Panchayats earn only 1% of their revenue through taxes

Subject: Polity

Section: Local govt

Context:

Only 1% of the revenue of panchayats was earned by them, with the rest being raised as grants from the State and the Centre. Specifically, 80% of the revenue was from Central government grants; only 15% was from State government grants.

About Panchayati Raj

Self-Government: The term Panchayati Raj in India signifies the system of rural local self-government.
Grass Root Level Democracy: It has been established in all the states of India by the Acts of the state legislatures to build democracy at the grass root level.
- Panchayati Raj Mahatma Gandhi advocated Gram Swaraj or village self-governance as a decentralised form of governance in which villages would be responsible for their own affairs, serving as cornerstones of India’s political system.
73rd Constitutional Amendment Act (CAA): It was constitutionalised through the 73rd CAA of 1992. The act has given a practical shape to Article 40 of the Constitution.
- This act has added a new Part-IX to the Constitution of India entitled as ‘The Panchayats’ and consists of provisions from Articles 243 to 243 O.
- The act has also added a new Eleventh Schedule to the Constitution. This schedule contains 29 functional items of the panchayats.

Assessment of Panchayati Raj Finance

Central Finance Commissions (CFCs): Successive CFC have recommended a consistent increase in grants to PRIs, from 4,381 crore by the Tenth CFC to 2.37 lakh crore by the Fifteenth CFC.
State Finance Commission (SFC):Article 243-I of the Constitution stipulates the establishment of a SFC every five years to assess the financial status of Panchayats and propose a framework for sharing taxes between the State and Panchayats.
Revenue Collection:Article 243-H of the Constitution empowers Panchayats to impose, collect, and allocate taxes, duties, tolls, and fees.
- Panchayati Raj The decisions regarding taxes to be decentralised to local governments are, however, mainly at the discretion of State legislatures.
Other Funding Sources: In addition to these revenue sources, Panchayats also receive grants from international organisations and funds for executing Centrally Sponsored Schemes (CSSs) like the Rashtriya Gram Swaraj Abhiyan, the SVAMITVA, the National Horticulture Mission, etc.

Government Initiatives to Strengthen Panchayati Raj Institutions (PRIs)

e-Gram Swaraj e-Financial Management System: It is a Simplified Work Based Accounting Application for Panchayati Raj that assists in enhancing the credibility of Panchayat through inducing greater devolution of funds to PRIs.
Rashtriya Gram Swaraj Abhiyan (RGSA) Scheme: It integrates various interventions within the Ministry of Panchayati Raj (MoPR) and across sectors, employing participatory local planning at the Gram Panchayat level.
Sansad Adarsh Gram Yojana: It envisions the holistic development of villages, transforming them into Adarsh Grams.
- As part of the initiative, each Member of Parliament (MP) is tasked with promoting a holistic development of three Gram Panchayats (GPs) by 2019 and another 5 GPs by 2024.

LSDGs through PRIs: The Ministry has adopted a thematic approach for LSDGs leveraging a wide network of third tier of Government, the goals on these themes to be attained by 2030 in a graduated manner.
Panchayat Development Index (PDI): To measure the progress on LSDGs and to carry out assessment to prepare evidence-based policy, MoPR constituted a Committee to prepare mechanisms for computation of PDI.
Gram Urja Swaraj Abhiyaan: MoPR has collaborated with the Ministry of New and Renewable Energy to include the Gram Panchayats under all its schemes focusing on adoption of renewable energy.
National Panchayati Raj Day (NPRD): NPRD is celebrated annually on April 24th by the MoPR to commemorate the 73rd CAA of 1992.
- Theme for 2023- Panchayaton ke Sankalpon ki Siddhi ka Utsav: Celebrated in line with the directives of adopting “whole-of-society” and “whole-of- government” approach.