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The Second State Finance Commission Report (2001), Kerala
The Second State Finance Commission Report (2001), Kerala
KERALA
REPORT
PART -1
JANUARY 2001
1
Dr.Prabhat Patnaik
Chairman
Phone: Off: 337430
518822
State Finance Commission
Government of Kerala
6th Floor, Secretariat Annexe
Thiruvananthapuram - 695 001
Dated: 8th January 2001
Sir,
Yours faithfully,
Dr.Prabhat Patnaik
Chairman
2
Contents
SECTION I
Chapter 1 Introduction
Chapter 2 Approach of the Commission
SECTION II
SECTION III
SECTION IV
SECTION VI
SECTION VII
SECTION VIII
Summary of Recommendations
Annexures
3
ACKNOWLEDGEMENTS
its Report in two parts. This is the first part of the Report of the State
Finance Commission.
Section Officer
8. Shri.M.V.Markose
Assistant
9. Shri.M.B.Sanu
Assistant
10.Shri.P.Unnikrishnan Nair
Assistant
11. Shri.S.Suresh Babu
Assistant
12. Shri.J.L.Justin Wills
Assistant
13. Shri.A.Shibu
4
14. Shri.B.Pratheep Kumar Assistant
4. The Commission is very thankful for the support it received from the
for Development Studies, for the support it received from them in the
5
Planning Board, and Sri.K.N.Kurup, Secretary, Planning Department, for the
Thiruvananthapuram,
08.01.2001.
6
LIST OF TABLES
NUMBER CONTENTS
7
4.1 Total plan grants to LSGIs as part of people's planning
campaign (Including sponsored schemes)
8.1 Non-Plan transfers to LSGIs
8.2 Tax-Cum- Grants Transfers (Excluding VTC)
8.3 Proposed Distribution of General Purpose Grant
Between Tiers
8.4 Some Important Items of 191 Non-Plan expenditure 2000-
01
10.1 Salary, Interest and Pension components of the State for
the period 1991-99
10.2 Expenditure component of Revenue Deficit from 1989-
90 to 1999-2000
10.3 Outlay on Capital Expenditure from 1990-91 to 1999-2000
8
LIST OF ANNEXURES
NUMBER CONTENTS
1.1 Notification No. 33384/SFC.Al/99/Fin, dated 23,6.99
9
3.6.7 Share of each item under own revenue -Municipalities
3.6.8 Total expenditure of Municipalities for the years 1993-94 to
1998-99 (excluding plan grant in aid for peoples' plan
campaign)
3.6.9 Per capita expenditure of Municipalities
3.6.10 Total Receipts and Expenditure of Municipalities at a glance
3.7.1 Total receipts (excluding grant-in-aid for peoples' plan
campaign) of Municipal Corporations 1993-94 to J 998-99
3.7.2 Abstract of total receipts of Municipal Corporations under own
revenue
3.7.3 Percentage share of taxes to total Direct Tax Revenue-
Corporations
3.7.4 Percentage increase of taxes over previous year-Corporations
3.7.5 Percentage increase of own revenue over previous years-
Corporations
3.7.6 Share of taxes in total own revenue-Corporations
3.7.7 Share of each item under own revenue -Corporations
3.7.8 Total expenditure of Municipal Corporations for the years
1993-94 to 1998-99 (excluding plan grant in aid for peoples'
plan campaign)
3.7.9 Percapita expenditure of Municipal Corporations
3.7.10 Total Receipts and Expenditure of Municipal Corporations at a
glance
4.1 Details of transfer of Institutions and Staff to LSGIs
4.2.1 Physical achievement of Peoples Plan Campaign -
Panchayats
4.2.2 Physical achievement of Peoples Plan Campaign –
Municipalities
4.2.3 Physical achievement of Peoples Plan Campaign -
Corporations
4.3 Functions assigned to LSGIs
5.1 Status of implementation of the recommendations of the
First SFC
6.1 Proposed Formula for Infer Se Distribution of Plan Funds
9.1 Presumptive Profession Tax for Traders and self employed
persons
9.2 Proposed Licence fees for Trades and Installation of Plants
or Machinery
9.3 Proposed Licence fees under Kerala Cinema Regulation
Rules
9.4 Proposed Rate of Licence fees for Private Market
9.5 Proposed Licence fees under Kerala Places of Public Resort
Act
9.6 Proposed Rate of Licence fees for keeping animals for
commercial purposes
9.7 Proposed Rates for market fees
9.8 Proposed Rate of fees for using Public Halting and Parking
Places
10
9.9 Proposed Rate of Rent and Fee for Slaughtering Animals in
Public and Private Slaughterhouse
CHAPTER I
INTRODUCTION
BACKGROUND
11
APPOINTMENT OF STATE FINANCE COMMISSION
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TERMS OF REFERENCE
(ii) the determination of the taxes, duties, tolls and fees which may be
assigned to or appropriated by, the Panchayats and the
Municipalities;
(iii) the grants-in-aid to the Panchayats and the Municipalities from the
Consolidated fund of the State.
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finance, and suggest a framework for local self-governments to
take recourse to such sources along with procedures to be
followed and limits, if necessary, to raising such resources;
(ii) need for sharing the cost of maintenance of assets and institutions
transferred to local self-governments, and evolving criteria for it,
with due regard to the fiscal position of the State Government
and the local self-governments;
1.5 Government have gone beyond the Terms of Reference given to the First
SFC, and broadened the scope of the Commission's work by expanding the
second portion of the Terms of Reference dealing with the measures needed
to improve the financial position of LSGIs by clearly stating five specific
items. Thus, the Second SFC, besides suggesting devolution of funds and
their distribution among LSGIs has to go into the question of financial
management including raising of resources, availing
14
of loans, economy in spending and settlement of debts and dues. Also the
Second SFC has been given the task of suggesting procedural refinements
to ensure a smooth flow of funds from Government to local governments
and for ensuring proper financial accountability.
15
(4) The Commission had a special meeting with the Finance
Minister and the Finance Secretary.
16
Panchayats which could not fill up the first part of the
questionnaire relating to own income and non plan grants.
1.8 The First Report is structured in eight Sections with twelve Chapters
and a summary of the recommendations. The first Section has an
introductory Chapter on the constitution of the Second Finance
Commission, its Terms of Reference and the Methodology adopted by
it and the second Chapter outlines the approach of the Commission to
the major Terms of Reference. The second Section has two descriptive
Chapters -one giving an overview of local government finances and
other summarizing the decentralisation process in Kerala. Section III
has just one Chapter analyzing the recommendations of the First SFC,
with reference to their present status of operationalisation. Those
recommendations, which need to be followed up further are identified
in this Chapter. Section IV deals with devolution of funds from the
State Government to the LSGIs. This theme is presented in three
Chapters - one dealing with devolution of Plan funds, the next dealing
17
with devolution of funds exclusively for maintenance and the last one
in the Section dealing with devolution of General Purpose Grant in lieu
of the existing Assigned and Shared Taxes and Non-plan grants-in-aid.
The fifth Section has the Chapter on enhancing the own revenues of
LSGIs.
18
CHAPTER 2
OUR APPROACH
FINANCIAL DEVOLUTION
19
First, different categories of devolution are intrinsically interrelated. If more
funds are devolved to LSGIs for plan projects, then correspondingly larger
provisions have to be made for them for the maintenance and operation of
the assets created through such projects. Two separate bodies therefore
cannot in any meaningful sense (i.e. without one of them becoming a mere
rubber stamp) decide on these two kinds of devolution. The inseparability
of the two kinds of devolution necessitates that they fall under the
jurisdiction of one body, which can only be the Finance Commission.
Secondly, the 73rd and 74th Constitutional Amendments provide for a
statutory body to adjudicate on financial matters, namely the State Finance
Commission. The spirit of those Amendments therefore requires that the
jurisdiction of that statutory body be as comprehensive as possible. The
letter of those Amendments too is in conformity with this. The State
Finance Commission's task is to "review the financial position" of local
bodies. Since any such review can only be in relation to the functional
responsibilities of the LSGIs, and these include the responsibilities vested
in them for "the preparation of plans for economic development and social
justice", it follows that even the letter of those Amendments enjoins upon
the SFC a concern with the total financial requirement, both plan and non-
plan, of the LSGIs. Our Commission accordingly proposes to take a
comprehensive view of financial devolution from the state government to
the LSGIs and not confine itself only to non-plan devolution.
2.3 Given this perspective, and the fact of the inseparability of different kinds
of devolution, a tempting idea is to earmark a certain fixed proportion, say
20 percent, of the total tax revenue of the state government for devolution
to LSGIs for both plan and non-plan use. The inter sc distribution of this
amount among the LSGIs could then be determined by some specific
criteria, and individual LSGIs could, within limits, be
20
left free to allocate the funds at their disposal in any manner they choose.
This solution is tempting for a number of reasons. First, it is simple and
appears more in keeping with the idea of genuine decentralisation which
gives freedom of resource use to LSGIs. Secondly, it has intellectual
pedigree, having been mooted by some of the first SFCs (including the
SFC of West Bengal headed by Dr.Satyabrata Sen). Thirdly, it is in
conformity with the trend being initiated by the Central Finance
Commission itself. Fourthly, it apparently entails equitable sharing between
the state government and the LSGIs: they evenly partake of affluence and
penury, without either one of them squeezing the other in any obvious
manner. And finally it would seem to be more appropriate in the Kerala
context, where, the upkeep of the good infrastructure facilities being very
important, the LSGIs should not be constrained by the plan - non-plan
distinction. In these respects it would even appear to have an edge over the
current practice in Kerala, following the Peoples' Plan Campaign, of giving
a fixed percentage of plan funds (35 to 40 percent) to the LSGIs.
2.4 There are two obvious problems potentially associated with the current
practice. The first arises from the fact that the LSGIs' requirement of non-
plan funds, as already mentioned, is itself linked to the amount of plan
funds made available to them. Ensuring that a certain percentage of plan
funds is put at their disposal is therefore not enough; an appropriate
amount of non-plan funds must also be made available to them for meeting
the current operational costs and the maintenance requirements of the plan
assets. A system in which a certain overall share of tax revenue of the state
government is passed on to LSGIs, and the latter have a degree of
flexibility in deciding how to deploy their share, would be better able to
avoid any potential disproportionality between asset creation on the one
hand and asset maintenance and operation on the other. The second
problem associated with the current practice
21
arises from the fact that a relative or even an absolute decline in the size of
the state's plan outlay leads ipso facto to a similar decline in the magnitude
of devolution of plan funds to LSGIs and hence in the size of the LSGI
plans. This means that a sudden draft on the state government's resources
on the non-plan side, or plain non-plan profligacy on the part of the state
government, or niggardliness on the part of the Planning Commission, or a
financial squeeze imposed by the central government, all of these would
invariably impinge on the size of the LSGI plans. If we are concerned that
the size of these plans, which cater to the basic requirements of the mass of
the people, should be kept insulated from such extrinsic developments, then
a devolution formula which gives LSGIs a share of the state revenue as
opposed to one which gives them a share of the plan outlay appears
preferable. (To be sure, even with revenue sharing, LSGI plans would still
be vulnerable to the profligacy, on the non-plan side, of the LSGIs
themselves; but more directly exerted popular pressure, through institutions
such as Grama Sabhas and Ward Sabhas together with the imposition of
some pre-determined expenditure "norms", could take care of it).
2.5 The fear that a plan-outlay-sharing system makes LSGI plans vulnerable
to a whole range of extrinsic developments including a financial squeeze
emanating from the central government via cuts in grants-in-aid, is not an
idle one. The additional fiscal burden imposed on the state government on
account of the implementation of the recommendations of the Pay
Commission, together with the fact that grants-in-aid from the Central
government have tended to stagnate, has had an impact on the growth of
the state's plan outlay in 1999-2000 (RE) and 2000-01 (BE), and
correspondingly on the growth of plan transfers to the LSGIs, even though
the absolute amounts of such transfers remain impressive. The total plan
22
and non-plan transfers1 to PRIs as a proportion of the total tax revenue of
the state government, which amounted to 7.2 percent in 1996-7, increased
to 20.8 percent in 1997-8 when the Peoples' Plan Campaign took effect.
The ratio was 19.5 percent in 1998-9, but appears to have declined
somewhat thereafter: to 16 percent in 1999-2000 (RE) and 14.1 percent in
2000-01 (BE). Since the proportion of non-plan transfers to the total tax
revenue of the state government has remained more or less unchanged,
amounting during these five years (in percentages) to 2.07, 2.15, 2.61, 2.2,
and 2.61 respectively, it is the ratio of plan transfers to total revenue that
appears to have been affected. To be sure, these figures do not tell the
whole story, since they exclude the transfers by way of salaries to state
personnel who have been assigned to LSGIs; besides, the period is too
short, and, for the later years, we are not even talking about Actuals but
only about Revised and Budget estimates. Nonetheless, the possibility in
the coming years, if the fiscal problems of the central government get
compounded, of these problems getting "exported" to the state level, and
from there further downwards until they impinge on LSGI plans (or of an
exactly similar denouement arising from a worsening of the state
government's fiscal position for independent reasons), is to be reckoned
with.
2.6 Though the above discussion constitutes a strong case for moving to a
general revenue sharing arrangement between the state government and the
local governments, the Commission feels that there are a number of
weighty counter arguments which cannot also be ignored. These are
summarized below.
23
2.7 Any general sharing of revenue implies that there is a clear
demarcation of responsibilities between the state government
and the local governments. But actually this is an evolutionary
process. Though Kerala has gone beyond any other state in
sharing responsibilities with local governments there are areas
like the productive sector where only over a period of time
can the functional domains be defined with reasonable clarity.
Indeed, the local governments which have been initiated into
the planning process are themselves just coming to grips with
the developmental needs and solutions within their functional
domain, and would also require more time for working out
the financial needs of various aspects of the responsibilities
transferred to them.
24
schools, to the LSGIs themselves. All this would entail, first of all, an
enormous and unmanageable administrative burden on the LSGIs. They
would have to manage the payroll of a large number of personnel who
would now constitute their direct employees. They would have to arrange
supplies for the day-to-day running of a host of institutions. These tasks are
as onerous as they are unnecessary for LSGIs to perform. A distinction
must be drawn between decentralisation of administrative burdens and
decentralisation of decision-making. The former is not only not a pre-
condition of the latter but may even thwart the latter. Proper sequencing is
very important in the decentralisation process. An LSGI system which has
not stabilised would be put to severe stress if it takes on the burden of
administration in full. For example while it must be the LSGIs which
should control officers placed under them, assign them tasks, and ensure
their proper performance, this does not necessarily imply that they should
bear the burden of recruitment, payment of salaries and dealing with
service matters. These tasks consume a lot of time and energy and could
detract from LSGI efficiency in carrying out their essential responsibilities.
To be sure, there is an obvious contradiction in having personnel who are
recruited by one agency but are answerable to another, a contradiction
referred to by the Committee on Decentralisation of Powers as "dual
control". But a forcible resolution of this contradiction by simply
eliminating one of its poles, either through centralisation as existed earlier
or through complete decentralisation entailing the parcelling out of
administration, is no answer to the problem.
2.10 Even from a financial point of view, making LSGIs responsible for
meeting the entire current expenditure obligations in LSGI-run institutions
would make little sense. The state government has many more financial
options than the LSGIs have. It can borrow. It can introduce new,
innovative taxes;
25
and so on. In the event of an increase in the cost of administration, for
example a rise in salaries, the state government can absorb the increase far
more easily than the LSGIs in case they are asked to bear the cost of
administration under a new dispensation. It was mentioned above that under
the current practice of plan-outlay-devolution a sudden need on the part of
the state government to spend more on the non-plan side would squeeze
LSGIs' plans, and that this strengthened the case for revenue-sharing
between the state government and the LSGIs. This argument clearly lacks
general validity. It holds only when the increase in the state government's
non-plan expenditure need is of a kind that LSGIs would not face when
expenditure obligations are transferred to them along with a share of
revenue. But if they have to face the same non-plan expenditure need as the
state government, they would be worse off in a regime of revenue-sharing.
For example if they had to implement Pay Commission recommendations
out of their own funds in a regime of revenue-sharing, they would have
ended up being worse off than they have actually been under the current
dispensation. Of course it may be argued that additional financial options
which the state government has, such as borrowing, should be made
available to the LSGIs too. We examine this issue later, but, should this be
done indiscriminately, then very sharp inequalities could emerge among
LSGIs, forcing the backward ones to go under, which would defeat the
whole purpose of decentralisation.
2.11 Enough has been said to show that any simple rule stipulating the transfer
of a certain fixed proportion of total tax revenue from the higher to the
lower level, would be inappropriate in the present Kerala context.
Accordingly, we reject this approach. The approach we do adopt instead on
the question of devolution has six main features which are given below.
26
2.12 First, for reasons discussed in Chapter 6, we are of the view
that the current practice of making 35-40 percent of the plan
outlay available to the LSGIs to spend on plan projects of
their choice should be continued: our precise recommendation
is that not less than one-third of total plan outlay (excluding
state-sponsored schemes from the numerator) should be given
to LSGIs, A feeling has been conveyed to us that the transfer
of such substantial amounts of plan funds to the LSGIs has
been accompanied by a corresponding slackening of revenue
effort by the LSGIs themselves. This feeling is pervasive,
though the empirical support adduced in its favour is not very
persuasive. But irrespective of whether larger devolution has
actually caused a slackening of revenue effort, any slackness
in such effort is perse unwarranted. Stimulating revenue effort
therefore is a must; and we do so by incorporating revenue
effort explicitly into the formula determining the inter se
distribution of plan resources.
27
transferred. Likewise, if the increased devolution of plan funds had not
taken place, the state government would have used these plan funds through
its various departments, and would have paid for the maintenance of the
assets created through the use of these plan funds. The fact that this
devolution has occurred simply means that these assets are now under the
jurisdiction of the LSGIs; the state government's obligation to pay for the
maintenance of these newly-created assets (and those continuously being
created) is not removed thereby. Of course if the transferred or newly-
created assets were run on commercial lines, then the expenditure on
maintenance could come from their own revenue, exonerating the
government from the obligation to provide for their maintenance. But since
the bulk of these assets are not commercially operated, and are not meant to
be, the obligation on the state government remains. Finally, there are the
assets which are neither transferred under the September 1995 Government
Order, nor newly constructed out of the higher devolution of plan funds
following the People's Plan Campaign. An important segment of this third
category is constituted by assets which the LSGIs already owned prior to
September 1995. The maintenance expenditure on these assets has come
partly from the LSGIs' own funds, including what comes to them as Vehicle
Tax Compensation, and to a limited extent from such non-plan, non-
statutory grants of the state government as the Village Road Maintenance
Grant (when it existed). But the actual maintenance expenditure on these
assets has in practice been rather meagre. Adequate expenditure on the
maintenance of these assets, given their non-commercial nature, would
necessarily require additional financial support from the state government.
2.14 We suggest that this additional amount, together with the requisite amounts
for the first two categories of assets, should be provided by the state
government. In other words, the state
28
government should provide the entire maintenance expenditure on the pre-
existing assets of the LSGIs, on the assets transferred to them after
September 1995 and on assets newly-constructed by them out of plan
assistance in the period since 1997-8. It need not, however, make any
Vehicles Tax Compensation available to the LSGIs. Our approach is to get
the state government to transfer a certain total amount for the maintenance
of assets to the LSGIs as a whole, among whom it is to be distributed
according to certain criteria reflecting maintenance needs. It is essential of
course that the LSGIs in turn should not use the amount, handed to them
for the maintenance of assets, for all sorts of other purposes; we wish to
put this amount beyond their reach for expenditure other than on approved
uses.
29
In practice, however, any system where costs are met by one agency while
decisions regarding their size are taken by another, runs the risk of
profligacy (even if these decisions have to be formally approved by the first
agency). This problem has reportedly become quite acute through pressure
for the creation of new posts, by the LSGI. It would become even more
acute in the coming years unless something is done about it immediately.
30
transferred schemes, including wages to temporary employees, must
continue to be paid by the state government. Secondly, the current practice
of state government funding of medicines and books should be continued
exactly as it is, but in all other sectors, the state government should be freed
from its obligation of having to meet operating costs. And even in the
education and health sectors, all other operating costs, such as rents on
buildings, electricity and vehicle running charges, telephone expenses etc.
should be met by the LSGIs from their own funds including general
purpose grants and upto 10% of maintenance grants. Thirdly, the LSGIs,
apart from meeting all these operating costs, should have the freedom to
undertake extra expenditure at the margin in the education and health
sectors, over and above what the state government provides. And fourthly,
to enable them to do so, they should be allowed to spend up to 10 percent
of the Maintenance Transfer, which is being made available to them, for
meeting operating costs.
31
taxes, which were either "assigned" or shared till now, for its own use. For
determining the exact share which is to be so distributed among the LSGIs
and also the inter redistribution of the amount among the various tiers of
LSGIs, we make use of the observed historical shares in the recent past.
32
blanket division of the state government's tax revenue governing
devolution. This idea entails fixing a particular share of the total tax
revenue of the state government that is made available to the LSGIs as a
whole; the amount is distributed among the LSGIs according to some
formula and they are then left more or less free to spend their amounts as
they like. This idea, notwithstanding its simplicity and appeal, is
unworkable in the context of Kerala which has pursued its own unique
trajectory of decentralisation, a pursuit that has to be taken by us as a
historical datum. Our approach is to stipulate a share of plan outlay that
must be handed over to the LSGIs, as is the current practice, and a share of
tax revenue to be given as non-plan statutory transfer in lieu of the current
complex and cumbersome system of tax-assignments and tax-sharing. In
addition to these plan and non-plan transfers, the state government has to
keep meeting the salaries of all personnel on the transferred assets, to keep
making appropriate transfers to the LSGIs' for meeting a host of social
obligations (non-plan payments under Appendix IV of the budget), and to
keep defraying the costs of medicines in hospitals and books and
consumables in educational institutions under LSGI-jurisdiction. It also has
to transfer a certain amount every year for the purpose of meeting the
maintenance requirements on LSGI assets. In arriving at the magnitudes of
these transfers and their inter se distribution among the LSGIs, our
objective has been to simplify the system as far as possible, so that the
mystery and opaqueness governing the devolution of funds from the state
government to the LSGIs get minimised.
2.23 The increased plan allocation to LSGIs has generated a euphoria among
them regarding availability of funds. There is in fact a pervasive feeling
that LSGIs are flush with funds. There are however clear parameters
within which such funds
33
can be spent; they are meant for new development ventures, and, implicitly,
for such development ventures as would give adequate returns, both social
and economic. It is important to note that local governments have
traditional obligatory functions and are often judged on the quality of their
performance of these functions, which relate to public health and sanitation,
maintenance of infrastructure, and the exercise of regulatory civic functions
to ensure good quality of life for the citizens. Now that a lot of new assets
have been transferred to the LSGIs and the flow of maintenance funds from
the state government cannot but be limited on any reasonable expectations,
the need for mobilizing resources becomes very critical. If LSGIs can raise
more funds by themselves they can dramatically improve the upkeep of
assets transferred to them. An analysis of the resource inflows of LSGIs
shows that in the case of Village Panchayats the proportion was broadly
3:2:11 respectively for own funds, non-plan grant-in-aid from the state
government including assigned and share taxes, and plan grant-in-aid. The
corresponding proportion for Municipalities as well as Corporations was
3:1:2. Own funds therefore constitute a significant amount. The very fact
that LSGIs can raise resources including taxes is a symbolic affirmation of
their status as institutions of local self government. The right to fix the rates
for taxes and other revenues and collect them gives authority and
importance to the LSGIs. On the other hand it also demands a considerable
degree of responsibility from them, since the tax payers are not only very
close to the collection point but are also witnesses to the mode of utilization
of the taxes collected. This opens up the possibility of spontaneous tax-
compliance as well as of community pressure to pay dues to LSGIs,
provided the services of the local governments are perceived to be useful
and relevant.
34
2.24 There are however certain problems with regard to the mobilization of
revenue by LSGIs. The most important problem relates to the tax base,
which is rather inelastic and cannot be widened very easily. Moreover, the
minimum and the maximum rates for the taxes and most of the non-tax
revenues are fixed at present by the state government. In the case of many
of the non-tax sources the amounts are fixed by the government through
rules, and these, for a variety of reasons, do not get revised in tandem with
the rate of inflation. A serious additional problem relating to taxation at the
local level is the fact of gross under-assessment. Our interactions with
representatives of LSGIs suggest that the present demand is only about half
of what can really be collected. The assessment is done in a rather primitive
fashion and the process of assessment often tends to be very subjective. To
compound this problem the collection efficiency is also low. The
traditional mode of collecting from the doorstep is still being resorted to.
The enforcement provisions are rarely used.
2.25 The Commission believes that the tax base can be expanded inter alia
through the introduction of Service Tax. Also some non-tax revenue
sources can be further tapped. The Commission strongly endorses the view
that only the floor rates and amounts need to be fixed by the government.
This would allow greater autonomy to the efficient LSGIs to mobilize more
local resources. In addition there is urgent need to index the rates to
changes in money value. Tax assessment methods can be rationalised
essentially by reducing discretion and moving on to a transparent normative
basis, like plinth area in the case of buildings, seating capacity in the case
of cinemas, presumptive taxes for certain professions and so on. In this
respect, some of the recommendations of the first Finance Commission are
very pertinent. Collection efficiency is also very crucial, though the drive to
collect larger revenues has to come from the LSGIs themselves. To be sure,
training and motivating the collecting personnel would help, as would
35
external incentives of the sort we have provided, by incorporating the
revenue effort criterion into the inter se distribution of plan funds. But
there is no escape from the fact that the LSGIs themselves must internalize
the urgency of the need to garner larger revenue.
2.26 Though there are provisions in the Kerala Panchayat Raj Act,
the Kerala Municipality Act and the Local Authorities Loans
Act for borrowing by LSGIs, these provisions are not fully
utilized. The Commission believes that as more and more re
sponsibilities get transferred to LSGIs, they have to supple
ment their own resources and grants-in-aid with borrowings,
mainly for schemes which would generate a revenue stream
that can help repayment, and for socially relevant schemes for
which local surcharges can help in repayment. The question of
borrowing and the safeguards required would be dealt with
in the second part of the Report.
2.28 With so much of public funds being handled by the LSGIs, the need for
enforcing a degree of accountability upon them increases. Of course, since
they are close to the people there is some control from below, especially
through various
36
participatory mechanisms, which have already been adopted by the state
government. Nevertheless, financial accountability through certain fiscal
responsibility provisions as well as through improved maintenance of
accounts is very essential. Similarly the presentation of accounts to the
public to facilitate social audit also needs special attention. The current
procedure by which LSGI accounts are audited leaves much to be desired.
There is invariably considerable delay, and the quality of audit too is not
particularly good. It is a very routine form of audit and its contribution
towards system improvement or towards enabling penal action has been
very limited. These need to be totally revamped. The Commission is getting
a study done on the maintenance of accounts as well as on the procedures
of auditing by the Institute of Public Auditors of India and the second part
of the Report would carry detailed recommendations on the subject.
PROCEDURAL SAFEGUARDS
2.29 In order to ensure that the recommendations of the
Commission are properly implemented, certain procedural
safeguards have to be put in place. The most important
safeguard is to give legislative sanction to the proposed
devolution, by incorporating the share of taxes due to local
governments in the Kerala Panchayat Raj Act and the Kerala
Municipality Act. These devolved funds would be in three
categories: Plan Grant, Maintenance Grant and General
Purpose Grant. Each grant would have clear conditions for
use which should be issued in the form of Rules.
37
withdrawal, linking such withdrawals to actual expenditure. Similarly, the
funds have to be devolved according to fair and transparent formulae. This
is particularly true of the devolution of the maintenance grant, for which a
scientific assessment of the maintenance needs has to be made and the
results then used for an equitable inter se distribution of the funds.
38
follow-up action on Finance Commission's recommendations, for which
an empowered Committee is necessary.
39
its own recommendations. We are in agreement with both the spirit and the
letter of the first suggestion. We are in agreement with the spirit, though not
the letter, of the second suggestion, since we feel that a carte blanche to
state governments to set up Finance Commissions when they like may be
open to misuse; our own phrasing of the required Constitutional
amendment (given in Chapter 11) attempts to overcome this potential
problem. On the third of the CFC's Constitutional suggestions however we
have differences of both letter and spirit. Though we understand the
circumstances (relating to delays or non-compliance with SFC
recommendations by state governments) which make the CFC wish to get
rid of this albatross round its neck of having to base its own
recommendations on those of the SFCs, abandoning this clause altogether
would in our view be potentially detrimental to the smooth functioning of
our federal system. Our suggestion on the required Constitutional
amendment attempts to meet the problem without going to such extremes.
2.36 The second issue of principle raised by the CFC is one where we have a
basic disagreement, and it relates to their refusal to take any explicit
cognisance of the devolution of Plan funds to LSGIs. (Indeed their non-
recognition of the worth of the Kerala experiment in democratic
decentralisation springs essentially from this fact). We are of the view that
Finance Commissions should have comprehensive jurisdiction covering
both plan and non-plan devolution. It follows from this that if a particular
State Finance Commission has interpreted its jurisdiction narrowly and
refrained from making any recommendations covering plan funds, then the
fact that the state government goes beyond these recommendations to
devolve substantial plan funds to LSGIs should be deserving of
appreciation rather than unconcern. The index of decentralisation cannot in
other words be confined to criteria that stress only conformity to SFC
recommendations (which
40
does not of course mean that such conformity should be given the go by);
they have to be more inclusive.
2.37 The third issue, one of practice, relates to the task given to us
by the CFC to suggest criteria for the inter se distribution of
Rs.65.92 crores for PRIs, and Rs.15.05 crores for ULBs,
which constitute Kerala's share of the total amount (Rs.1600
crores for PRIs and Rs.400 crores for ULBs) made available
by it as a special grant for the improvement in civic services.
Our recommendation is that these amounts should be
distributed on the basis of the population criterion. They
should not be counted as a part of plan funds (either in the
numerator or in the denominator) in determining the size of
the plan grant to LSGIs.
41
CHAPTER 3
AN OVERVIEW OF LOCAL GOVERNMENT
FINANACES
3.1 INTRODUCTION
3.1.1 Kerala has 990 Village Panchayats, 152 Block Panchayats and
14 District Panchayats; in the urban areas it has 53 Municipalities
and 5 Corporations. Since the First SFC, the following charges
have taken places.
(3) Two new Corporations viz. Kollam and Thrissur have been created by
adding the following Grama Panchayats.
42
(4) Two municipalities namely Kalpetta and Koyilandi have
been expanded by including wards as shown below from
the adjoining panchayats.
(6) While 19 Village Panchayats have been merged with urban local bodies
20 new Village Panchayats have been created due to the bifurcation of
20 large Village Panchayats having a population of more than 50,000.
3.1.2 Except item No.l, all the changes were brought into effect in September
2000, with the general elections to LSGIs. With this reorganisation of
urban and rural local governments, the share of the urban population in the
State with reference to 1991 census has gone up to 16.87% from 14.22%.
Kerala has fairly big Village Panchayats, the biggest in the country. It has
relatively small towns. In fact, other than the five cities it has
43
only three Municipalities having a population of more than one lakh.
Table 3.1
Village Panchayats.
Range of population No.of Village Panchayats
Below 10,000 16
Between 10,000 and 20,000 287
Between 20,000 and 30,000 426
Between 30,000 and 40,000 181
Between 40,000 and 50,000 59
Above 50,000 21
Table 3.2
Municipalities
44
3.1.5 The population of the five Corporations may be seen in Table3.3.
Table 3.3.
Corporations
Thiruvananthapuram 7,04,375
Kollam 3,49,348
Kochi 5,64,589
Thrissur 2,99,042
Kozhikode 4,19,831
Table 3.4
45
3.1.7 Kerala has a long sea-coast. 89 Village Panchayats, 13
Municipalities and 4 Corporations face the sea.
Table 3.5
46
3.1.9 The grading using the same norms by the First SFC showed 979 Village
Panchayats as Special Grade and the remaining four Panchayats as First
Grade and Second Grade (two each) on the basis of the data on 987 Village
Panchayats available with them.
47
Table 3.6.
3.1.11 A few interesting statistical highlights regarding LSGIs are given below:
48
49
FINANCIAL POSITION OF LOCAL GOVERNMENTS
3.3 These are available only to the Village Panchayats and ULBs.
They could be classified into the following categories.
(3) Grants-in-aid
(4) Loans
TAX REVENUE
50
3.4A.1 OWN TAXES
3.4A.1.1 (i) PROPERTY TAX. Property Tax constitutes the major item of revenue
for the Village Panchayats, Municipalities and Corporations, which
have a per capita collection of Rs.12.39, Rs.77.62 and Rs. 151.30
respectively. Though amendments have been brought about in the
Kerala Panchayat Raj Act and the Kerala Municipality Act in 1999 to
introduce plinth area based assessment of Property Tax for both
residential and non-residential buildings including commercial
buildings, rules and operational instructions have not yet been issued.
Therefore, Property Tax continues to be assessed as per the old system
based on rental value. In anticipation of switching over to the new
method of assessment Village Panchayats have not had any general
revision of Property Tax since 1993 and in the case of ULBs where the
general revision varies from one Municipality to another there has not
been any such revision after 1998. This has prevented the usual
periodic increase in Property Tax, which normally works out to be
25% at the time of each general revision.
3.4A.1.3 The rates fixed as per the amended Section 233 of the
Kerala Municipality Act are given in Table 3.7.
51
The maximum rate is 20% for Town Panchayats, 25% for Municipalities
and Corporations.
3.4A.1.4 Property Tax constitutes 15 percent of the tax and non-tax revenues of
Village Panchayats; the figure for Municipalities is 21.39 and for
Corporations, it is 35.32. Property Tax has grown by 40.34% over a period
of six years in the case of Village Panchayats. The increase for
Municipalities and Corporations is 66,27% and 76.33% respectively.
3.4A.1.5 It is interesting to note that the LSGIs tend to levy lower tax even when
they have a range to choose from. The First SFC has given the details
relating to Village Panchayats and Municipalities, which can be seen in
Tables 3.8 and 3.9.
52
TABLE 3.8.
TABLE 3.9.
53
3.4A.2 (ii) PROFESSION TAX. Profession Tax is levied from individuals and
companies by virtue of Section 204 of the Kerala Panchayat Raj
Act in the case of Village Panchayats and Section 245 of the
Kerala Municipality Act in the case of Municipalities and
Corporations. All companies and individuals transacting business
or engaged in a profession for at least 60 days in a half year are
bound to pay the tax at such rates as are fixed by the concerned
local government subject to the maximum rates prescribed by
Government. However, Article 276 (2) of the Indian Constitution
has fixed the maximum tax leviable per year at Rs.2500/-. Now the
11th Finance Commission has recommended that this provision be
taken out of the Constitution and be made part of a Central Act so
that its amendment could be easily made.
Based on the report of the First SFC, Profession Tax has been
revised in Village Panchayats. (TABLE 3.10) But in the case of
3.4A.2.1
ULBs the revision is yet to be carried out. The old rates are still
followed. (TABLE 3.11) However, Dearness Allowance is also
now included in the calculation of income for assessment of
Profession Tax in ULBs as suggested by First SFC.
TABLE 3.10
54
TABLE 3.11
55
3.4A.2.2 Profession Tax constitutes the second largest source of own
income for the Village Panchayats and has the 5th position for the
Urban Local Bodies. During the last six years the tax has grown by
101.6%, 110.49%, and 180.26% in \ Village Panchayats, Municipalities
and Corporations respectively. This has been mainly due to the steep
increase in salary due to the Pay Commission Recommendations and
due to the inclusion of DA in the calculation of income in ULBs.
56
both in Village Panchayats and Municipalities during the year 1998-99
in comparison with the previous year.
57
tion 209 of the Kerala Panchayat Raj Act and 271 of the Kerala
Municipality Act. The tax is collected based on bye-laws framed by
the Village Panchayats and ULBs. There are no rules issued by the
Government regarding minimum rates or the mode of collection.
3.4A.5 (v) SERVICE TAX: This tax exists only in Village Panchayats. In
ULBs it is an inbuilt component of Property Tax. It is provided for in
Section 200 of the Kerala Panchayat Raj Act as per which Government
is authorised to fix the minimum rates. The revised rules are under
examination by the Subject Committee of the Legislature and are
expected to be issued soon. The accepted recommendation of the First
SFC to have an independent Service Tax has not yet been
operationalised. The total collection of Service Tax in all the 976
Village Panchayats for which the data is available comes to Rs.1.89
crores or 0.7% of the own revenue.
58
TABLE 3.12.
a) Panchayats
b) Municipalities
The rates for Village Panchayats have not yet been revised in accordance
with the recommendations of the First SFC.
The collection figures of Show Tax including surcharge for the Village
Panchayats and for the Municipalities and Corporations are shown in Table
3,13.
59
TABLE 3.13.
(Rs. in lakhs)
nicipality Act which allows the Council to collect in the manner decided
by it a tax on timber brought into the Municipality at the rate of Rs.24/-
per tonne. This has also fallen into disuse and only Kozhikode
60
Corporation which has the traditional timber yard of Kallai within its
area is realizing this tax which fetched it a revenue of Rs.97,000/- during
19,98-99. This item of revenue has been declining year after year.
3.4A.10 (x) SURCHARGES: Both the Village Panchayats (as per Section 208
of the Kerala Panchayat Raj Act) and ULBs (as per Section 230 of the
Kerala Municipality Act) are empowered to levy Surcharges. In the case
of Village Panchayats up to 5% Surcharge can be levied on the Property
Tax subject to a maximum of two Surcharges and in the case of ULBs a
Surcharge not exceeding 10% can be levied on any Tax other than
Profession Tax. This Surcharge is to be levied for providing for any
specific services or amenity in the case of ULBs and for meeting any
extraordinary expenditure by way of implementation of a scheme, plan
or project in the case of Village Panchayats. This item has not been
tapped in any of the ULBs. For Village Panchayats the total collection
during 1998-99 was Rs.5.29 lakh, which works out to just 0.15 % of the
Property Tax collected during the same year. It is noteworthy that even
with specific quid pro quo, LSGIs have been reluctant to impose
Surcharges.
61
ASSIGNED TAXES
3.4B
These taxes are collected by the Government but the entire revenue is
assigned to local governments.
3.4B.1 (i) BASIC TAX. Kerala does not have a traditional system of land
revenue. Instead it has a general tax on land known as the Basic Tax.
The rates of Basic Tax are given in Table 3.14
TABLE 3.14.
3.4B.1.1 The entire collection is given to the rural LSGIs after deducting a
collection charge of 3%. 3/8th of the Basic Tax is given to the Village
Panchayats, 3/10th to the Block Panchayats, and l/5th to the District
Panchayats. The remaining l/8th is credited to the Rural Pool. Except
in the case of Rural Pool, the distribution is as per the area of the
concerned Panchayat. Though Government had accepted the
recommendation of the First SFC to give a share of Basic Tax to the
ULBs this has not been operationalised so far.
62
3.4B.1.2 The Basic Tax collected and distributed during the last five years is
shown in Table 3.15.
TABLE 3.15.
(Rs. in crores)
3.4B.2.1 The earlier and the present rates are given in Table 3.16.
63
TABLE 3.16.
64
TABLE 3.17.
(Rs. in lakhs)
65
Stamp Duty and pay them directly to the Kerala Water Authority
(KWA). The amounts thus deducted and given to the Water Authority
in the last five years are indicated in Table 3.18.
TABLE 3.18
(Rupees in lakhs}
Amount deducted
66
3.4C SHARED TAX
3.4C.1 MOTOR VEHICLE TAX. This is the only shared tax and it
is called Vehicle Tax Compensation (VTC) and is given to local
governments as per Section 19 of the Motor Vehicles Taxation Act 1976.
3.4C.1.1 20% of the net collection of Motor Vehicles Tax is distributed among
Village Panchayats and ULBs as per road length according to the formula
based in unit length of roads given in the Table 3.19.
TABLE 3.19
Actual collection of Motor Vehicles Tax and the actual distribution during
the last five years can be seen in Table 3.20.
67
TABLE 3.20
(Rs. in lakhs)
3.4C.1.2 Over the years there used to be substantial arrears in the payment of Basic
Tax, Surcharge on Stamp Duty and Vehicles Tax Compensation. Based on
the recommendations of the First SFC, Government released Rs.150 crores
in three instalments as a one-time settlement of dues under Basic Tax,
Surcharge on Stamp Duty and VTC.
NON-TAX REVENUE
3.5 Non-tax revenue of Village Panchayats, Municipalities and Corporations
could be classified as follows:
68
(5) Permit fee
69
3.5.2 GATE FEES : These are fees, which are normally farmed out
by auction to the highest bidder who is then given the right
to regulate entry based on certain fees. The major sources of
gate fees are -
70
(2) Fee for permits for the construction, establishment or installation
of factories, workshops or work places where electricity is used.
2. Registration of Tutorials.
71
(1) Proceeds from auctioning of meat stalls (done in a
few Village Panchayats only).
(3) Endowments.
(5) Contributions/donations.
3.5.10.1 The details regarding the rates for each of the important sources of non-
tax revenue are given in the Annexures in Chapter IX relating to the
existing and suggested rates.
72
TABLE 3.21.
73
74
75
77
78
GRANT-IN-AID FROM GOVERNMENT
3.6 In the case of Village Panchayats, now there are only two Non-Plan
Grants-in-aid from Government viz., Rural Pool and Level Crossing grant-
in-aid. Rural Pool has been created by pooling the 14 specific purpose
grants-in-aid, which were in vogue earlier, 25% of the surcharge on Stamp
Duty and l/8th of the Basic Tax. The amounts released to Village
Panchayats after the constitution of Rural Pool are shown in Table 3.22.
TABLE 3.22.
(Rupees in Crores.)
3.6.2 The grant for Level Crossing is given only to five Village Panchayats to
meet the additional burden on them due to existence of manned Level
Crossings whose establishment costs need to be shared with the Railways.
3.6.3 In the case of ULBs there are two grants - General Purpose
Grant and Specific Purpose Grant. General Purpose Grant is a per capita
grant calculated as follows:
79
It is governed by the General Purpose Grant-in-aid Rules 1962, The
amounts released under this head during the last five years are shown in
Table 3.23.
TABLE 3.23
(Rupees in lakhs)
80
TABLE 3.24.
(Rupees in lakhs)
3.6.5 In addition to the above mentioned grants, there are two kinds
of special grants given to both Village Panchayats and ULBs. 96 Primary
Schools and 21 High Schools are run by Village Panchayats and 3 Primary
Schools and 2 High Schools are run by ULBs. The Education Department
gives a grant-in-aid for running these schools, which are treated as Aided
Schools as per the Kerala Education Rules.
The amounts given during the last three years are summarized in the Table
3.25.
TABLE 3.25.
(Rs. in lakhs)
Year Village Panchayat Municipality Corporation
1996-97 1.36 NIL NIL
1997-98 2.18 NIL 0.63
1998-99 4.16 NIL 0.23
81
Similarly, libraries run by Village Panchayats and affiliated to the Kerala
Grandhasala Sangham, which gives grant-in-aid as per the size of the library.
The grant –in-aid given during the last three years are noted in Table
TABLE 3.26.
Grant-in-aid given to local governments for running Libraries
LOANS
3.7 In the case of Village Panchayats, loans can be taken with prior
Government permission from the Kerala State Rural Development
Board (RDB) or Commercial Banks. With the acceptance of the
recommendation of the First SFC, Government decided to
restructure RDB. Now it does not give loans and is engaged in
completing the construction projects taken up earlier. However, the
Village Panchayats owe Rs.7.98 crores to RDB by way of
overdues. In addition in the last two years Village Panchayats have
been taking Housing Loan from HUDCO and Co-operative Bank,
jointly with the Block and District Panchayats. LSGIs in Kollam
have borrowed Rs.80 crores from HUDCO in 2000-2001.
Similarly LSGIs in Thiruvananthapuram have availed themselves
of Rs.89.62 crores from the State Co-operative Bank. These loans
are for
82
house construction for families Below the Poverty Line. They are
guaranteed by the Government and repayment of interest would be from
future Plan funds and repayment of the principal amount is taken care of
by fixed deposits which would multiply over a period to the amount
needed for repayment. ULBs have also taken these special loans.
In the case of urban local governments the major sources of loans are the
3.7.2 Kerala Urban Development Finance Corporation (KUDFC), HUDCO and
Commercial Banks. In addition there are loans from Government,
Institution-wise distribution of loans taken by ULBs during the last five
years is given in Table 3.27.
TABLE 3.27.
(Rupees in lakhs)
83
Loan Released by Commercial Banks
3.8 Both Village Panchayats and Municipalities have certain items of funds,
which cannot be used by them and are kept normally in the Debt Heads.
The major items are, Earnest money Deposit, the Securities, Library
Cess, Taxes deducted at source, contributions to Provident and Pension
funds (for ULBs), Advances etc.
3.9 New forms of grant-in-aid are being given to all local governments
since 1995 to discharge the new responsibilities transferred to them.
These can be grouped into two.
84
3.9.1 GENERAL PLAN GRANTS-IN-AID. Government have been giving
Plan Grants-in-aid for preparing local level development schemes. This is
a practically untied grant, with the specification that at least 40% of the
grant-in-aid given to Panchayat Raj Institutions should be spent on the
productive sector and not more than 30% can be spent on infrastructure; in
the case of ULBs, the figures are 30% and 40% respectively. (In addition,
for taking up Housing and Water supply Schemes up to 10% can be
diverted from the productive sector by any LSGI). The amounts given to
various LSGIs during the last four years are shown in Table 3.28.
TABLE 3.28.
(Rupees in crores)
85
TABLE 3.29.
Weightage (Percentage)
86
non-divertible by the departments for other purposes. These funds could be
broadly classified as follows: i Grant-in-aid for implementing
transferred Plan schemes both State sponsored and Centrally sponsored.
87
tional expenses like supply of medicines in hospitals. However, office
expenses and maintenance costs are given as non-plan grants to LSGIs.
The comparative figures for the last four years for Health, Education and
Public Works Departments who have transferred most of their assets to
LSGIs can be seen in Table 3.30.
TABLE 3.30
(Rupees in lakhs]
This clearly shows that the funds given to LSGIs are inadequate vis a-vis
the maintenance requirements. This underlines the need to rationalize
allocation of funds for establishment purposes and mainte nance purposes
in respect of the institutions and offices transfers to local governments.
For meeting the establishment costs including salary and related expenses
of staff from the Panchayat Department deployed specifically to the
88
Block and District Panchayats, honorarium and travel
89
expenses of elected members and other office expenses, a grant-in-aid is
paid to them. This grant-in-aid, which was fixed in 1996, has not been
changed since then, even though the salaries of staff have increased
considerably after the 1997 Pay Revision and the honorarium of elected
members was enhanced based on the recommendation of the Committee on
Decentralisation of Powers. As of now each District Panchayat gets an
annual grant of Rs. 16.43 lakh and each Block Panchayat gets Rs. 4.01
lakh. Figures collected from District Panchayats and Block Panchayats
show that this provision is highly inadequate resulting in diversion of other
grants-in-aid for meeting establishment cost. (Table 3.31).
TABLE 3.31
RECEIPT AND EXPENDITURE OF THE ESTABLISHMENT
GRANTS FOR DISTRICT PANCHAYATS/BLOCK PANCHAYATS
District Panchayat
Block Panchayat
90
EXPENDITURE OF LOCAL
GOVERNMENTS
1. Establishment costs
TABLE 3.32
ULBs.
91
92
93
3.15
94
3.5 Relating to Village Panchayat
95
3.6.7 Share of each item under own revenue
96
3.15.1 For meeting the establishment costs as well as performing the obligatory
duties the Village Panchayats and ULBs can use tax revenue other than
shared tax, non-tax revenue, specific purpose and general purpose grants
(in the case of ULBs) and Rural Pool (in the case of Village Panchayats).
The degree of self sufficiency of various LSGIs can be gauged from Table
3.33.
97
3.15.2 General picture of self sufficiency for establishment as well as obligatory
functions as revealed by expenditure percentage for various categories of
establishment and obligatory functions is given in Table 3.34
TABLE 3.34
SELF-SUFFICIENCY OF LSGIs
98
99
MUNICIPALITIES
Own Revenue
Expenditure
• Own Revenue
• Expenditure
100
101
CHAPTER 4
102
The budget presented in 1996 February, can be considered as the next
important milestone in the decentralisation process. It: expanded the
concept of untied funds. It was in 1990 that foi the first time a small
amount was set apart for Village Panchayafc as a plan scheme for which
they could draw up their own schemes according to local priorities. This
scheme, which had an allotmen; of Rs. 28.58 crores in 1995-96, was stepped
up to Rs.155.71 crores and extended to all LSGIs, both urban and rural. The
budget enshrined two important procedural innovations. First the idea of a
separate budget document for local governments was brought into effect. To
this was added the innovation oi giving the specific Head of Account "191"
which indicated gram to LSGIs and which allowed Heads of Department to
transfei credit the amount only to the LSGIs. Any other way of drawing the
grants was prevented by this procedural device. Thus th; local governments
got legislative approval for their resoura allocation and a separate sub
system of grants in aid, which couli flow only to LSGIs, was created. The
second innovation relate to bringing certain departmental Plan schemes into
the sped system and they were the forerunners of the so called "State
sponsored schemes" which still constitute about a tenth of Ph grant-in-aid to
LSGIs. Such schemes are implemented by LSGIs according to the
guidelines issued by the State or Centra Governments.
4.4 The most important landmark in the decentralisation process of the State
is of course the momentous decision taken in July 199f to earmark 35 to
40% of the Plan resources to LSGIs and th launch of the People's Plan
Campaign in August 1996 to provid a framework for decentralisation, flesh
it out and infuse life into it.
103
4.5 Thus considerable resources were handed down to the LSGIs through this
policy decision of the Government and proper utilisation of the resources was
attempted through the mechanics of People's Plan Campaign. The funds
transferred to LSGIs as part of this government decision are indicated in
Table 4.1
TABLE 4.1
4.7 PEOPLE'S PLAN CAMPAIGN: Decentralised local level planning has been used
as the engine for harnessing public action in favour of decentralisation. In order to
shake the system and force the process, a campaign approach has been followed.
This campaign has succeeded in setting the agenda for decentralised development.
104
4.8 The People's Plan Campaign has succeeded in providing
concrete methodology for participatory plan for local lei development.
The salient features of this methodology described below, stage by stage.
4.8.3 Strategy setting: Based on the Grama/Ward Sabha feed I and the
Development Report, a one day seminar is held at I local government
level in which participation of experts, elect members, representatives
nominated by 6rama/Ward Sato and practitioners from among the
public is ensured. Thi Development Seminars decide the broad
priorities andf general thrust of developmental projects to be taken
particular year.
105
4.8.4 Projectisation: The ideas thrown up by the above three
stages are translated into projects by Task Forces at the LSGI
level. For each LSGI there are about 12 Task Forces dealing
with different sectors of development. Each Task Force is
headed by an elected member and is convened by the concerned
government official. The Vice Chairman of the Task Force is
normally a non-government expert in the sector. The projects
are prepared in the suggested format outlining the objectives,
explaining the benefits, describing the funding and detailing the
mode of execution and the phasing of the project.
4.8.7 Plan approval: The DPC gives the formal approval to the plans
after which the LSGI can start implementation. It is to be
noted that the DPC cannot change the priority of an LSGI. It
can only ensure that government guidelines are followed.
Administrative approval for implementation is given project-wise
by the concerned LSGI. Every local government has unlimited
powers of Administrative Sanction subject only to the limits of
its financial resources.
4.8.7.1 The most noteworthy feature of the decentralised planning process is the
freedom to plan and prepare projects according to
106
local priorities using the Plan grant-in-aid, which is devolved the LSGIs in a
practically untied form. The only restriction ( the LSGIs is that they have to
spend at least 40% (30% in tl case of ULBs) on the productive sector -
meaning agricultui and allied activities, industries, self-employment etc., and
nc more than 30% (40% in the case of ULBs) on infrastructure.] general
stipulation that 10% of the funds have to be spent 01 women's development
projects is also there. The Specia Component Plan/Tribal Sub-Plan
component for each LSGIii indicated clearly. Also upper-limits of subsidy for
beneficial oriented schemes has been fixed by Government after consultation
with the LSGIs. Thus one third of development schemes in tit State are
conceptualized, formulated and implemented by LSGIs, The physical
achievements of LSGIs in the three years starting from 1997-1998 are
captured in Annexures 4.2.1, 4.2.2 and 4.2.3.
4.8.7.2 Another important feature of the People's Planning Campaign has been the
effective capacity building efforts taken up. In the( first year a cascading
system of training was introduced to enable quick outreach to the cutting
edge level. About 600 Key Resource Persons (KRPs) were identified at the
State level both frou Government and outside, representing various
disciplines. Ai the district level about 10,000 District Resource Persons
(DRPs) and at the local government level about 100,000 Local Resource
Persons (LRPs) were selected. All the DRPs and LRPs and a good number of
KRPs were selected by the LSGIs themselves from government officials,
professionals and activists. Thel massive training programme ensured that at
the level of a Village Panchayat or ULB, there would be nearly 100 persons
sensitized on the objectives and methodology of decentralised planning,
These Resource Persons have taken an active part in spearheading the
campaign as well as intervening in critical stages of the Plan preparation and
implementation cycle.
107
4.8.7.3 In order to fortify and simplify the training system from the
second year, handbooks on various development sectors were
prepared by expert panels and circulated widely among the LSGIs
and Resource persons. These handbooks outline the problems
and possibilities of the sector and contain model projects, which
can be adapted according to local needs. Thirteen such sector-
specific handbooks have been prepared so far; in addition twelve
handbooks have been prepared on topics dealing with operational
procedure.
4.8.7.4 Now the focus is on strengthening the capacity of the Task Forces
on various sectors. Institutions like Medical College, Agricultural
University, Centre for Water Resource Development and
Management (CWRDM) etc., are being utilised to provide high
quality technical training to members of Task Forces in their
respective disciplines. In addition, LSGIs, which have evolved
successful models, are now utilised to train sister LSGIs by
exposing them to the models evolved.
PROCEDURAL REFORMS
4.8.8
108
This consisted of experts in various fields who responded to tl call of
Government to render voluntary professional services i the cause of local
level development. These VTCs were converts into Block/Municipal Level
Expert Committees (BLEC/MLEC and District Level Expert Committees
(DLEC) by adding to it membership professionals from Government. These
Exper Committees are given a three-fold role. Firstly they are expectei to
provide technical advice to the LSGIs whenever requested. I: this respect
they act as Technical Resource Groups for LSGIs t tap. Secondly they are
empowered to technically vet the project of the LSGIs before they are sent
to the DPCs for approva Here the Expert Committees function as the
Technical Advisor Groups of the DPC. However these Expert Committees
are m empowered to change the priority of an LSGI; they can on! insist on
following of technical standards, adherence t mandatory Government
instructions and proper costing an phasing of various programmes. The
third function of the Exper Committees is to give Technical Sanction for
works, which requir such approval. In this role they function as the
Technical Suppor Group of the LSGIs. For technical sanction, sub groups
consists of at least three experts are formed in which as far as possibl the
Government professional is the Convenor and the non government
professional is the Chairperson. This system c technical approval is faster,
cheaper and more transparent, I; the case of Village Panchayats without
engineers, the engine? members of these Expert Committees are allowed to
perforr the role of the engineers on payment of a small fee not exceedini
2.5% of the estimate of a work for the full range of functions,
109
poverty and minimum needs programmes for people below poverty line is an
important activity of LSGIs. Without infringing on the basic autonomy of
LSGIs, the Government have prescribed a due process for beneficiary
selection. The key elements of this process are fixing of definite and
transparent eligibility criteria for each scheme as well as prioritisation criteria
among those eligible for such scheme. The prioritisation criteria have to be
given weightages in the form of points or marks. These criteria have to be
published and application forms invited after widespread publicity. In fact,
full-page advertisements are issued by Government alerting the people about
impending beneficiary selection and exhorting them to approach the LSGIs.
Each application received has to be acknowledged. Thereafter it has to be
enquired into either through officials or preferably through a committee of
officials and non-officials and marks awarded for each criterion and totalled. A
draft priority list based on these marks has to be prepared and taken to the
Grama/Ward Sabha in which the applicants from that particular ward also
participate. The marks have to be justified in the Grama/Ward Sabha and
altered if decided by the Grama/Ward Sabha. Once the Grama/ Ward Sabha
approves the list, the priority cannot be changed by the LSGIs. In order to
ensure equitable distribution of benefits among the different wards of a Village
Panchayat/Urban Local Body, ward-wise physical target is prepared in
proportion to eligible applicants. Even for selection of beneficiaries to schemes
sponsored by Block Panchayats and District Panchayats it is the Grama
Panchayat, which is to perform the function through its Grama Sabhas in the
manner prescribed above. All records relating to selection of beneficiaries have
been declared as public documents. This insistence on due process has
considerably reduced patronage and nepotism in the selection of beneficiaries.
110
for execution of public works by LSGIs was issued. It providt for
community contracting of works through committees (I beneficiaries along
with stringent provisions to guard again" benami contractors masquerading
as conveners or nominees I beneficiary committees. The rules provide for
compulsor transparency with all records relating to a public work right fro;
preliminary estimates, up to final bills and payment vouchee being declared
as public documents for any one to peruse or tat copies. The rules also insist
on preparation of a summary of tt estimate in layman's language and
exhibition of this summaryi well as details of execution at the work site. In
addition th process of technical approval is sought to be demystified so th;
government could, through an executive order, bestow powei of technical
sanction on institutions as well as committees ( government or non-
government professionals. This radic; feature provides for easy access to
technical expertise, ll pursuance of these rules the government have decided
on programme of preparing a separate public works manual for loci
governments with updated specifications and standards and mor
accountable and people-friendly methods of preparation c estimates, taking
measurements of public works and finalizini bills. This ambitious
programme when it is carried to its logic; conclusion is expected to improve
the execution of public wort by reducing chances of corruption and
facilitating social audit
111
decentralisation process, some of them interrelated, are summarised below.
112
is rather limited. Unless these officials, especially tf professionals take an active
interest in the planning proa and assume ownership of the plans and serve as the vita
link between the people and the plan, it will not be possibli to consolidate and
iteratively refine the quality of the plflfi in their areas of expertise.
113
LSGIs, the Government accepted the recommendations of the Committee on
Decentralisation of Powers (popularly known as the 'Sen Committee5 named
after its Chairperson late Dr. S.B.Sen) and decided on a rational allotment of
functional responsibilities among them. Thus the Kerala Panchayat Raj and
Municipality Acts were radically restructured to go beyond the llth and 12th
Schedules of the Constitution by attempting to define clearly the functional
areas of the different tiers and types of LSGIs as precisely as possible.
4.10.2 The llth and 12th Schedules of the Indian Constitution actually do not carve
out the functional domains of LSGIs. They only list developmental areas
where, if so decided by the state government, LSGIs could have a role in
planning for economic development and social justice and in the
implementation of such plans. But Kerala has demarcated the functional
domains of LSGIs with a great degree of clarity. The Kerala Acts classify
functions as mandatory functions, general functions and sector-wise functions.
The functions assigned to the three tier Panchayats and Urban Local Bodies
are given in Annexure 4.3. In areas related to infrastructure and management
of public institutions, the functional differentiation is sharp and clear, but in
productive sectors it is difficult to clearly earmark functions separately for
each tier. Only through experience can the natural functional area in such
sectors get defined. There is a clear recognition of the existence of a role-
range for LSGIs - Agent, Adviser, Manager, Partner and Actor - with the
objective being to reduce the agency role and expand the autonomous - actor
role.
114
transfer the district level offices to the District Panchayats rationalise the
staff structure for better service to other tien local governments. Of
particular relevance, is the decision provide additional engineering
support as per which, there wot be three Engineering Circles under
Superintending Enginet each District Panchayat will get an additional
division under Executive Engineer, all the Block Panchayats would get
Assistant Executive Engineer each and 573 Assistant Enginet would be
deployed among Village Panchayats in such a man; that 203 large
Village Panchayats would get one engineer a and others at the rate of
one engineer for two Panchayats. i the Urban Local Bodies one
Superintending Engineer each woi go to the two new Corporations, one
Executive Engineer tod of the 12 Grade I Municipalities and one
Assistant Execuc Engineer to each of the remaining 41 Municipalities.
115
have been transferred to the District Panchayats and the primary and
upper primary schools have been transferred to Village Panchayats; in
urban areas, all schools have been transferred to the ULBs.
c) Dairy development.
e) Inland fisheries.
(7) The whole of sanitation and almost the entire rural water
supply have moved over to LSGIs.
116
(8) Promotion of tiny, cottage and small industries is mostly
local government task.
Thus it is clear that, in terms of governance, more than halil with the LSGIs.
4.12.3 As of now government pays the salary and meets other operational
costs particularly in health institutions. All the other
responsibilities of providing new infrastructure and equipments
to attain the minimum standards and of maintaining the
transferred have become the burden of the LSGIs. For examples
282 Krishi Bhavan offices, 2561 Lower Primary Schools; 962
Upper Primary Schools, and 6911 Anganwadis have
transferred to the Village Panchayats alone. In addition the
Village Panchayats have to provide new buildings to 2040 fu
Welfare Centres, 207 PHCs and 9199 Anganwadis.
117
CHAPTER 5
INTRODUCTION
5.1 The first State Finance Commission which was set up along with
the enactment of the Kerala Panchayat Raj Act 1994 and one
month before the enactment of the Kerala Municipality Act 1994
started functioning from 23rd April 1994 and submitted its report
on 29th February 1996. The context in which the First SFC
functioned needs to be noted. Till October 1995 there were no
elected bodies. The Village Panchayats and Municipalities were
run by Administrative Committees, which consisted of the elected
members who were there before the expiry of the term of office;
and in the Corporations, District Collectors were posted as
Administrators. And in Kerala there were no District Panchayats
or Block Panchayats before 1995.
118
SIGNIFICANCE OF THE RECOMMENDATIONS OF THE
FIRST STATE FINANCE COMMISSION
5.3 In spite of the constraints, the first SFC broke new ground in
several ways. They are listed below:
119
The Commission had laid down the principle that the maintenance
requirements should be calculated on the basis of the current
replacement cost and not on historic cost. Though the State
Government did not accept the suggestion it has certainly influenced
the Second SFC in its assessment of the maintenance needs, to
quantify the devolution required for reasonable maintenance of assets
transferred to LSSIs as well as of new assets created by them using
plan funds.
120
Thus grants to local governments were brought into ti realm of
entitlements and all forms of discretion whi; were used earlier to
discriminate among LSGIs, were tate away with the acceptance of
the report of the First SFC
(8) The First SFC had rightly stressed the need for continues
data gathering on local government finances. The Secor
SFC reiterates this need.
(9) The First SFC gave a comprehensive picture of the local government
finances by providing an update, which was: very difficult thing to
do in the absence of proper datu The analysis of the finance of
Village Panchayats ans Municipalities - the distinguishing features
and thei rationale, the problems and the potentialities, tJ distortions
and their correctives - has proved very useful.
121
has proved to be time consuming. Also some of the recommendations had to
be implemented by departments other than the Local Self Government
Department. Therefore at this point of time some of the recommendations of
the First SFC including very important ones like rationalization of property
tax, tax mapping etc., have not been fully operationalised even though they
were accepted by the Government. The status of implementation of the
various recommendations of the First SFC can be seen in Annexure 5.1.
(1) The rules for levying Property Tax may be notified and
the assessment work started in January 2001 itself. Some
general suggestions in this regard are given in Chapter 9.
122
(3) Service Tax may be levied as an independent tax by the
urban and rural local governments. Further legislative
action is needed.
(6) The First SFC had suggested revision of rates of fees and other
similar non-tax sources. This has been partially
implemented. The Second Finance Commission
recommending thorough revision in Chapter 9.
123
governments and the unique premises numbering system followed.
(11) The First SFC had suggested that the Rural Development
Board be made into a financing agency and that soft loans
should be given both by the Rural Development Board and
the Kerala Urban Development Finance Corporation. This
matter will be dealt with in detail by the Second Finance
Commission in the second part of its Report. However, it
is suggested that a single financing agency would do for
all LSGIs, both urban and rural.
124
(16) The recommendations of the First SFC were accepted! 1997.
Strictly speaking they should have been maJ effective from 1-4-
1996. However they are legally in fon since 1-4-1997. Therefore
any shortfall in devolutioi below the accepted level in respect of
assigned and shari taxes should be made good by the government.
125
CHAPTER 6
THIS DEVOLUTION AND INTER SE
DISTRIBUTION OF PLAN FUNDS
6.1 T he decision to transfer 35-40 percent of plan outlay to LSGIs,who are
then left left free to spend the amount on plan projects formulated by themselves,
has been a historic one. While panchayats as active institutions exist in several
other states in the country, notably in West Bengal which played a pioneering role
such a high proportion of plan funds handed over to the LSGIs. The second and
related feature is the freedom accorded to LSGIs to make plans according to their
own priorities. There exists of course a system of vetting of local plans at higher
But subject to such general constraints, the priorities informing any local plan are
respected. The third feature has to do with the fact that there is a clear
These three features make the Kerala practice the first authentic attempt,
much attention from other states, aroused a great deal of curiosity all over the
126
which has even been hailed as "a synthesis of Gandhi and Marx”
6.2 There can be little doubt that Kerala's ability to achieve this breakthrough
can be attributed to the fact that it was a part of the Peoples' Plan
Campaign. The significance of this Campaign,
and the array of measures of democratic decentralisation which
followed in its wake (of which the devolution of 35-40 percent
of plan outlay to LSGIs is only one), have been described in an
earlier chapter. Here we would like to reiterate our belief that
minimum share of plan funds of this order of magnitude should
continue to be transferred to the LSGIs every year. While we
recommend this for the next five years which constitute our jurisdiction, we
hope this practice would be carried forwar
thereafter too. To be sure, there are several problems associated
with the present practice of decentralised planning. Some of these
are discussed below. But these in no way negate the worth and
legitimacy of the experiment, which should be seen not merely
in narrowly economic terms as an alternative, more effects
model of planning, but more importantly as a means of deepening
democratic structures in our country.
127
to LSGIs in the transitional phase. These would decline naturally with the
passage of time, and have been doing so. The total outlay on state-sponsored
schemes has in fact been declining, from Rs.276 cr. in 1997-8 to Rs.166.50
cr.in 1998-9, to Rs.134.40 cr.in 1999-2000 (RE). As long as state sponsored
schemes exist the outlay on such schemes should not be counted as part of
total devolution, but should be treated as an additionality: counting them as
devolution causes a hiatus between the actual and apparent magnitudes of
funds left to the domain of LSGI decision-making. (What appears for instance
as 35 percent devolution actually means less, as we have seen for 1999-2000).
Our recommendation is that a minimum of one-third of the state's plan outlay
in any year should be statutorily transferred to the LSGIs, and that in
computing this ratio the transfers on account of state-sponsored schemes
should be excluded from the numerator. This is convenient for framing
appropriate legislation and corresponds on present reckoning to over 35
percent plan outlay, including state-sponsored schemes in both the numerator
and the denominator1
6.4 We now come to the problems associated with transferring such huge amounts
of plan funds to LSGIs. Among the many problems that can be identified we
would focus on four broad sets of problems here. Two of these will be
discussed here only cursorily since they would be taken up in the second part
of our report. The first of these is the absence of an adequate permanent
institutional framework for decentralised planning, which makes the exercise
a "voluntaristic" one, not de-linked from a
1.
The figure 35-40 percent was originally arrived at through some studies
which showed, on the basis of historical data for the state, that the proportion
of plan outlay which could in principle fall within the province of district-level
planning (including planning by tiers below) was around this. It has acquired
an added legitimacy from practice which induces us to stick to this figure.
128
"Campaign mode". An example of this absence of an institutional
framework is the fact that the decision to transfer 35 percent or plan funds
to LSGIs has itself till now been only an administrative decision, reversible
at any point of time. It has been without any statutory basis whatsoever (a
lacuna that we hope o recommendation would remove). But more generally,
planning of any kind required personnel. A carde of trained personnel
appropriate for this kind of planning, has not yet bet fully created.
Decentralised planning has had to make do win whatever personnel are
available from voluntary organisatloi and the ranks of locally available
experts. Some no doubt wouli see a virtue in the present state of affairs: the
Campaign mod; arouses popular enthusiasm, while shrouding decentralised
planning within an institutional framework would lead n bureaucratisation,
ossification, and "routinisation", all of what are inimical to the spirit of
popular participation. In short tt: fear may be expressed that the very
process of institutionalisinf decentralised planning would rob it of its
authentic democrat character, i.e. would make people passive objects all
over again. from being, in howsoever limited a fashion, active subjects.
Whil this fear is not without justification, it is nonetheless the can that
voluntarism is essentially impermanent, that the "Campaign mode" can
never be sustained for long, so that eschewicf institutionalisation eventually
means throwing the baby out wit the bathwater. The need is to combine
active popular participate with an appropriate institutional framework which
would mail the existing government staff, both professionals and generalisti
fully involved. The process of bringing into being an appropriate
institutional framework for decentralised planning is currentli underway in
the state. Ensuring that active popular participate in planning is not
destroyed as this framework comes into bein will be one of the challenges
before decentralised planning i the coming years.
129
corruption. Corruption, without a doubt, exists in several different forms in the
decentralised planning system. But then so it did, even earlier, i.e. prior to the
increased devolution of plan funds. There is no reason to believe that the scale
of corruption in the use of plan funds has increased in any way after
devolution; indeed several knowledgeable observers have the impression that
it might have decreased. Its continued existence nevertheless is a source of
concern. The fact of popular participation, and hence vigilance, should have
the effect of reducing at least certain types of corruption. On the other hand
however the absence of an appropriate institutional framework for
decentralised planning would provide scope for corruption. Putting it
differently, a comparison of the earlier planning system with an alternative
system of decentralised planning with popular participation would associate a
much lower level of corruption with the latter. It follows that if corruption
exists on a by-no-means-modest scale in the present dispensation, then this is
at least partly due to the fact that the system of decentralised planning,
complete with its own institutional framework with its new checks and
balances, has not yet been put in place. Once the institutional framework for
decentralised planning is erected, the scale of corruption should come down
significantly. The recent appointment of an Ombudsmen is an example of an
institutional framework gradually coming into place, which should reduce the
scope for corruption. A more elaborate discussion of these issues together with
specific suggestions will be made in the second part of our report.
6.6 The third problem springs from the type of plan projects which small bodies,
such as the panchayats, are intrinsically capable of undertaking on their own.
These typically are tiny projects catering to local needs. Transferring
substantial plan funds to them would necessarily result in a proliferation of
such projects. While this would not be a bad thing at all for a certain period of
time (since centralised decision-making typically ignores local
130
needs, and has done so in our country), a continuous replication of such
projects, with progressively lesser and lesser soc usefulness, can scarcely be
justified, especially when resour are being taken away from larger state-
level projects which migli be essential for the state's economic health.
Putting it different a devolution of 35 percent of plan funds continuing not
jir into the immediate, but also into the more distant, future woif be justified
only if the composition of projects on which tk amount is spent can be
made to keep changing in consonan; with the changing requirements of the
people. This in tuJ requires that the LSGIs should be capable of overcoming
the narrow, "small bodies'" horizon. Village panchayats, for instant should
in the next phase be prepared to collaborate with one another to undertake
meso-level projects, or even macro-level projects. In short the transfer of
resources to the lower level should not mean a perpetual entrapment in
mini-projects a progressively decreasing rationale. One can go further. The
LSGI have to break out at some stage not only from their narrow micro
project preoccupation, but also from their almost exclusive rol of being
purveyors of welfare goods and services to the people. To be sure, the need
for such goods and services can hardly bj overemphasised, but the word to
note is "exclusive". Even fit providing a larger flow of welfare goods and
services to the peopt at a later date, the LSGIs may have to take on a more
diversify, role, aimed at augmenting the means at their disposal. Many of
them of course provide help at present to deserving private individual
producers in their respective areas, but this has nc generally been a source
of revenue for them. It has been a: extension of the welfare-purveyor role.
They have to pay greatr attention to means augmentation possibilities while
renderta such help. In addition, LSGIs can also boost their resources by
eliminating the wastes and "leakages" that entrusting public work
programmes to middlemen entails, and by undertaking innovate output
augmenting local projects which can yield larger revenues as well. Taking
up government contracts for civil construction
131
for a reasonable centage charge is a possibility work exploring. The third
problem for decentralised planning would arise therefore if the LSGIs do not
show sufficient flexibility to transform and broaden their nature. If they
continue to remain mere conduits for distributing welfare goods and services,
then even this role cannot be sustained in the not-unlikely event of a
worsening of the fiscal squeeze experienced by the central or the state
government, for then, as this squeeze gets "passed downwards", they would
find themselves increasingly bereft of resources.
6.7 The fourth problem concerns the inadequacy of the LSGIs' own
tax effort. It is often asserted that there has been a slackening of the LSGIs tax
effort as larger plan funds have been made available to them. While hitherto-
published research attempting to establish this slackening hypothesis is not
convincing, the view that such a slackening has actually occurred is widely
held in knowledgeable circles. Time-series data do show a lower level of
revenue in recent years compared to what a long-term trend fitted to earlier
data would project, but this per se does not constitute proof of slackening.
Besides, this shortfall relative to trend predates the increase in devolution that
came with the Peoples' Plan Campaign. But whether or not there has been an
actual slackening on account of the larger devolution, the fact remains that
LSGIs5 tax collections are way below potential. This makes them almost
entirely dependent on devolution from the state government and hence
extremely vulnerable to the fiscal travails afflicting the state, and hence by
implication the central, government. In the absence of adequate local-level
resource mobilisation the base for decentralised planning remains extremely
fragile. We recognise of course that resource mobilisation is not synonymous
with raising larger tax revenue: the former can take several forms, such as for
instance mobilisation of voluntary labour by LSGI, of which tax effort is only
one. It has also been brought to our notice that not an inconsiderable amount
of additional resource
132
mobilisation has occurred in LSGIs, even when conventional indices like
tax revenue have shown unimpressive increase! Nonetheless, given the
indubitable fact that tax collections by LSGIs have been much below
potential, our Commission has felt the need to recommend the introduction
of a system of rewarl for tax effort through an amendment in the formula
for the inter se distribution of plan funds.
The first Finance Commission had suggested the following criteria for the
6.8 inter se distribution of plan funds.
ULBs RLBs
6.9 The Finance Commission had not explicitly demarcated between the
different tiers of the PRIs and ULBs, the presumption being that the above
criteria would apply within each tier, while the division between tiers
would continue in the same ratios as were prevailing at the time. The
Cabinet Subcommittee set up to examine the First SFC report felt that,
instead of the formula recommended by the Commission, plan funds may
be distributed according to a simple formula giving 90 percent weight to
population and 10 percent to area. The distribution of funds in
133
1997-8, the year when plan grant-in-aid was greatly increased, was however
entirely on the basis of population alone. The Planning Board set up a
Working group in October 1997 to look into the matter and evolve a fresh
formula for the inter se distribution of plan funds. This formula, on the basis
of which plan funds are distributed at present is the one set out in Chapter 3
above.
6.11 While suggesting that the tax effort, or more accurately the
revenue effort, criterion should be introduced in addition to
the above, we propose not to disturb the current pattern of
distribution of plan funds among the various tiers. The revenue
effort criterion should be introduced only at the stage of inter
se distribution within a tier. It follows that this criterion can be
introduced only in the Grama panchayats and ULBs which alone
have significant revenue raising capacities. To see how we propose
to introduce the revenue effort criterion into this scheme, let us
134
first look only at Grama Panchayats. We wish to earmark a maximum of 10
percent out of the plan funds destined for Grama panchayats for distribution
on the criterion of revenue effort. This percentage, which is not a fixed one
but varies from year to year, has to come out of the 65 percent currently
distributed on the (Non-SC/ST) population criterion. This percentage
should be arrived at as follows. In any particular year some panchayats will
show an increase in their revenue (consisting of all revenue from taxes, fees
and other sources1) over the previous year, whilt others will show either a
decline in revenue or the same level of revenue. Let the number of
panchayats showing an increase it revenue be n, while the total number of
panchayats is N. The percentage of plan funds distributed on the revenue
effort criterion in the following year (by which time the relevant data
regarding revenue collections by the panchayats would haul become
available) will then be 10.n /N. If for instance out of 990 village panchayats
in a particular year only 371 show at increase in revenue (over the previous
year) then the proportion of plan funds distributed on the revenue effort
criterion in ths following year will be (10 multiplied by 371) / 990. We
recommend that in actual calculation, 990 should be roundeo: off to 1000
for simplicity. Adopting this procedure, the proportion distributed on the
revenue effort criterion would be 3.71 percent, and the proportion
distributed on the Non-SC/ST population criterion would be 61.29 percent.
Once the amount of plan funds to be distributed on the revenue effort
criterion in any particular year is so determined, this amount has to be
1
There have been instances, where due to some government or Court order
revenue has not been collected for some time under some particular head,
and the lifting of the ban causes a sudden jump in revenue under that head.
Since jumps of this sort would cause a distortion in the application of our
proposed criterion, we suggest that in all such cases the increase in
revenue under this head in the year of the jump should be ignored. This
head should begin to count only from the next year onwards.
135
distributed among the panchayats which did raise their revenue, i.e. the 371
panchayats in the above example. For this we recommend the following
procedure. For each of the 371 panchayats there is a certain percentage
increase in revenue in the year just completed over the preceding year. This
percentage for any panchayat multiplied by its population gives a number for
that panchayat. The share of that panchayat (in the total amount available for
distribution on the revenue effort criterion) is this number divided by the sum
of such numbers for all the 371 panchayats. If the share for panchayat i is
denoted by q i, the percentage increase in its revenue is given by r . and its
population by P i then
qi = ri .Pi / Σ ri .Pi
6.12 A simple example will clarify the proposed procedure. To do so however let
us take a smaller number of panchayats showing a revenue increase. Let the
number be 10. Then 10 times 10 divided by 1000, i.e. only 0.1 percent of plan
funds will be distributed on the revenue effort criterion and 64.9 percent on the
non-SC/ ST population criterion. Suppose the plan grant-in-aid earmarked for
Grama panchayats is Rs.1000 crores; then Rs.l crore will be distributed on the
revenue effort criterion. How will it be distributed? Suppose the percentage
increases in the revenue of the 10 panchayats are respectively, 1, 2, 3, 4, 5, 6,
7, 8, 9, and 10. And suppose their populations are respectively 100, 200, 300,
400, 500, 600, 700, 800, 900, and 1000. Then the share of the first panchayat
will be (1 times 100) /(1 times 100 + 2 times 200 + 3 times 300 + 4 times 400
+...........).The respective shares of the ten panchayats in the pool of Rs.l crore
work out in this fashion to: 1/385, 4/385, 9/385, 16/385, 25/385, 36/ 385,
49/385, 64/385, 81/385, and 100/385. These shares add up to 1.
6.13 In the actual application of the formula however we suggest a modification.
Since we are taking percentage increases, a Panchayat with a low base can
show a phenomenal increase in a particular year and hence get unduly
rewarded by our formula. Likewise a Panchayat which shows a negative
increase in year and a large increase in the following year would stand to gain
by our formula (since we are not directly penalising negati increases). To
avoid such quirky results, we propose to count all percentage increases of 30
or above as 30. The reason for taking 30 as the ceiling is the following. From
136
simulations carried out on data for 1998-9 and given in an Annexure, it turns
out that the difference made to the big losers from alternative ceiling
negligible. This being the case, since the incentive effect for the others would
get blunted if we take a very low ceiling, say 10 or percent, we have decided
to take 30 percent as the ceiling,
137
6.15 Let us now turn to the rationale of the above formula. Ideally,
revenue effort should be evaluated by looking at the actual
revenue collections in comparison to some notion of potential
revenue generating capacity. Unfortunately we simply do not have
the data to calculate this potential capacity for each and every
LSGL Looking at Increases in revenue as an indicator of effort
is only a convenient proxy. Here, introducing explicit penalties
for LSGIs showing reductions in revenue would be unfair, and
would inevitably result in appeals to discretion on pleas of special
circumstances, which would have the effect of undermining the
entire system. We have therefore introduced penalties indirectly,
not merely through an exclusion from reward for revenue
increases, but through consignment to a group that only shares
a reduced amount available for distribution on the population
criterion. The precise formula of course has been dictated by the
need to have "well-behaved" properties (which also constitute a
reason for the exclusion of "negative" transfers, i.e. of explicit
penalties for reduced revenue collection), and the need to avoid
absurd results. For instance, a variable proportion of plan funds
is supposed to be distributed on this criterion, as opposed to a
fixed proportion on other criteria, because of the need to avoid
absurd results. If in a particular year, say, only 10 panchayats
happen to show an increase in revenue, then, with a fixed 10
percent distribution on revenue effort basis, they would walk
off, in the above example, with nearly Rs.100 crores between
them, which would be extremely unreasonable (especially since
we are using ordinal terms like "increase" and "decrease"). As
for the actual formula for the inter se distribution from the pool
earmarked for rewarding revenue effort, it satisfies the property
that if all panchayats showing revenue increases showed the same
percentage revenue increases, then the pool would be shared
among them exactly in the same ratio as their non-SC/ST
138
population, which is perfectly reasonable. On the other hand the above
formula also says that if all panchayats showed a reduction or constancy in
revenue collections, then again the size of the pool would be zero, so that
the entire 65 percent of plan funds would be shared among grama
panchayats (75 percent for ULBs) on the non-SC/ST population criterion,
the same as is the practice now. In such a case in other words, all being
delinquent, none would be singled out for punishment, which too is
reasonable.
6.16 The real limitation of the above formula arises from the fact that we are
taking percentage increases. This gives rise to two different kinds of
problems: the first is the "low base" effect. For example if a panchayat had
zero (or very low) revenue in one year and some increase in the next year,
then its rate of growth would be infinitely large, giving it an enormous,
illegitimate advantage. One way of avoiding this problem is to divide the
absolute increase in revenue by the total income of the inhabitants of a
panchayat (or some similar variable). But we do not have data on the total
income of the inhabitants of a panchayat. Taking the expenditure by
panchayats as the denominator, while it would get rid of the low base
problem, would work against the poorer panchayats. All things considered,
therefore, there is no easy alternative to taking percentage increases in
revenue as the proxy for revenue effort. And it may not be a bad proxy in
practice. Nonetheless, to guard against anomalies, we are suggesting a
maximum figure of 30 for the percentage increase in reveue. The second
problem with taking percentage increases is the fact that the revenue
raising capacity of panchayats and ULBs is subject to a limit that does not
move up much from one year the next. It does not even go up in tandem
with price increases or real income increases of residents within their
jurisdiction since a good part of this revenue is supposed to come from
property taxation, and the revenue to be raised from a particular property
can be adjusted only at discrete intervals. As a result
139
even with the best of intentions some local bodies will find it difficult to raise
their revenue beyond a point. Any criterion that looks only at percentage
increases in revenue therefore is potentially discriminatory against them. This
no doubt is an important consideration, but its practical relevance over the
next five years may not be all that much. The current level of revenue
mobilisation relative to potential is too low in the case of all Panchayats and
ULBs for us to worry about the implicit discrimination against those that have
hit or are close to their revenue-raising capacity. What is true however is the
fact that this formula, though adequate for the coming five years, should not
be continued ad infinitum. True, the low base effect would disappear over
time, but the other factor mentioned above would introduce serious biases as
some local bodies approach their revenue-raising ceiling.
6.17 Let us now turn to the practical problems of using the above formula. While the
mechanics of making the necessary computations are quite simple and non-
time consuming once the data on tax and non-tax revenue collections by the
local bodies are available, the real problem lies in obtaining reliable revenue
collection data. To overcome this, our recommendation is that it should be
made mandatory for all local bodies to have a separate account with the
treasury where collections from all items constituting their own income, and
only such collections, are deposited. Then these data would be easily available
to the state government from the treasury, and would be useful for a number of
purposes quite apart from the employment of the revenue effort criterion for
determining the inter redistribution of plan funds. Of course even if this
statutory provision is introduced, local bodies would not necessarily comply
with it immediately. To goad them into doing so before more drastic action is
taken against the deviants, a particular date should be fixed from which the
revenue effort criterion should be introduced into the distribution of plan
funds; and all local bodies for whom there
140
is no treasury-authenticated information on revenue collection should Ipso
facto be treated as if they have not had any revenue increases and thereby
excluded from any distribution under this head. Announcing such a date in
advance would also be useful for another reason, namely, any sudden
drops in plan funds for particular LSGIs can be avoided if they intensify
revenl collection effort owing to prior warning. (And if they do not then
they can scarcely claim injured innocence). For an early introduction of
the revenue effort criterion, it is essential that the government should bring
in this statutory provision as soon as possible. Since the criterion is based
on increases, time-laga intrinsic to it.
6.18. A simulation exercise on the basis of the data given to us on PRI and ULB
revenues has been carried out to determine what would have been the
distribution of plan funds in 1998-9 if the revenue effort criterion had
been applied in that year. Some results from a comparison of this
distribution with the actual distribution is given in an Annexure 6.1.
141
CHAPTER 7
7.1 A substantial number of assets has been transferred from the state
government to the LSGIs as part of the functional devolution under the
Panchayat Raj and Municipal Legislations. A good number of assets were
transfered through a Government order in September 1995 and some more
assets were transferred in the wake of the Peoples' Planning Campaign. As a
sequel to this Campaign, the devolution of plan funds to the LSGIs was
substantially increased, and this in turn was used for building up further assets.
The LSGIs today have thus become the custodians of a vast array of assets,
and the problem of the maintenance of these assets has acquired a degree of
urgency. For convenience of discussion, the assets existing under LSGI
jurisdiction at present can be divided into three categories: assets which the
LSGIs owned and maintained prior to the transfers following the September
1995 Government Order (for the maintenance of some of these assets they had
access to specific revenue sources such as VTC, and grants such as VRM);
assets which have been transferred to the LSGIs following the Government
Order; and assets which have been built since 1997-8, the year in which
enlarged devolution began. Within this last category not all assets have been
financed out of plan funds alone; surplus from own revenue and public
contribution have also gone with in. The maintenance requirements as well as
the sources of funds for maintenance for these three different types of assets
need to be discussed separately. But let us first see what exactly is being
referred to under the concept of maintenance.
7.2
142
7.2 THE CONCEPT OF MAINTANANCE
143
on depreciation-cum-maintenance is Rs.20 per year in the former (10 + 10),
and Rs.23 1/3 per year in the latter (15 + 8 1/3).
7.2.3 The logic of this argument is not affected even when there are no
explicit depreciation provisions, as is the case with LSGI assets. This is
because at the end of 12 years in the above example, following the first
option (where the asset is replaced after 10 years), we would have
spent a cumulative sum of Rs. 120 on maintenance and would be having
a 2-year old asset with a depreciated value of Rs.80 (which comes from
100 original value minus 20 loss of value owing to depreciation); on
the second option we would have spent a cumulative sum over the 12-
year period of Rs.180 on maintenance and would be having a brand
new asset worth Rs. 100 at the end of it. By following the second option
then we would have, compared to the first option, spent Rs.60 extra as
maintenance over the 12 years and ended up with only Rs.20 worth of
extra asset value. This being patently irrational, the first option should
be adopted. It follows then that the comparison between the two, or
several, options is unaffected by whether depreciation provisions are
actually made each year or not. There would be some optimum option
on the basis of which the maintenance norms can be ideally calculated.
144
7.2.5 The conceptual basis of actual estimates of maintenance expenditures
however is shaky because it is invariably mixed up with net investment.
When the roof of a school building is repaired, this does not occur in
pristine purity. Sometimes a boundary wall is added at the same time
While the repair constitutes maintenance expenditure, the addition
constitutes net investment. But the two are frequently reported together as
maintenance expenditure. This is not just due to lack of knowledge about
the distinction. Sometimes drawing the distinction is practically
impossible, since it entails a separation that is either impossible or tedious.
An example of impossibility of separation is when sow maintenance
expenditure raises the quality of service of the asset compared even to
what it was when the asset was newly installed: here maintenance has got
inextricably merged with net investment. A more common case however is
where disaggregation is possible but tedious For instance if in the process
of adding a new wing to a hospital which has to be whitewashed, some
existing walls also get whitewashed, tha keeping track of the latter as
maintenance in contrast to the formar which is net investment requires a
degree of disaggregation that is too tedious to be practically possible. All
this, somewhat abstract discussion has practical implications to which we
shall return later.
7.3
MANITANACE EXPENDITURE OUT OF PLAN ASSISTANCE
7.3.1 It can be argued that of the three categories of assets, clearly the
maintenance requirements of those assets which were with the LSGls
earlier and for whose maintenance specific revenue sources were assigned,
such as VTC, should be maintained by them; the state government should
have no responsibility in this regard. As for the assets transferred after the
1995 Government Order, the responsibility of meeting the maintenance
expenditure must fall on the state government. This is because if these
assets had not been transferred and had remained with government
departments, then the responsibility of maintaining these assets would have
fallen on the state exchequer Since these are not income-earning assets, so
that their transfer to the LSGIs has not been accompanied by any
corresponding transfer of
145
income, the task of meeting their maintenance expenditure must still fall
on the state government1. When it comes to assets constructed by
LSGIs from 1997-8 onwards, clearly the responsibility for the
maintenance of the assets whose construction has been financed by the
larger devolution of plan funds should also be borne by the government.
The reasoning again is that if these funds had not been transferred to the
LSGIs then the departments would have used them for their plan
projects, for which the government would have had to provide
maintenance. (Of course a distinction may be drawn between the assets
built out of the increased devolution, and assets that would have been
constructed out of those plan funds which would have come to the
LSGIs anyway, and the government's responsibility for providing
maintenance confined only to the former. But, without the increase, the
plan funds with LSGIs would have been so meagre that we can ignore
this distinction). As for the assets whose construction in the period
starting 1997-8 has been financed by sources other than plan funds,
clearly the LSGIs would have to look after the maintenance
requirements of these assets on their own.
7.3.2 As a matter of fact however even with regard to the assets existing with
the LSGIs earlier to the large-scale transfers, the actual maintenance
expenditure was woefully small. The first State Finance Commission
had noted that with respect to roads, the most important
1
While this principle is perhaps accepted at present, the amount of actual
maintenance expenditure undertaken is too minuscule to confirm this
acceptance. The total maintenance grant to LSGIs in the budget during the
four years 1996-7 to 2000-1 has been, respectively, Rs.3.74 cr., Rs.5.05 cr.,
Rs.5.77 cr. and Rs.3.53cr.
146
asset owned by LSGIs in the pre-1996-7 period, against the maintenance
expenditure requirement of Rs. 102.88 crores, on Rs.30 crores were being
spent.2 Of these Rs.30 crores, Rs.23 crores came from VTC and VRM. The
LSGIs' own resources contributed only about Rs.7 crores. Thus, for the
proper maintenance even of these assets, the state government has to meet
the bulk of the maintenance requirement, while ensuring that the LSGIs do
not spend in other ways what it provides maintenance. In return it need not
make any VTC payments to the LSGIs. (The first Finance Commission's
recommendation that the VTC and VRM should be merged has been
accepted by the government).
7.3.3 Of course it may be argued that with such a large share of plan funds being
set aside for the LSGIs, they should now meet their own maintenance
requirements. But this argument is wrong for several reasons: first, using
plan funds for purposes of meeting non-plan current expenditure, which is
what maintenance expenditure amounts to, is wrong in principle and would
set an unhealthy precedent. Secondly, it would defeat the very purpose of
democratic decentralisation, which is to let people prioritic investments
allocation based on local needs. Maintenance expenditure, though essential,
does not really involve any choice. If financed out of plan funds it
precludes plan projects, and ipso facto any choice in the matter of plan
projects. Thirdly, plan,
2
The fact that the "norm" used by the Commission relates to 1996-7 while
the actual expenditure figures relate to 1993-4 makes little difference to
the arguments Likewise the questions raised in the text below about the
accuracy of the estimate of Rs. 102.88 crores do not invalidate the
Commission's general point about the inadequacy of the actual
maintenance expenditure undertaken
147
assistance from the state government to the LSGIs, as a proportion of the state
government's total tax revenue, has already shown a decline in the last couple
of years: from 19.12 percent in 1997-8 and 19.52 percent in 1998-9 it came
down to 15.6 percent (RE) in 1999-2000 and 13.3 percent (BE) in 2000-01. As
the state government has faced a somewhat tighter fiscal situation owing to a
stagnation in central grants-in-aid and increased expenditure on implementing
the Pay Commission recommendations, its plan outlay has suffered, and even
though the 35 percent "norm" has been maintained, the devolution of plan
funds to LSGIs as a proportion of tax revenue has gone down. If in this
situation, maintenance requirements on LSGI assets have to come out of the
plan funds, then the size of the LSGI plans would in effect become a sort of
residual which would mean an attenuation of local planning. Fourthly, since
maintenance requirement on LSGI assets is going to increase in the coming
years, relative to other variables, owing to the fact that maintenance
expenditure on some of the newly constructed LSGI assets, negligible till now,
will have to begin and be sustained on a rising scale, the attenuation of local
level planning involved in making LSGIs finance their maintenance needs out
of plan funds, would be far greater than appears at first sight. The following
paragraphs highlight some of the issues.
7.3.4 If a certain proportion x of the value of an asset has to be spent each year for
its maintenance, then the total maintenance expenditure Mt upon this asset in
any year t is given by
where I denotes gross investment, the subscript refers to the year when a
particular addition to the asset (represented by the corresponding investment)
started functioning, t-1 the previous
148
year ( the asset's life-time T is assumed to be not less than t),3 There are
however some assets, of which roads are a prime example, for which the
pattern of maintenance expenditure has a singular complexity. Roads too
require a certain amount of expenditure on repairs every year; but, in
addition, surfaced roads require re-topping every three to five years. Since,
with such maintenance and re-topping, surfaced roads can last a very long
time, both these types of expenditure should be counted as maintenance
expenditure. Our perception of maintenance expenditure then has to be
modified in the case of surfaced roads
3
With this definition we have two formulae representing simple logical
truisms a universe where gross investment grows at a steady rate g. If the
asset (assmued for simplicity to be a single homogeneous one), which it
creates, has, as before a life of T years and requires x percent of its value as
maintenance expenditure each year, then the ratio of total maintenance
expenditure to gross investment any year becomes a constant
M1/It=(x/g).{1-1/91+g)T-1}
after a minimum period of T years of operating the asset has passed. Before
T years have passed, the ratio of maintenance expenditure to gross
investment during any year t , such that 1 < t <T, is given by
(x/g).{1-1/(1+g)t-1}
which, for any x and g, keeps increasing until it reaches the value given in
the first formula. The first formula therefore gives an upper limit for the
ratio. If the ratio of maintenance expenditure to the value of the asset
increases over the life of the asset, then x in the first formula has to be
interpreted as a weighted average. In the second formula maintenance
expenditure as a proportion of gross investment would then rise even faster,
both because t rises and because x also rises with time. Now, even if gross
investment creates an assortment of assets and not just one single asset, as
long as they have similar life-spans and simihi patterns of maintenance
requirement (as proportion of value of asset) through life, both formulae
remain valid.
149
(whose maintenance is of overriding practical importance in Kerala). If a
surfaced road needs re-topping every T years, if the expenditure on re-topping
per unit of investment (however measured) is given by y, and the expenditure
on repair per unit of investment is given by x, then the total maintenance
expenditure on surfaced roads in any year t is
7.3.5 Now, on the basis of "norms" mentioned below, the maintenance expenditure
at 2000-1 prices for the road length that existed with the LSGIs prior to
September 1995, or has been transferred to them after September 1995, comes
to about Rs.109 crores (the calculations are given below). In addition, on the
basis of assuming that about 5000 kms. of surfaced roads are, on average,
newly constructed each year by the LSGIs out of plan funds from 1999-00
onwards (we know that about 8000 kms. were constructed in the two years
1997-8 and 1998-9), and that all such new roads are constructed entirely by
converting existing un-surfaced roads into surfaced roads (an assumption that
turns out to be not very consequential), the additional maintenance
requirement for this road length comes to about Rs.159 crores for the year
2005-64. In that year in other words, Rs.268 crores would be needed for the
maintenance of roads alone. The maintenance expenditure on assets, either
already with LSGIs
4
The assumption of SOOOkms of extra roads each year is perhaps on ihe high
side. Knowledgeable persons we have spoken to believe that 4000 km. is a
more plausible figure. On the other hand however Planning Board estimates
suggest that 17600 kms of new roads have already been built in the three-year
period 1997-8 to 1999-00, as against 13000 assumed by us. If 4000 km is
taken to be the average annual addition after 1999-00, the number of extra
kms of road-length assumed by us for the terminal year 2005-6 still remains
valid (though its distribution over time would be different from what we
assume).
150
prior to Septemebr 1995 or transferred to them thereafter, comes to about
Rs.30 crores at 2000-1 prices. On the assumption that plan assistance to
LSGIs in 2001-2 would be raised one percentage point to 14.2 percent of total
tax revenue, and would grow (like total tax revenue) at 5 percent per annum in
real terms thereafter, the magnitude of maintenance expenditure (at 2 percent
of capital cost) on newly created, plan-assistance-financed assets would be a
further Rs.88 crores at 2000-1 prices in 2005-6. The total maintenance
requirement of the LSGIs for these particular assets in that year would thus be
Rs.386 crores which would absorb 25 percent of plan assistance on our
assumptions, Moreover if LSGIs are allowed to use plan assistance for
maintenance, then they would use such funds even for maintaining those
assets which have been constructed in the post-1997-8 period out of funds
other than plan assistance. In such a case the share of maintenance in plan
assistance would go up to 41 percent. The conclusion is inescapable that if
LSGIs are given the freedom to use plan assistance for maintenance, and if
they are serious about maintenance, then they will end up using up to two-
fifths of such assistance even as early as 2005-6, and still higher and higher
proportions beyond that date. This clearly is an untenable situation. On the
other hand if they are not serious about maintenance, then that too becomes an
untenable situation The object is both to prevent erosion in plan size and to
ensure the maintenance of assets. And this can be served only if the state
government takes the responsibility of financing the maintenance requirement
of the bulk of the LSGI assets. The only exception would be those assets
which have been constructed I in the post-Campaign period by LSGIs with
funds other than what the government has provided. Even as the government
takes I the responsibility of financing the maintenance expenditure onal whole
range of LSGI assets, it must be emphasised to the LSGIs that the
maintenance of the remaining assets would have to be I financed from their
own sources, other than plan assistance. In other words the habit of treating
plan funds as a cornucopia that
151
can finance all kinds of expenditures should be actively discouraged5. We
shall return to this issue in the second part of our report.
7.3.6 According to our perception then, what the government has to meet by way of
maintenance expenditure, consists of two components: one component for a
fixed stock of assets either possessed by LSGIs earlier or transferred to them
after the 1995 GO; this would be a constant component (except to the extent
that the maintenance requirement itself might grow with the age of the assets).
The other component is for assets constructed out of plan assistance in the
period since 1997-8; this would be a growing component since the stock of
assets whose maintenance has to be covered would itself be growing.
7.4.1 There is a serious paucity of reliable data for making a proper estimate of
maintenance requirements. Even though a comprehensive list of assets
transferred to the LSGIs is now available, the age-structure of the transferred
assets is not known. What is more, even on the road length owned by the
LSGIs there are vastly differing estimates. Thus, the first Finance
Commission had shown a total road length of 112491 kms. with the LSGIs
5
. This argument also applies to the view that re-topping of roads should be
counted as part of plan, rather than maintenance, expenditure. This view is
both conceptually questionable, given the meaning of the term "maintenance"
discussed earlier, and practically inadvisable, since it would entail a big drain
on plan outlay. To be sure, if the maintenance expenditure undertaken by
LSGIs on roads is separately met by the State government, as we suggest, then
this would only encourage still more extravagant road building. But this
problem has to be addressed separately, by placing tighter constraints, if need
be, on road-building. If LSGIs are both left free (within the 30/40 percent
ceiling) to go on building roads and have to re-top these roads from plan
outlay, then the problem of unwise use of plan funds would only get
compounded.
152
as on 31.3.1996 (including 3437 kms. of PWD roads transferred), of
which 105553 kms. were with Grama Panchayats. On the other hand data
given to us by the Directorate or Panchayats show that Grama
Panchayats own only 77359.49 kms. of road length as on 31.3.1999. This
decline of 28000-odd kms, in four years is wholly inexplicable. Under
the cirucumstances we have assumed in our estimates that the total road-
length shown by the first Finance Commission is correct and that the
increase in the road-length of surfaced roads that has occurred since
31.3.1996 has been through the surfacingi hitherto un-surfaced roads6.
7.4.2 The first Finance Commission had estimated the maintenance expenditure
required on the 112491 kms. of roads with LSGIs at Rs.102.88 crores on
the basis of maintenance norms for different road surfaces which were
derived from figures given by the Ministry of Surface Transport of the
Government of lndia There are however two problems with the estimate
of the first Finance Commission. First, it does not take into account the
question of re-topping at all. Its estimate relates exclusively annual
repairs in the sense of patchwork. Secondly, the norm takes for the
maintenance of un-surfaced roads, which is Rs7500 per km. per year at
the prevailing prices, is extremely high.We have been told by several
knowledgeable persons that even today's price a sum of Rs.2000 would
be quite adequate for the annual maintenance expenditure per km. of
earthen and gravelled road. We attempt to rectify the estimates on both
these coun For re-topping, the PWD rates are Rs.6.5 lakhs per km. of
Blac Topped road, and Rs.7.25 lakhs per km. of WBM road when the
road width is 15 metres. Since village roads are 3.8 metres wide, we have,
with proportionate adjustment, Rs.1.65 lakh
6
. Dropping this last assumption and taking the entire increase since
31.3. as a net increase (consisting of surfaced roads) would not make
much diffem to our estimates
153
per km. of B-T road and Rs. 1.84 lakhs per km. of WBM roads as the re-
topping expenditure. As for costs of repair, we take the first Finance
Commission's figures for B-T and WBM roads adjusted for a 30 percent price
increase7, and Rs.2000 per km. for un-surfaced roads at today's prevailing
prices. Applying these norms to the figures given by the first Finance
Commission's data on road lengths, taking four years as the interval for re-
topping (and making allowance for the fact that if a road is being re-topped in
a given year, it does not need repairs in addition in the same year), we get a
total annual maintenance requirement of Rs. 108.6 crores at 2000-1 prices on
the road-length existing with LSGIs on 31.3.1996, i.e. prior to the 1997-8 plan
assistance increase.
7.4.3 As regards the assets transferred, the first Finance Commission had quite
rightly suggested that the basis for calculating maintenance expenditure
should be, not the original cost of the building but its current replacement cost.
We have accordingly tried to calculate the current replacement cost of this list
of buildings on the basis of certain assumptions: an LP School has seven
rooms (20' by 20') and a veranda 5' wide running its entire length; a UP
School has 8 such rooms with a corresponding veranda; a High School has 2
labs (40' by 40') in addition to what a UP School has; and PHCs, Dispensaries,
Veterinary Centres and Krishi Bhavans have 4 rooms each (20' by 20'). We
have assumed Rs.400 per sq.ft. as the current construction cost, 2 percent of
capital cost as maintenance expenditure for schools and hospitals and 3
percent for other buildings. What our
7
This is not too far from an alternative estimate we can make. That is as
follows. For annual repairs we can take the PWD norms of Rs.150 per
sg.metre as the cost of patchwork, and 4 2/3 percent of surface area
as the necessary extent of patchwork per annum. This gives us an estimate for
repairs on B-T roads which is Rs.26619 per km. of road length. Our estimates
based on adding 30 percent for price increase to the first FC's figure assume
Rs.2509Q per km.
154
illustrative calculations indicate is that the total amount of maintenance
requirement on this part of the asset stock of the LSGIs is very small
compared to that on roads. We surmise in the basis of our calculations that
a sum of about Rs.30 crores would perhaps be adequate for the
maintenance needs of the transferred assets (i.e. more accurate information
on the age structure would not add all that much to the total). This sun (of
Rs. 140 crores approximately) is unlikely to increase much in real terms
in the coming years. True, there would be soni increase in the maintenance
requirement with the ageing of the assets. But it is only for schools and
hospitals that we have assumed a 2 percent maintenance cost; for the
others we havt taken 3 percent which is the government's norm for
ordinary old buildings. The increase in maintenance requirement owing
to asset aging will add only a small sum.
155
2001-2 Rs. 69.95 crores
2002-3 Rs. 129.97 crores
2003-4 Rs. 134.91 crores
2004-5 Rs. 147.25 crores
2005-6 Rs. 158.70 crores
7.4.6 Taking the two components together we can say that the total
maintenance requirement on account of all the LSGI assets whose
maintenance should in our view be the responsibility of the state
government, goes up from Rs.245 crores in 2001-2 to Rs. 387
crores in 2005-6 at 2000-1 prices. If we assume the state
government's total tax revenue at 2000-1 prices to grow at about
5 percent per annum from 2000-1 onwards, which is roughly
equivalent to the SDP growth rate, then the maintenance
requirement on account of all these assets, new as well as old, as
a proportion of the tax revenue of the state, would increase from
2.72 percent in 2001-2 to 3.55 percent in 2005-6. The former
figure is more firmly based than the latter. In arriving at the
latter figure we have had to make assumptions about the size of
156
plan assistance in the years to come which may not materialise. On the other
hand, the assumption that the ratio of plan assistance to total tax revenue can
be raised by at least one percentage point during the next year and kept at
that level until 2005 appears to be an eminently reasonable one, in view of
the fact that this ratio was as high as 19.1 percent in 1997-98 and 19.5
percent in 1998-99. Likewise the assumption that real revenue would grow
at 5 percent per annum is by no means a far-fetched one. If this happens
then the government’s maintenance commitments as visualised by us
would increase from an estimated 2.72 percent of the total tax revenue in
2001-2 to 3.55 percent in 2005-6.
7.5.1 To keep the procedure simple, we are of the view that each year the
government should set aside an amount equivalent to 3 percent of its total
tax revenue for distribution among LSGIs for meeting their maintenance
requirements8. Since it was felt
157
by the Commission that earmarking a share of total tax revenue including the
share in central taxes might not be appropriate, we would like to present our
recommendation in terms a share in the tax revenue raised by the state. On
average an approximate ratio of 3:1 has been maintained in recent years
between the state's own tax revenue mobilisation and its share of central taxes.
Given this fact we would like to recommend that the state government should
put aside 4 percent of the tax revenue raised by itself each year over the next
five year period for distribution among the LSGIs for meeting their
maintenance requirement. LSGIs should not accordingly have the option, that
they now enjoy of spending 10 percent of their plan funds for purposes of
maintenance.
7.5.3 This amount consisting of two parts, one constant and the other
changing, must also be distributed according to two distinct
criteria. Of the total amount so earmarked, Rs. 140 crores at
2000-1 prices should be distributed in accordance with the
distribution of old and transferred assets among the LSGIs, for
whose maintenance it is meant. The remainder has to be
distributed in accordance with the distribution of newly created
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assets out of plan assistance among the LSGIs. Since the latter would
correspond roughly to the distribution of plan assistance itself, the
distribution of this part of the maintenance transfer should mirror exactly the
distribution of plan assistance.Or course we are introducing a break in the
pattern of distribution of plan assistance, by bringing in the revenue effort
criterion in addition to those being used earlier. As a result, the distribution
henceforth would be somewhat different from what it has been till now, so
that if this part of the maintenance fund is distributed according to our
criterion then it may diverge from the maintenance requirement on newly
constructed assets whic would have been determined till now by the way
plan assistance has been distributed so far. But this divergence is unlikely to
be very significant and may in fact provide further inducement for
undertaking a revenue effort. Besides, simplicity has to be an important
consideration. Our recommendation for the inter se distribution of the
maintenance fund then is as follows: an amount equivalent to Rs.140 crores
at 2000-1 prices has to be distributed keeping in mind the distribution of a
stock of assets The remainder is to be distributed in exactly the same way as
plan assistance. The adoption of this dual criterion would ensure that neither
the Block and District Panchayats whose share in the stock of assets is larger
than their share in plan assistance nor Grama Panchayats for whom the
opposite is true, would have any cause for complaint.
7.5.4 At present 3437 kms. of roads which have been handed overt to the District
Panchayats are being maintained by the PWD. If the entire maintenance of
the transferred assets is going to be the responsibility of the LSGIs
themselves, then the District Panchayats should get the amount equivalent
to the maintenance expenditure on these 3437 kms of roads. Likewise at
present while assets have been handed over to the LSGIs, the maintenance
of these assets often remains with the respective Departments. The
responsibility for the maintenance of all such transferred
159
assets should from now on be transferred to the LSGIs, since we are asking for
funds to be made available to them for this purpose.
7.5.5 While the distribution of a part of the maintenance fund in accordance with
that of plan assistance is easy to arrange, the distribution of the other part, the
Rs.140 crores at 2000-1 prices, in accordance with the maintenance
requirements of old and transferred assets, would be more difficult to effect.
We would therefore suggest the following procedure only for the fixed
component of the maintenance transfer. Out of the total of Rs.140 crores at
2000-1 prices (which has to be translated to current prices every year), one-
seventh should be kept aside for the District Panchayats and Block
Panchayats. Five percent of this amount (i.e. 1 /140 th of the total amount)
should be given to the Block Panchayats for equal division among them. The
other 95 percent should go to the District Panchayats which would now have
the responsibility of maintaining 3437 kms of surfaced road-length (including
re-topping at four year intervals). The remainder of the Rs.140 crores (at 2000-
1 prices) should be distributed among the Grama Panchayats and the
Municipalities. The mode of distribution of the respective amounts among the
District Panchayats and among the Grama Panchayats and Municipalities will
be initially according to the following formula. The maintenance amount for
District Panchayats should be split between road and non-road assets on a
50:50 basis. The former should be distributed on the basis of road length and
the latter on the basis of certain "norms" (given below) applied to the value of
non-road assets. For Grama Panchyats and Municipalities, exactly the same
formula should hold except that the distribution of the maintenance amount
between road and non-road assets should be in the ratio 7:1 (correspondingly
roughly to their estimated requirements). For the distribution of the
maintenance amount on roads the existing criteria based on Babu Paul
Committee report should be followed. For the other part, the "norms"
mentioned below could be applied to the data on the
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magnitude of transferred assets to get an inter se distribution To be sure,
what any particular LSGI would get out of Rs.140 crores (at 2000-1 prices),
distributed in this manner, may be very different from what it objectively
needs for the maintenance of the old and transferred assets at its command
in accordant with the given "norms". Ideally, to get at a genuin
correspondence between the two vectors, namely, what the LSGIs get for
the maintenance of these assets and what they objectively need, there
should be an iterative procedure of the following kind.
7.5.6 In the first year, as the total maintenance expenditure amounting to Rs.140
crores (at 2000-1 prices) is distributed according to the above criteria, the
government can simultaneously announting these maintenance expenditure
"norms" (e.g. rupees per sq.ft of buildings and per km. of road length etc.)
on the basis of which those LSGIs which feel that they have got less than
theij due would put in claims for more. At that point, the validity of their
claims will have to be verified by the government (and in the process a
proper inventory of their pre-existing an transferred assets built up). Now,
suppose the sum of valid exte claims comes to Rs.10 crores. Then, in the
second year, since tk total maintenance transfer would increase to a larger
figure owini to price increase (say to Rs.154 crores, if prices rise by 10
percent), these extra claims can be met out of this increase. In the second
year then Rs.10 crores would be given to thos: particular LSGIs which had
got less in the first year, and Rs.144 crores (154 - 10), distributed among
all the LSGIs (including those who have been given the extra Rs.10 crores)
in a new ratio (where the Rs.10 crores get added to the weights of those wb
have been given this sum). If on the other hand the sum of extra claims
exceeds the increase in the provision in the second yea. say the valid extra
claims come to Rs. 20 crores against an increase in provision of Rs.14
crores, then the Rs.14 crores would have to be rationed out among the
claimants, with each getting 70
161
percent of the extra claims, and being asked to put in fresh claims for the
remainder next year. When the available funds exceed the claims at the old
norms, this excess can be distributed in accordance with the latest prevailing
weights. And at this point the norms can be revised to take account of price
increases in the interim, on the basis of which fresh claims would be put
forward.
7.5.7 When a situation arises where all LSGIs put in valid extra claims,
we have reached the end of the iterations. Once these claims have
been accommodated in the manner described above, the pattern
of weights prevailing at that point can be used for all subsequent
distribution of the fixed amount (of Rs.140 crores at 2000-1
prices). In this manner we start with incomplete information,
and hence only a rough and ready index of weights for inter sc
distribution, but we keep revising the index as we go along on
the basis of information provided by the LSGIs themselves (and
verified as authentic by the government), and simultaneously
building up the information base. This way eventually we should
get at the “true" index of weights (i.e. the iterations will converge
to the "true” index), provided we start in the neighbourhood of
the "true" index.
162
7.5.9 The scheme of iterations has several additional advantages: first,
it is flexible in the sense that it can be stopped after any round if
we are not too finicky. For instance when the very first round of
excess claims have been accommodated, and available funds have
shown an excess over claims (and hence distributed according to
the latest prevailing weights), the iterations may be stopped. The
latest prevailing weights can then be taken as final, for the safe
of convenience. Secondly, it is flexible in yet another sense: the upward
revision in the maintenance norms (to reflect price increases) can be
calibrated in accordance with the capacity of
the administration. Since all claims have to be verified by the
administration, a sharp increase in the norms would put a greatcj
burden on the administration than a small increase in the norms
Thirdly, the scheme works even if the original estimate of Rs.140
crores (at 2000-1 prices) as maintenance expenditure requirement
on old and transferred assets is inaccurate. What the schemt
achieves is the following: if the amount is "too little" or "too
much", this "too little-ness" or "too much-ness" is evenly
distributed across LSGIs. Notwithstanding the advantages of the
scheme of iterations however, it was felt by us that on practical
considerations a once-for-all formula of inter se distribution
would be better. We would therefore recommend the latter.
163
the future when the weight of the maintenance expenditure on pre-existing or
transferred assets in the total would have gone down (it being a fixed part of a
growing amount), this dual criterion can be replaced by a single one, viz.
distributing maintenance assistance entirely in the same proportion as plan
assistance.
7.5.11 It remains to identify the verifying authority and to fix the initial norms. This
authority should vest with the Ministry of Local Self Government of the state
administration. The initial norms can be as follows
164
These figures would have to be updated from time to timet to take account of
inflation.
(i) Set aside, in each year's budget, 5.5 percent of the tax revenue raised
by the state government during the latest year for which audited
accounts are available, for transfer to LSGIs as a maintenance fund.
(ii) On the basis of a price-index work out what Rs.140 crores at 2000-1
prices amount to for the coming year for whichthe provision is being
made in the budget. (The deflator for the construction sector
employed in SDP calculations can be used for the purpose and the
Department of Economics and Statistics can be asked to give a quick
estimate of its increase during the preceding 12-montr period at the
time of the formulation of the state budget, and this increase can be
assumed to hold over the next twelve months).
(iii) Of this sum, one-seventh is to be kept aside for District and Block
Panchayats, and divided between them in the ratio of 19:1. The Block
Panchayats should have the amount equally divided among them. The
District Panchayats shout have half the amount divided among them
in exactly the same ratio as the 3437 km. road length is distributed,
and the other half on the basis of "norms" applied to estimated non-
road asset values.
165
and the remaining one-eighth on the basis of "norms" applied to
estimated asset values.
(v) The remaining part of the maintenance fund, i.e. the excess of 5.5
percent of the state's own tax revenue two years ago over Rs.140 crores
at 2000-1 prices, is to be distributed exactly in the same ratio as the
plan assistance.
7.5.13 The LSGIs should not in general be allowed to spend the amount they receive
as maintenance transfer for any other purpose. There is however a problem
here. Since, as argued earlier, the expenditure on maintenance cannot be
distinguished from net investment in many cases, the LSGIs would perforce
get embroiled in tedious, almost theological, hair-splitting if they seek
scrupulously to follow this injunction. The only practical way of avoiding this
and yet ensuring that the maintenance transfer is not illegitimately used, is to
insist that the total amount of such transfer should be spent exclusively
(subject to one qualification mentioned below) on the assets for which they are
meant. Ideally, the amount meant for the maintenance of transferred and old
assets should be spent on these assets alone and on nothing else, and the
amount meant for the maintenance of newly constructed assets should be spent
on only these assets and on nothing else. But, ensuring that maintenance
transfers within each category are spent exclusively on assets belonging to that
category, would be practically impossible. What can however be ensured is
that the total amount transferred for maintenance is spent only on assets that
require maintenance. (Of course, in the process, some of the maintenance
transfer would be used for the maintenance of assets newly-constructed from
sources other than plan funds. But this is a problem which can be ignored for
the time being). What is most important is that maintenance transfers to LSGIs
should not be diverted either towards entirely new projects or for arbitrary
current expenditures. If this much is assured through proper audit, then it can
be left to the peoples'
166
intervention to ensure that the maintenance amounts are spa as far as
possible on maintenance. Once it is known that adequa amounts are
available for the maintenance of assets, thenal observed poverty in the
quality of these assets would aroJ popular anger which is the best means
of ensuring that the LSfl follow the straight and narrow path of rectitude.
167
7.5.15 To recapitulate, we are allowing LSGIs to use maintenance funds
for operational expenses up to a ceiling of 10 percent; in addition
we are allowing them some leeway in selecting the assets for
maintanance expenditure in a particular year. This is because
maintenance too is undertaken in practice in a bunched manner.
It is not as if little bits are spent regularly on the repair and
maintenance of particular assets; rather, sizeable sums are spent
every once in a while for the maintenance of particular assets.
The candidates on whom such sums are spent differ from year to
year.
7.5.16 Earmarking a part of the state's own tax revenue for transfer to
LSGIs for the maintenance of their assets would no doubt entail
a certain additional strain on the state's finances. The whole
purpose of the exercise however would be lost if this strain is
sought to be met by cutting back on plan outlay. If we disapprove
of the use of plan funds for maintenance at the LSGIs' level,
then we are equally opposed to the use of what in effect would
have been the state's plan outlay for the purpose of maintaining
LSGI assets. Any such reduction in the state's plan outlay would
also entail a reduction in plan assistance to the LSGIs (under
the one-third formula suggested by us), so that a part of what
the latter would gain through maintenance transfers would be
lost through reduced plan assistance. The funds for the
maintenance transfers therefore have to be found independently.
One way of ensuring that plan assistance to LSGIs is not adversely
affected by the maintenance transfers, is to suggest that a certain
minimum proportion of tax revenue should go as plan assistance,
in the same way as we have done for maintenance assistance. But
if we do so, then, together with our stipulation of one-third
transfer of plan outlay to LSGIs, it would amount to fixing the
minimum size of the state's plan outlay itself (as a proportion of
its tax revenue) which is outside our terms of reference. Our
expectation is that plan assistance to LSGIs which has fallen to
13.3 percent of total tax revenue in 2000-01 (BE) would be raised
168
by at least one percentage point and whould be kept at least! that level for
the next quinquennium.
7.5.17 That still leaves the question: how is the state government to find the
resources to make this extra transfer to the LSGIs? The amount is not
much, since against payments to be made as maintenance transfer we have
to offset the savings the government would be making by not paying VTC,
by not paying the PWD for the maintenance of 3437 km. of road-length,
by not paying the (very small amount of) maintenance grants currently
used by Departments for maintaining assets falling within the jurisdiction
of LSGIs, and by not paying the operational expenses except for the
purchase of medicines, books and consumables. Even so, funds have to be
found for this. How the government can do so, is an issue that falls
outside our terms of reference. It seems to us nonetheless that that if the
service sector in Kerala, which has been the fastest-growing sector, could
be brought under the ambit of taxation to a greater extent than has been
the case till not then the state which has a good record of revenue
mobilisatioin would do still better.
169
CHAPTER 8
8.1 Traditionally, transfers from the state government to the LSGIs have been
grouped under two separate heads: plan transfers and non-plan transfers. We
have discussed plan transfers in Chapter 6. In Chapter 7 we have introduced a
new category, namely transfers for the maintenance of certain LSGI assets, or
"maintenance transfers" for short. In the current chapter we shall discuss what
was traditionally referred to as "non-plan transfers" and what we shall call
"non-plan, non-maintenance transfers" to emphasise that we are no longer
discussing "maintenance transfers" (which logically must also fall under the
general rubric of "non-plan"). At the time of the first Finance Commission
Report, the bulk of the "non-plan transfers" referred exclusively to the
transfers of shared and assigned taxes and a host of specific and general
purpose grants to LSGIs. And these "non-plan" transfers were divided into two
parts: statutory transfers and non-statutory transfers. The former referred to the
transfers on account of the assigned taxes (Basic Tax, and Surcharge on Duty
on Transfer of Property) and shared taxes (Motor Vehicle Tax), while the non-
statutory transfers included a host of grants (a possible 18 in the case of
panchayats and a possible 10 in the case of municipalities). Now, on account
of the shifting of a whole array of assets and responsibilities to the LSGIs
whose operational costs have to be financed by the state government, there is
an additional and significant element of transfers whose magnitude even
exceeds what conies to LSGIs through shared and assigned taxes and sundry
grants. An entirely new category,
170
which had appeared only in an embryonic form at the time the first Finance
Commission has now grown to an extent when it even dwarfs what
traditionally constituted "non-plat transfers". This category in turn has two
distinct parts: one is listed in the budget under the Minor Head "191:
Assistance Local Bodies and Municipalities/ Municipal Corporations". We
shall refer to this part as the "191 Non-Plan Transfers" (since Plan Transfers
are also listed under 191). The other part consists of the amounts that are
made available to the LSGIs on account of meeting the operational costs, i.e.
the salaries and material input costs, on transferred assets. We shall refer to
these transfers as "Operational Cost Transfers". Finally, we shall refer to
thtl transfers on account of tax devolution and minor grants as "Tai-Cum-
Minor Grants Transfers". It follows then that we are talking! of four distinct
kinds of "non-plan transfers": the "Tax-Cum- Minor Grants Transfers"
(which were the predominant element! until 1995-6), "191 Non-Plan
Transfers" (which are a resulto! the shifting of several responsibilities to the
LSGIs), "Operational Cost Transfers" (which are a result of shifting assets
to LSGIs), and "Maintenance Transfers" (which we wish to bring into
being).
8.2 At the time of the first Finance Commission, the transfers through these
minor grants, or what the Commission had called "the non-plan, non-
statutory transfers", were many in number, minuscule in amount, and
divided, in addition, into general and specific purpose grants. The
Commission had therefore made a number of suggestions for simplifying
the system and making it more meaningful. One was to make all of them
general purpose grants. The other was to ensure that the total of such
transfers should constitute 1 percent of total state revenue (appropriately
defined for the purpose), and should go into two pools, the rural and the
urban, according to the weights of the rural and urban populations in the
total population of the state. In addition, the rural pool was to have 25
percent of the Basic Tax from panchayat
171
areas, and 25 percent of the Surcharge on Stamp Duty from panchayat areas,
while the urban pool was to have 100 percent of the (newly-proposed) Basic
Tax and 25 percent of the Surcharge on Stamp Duty collected from urban
non-Corporation areas (the Corporations were to be simply given the taxes
collected from their areas). In the event the government accepted the other
suggestions but not the one relating to 1 percent of total state revenue, which
essentially meant retaining the tail without the sting. It accepted the idea of
the rural and urban pools, but these pools could not be nourished by 1 percent
of state revenue.
8.3 Today we once again have a complex and intricate system of "Tax-
Cum-Minor Grants" transfers whose complexity and intricacy is
entirely unnecessary. There is a rural pool, which undoubtedly
had a rationale at the time of the first Finance Commission's
report, but whose rationale is much reduced after the ushering
in of democratic decentralisation. It represents, besides, a rather
meagre sum. To make up this meagre sum, even more meagre
streams from various tax transfers have to be joined together;
and their respective sizes too are determined by elaborate
formulae.
8.4 This is not all. Quite apart from the question of complexity and
intricacy, the whole conception of assigned taxes and shared taxes
is open to question. If the financial relationship between the state
government and the LSGIs is to be characterised by sharing,
then it is not clear why this sharing should take the form of
some particular taxes being destined for LSGIs and others for
the state government, and why the revenue of only some
particular taxes should be shared between the two in certain
ratios. This conception, apart from its complexity and lack of
rationale, is also foreign to the underlying philosophy of
democratic decentralisation. This visualises not a tussle between
the state government and the LSGIs, not an antagonistic
relationship, but a relationship aimed at constituting a total
172
democratic structure more meaningful than what exists now. We are
talking after all of two entities, each of which has ai administration headed
by elected representatives of the people The conception of success of the
overall structure must be defind in terms of the degree of empowerment of
the people. An important component of the index of success of institutions
at one level therefore must be the degree to which they strengths the
institutions at the other level. We have to get over the mindset of
visualising the problem of resource sharing between the tw levels as if two
self-centred, self-absorbed, hedonistic entities an squabbling over shares in
a piece of cake (with the role of the Finance Commission being that of an
arbitrator reconciling thestl conflicting claims). In short the old formulae
for sharing, which meant assigning particular tax revenues to particular
levels, haw to be replaced.
8.5 There is an additional reason for our suggesting this. If we look into the
fiscal future of Kerala, there can scarcely be any doubil that the state will
have no option but to rely increasingly on taxation of the service sector. It
is more than likely that such shift would give a greater buoyancy to the
tax-revenue ofthJ state government, compared to the tax revenue of the
LSGIs, ii the latter continue to depend exclusively on a certain limitcil
number of assigned taxes. An overcoming of this dichotomy will
inevitably come on to the agenda. Sooner or later in other words we have
to move away from the system of basing LSGI financal on a set of
assigned taxes, towards one where the LSGIs and the state government
share the proceeds of the entire tax revenue raised by the latter. If this be
so, then we may as well move toi system of tax-sharing right from now.
We are basing on: recommendations on the existing set of taxes. We hope
that future State Finance Commissions would take into account new taxes
which may get imposed, so that the principle of total tax sharing is
continued.
173
8.6 The magnitudes of non-plan transfers to LSGIs which have occurred under
two of the several heads, viz.191-Transfers and Tax-Minor Grant Transfers,
are given in table 8.1.
Table 8.1
* See footnote 1.
Source: Budget Documents
8.7 The category "others" in Table 8.1 comprises what we have referred to as "Tax-
Cum-Minor Grants Transfers". For the last three years, when the VRM grant
was discontinued, this category consists of the following items:
174
(i) the three main tax sources
(ii) a grant of Rs. 8.4 crores (in 1999-00 and also in 2000-01) to District
Panchayats (who got Rs. 2.3 crores) and Block Panchayats (who got
Rs.6.1 crores) for meeting their revenue expenditures1
8.9 In view of what has been said above, we recommend that in lieu
of the present arrangement of specifically assigned and shared taxes and of
sundry grants, a certain proportion of the state
government's own tax revenue (excluding its share in central
taxes) should be set aside for transfer to the LSGIs. In the
preceding chapter we have already provided for "Maintenance
Transfers", i.e. non-plan assistance from the state government
to the LSGIs for the maintenance of transferred assets, of old
assets which were with them, and of newly constructed assets
from 1997-8. While doing so the state government need not pay
any VTC to the LSGIs, since the purpose of VTC and VRM was
to finance maintenance expenditure for roads under the
jurisdiction of the LSGIs. Now, if the state government did not
have to pay VTC, then the amount of "Tax-Cum-Minor Grant
1
. Since this particular item also appears under the non-plan expenditure
listed in Appendix 4, in order to avoid double counting we have removes it
from our total of "191 Non-Plan Expenditure". For 1999-2000 and 2000-1
therefore the totals of "191 Non-plan expenditure" do not correspond to the
figures available in published official statistics.
175
Transfers" that it would have made available to the LSGIs during the last six
years is given in Table 8.2
Table 8.2
Tax-Cum-Grants Transfers (Excluding VTC)
Year Tax-Cum- Sate’s Tax- (ii)/(iii) %
Grants Revenue(excluding
Transfers(Rs.Cr) share in Central
taxes)Re.Cr
(i) (ii) (iii) (iv)
1995-96 66.6 3383 1.97
1996-97 116.0 3899 2.98
1997-98 109.5 4501 2.43
1998-99 105.6 4650 2.27
1999-00(RE) 120.4 5472 2.20
2000-01(BE) 121.1 6440 1.88
8.10 The average figure for the percentage of the state's own tax revenue
transferred each year on account of taxes and minor grants comes to 2.29
percent for the entire six-year period. In fact if we leave out 2000-1, for
which we have only budget estimates anyway, then the figure for the
preceding two years is remarkably close to this average. It would appear
then that an amount approximately equivalent to 2 ¼ percent of the state
government's own tax revenue (excluding its share in central taxes) has
been handed over each year, in recent years, to the LSGIs on account of
tax assignments, tax sharing and the minor
176
grants (other than through the VTC). We recommend that 2,51 percent, of
the total tax revenue of the state government (excluding its share in central
taxes), should henceforth be sell aside for distribution to the LSGIs. On the
other hand the government should retain the entire tax proceeds from those
taxes which it either collects on behalf of the LSGIs or shares with them
currently. The reason for our suggesting a slightly higher percentage (2.5 as
opposed to 2.25 ) of own tax revenue for devolution to LSGIs under the
head "Tax-Cum-Minor Grants! Transfers" (which we wish to re-christen as
"General Purpose Transfers" or "General Purpose Grant") will become
clear later, But the increase is marginal. Our main concern is simply a
rationalisation and simplification of the existing system.
177
8.12 The Commission's recommendations amount to a radical departure
from assigning and sharing of specific taxes to sharing of revenue from all the
own taxes of the State Government. Of course assigned taxes and specific
shared taxes have a certain sanctity coming out of their long history and
universal practice. And more importantly they are legal entitlements, which
over a period of time have come to be seen as a matter of right for LSGIs
enshrined as legislation and protected by it. The LSGIs have a historic as well
as legal right over these sources of revenue. They have been used to it for so
long that it has become an integral part not only of their fiscal system but also
of their expectations of revenue. Thus any move away from this system has to
be done with caution and care. Not even in the slightest way should there be
any erosion in the legal entitlement of LSGIs. In fact there should be a
strengthening of them. In deciding the quantum as well as in the precedure of
sharing the state taxes there cannot be any discretion whatsoever; it cannot be
in the nature of a grant left to the executive to decide nor can it be left even to
the annual Finance Act. It has to become an unambiguous part of the
Panchayat Raj and Municipal legislation, additionally safeguarded by policy
commitment to allay all misgivings. There fore, when the commission
recommends a shift away from the present system of specific taxes assigned or
shared to a general sharing of all taxes, there need not be any doubt or fear
about the potency of the new entitlement. In fact by suggesting a general
share of all taxes, the entitlements are broadened and deepened. It has the
added symbolic significance suggestive of LSGIs standing shoulder to
shoulder with the State Government in sharing responsibilities and revenue.
It is as if the local governments have grown in importance to claim a general
share of all taxes rather than just three specific taxes.
178
8.13 We recommend the following principle of Inter se distribution of this
amount between the different tiers of the LSGIs. The I District Panchayats
and the Block Panchayats, which have no sources of income as yet, rely
exclusively on state government grant for their house-keeping expenditure.
Since the size of the household to be kept is not uniform their share should
be I determined on a normative basis. The total amount earmarked for them
should be set apart and distributed among them according to their genuine
requirments which should be determined on the basis of prescribed norms.
The share of Municipalities, Corporations, and Village Panchayats, each
taken as a group, should in principle be fixed at the levels which have been
observed in recent years. There is however an important additional
consideration, namely, the significant boundary changes that have taken
place of late. Two new Corporations, Kollam and Thrissur, have been
created out of Municipalities, with the addition of certain Panchayats.
Likewise the Thiruvananthapuram Corporation has been expanded with the
addition of certain Panchayats. And there have been other changes
involving the incorporation of Panchayat areas into Municipalities. In view
of these changes, the distribution of the General Purpose Grant across tiers
can no longer conform to the historically observed shares; suitable
adjustments have to be made. Taking this fact into account we recommend
the following
179
distribution of the General Purpose Grant across tiers2, after setting apart the
share of District and Block Panchayats.
Table 8.3
Municipalities 8.5
Corporations 13.0
2. The basis of these calculations should be clarified. Since each of these tiers
would be getting a separate grant for the maintenance of their old assets and
transferred assets, there would be no need to transfer VTC to them any longer.
As far as the Municipalities and Corporations are concerned, they get very little
government (non-tax) grants of the sort that Panchayats get. The first Finance
Commission had recommended that urban local bodies too should be eligible
for Basic Tax Grants which should then be put into the urban pool. Though this
suggestion was accepted by the government, appropriate legislation is in the
process of being enacted, so that no actual Basic Tax has yet accrued to the
urban LSGIs either directly or indirectly (via the urban pool). Likewise since
the urban pool has not yet taken shape, the deduction of 25 percent of the
Surcharge on Stamp Duty in urban areas, which is supposed to go into this
pool, has not yet taken place. It follows that for the urban LSGIs, once VTC is
excluded, the surcharge on stamp duty coming their way is the sole form of
"Tax-Cum-Minor Grants Transfer", The budgetary allocations on this score, as
a proportion of the total "Tax-Cum-Minor Grants Transfers" excluding VTC,
were on average about 18 percent over the period since 1997-8, and these were
approximately evenly divided between Municipalities and Corporations. The
observed shares of the different tiers obtained on this basis are then adjusted to
take account of the boundary changes to give us the figures of table 8.3.
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8.14 As regards the inter sc distribution among tiers, GPs,
Municipalities, and Corporations, our recommendation is the
following. For Municipalities and Corporations the inter se distribution
should be entirely on the basis of population. As
regards Grama Panchayats, out of the total amount earmarked,
Rs.10 crores should go towards filling the deficits of certain
poor GPs in meeting establishment expenses (as is the practice
now). The remainder should be distributed on the basis of
population. For District and Block Panchayats, they may be grouped.
based on requirements, and allocations made on normative basis.
including expenditure ceilings for certain categories like telephon;
charges, P.O.L, travelling allowance and extraordinary items.
181
Corporations and Municipalities), but the only justification for doing so would
to avoid any sudden financial hardships to any particular local bodies, such as
a sudden shift to a different criterion of distribution would entail. But this is
an argument of pragmatism not of principle. If the pragmatic concerns could
be taken care of in some other way, then we could move to some alternative
criterion which is more reasonable in principle. Since plan assistance which
constitutes the bulk of the transfers is already being distributed according to a
set of complex and carefully-worked out norms, population is the obvious
simple basis for distributing the "General Purpose Transfers".
8.16 But the move to this simple criterion may create hardships for particular
LSGIs in the transitional period. They may suddenly find themselves with
reduced incomes. True, they are getting substantial plan assistance and would
be getting, on our recommendations, a significant amount of funds for the
maintenance of assets. It may therefore be thought that a certain transitional
reduction in incomes should not be a cause for concern. But precisely because
we are of the view that maintenance grants should not be used indiscriminately
for other purposes, and that plan funds should not be used for current
expenditure needs, we feel it necessary to ensure that no income fall occurs in
the period of transition; otherwise we would be condoning, indeed
encouraging, financial impropriety. It is for obviating any such hardships that
we have recommended a small rise in the proportion of "Tax-Cum-Minor
Grant Transfers" (excluding VTC), now christened "General Purpose
Transfers", from its current figure of about 2 ¼ percent of the state's own tax
revenue to 2 l/2 percent. This extra ¼ percent would come to about Rs.15
crores (out of a total own tax revenue estimate of Rs.6440 crores) in 2000-1,
but it would result in a streamlining and simplification of the system in a
relatively painless manner,
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in the sense that no individual LSGI would experience an absolute
shortfall in its receipts on account of these transfers.
8.17 One consequence of our recommendations is that the rural and the urban
pools would have to go. In fact they would no longei be necessary. The
rationale of having the rural and the urban pools was precisely to provide
some relief from the relentless logic of the "place of collection" criterion in
distributing these tax transfers. Many LSGIs, from whose territorial
jurisdiction not much tax could be collected, required succour, and the pools
were meant to provide such succour. By providing for these pools. the first
Finance Commission had already taken a few steps awan from the "place of
collection" criterion which in turn derives from the logic of "assigned taxes".
We have only taken that movement to its logical conclusion. Of course, a
certain practical awkwardness is introduced in the process. Several
legislations to give effect to the recommendations of the first Finance
Commission have already been enacted or are in the process of being
enacted. Our recommendations being introduced at this stage would make
many of these legislations irrelevant, unnecessary or infructuous. But the
awkwardness here is in parti an inevitable product of the inordinately long
time-lags witlj which Finance Commission's recommendations are
implemented, and in part a result of the peculiarity of any period of
transition, such as what characterises the process of decentralisation ill
Kerala. Many things have happened between the first Finance Commission
and the second, and in taking cognisance of these our report necessarily has
to differ qualitatively in many spheres from that of the first Commission.
But once this remarkable period of transition is over, subsequent Finance
Commissions can build on their predecessors' reports to a greater extent (and
thus provide greater continuity) than we have been able to do.
183
8.18 We now come to the question of "191 Non-Plan Transfers" which
is yet another component of "Non-Plan, Non-Maintenance Transfers". An
idea of what this component covers can be had from Table 8.4 which
gives information on the budgeted expenditure for 2000-1 on some
important items under this head.
Table 8.4
Some Important items of 191 Non-Plan expenditure 2000-1
8.19 Clearly the bulk of the 191 non-plan transfers consists of social expenditure
of different kinds, for which the responsibility has now been shifted to the
LSGIs. These, with the sole exception of the "Assistance to BPs and DPs" (for
whom we have made alternative provisions), should continue exactly as
before. We refrain from making any recommendations regarding the
184
minimum provisions on these heads, though the stipulation of such a
minimum is essential to take account of both inflation and the inevitable
increase in the number of intended beneficiaries, in the belief that the
pressure of public opinion would automatically enforce such a minimum.
185
purchasing current inputs entirely to the LSGIs. Taking all these
considerations into account, we recommend the following with regard to
"Operating Cost Transfers": first, the state government should continue to
provide for medicines and books and consumables in schools exactly the way
it has been doing till now; secondly, the LSGIs should be permitted to make
extra purchases of medicines and books and consumables which they may
consider necessary at any point of time; thirdly, the state government should
be absolved from the responsibility of meeting all other current costs such as
telephone, electricity and water charges, vehicle operating costs and rents in
these two sectors as well as and in other sectors, and for these costs the LSGIs
should make their own provisions; fourthly, these provisions and the extra
expenditure on health and education materials, can be financed, upto a ceiling
of 10 percent, from the "Maintenance Transfers" made available to the LSGIs.
186
choice of assets. An alternative course, more in tune with democratic
decentralisation, might be to have a certain sum, earmarked for operational
expenditures and arrived at according to certain macro norms, distributed
among the LSGIs in the samt ratio as plan assistance. The LSGIs can then
be left free to choo« their assets, i.e. make their plans, keeping two budget
constraints (in the sense of state government assistance) in mind, one
relating to plan assistance, and the other relating to operational assistance,
(Needless to say, they can use their own funds to spend in excess of these
constraints). These issues of course are not of great immediate concern: in
the next five years, which constitute time-horizon, the LSGIs are likely to
continue emphasising the construction of those assets, e.g. roads, bridges,
houses etc, which do not require any significant operational expenditure
(as distinct from maintenance for which we have mad provisions); it is
only future Finance Commissions that woul be exercised over such issues.
Nonetheless we have opened window towards a possible "two-constraints"
solution b allowing LSGIs (for the time being) to spend up to 10 percen of
the Maintenance Transfers for meeting operational costs. Sine
Maintenance Transfers are to constitute approximately 4 percen of the
state government's own tax revenue in any year (which have translated as
5.5 percent of the state government's ownta revenue two years ago), we
are implicitly putting in place a syste where a certain percentage of the
state government's current ow tax revenue (0.4 in this case) is transferred
to LSGIs for meetiti their operational costs. Future Finance Commissions
may we consider building on this foundation while changing the ratios in
question.
187
CHAPTER 9
188
9.4 TAX REVENUE
9.4.1 (1) Property Tax: With the change over of Property Tax
assessment from rental value calculation to plinth aret based
assessment, it is expected that instances of underassessment and
corruption in assessment would be reduced considerably. Empirical
studies are being done to determiiu the rates, factor values and
suitable methodology assessment; which would then be issued in
the form rules. The Commission would recommend a transparent
system of self-assessment with a proviso that for concealing or
under-reporting of plinth area, there shouk be a penal provision to
collect tax at ten times the normt rate. This penal provision should
be equally applicablelt any misreporting by verifying or inspecting
authorities even if detected later by a supervisory or vigilance
authority.
189
(1) Ordinary Building.
(1) Commercial
(2) Non-commercial
(e) The relative weights for the types of building could be 1:1.5:2
(g) The deductions for age and owner occupation may be as provided
for in the Kerala Municipality Act.
9.4.1.2 It is possible that when the changeover happens some of the existing under-
assessed buildings would have to pay taxes several times the existing
amounts. It is also possible that a few of the buildings would have to pay
much less tax than at present. The Commission would strongly recommend
that on no account should there be a cap on increases or limit to decreases in
respect of any building, for what is due as per law has to be paid. Past failures
in assessment cannot be legitimatized when a new system is designed. In
order to avoid unnecessary and ill-informed criticism, it is suggested that
massive publicity campaign be initiated immediately, pointing out the virtues
of a simplified taxation system, which would free the citizen from dependence
on the mercies of the taxing and appellate authorities.
190
9.4.3 (3)Entertainment Tax. Here again, the Commission would
reiterate the recommendation of the First SFC to go in for tax
assessment on the basis of seating capacity and occupancy ratio.
Detailed suggestions on the assessment procedure would be given in
the second part of the Report after conducting a quick field study and
after evaluating the systems prevalent in Tamil Nadu and Andhra
Pradesh.
9.4.4 (4) Advertisement Tax. The Commission feels that there is much scope
for collection of Advertisement Tax in a state like Kerala where
marketing of consumer goods is quite widespread even in rural areas.
But the collection figures show that this source of tax is not even
partially tapped by the LSGIs. The Commission recommends the
following:
(I) Government may fix the minimum rate of taxation for different types
of advertisement for different locations.
(iii) Penal provisions for 'escaped tax' should be at least five times the
normal tax.
192
Show Tax
9.4.5 (5) Land Conversion Tax. Conversion of land use imposed additional
burden on LSGIs, which have to provided civic services and other basic
amenities. Therefore the Commission recommends expansion of the existing
Conversion Cess into a Land Conversion Tax. For the purposes of this tax
conversion may be defined as change of land use from agriculture to non-
agriculture, which would include conversion for the purpose of house plots,
building construction etc.
193
authorised conversion of paddy fields as per provisions of the Kerala Land
Utilisation Order five percent of the capital value may be realized as
Conversion Tax. However, exemption from the Land Conversion Tax may be
given if the extent of paddy land converted is five cents or less and the
building put up is less than 50 sq. metres in area. If no building is put up
within six months of the conversion, then no exemption need be given.
9.4.5.2 In respect of other kinds of conversion the tax may be fixed as two and a half
percent of the capital value with the same kind of exemption as suggested for
conversion of paddy land.
9.4.6 (6) Service Tax. At present the tax is optional for Village Panchayats and it is
an integral part of the Property Tax in the case of ULBs. In the context of
decentralisation, which enjoins LSGIs to perform certain functions declared as
mandatory. Service Tax should be made compulsory and made an
independent tax. It could be assessed as a percentage of the Property Tax
linked to the recurring cost of performing the mandatory functions.
9.4.7 (7) Surcharges. As per Section 208 of the Kerala Panchayat Raj Act and as
per Section 230 of the Kerala Municipality Act, Village Panchayats and
ULBs are permitted to levy surcharges on Property Tax. Now the upper limit
is statuto-rily fixed as 5% for Village Panchayats and 10 % for ULBs. Since
the surcharge is to be specifically used for taking up new development
projects, it is felt that the ceiling may be removed and the LSGIs be given the
freedom to decide tne percentage which can be varied every year as decided
by them to meet the cost of the selected new projects.
194
9.5 NON-TAX REVENUE
(1) In the case of ULBs, most of the Non-tax Revenue rote have to be
determined by themselves. This is as Section 492 of the Kerala
Municipality Act. Due to inexperience, lack of awareness and weak
political wl these rates do not often get fixed and even if they fixed
they are pegged at very low levels, f or the Municipality Act or Rules
do not fix a minimum or maximum Another problem is that once fixed
these items are rarek revised.
(2) The problem in the case of Village Panchayats is the reverse one. Here
in most cases the rates are fixed in Rules either as minimum or
maximum or by giving a range between the minimum and maximum.
Since Rules are not fied after receiving proposals from the Director
Panchayats, examining them in the Local Self Government Department
and Law Department and sending them for the views of the Subject
Committee and finally gazetting them, amendment to rules is a
cumbersome process and
195
most of the rates do not get revised. This issue was pointed out by the
First SFC, but solutions have not been fully found.
(6) Since LSGIs are very close to the people, there is a natu
ral limitation in imposing penalties and fines. Even if, for
the sake of deterrence, prosecution is to be resorted to,
it is not done due to the cumbersome litigation process,
196
which would take away a lot of valuable time from senior officials of
the LSGIs. This causes laxity in collection of dues.
(ii) As far as possible the fees, rents etc., are to be to dexed to take
care of inflation. Necessary enabling provisions have to be made
in the Kerala Panchayt Raj Act and the Kerala Municipality Act
to allow for automatic two-yearly increases based on a genm
government notification.
197
ties should disclose the various items which are given by auction, the
likely time of auction and the amount received during the previous
years, during Grama Sabha, Ward Sabha and Ward Committee
meetings. There must be a compulsory display by all LSGls indicating
the various items, which are auctioned, the name of the successful
bidder and the amount. This should be permanently exhibited at the
site like the sand mining place, market, slaughterhouse, shop building
etc. This transparency provision should be enshrined in the Kerala
Panchayat Raj Act and the Kerala Municipality Act and detailed
rules issued.
(v) It is recommended that every year before the end of December all the
Village Panchayats should inform the Deputy Director of Panchayats
the auctions, which they have to conduct in the coming three months.
This should be advertised in at least three newspapers having largest
circulation in the district as a general advertisement. As far as ULBs
are concerned this advertisement could be given for a group of ULBs
in every district. The Joint Director of Municipalities could facilitate
this.
9.6.1 Trade Licences. In the case of Village Panchayats licensing of trades is done
as per the Kerala Panchayat Raj D & O Trades Rules. These rules as of now
fix the maximum fees related to turnover. It is suggested that instead of this,
minimum fees alone
198
be fixed by Government. This may be converted into flat rate! based on
the size of the trade as in the case of ULBs, with septl rate rates for large,
medium and small sizes.
9.6.1.1 In urban areas it is the local government, which set the retes under Section
492 (5) of the Kerala Municipality Act. The analysis made by the
Commission shows that most of the ULBs have
fixed relatively low rates and have been tardy in revising them
Since revision does not take place for very long periods of tin
it acts as an inhibitor when a Municipality wants a change, as these
revisions after long intervals would invite protest due to
the inevitable steep increases. The Commission would recomend that the
minimum rates alone should be fixed by the Government through
notification. In ULBs, since milk trade can be licensed under Section 447
there is no need to retain Section 456.
9.6.1.3 Under Section 448 of the Kerala Municipality Act, rules were
issued in 1966 viz. 'Construction or Establishment of Factorie
and Installation of Plants or Machinery Rules'. But the rates
have not been revised for nearly three and a half decades.
9.6.1.4 The existing rates and the suggested rates for each kind of trade including
factories, plants and machinery are given separately for Village
Panchayats and ULB’s in Annexure 9.2.
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9.6.1.5 In order to get a clear idea of the trade establishments functioning within a
local government area, to keep track of renewal of licences, to serve as a
guide for assessment of profession tax and to help in the discharge of other
local government obligatory functions it is suggested that a separate
numbering system should be adopted for trade establishments. This would be
in addition to the building number assigned for Property Tax assessment.
Every year the new establishments should be given supplementary numbers
before the first of March.
9.6.4 Licences under Kerala Places of Public Resort Act.The fees for these
licences issued under Rule 28 may be revised and the minimum rates be fixed
as indicated in Annexure9.5.
200
9.6.6 Licence fee for Brokers, Commission Agents, Weigtmen, Measurers
etc. Licence fee is fixed as per the provisions of Rule 13 of the Kerala
Panchayat Raj Public and Private Market Rules issued under Section 221
and Section 222 of the Kerala Panchayat Raj Act and Section 458 (2)(e) of
the Kerala Municipality Act. It is suggested that the minimum licence fee
should be fixed as Rs.lOO/-per year.
9.7.1 Market Fee. The various fees for using public markets may
be increased as given in Annexure 9.7.
9.7.2 Public Halting and Parking Places. Fess for the use a public halting
and parking places is levied as per Section 227 d the Kerala Panchayat
Raj Act and Section 472(1) of the Keral Municipality Act. Minimum
rates may be fixed both for Munici palities and Panchayats as given in
Annexure 9.8.
201
Section 452 of the Kerala Municipality Act. The rates may be revised as
suggested in Annexure 9.9.
LSGIs must broaden and deepen their collection of service/user charges. A list
needs to be made of all services provided and utilities maintained by LSGIs
with the cost of providing/running them. A policy decision may be taken by
each Village Panchayat or ULB on the proportion of the cost to be realized
from the users. Thereafter the users may be classified, and the rates for each
class of users determined. As a rule of thumb full cost may be realized from
commercial concerns and exemption need be given only to the families below
the poverty line. It is suggested that service charges should be collected
compulsorily from users of burial grounds, burning ghats and electric crema-
toria, which are maintained by the LSGIs. In the case of electric crematoria
the fee should be fixed to meet the operation and maintenance cost of the
machinery.
202
It is seen that there is a discrepancy between the Compounding of
Offences Rules applicable in Village Panchayats and those applicable in
9.10.1
Municipal bodies. It is suggested that the same provisions applicable to
the ULBs could be included in Villagt Panchayat Rules also. This will
bring larger number of offences within the compounding powers of the
Secretary enabling ii mediate punitive action to be taken.
203
CHAPTER 10
10.1 Our Commission has been guided by two major considerations while
analysing the State Finances. Firstly, the issue that we have addressed is
whether the state finances are in a position to accommodate the scale of
transfers that we have suggested in our recommendations. Secondly, we have
also examined whether there are significant pointers that we need to highlight
on the evolving trends in the overall financial position. This becomes
necessary because such movements accumulate to impinge on delivery of
services to the people of the State and thus affect the LSGIs directly. In this
process we would also like to capture broadly what the current trends reflected
by the figures mean for the future development of the State, with reference
particularly to the expenditure on maintenance services on assets, whose
benefits directly accrue to the poor. A snapshot of expenditure and receipts
figures, be it on the revenue or capital side, at the end of a particular year, will
not serve the requirements of such an examination. To facilitate this
discussion on the finances of the State Government, an analysis of the trends
of a reasonably long period becomes necessary.
10.2 We feel that for three reasons, the decade of the nineties would afford
a sufficiently long enough spectrum for the analysis. Firstly, data from this
decade can be expected to capture the years when the world saw liberalisation
and globalisation characterising international economies in general. Secondly,
given the fact that trends in the nineties continue to firm up in various
economies of the world as is reflected by subsequent developments, data from
the nineties may broadly reflect the shape of things at least in the short term,
and expectedly, for the
204
period that will be covered by the Second State Finance Commission,
Finally in the limited arena of the State public finances too, this period has
witnessed a good mix of alternative socio-economic policies and
approaches.
10.3 This Commission has been asked to suggest the measures needed to
improve the financial position of the local governments. However, it
is not in our charter to delve into aspects of financial management of
the State Government itself. Our Commission would, as is required,
strictly choose to stay within the confines of our Terms of Reference,
Hence we do not intend to make this assessment of the State's finances
a prescriptive exercise. Where we may be perceived to trespass this
rule would be only to make an occasional remark on aspects of the
State finances that clearly impinge on the services rendered by the local
bodies. Here we would think that we have a role to play as a linesman
overseeing the interplay of forces and factors having an influence on
the financial relations between the State and the local governments.
205
starkly rising internal debt and interest payment liabilities on the borrowing
State. The resource base of States is far too limited to meet growing
expenditure commitments. State Governments account for a third of the
combined receipts of the Union and the States, while they incur three quarters
of the entire social service expenditure and half the economic service
expenditure. Tax receipts in the States have exhibited a certain degree of
rigidity during the nineties as compared to the eighties. States' tax base has
remained narrow with greater dependence on sales tax in particular. States'
own tax revenue receipts finance only 32-34 per cent of the total expenditure.
Losses of the State Public Sector Undertakings (particularly the Electricity
Boards and the Road Transport Corporations) have also contributed to the
pressure on State Finances. Resource gaps are financed by vertical resource
devolution from the Centre apart from direct borrowings by the State
Government and its Public Sector Undertakings. The fiscal consolidation
measures initiated by the Union Government since the early nineties have also
had their effect on state finances. There has been a definite falling trend in the
resource transfer from Central Governments particularly in the form of loans
and advances to States. In the last two decades, debt-SDP ratio of States rose
from an average level of 17.6 per cent in the eighties to 19.4 per cent hi the
nineties. Gross Fiscal Deficit and Revenue Deficit of States have recorded all
time high levels of 4.3 per cent and 2.3 per cent of their State Domestic
Product respectively. The additional expenditure arising out of implementation
of the revised pay scales of the State Government Employees in 1996-97
continues to affect the deficit levels of most State Governments. The gross
expenditure of the States in 1998-99 peaked at an annual growth rate of 22.4
per cent while the average decadal growth rates for the eighties and nineties
have been of the order of 15 per cent only. Development expenditure
accounted for 70.7 per cent of the total expenditure in the eighties. This fell to
65.4 per cent during the nineties. The high level of debt of all the State
Governments put together raises questions about its sustainability, especially
since its utilisation for capital investment is declining.
206
10.5 It is in the general background of the finances of State Governments
that our assessment of the State finances for Kerala is conducted. We first
look at trends in Revenue Receipts and Expenditure, the debt burden of the
State, the Gross Fiscal Deficit, the growth of standard overheads like
Salaries, Pension, Debt Servicing. Finally we trace the patterns of actual
maintenance expenditure in specific services like Health, Education, and
Public Works to help our own understanding of the problem that Local
Bodies would face on maintenance expenditure.
REVENUE RECEIPTS
10.6 Revenue receipts of the State Government consist mainly of tax and
non-tax revenue of Government and receipts from Government of India.
Revenue receipts have registered a growth rate of 14.18 per cent over
the nineties. There has however been a marked decline in the growth
of revenue receipts in the latter half of the nineties. The growth rate
of revenue receipts touched an unprecedented low of 1.12 per cent in
1998-99. Overall, tax revenues of the State registered a healthy growth
of 16.24 per cent per annum in this period. However for the years
after 1995-96 the growth rate is only 11.4 per cent, with a very sharp
drop to 3.3 per cent in 1998-99. Sales tax is the main source of tax
revenue for the State accounting for 70 per cent of the total tax receipts,
Non tax revenue registered an annual average growth rate of 12.36 per
cent from!990-91 to 1999-2000. But here too the growth rate has
shown a downward trend, with a negative figure of (-) 4.05 per cent
for 1996-97. The growth rate has shown an extremely significant
decline over the years 1996-97 to 1999-2000.
10.7 Total transfers from the Central Government consist of transfers under
the Finance Commission award, the Plan grants and the Non Plan
grants. The total transfers have shown an annual growth of around
11.12 per cent alone during the nineties. It is relevant to mention here
that this is much lower than the rate of growth of revenue receipts of
the Government of India. In 1998-99, there was a sharp downward
207
trend of (-) 14.00 per cent in total transfers. This is explained by the fact that
the increase in 1997-98 was on account of the share of proceeds to the State
from the earnings of Government of India under the Voluntary Disclosure
Scheme (VDIS) - which was an isolated and one time revenue enhancing
measure.
10.8 Overall, the own tax revenue of the State (OTR), reckoned as the sum of the
tax and non-tax revenues of the State Government excluding all transfers from
Government of India have grown annually at 15.78 per cent over the decade.
The sharp dip in both tax revenue and non-tax revenue in 1998-99, mentioned
earlier, is reflected in the low growth rate of 3.05 per cent in OTR for that
year.
REVENUE EXPENDITURE
10.9 Revenue expenditure has been growing at a steep rate of 16.82 per cent per
annum over the nineties. The Pay Revision granted by Government for its
employees in 1997-98 led to a sharp spurt with expenditure registering a
sudden jump of 21.4 per cent. Revenue expenditure in the year 1999-2000
increased by 24 per cent. Increase in the salary bill accounted for the major
share of the increase in 1997-98. In 1999-2000, the increases in non-plan
expenditure on account of interest payment (34.99 per cent), pension (56.65
per cent), police (38.35 per cent) and education (33.51 per cent) accounted for
the high increase in revenue expenditure.
10.10 Table 10.1 below shows the salary, interest and pension components of
the State for the period 1991-1999. An average of 60-65 per cent of the
Revenue Expenditure of the State is devoted to meeting interest payments and
paying the employees both serving and retired. Here, we would like to sound a
note of caution. The State's bill on salary, interest and pension has assumed a
level, which does not bode well for the future spending plans of Government.
We have in detailing our approach observed that the State, as demanded by
prudent fiscal
208
considerations, should, as far as possible, refrain from creating in LSGIs
for which it would have to meet the salary commitments. We have
recommended in our award, that future additions to st the LSGIs should be
subjected to a careful scrutiny by the Ombudsman whose role should be
expanded to perform the function of a financial steward and appraiser.
However, it will not be inappropriate for us to remark that Government
might have to seriously curtail the share of its expenditure on employees,
if it is to free resources for development. As far as salaries and pensions
go, this can be done only if the State Government temporarily suspends
its role as a provider of additional employment till it can nurse the public
finances back to health, On interest payment, the only remedy is to be
selective in taking recourse to debt, and progressively limit the use of debt
for capital expenditure alone.
209
REVENUE DEFICIT
10.11 The excess of revenue expenditure over revenue receipts, which is the
revenue deficit, is a good first measure of how well a Government is able to
manage its finances. It is instructive to appreciate the behaviour of the
revenue deficit of a State from year to year. For any given year, let the
revenue expenditure, revenue receipts and revenue deficit be denoted by Et, Rt
and Dt respectively. Let the growth in revenue receipts and revenue
expenditure for the next year be denoted by grt+1 and get+1 respectively. The
Revenue Deficit in the next year Dt+1 will be given by
10.13 Given the deficit Dt in any year, the second component Dt(l + get+1)
solely depends on the growth hi expenditure. If the growth rate gf
can be controlled then this component of revenue deficit can be managed.
Hence this component may be referred to as the expenditure component
of revenue deficit. Reductions in expenditure growth get+1’ directly
result in reductions of this component. Table 10.2 shows these
components for the ten years 1990-2000.
210
TABLE 10.2
10.14 The analysis of the revenue deficit figures shows that the relative
efficiency component helped stabilise the revenue deficit in as many as
five out the first six years in the nineties (as indicated by negative signs
in columns 5 and 9). However, thereafter, in the last four years, the
excess of expenditure growth over revenue growth has adversely affected the
revenue deficit.
10.15 We had observed earlier, the very significant dip in OTR, (on
both tax and non tax revenues) of the State in the year 1998-99. It would be
pertinent to remark here, that this is the only year in the decade in which own
tax revenue has declined in real terms, allowing for inflation
211
during the corresponding period. But, what is surprising at the same
time is that there has been no noticeable decline in the growth of SDP
212
during this period. There seems to be an incongruity in this and we fail to
understand how revenue mobilisation and economic growth could exhibit this
kind of a divergence in their growth trends. But, suffice it for us to say, that if
there has been any let up in the efficiency of tax and revenue administration in
the State during the period, then unless such trends are guarded against in
future, these would have very debilitating effects on the State finances.
10.16 It is pertinent to remark here that the data reveal that high revenue
deficit in Kerala in the recent years, is primarily a result of fall in efficiency of
resource mobilisation, and only secondarily because of the growth in
expenditure. It is not the growth rate of expenditure that has shown a marked
increase; it is the growth rate of revenue that has fallen noticeably. This
interpretation of the State's deficit affords fair ground for optimism about the
future of the State finances. Growth in revenue has historically been 18-20 per
cent in the past. Many reasons are ascribed for the general fall in revenue
collection in the second half of the nineties. Several analysts hold the view that
revenue mobilisation has fallen partly on account of the general economic
recession in the country and the slump in prices of agricultural commodities.
The general prices of agricultural commodities grown in the State remain far
from satisfactory and do not yield a reasonable margin to the farmer for
sustaining production. Both Governments, at the State and the Centre, are
seized of this crisis in the agricultural sector. If there is a recovery in the
agricultural sector, then this fact, coupled with some improvements in the tax
and non-tax administration, will push up revenue collections. There already
are positive indications, which suggest a recovery in revenue collections. From
figures available in the Finance Department, the half yearly tax collections
show a growth rate near the 18 per cent mark in 2000-01. Of course, the
absolute figures this year will not be impressive since there has been
considerable erosion in revenue receipts in the years 1997-1999; but signs of a
recovery are there. Even so, the task ahead for the Government in the next few
years is quite formidable.
213
CAPITAL EXPENDITURE
214
DEPT AND INTEREST BURDEN OF THE STATE
10.19 Tables 10.4 to 10.10 show the growth of various components in the
overall debt of the State in the years 1990-1999. Debt of the State arises from
borrowings on account of Internal Debt, Savings and Loans from Government
of India. Internal debt of the state consists of Market Loans borrowed by
Government and Ways and Means Advances received from the Reserve Bank
of India. Debt liabilities on Savings arise from the deposits received in the
Savings Accounts in the Treasuries, the remittances retained in the State
Provident Fund, Money in Insurance and Pension Funds and in trusts and
endowments. Loans received from Government of India include those received
under Central Plan, Non Plan Loans, State Plan Loans and Centrally
Sponsored Schemes. Each of these three streams of the State's debt (viz.
Internal debt, Savings and Loans from Government of India) was subjected to
a detailed analysis. The interest payment on accumulated liabilities in each of
these streams was also examined. We looked at gross retention (defined as the
excess of receipts over disbursements) and net retention (defined as gross
retention less interest payments for that stream of borrowing). This approach
has its limitations: interest payments in a particular year used for reckoning net
retention, would relate wholly or largely to accumulated balances on that
stream of borrowing in the past. Likewise the disbursements in any year would
correspond to the repayment on the principal borrowed in the past. A rigorous
analysis would therefore include an analysis of the lag in the receipts,
disbursements and interest payments over a longer time horizon.
215
10.20 As the detailed accounts on debt for the year 1999-2000 have not yet
been published by the Comptroller and Auditor General, the analysis has been
restricted to the period 1990-1999. Receipts on account of Loans from
Government of India, do not seem to conform to affi definite pattern of growth
(Table 10.4). The fluctuation is explained by the variability of schemes included in
the Government of Indii budget as well as the utilisation and drawal of funds by
the State. Itis significant that in two years towards the latter half of the period
considered, net retention has been negative from this stream even though the gross
retention has been positive.
TABLE 10.4
10.21 Deposits into the savings accounts in the treasury have been a pillar of
support for the finances of the State. The stream has yielded a positive gross
contribution to financing the State. The State is becoming more dependent on this
source to finance its deficit. This stream has in one year 1995-96 shown a
negative net figure during this period. But borrowing from the savings accounts in
the Treasury has been particularly large in the year 1998-99 and 1994-95, withal
unprecedented jump of 468% in 1998-99. (Table 10.5)
216
TABLE 10.5
Small Savings and Deposits (in Rs. Cr.)
10.22 Net accretions from the State Provident Fund have steadily tapered off, and
in some years show negative balances (Table 10.6). Insurance and Pension
funds account only for a very small amount of the total borrowing and hence
separate data for this stream of borrowings are not presented here.
217
TABLE 10.6
State Provident Funds (in Rs. Cr.)
Year Recipts Disburse Interest Gross Growth Net Growth
ment Retention Rate Retenti Rate
on
1990-91 382.04 180.41 77.73 201.63 123.90
1991-92 369.22 226.38 89.97 142.84 -29.16% 52.87 -57.33%
1992-93 405.27 337.98 101.92 67.09 -53.03% -34.83 -165.88%
1993-94 692.15 368.82 174.13 323.32 381.92% 149.19 -258.34%
1994-95 773.16 428.20 159.33 344.96 6.69% 185.63 24.43%
1995-96 800.90 513.36 176.04 287.54 -16.65% 111.50 -39.93%
1996-97 880.10 363.32 214.66 243.78 -15.22% 29.12 -73.88%
1997-98 972.17 779.95 253.69 192.22 -21.15% -61.47 -311.09%
1998-99 1128.11 770.01 276.32 358.10 86.30% 81.78 -233.04%
10.23 Internal debt of the State has been rising markedly to finance the State
budget (Table 10.7). This is largely on account of the steady growth in the
annual market borrowing of the State Government, approved b
Government of India as part of its overall credit policy.
218
TABLE 10.7
10.24 For the limited purpose of this analysis, a discussion on each line of debt
financing in detail may not be called for. But, the stark reality that confronts
us is that with respect to many of the sources of debt financing, outflows
exceed the inflows. The overall picture that emerges is given in Table 10.8.
219
TABLE 10.8
Total debt (L&A from GOI, Small savings and deposits, State Provident Funds and
Internal debt)
(inRs.Cr)
10.25 Table 10.9 also shows the relative shares of the major streams of
borrowing viz. Internal Debt, L&A from GOI and Small Savings in the
total gross retention, net retention and interest payments. As seen in the
table, the shares accounted for by Internal debt (which comprises mainly
market borrowings) and deposits received in the Treasuries through savings
schemes account for an increasing percentage of the total. It is pertinent to
note that in two years viz. 1994-95 and 1998- 99, the State has leaned more
pronouncedly on amounts mobilised into the treasuries through the savings
scheme. It is understood during this period that the State did face
considerable difficulty in its liquidity management. The share of the State
Provident Fund shows a decreasing trend.
220
TABLE 10.9
Year Internal Debt L&A from GOI Small Savings etc. State Provident Fund
GR/ NR/ INT/ GR/ NR/ INT/ GR/ NR/ INT GR/ NR/ INT
Total Total Total Total Total Total Total Total Total Total Total Total
GR NR INT GR NR INT GR NR INT GR NR INT
9-91 27.36 26.26 28.64 34.82 3028 40.61 10.03 12.56 6.79 26.06 28.53 22.82
91-92 29.83 37.17 25.78 35.89 14.25 47.82 12.22 24.11 5.66 19.05 19.84 18.60
92-93 39.81 60.98 28.57 34.47 16.88 43.80 15.26 30.04 7.41 8.08 -12.09 18.79
93-94 4.50 -65.45 26.33 43.61 53.63 40.48 13.85 36.89 6.66 35.86 69.56 25.34
94-95 21.25 15.98 26.40 37.72 35.03 40.35 18.45 24.43 12.60 21.26 23.13 19.44
95-96 31.48 41.60 27.45 39.62 25.54 45.24 4.83 -0.60 6.99 22.24 30.25 19.05
96-97 37.06 81.50 28.83 28.63 -58.74 44.79 13.67 56.96 5.66 18.65 14.27 19.46
97-98 42.44 140.01 30.21 26.12 -107.13 42.82 15.76 93.92 5.69 13.28 -38.02 19.73
98-99 29.63 26.97 32.18 23.22 3.69 41.94 33.19 62.12 5.46 12.64 5.90 19.11
10.26 Table 10.10 shows the growth of the Debt of the State along with the interest payments
over the period 31.3.1990 to 31.3.2000.
221
TABLE 10.10
DEBT AND INTEREST PAYMENTS FOR THE PERIOD
31.3.1990 TO 31.3.2000
Debt Interest
222
10.27 The picture of the year-to-year borrowing of the State that emerges is
not encouraging. The data in Tables 10.4 to 10.10 above warrant a critical
look at the advisability of the State's taking increasing recourse to debt. We
feel that drawing up a comprehensive debt strategy for a reasonably long
period ahead, with the assistance of experts would be eminently desirable for
the State at this juncture. We leave this suggestion for the consideration of
Government.
10.28 In the preceding chapters, it was argued that the maintenance of assets
created should be a focal point for action for LSGIs. Given the scale of
transfer of resources to the LSGIs, through Plan devolution from 1995-
96, the State is witnessing an unprecedented surge of activity, which
has led to creation of wealth at the community level, in the form of
buildings, roads and irrigation structures. Besides, institutions that
were hitherto managed by Departments of the State have been
transferred on a large scale to LSGIs. These aspects have been discussed
elsewhere in this report.
10.29 It has been a general experience that the first casualty of a shortage of
funds is the outlay earmarked for maintenance expenditure. This is
not confined to LSGIs or State Governments alone, but seems to be a
universal phenomenon. Successive Finance Commissions have been
seized of this problem and have in their assessment made provisions
for maintenance requirements of the States. The Eleventh Central
Finance Commission in its report (Chapter V Para 5.38) observed as
follows: "It is a matter of concern that our capital assets are languishing
because of poor maintenance". Despite affirmations about the
importance of earmarking adequate provisions for maintenance,
expenditure for this has not been commensurate with the requirements.
The Report of the Eleventh Central Finance Commission further notes:
" This has happened in spite of the fact that successive Finance Commission in
the past have made liberal provisions for maintanance of capital assets in
their assessment of revenue expenditure”.
223
10.30 Table 10.11 gives approximate expenditure on maintenance
requirements in the selected sectors of Health, Education and PubEc
Works for the period 1990-2000. These figures are only approximations.
There would be always some expenditure under various heads of account,
which, at least partly, would fall under the categon of maintenance
expenditure. Thus maintenance outlays are not explicitl] identifiable in the
budget or the Government accounts. As the Table reveals, the total
maintenance expenditure as a percentage of Revenue Expenditure of the
State has been just over 3 per cent. During the three years 1997-2000,
which correspond to a difficult financial peritx for the State Government,
maintenance expenditure, as a percentage o total revenue expenditure, has
shown a decrease. This again confirms the general assertion made in the
last paragraph. Thi finding has been a prime consideration behind ou
recommendation that funds should be adequately earmarks for
maintenance.
TABLE 10.11
MAINTENANCE EXPENDITURE
224
GROSS FISCAL DEFICIT OVER THE DECADE 1990-2000
10.31 Data on the growth of the gross fiscal deficit (GFD) of the State and
its components are shown in the Table below. The growth in revenue
deficit accounts for a growing share of the gross fiscal deficit. There
has been a decline in net capital expenditure on the State account,
particularly from 1997-98. This watershed line coincides with the 35-
40 per cent devolution of the total plan to the local bodies in the wake
of decentralised planning. The revenue deficit has grown inordinately
in the second half of the decade, particularly since 1997-98, the first
year in which decentralised planning was introduced. Revenue deficit
accounted for 74 per cent, 82 per cent and 73 per cent of the gross
fiscal deficit in the years 1997-98, 1998-99 and 1999-2000. A partial
explanation for this disproportionate growth in revenue deficit, is that
the entire devolution under Plan to local bodies, is, for accounting
reasons prescribed by the Comptroller and Auditor General, classified
as revenue expenditure. However, the stiff rise in revenue expenditure
on account of the pay revision has also contributed significantly to the
problem.
10.32 There are two ways of assessing the high revenue expenditure.
Government has held the view that as much as 60-70 per cent of the
transfer to local bodies is on capital works, and that there is not much
cause for alarm in the figures of revenue deficit. While it is not possible
to confirm the actual percentage of capital expenditure out of the plan
devolution to local bodies, in the absence of data, it should be conceded
there is a great deal of merit in this argument. Even when final figures
are available, classifying micro-level infrastructure works into two
neat categories of 'revenue' and 'capital' expenditure would pose
problems. By Government's argument thus, the percentage of revenue
deficit in the gross fiscal deficit for the three years would reduce to 25
per cent, 45 per cent and 65 per cent respectively.
225
10.33 On the other hand, if one were to extrapolate the growth rate in capital
expenditure of the first half of the decade i.e. 14.89 per cent over the three
years in question, and apply this to the funds transferred to LSGIs, then the
percentage of revenue deficit in the gross fiscal deficit for the three years
would reduce to only 47 per cent, 62 per cent and 73 per cent respectively.
Gross fiscal deficit has risen at 21 per cent per annum over the decade, and
10.34 at a higher rate of 36 per cent in the second half of the decade, But what is
worrisome is that this gross fiscal deficit has been increasingly used for
financing revenue deficit of the State. In such a situation, these alternative
views on revenue deficit of the State Government would afford little
comfort to any State Government, These figures would point to the inherent
weakness of the financial position of the State, and give an idea of the level
of borrowing that the State Government has to do each year to sustain
spending levels, particularly on account of the revenue expenditure
envisaged in the budget. Table 10.12 gives the picture of the gross fiscal
deficit of the State over the decade 1990-2000.
TABLE 10.12
226
1999-00 3515.61 79.16 73.19 661.20 14.89 1.47 264.21 5.95 -20.08 4441.02 47.43
227
FORECAST OF STATE FINANCES 2001-2005
10.36 The allocations to local bodies are a part of the revenue expenditure of
the State. As stated earlier, since it is not our intention to prescribe
remedies or measures to improve the State's finances, we have not
attempted to project the capital side of the state finances or the gross
fiscal deficit.
228
10.37 With this background, we attempt a forecast of the revenue account of
the State Government. For this we use the year 2000-01 as the base
year. The accounts are yet to be published by the Accountant General
At this point in time, Finance Department has completed a review of
the half yearly status of revenue collection. We use the buoyancy figures
for the various streams of tax revenue available at the close of the half
year 2000-01.
(2) For Sales Tax, we assume that buoyancy will pick up to the leve
in the first half of the nineties. We assume that it will touch the
level of 22 per cent, which was roughly the figure for the early
nineties, before its growth loses momentum to reach 20 percent
in 2008-09.
(4) A proposal to adopt minimum fair value fixation as the basis for
levying stamp duty is under implementation. We expect that it
will take the next financial year for the system to be fully
implemented. Hence we expect the buoyancy to record a
substantial increase in 2002-03 and touch 23 per cent and
subsequently to attain a stable rate of 18 per cent viz. the
projected SDP growth rate by 2008-09
229
(5) However where there has been a decrease or negative growth in either of
the two previous years (i.e. 1998-2000), we take the minimum of the
half yearly buoyancy for 2000-01 and the positive growth rates
registered in 1993-1999.
NON-TAX REVENUE
(1) The major components of this non-tax revenue in the State are
Forests, Miscellaneous Departments and Interest receipts.
Collection from Forests is largely dependent on the revenues
that come out of felling of trees and disposal of timber. With
felling of trees having been brought under more rigorous
guidelines in the recent years, the growth of this line of revenue
has not been as significant as it used to be in the past. For
Forests, we use the half yearly growth rate.
(2) Non Tax Revenues from other departments come largely through
collection of fees and user charges. The Non Tax Revenue Wing
of the Finance Department has submitted proposals for approval
of Government. Decisions are yet to be taken in many of these.
Hence for the years 2001-02 and 2002-03, we assume that there
will be a quicker growth in such revenue and assume this to be 17
per cent per annum. Subsequently we have assumed this to stabilise
at the same rate as the non-interest component of revenue
expenditure viz., at 13 per cent.
(3) Interest receipts are assumed to grow at the average historical rate observed
for the period 1993-1999.
GRANTS IN AID
Grants in aid received from Government of India are for Non Plan, State Plan,
Central Plan, Centrally Sponsored Schemes and Special Plan schemes. The
major share is accounted for by Grants in aid for
230
State Plan and for Centrally Sponsored Schemes. The average historial
growth rate for the period 1993-1999 is used for making the projections.
10.39 The growth rate assumed for each tax is presented in the table below
We have shown the rates for the years 2002-2009 for the reason that it will
be instructive to look at a slightly longer-term period than that covered by
our award. We have not included the year 2001-02 in the table below as we
have based our projections of revenue receipts for 2001-02 on what has
been adopted in the Finance Department for id assessment as in November
2000. The maximum annual growth ratt in the decade 1990-2000 for
selected taxes are also shown in the last column of Table 10.13
TABLE 10.13
Maximum
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 Growth
Rate for
selsected
Items in
1990-2000
Agricultutal Income 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Land Revenue 10.52% 10.52% 10.52% 10.52% 10.52% 10.52% 10.52% 37.81%
Stamps and Registration 23.00% 22.00% 20.00% 18.00% 18.00% 18.00% 18.00% 28.52%
State Excise 15.00% 1600% 16.00% 16.00% 16.00% 16.00% 16.00% 29.84%
Sales Tax 19.00% 20.00% 21.00% 22.00% 21.00% 21.00% 20.00% 22.58%
Taxes on Vehicles 15.00% 16.00% 15.00% 15.00% 14.00% 14.00% 14.00% 21.83%
Taxes on duties on electricity 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Building Tax 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00%
Other taxes and duties 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 44.31%
231
10.40 The figures for own revenue, revenue receipts, revenue expenditure and
revenue deficit for the years 2001-02 to 2005-06 arrived in the forecast
exercise are shown in Table 10.14. We have analysed the figures for three
years beyond the period 2005-06. However the general results for the award
period hold also for this extra period. We see a decline in the percentage of
revenue deficit as a share of State Domestic Product from the current level of
3.5 per cent to under 2 per cent, even assuming a comparatively low nominal
growth rate of SDP at 15.94 per cent (the average historical value).
10.41 The State has seen a comparatively steep decline in tax collection over
the last few years. However, if the cycles of economic growth, as reflected in
the eighties and nineties repeat over the next five years, the State is poised for
a faster financial recovery than what we have given in Table 10.14. We have
taken care to recommend a scale of transfers, which therefore would not
impose an unduly difficult target for the financial managers of the State.
232
TABLE 10.14
10.42 What is important here is the fact that the transfers lie in a narrow
band between 0.18 and 0.22 per cent of estimated State Domestic Product.
The average value for the award period being 0.20 per cent, Given our
assumptions, we feel that there is considerable scope for the finances to
improve over the years, albeit slowly. We do not endeavour to guess the
State Government's response to the Fiscal Responsibility Act under
enactment by Government of India or the ingredients of the financial
reforms under discussion with the Asian Development Bank, We have not
taken into account any deep cuts in expenditure as a part of the financial
reforms of public expenditure that the State Government may undertake.
233
10.43 In our exercise, we have also looked at the behaviour of this difference under
various growth rates of the State Domestic Product for the forecast period.
With our recommended scale of transfers, the average value of transfers as a
percentage of State Domestic Product stabilises with improved economic
growth at around a peak value of 0.2184, as is shown in Chart 10.1. As
mentioned elsewhere earlier, we have assumed that the State Domestic
Product will grow at the average historical value. For alternative growth rates,
Own Tax Revenue has to be correspondingly adjusted for the forecast period.
This has been done by using a simple proportionality factor. It is clear that
with faster growth the transfers that have been recommended by this
Commission will be accommodated better in the fiscal balance of the State:
this is so because revenue deficit as a percentage of SDP declines for
increasing growth rates of SDP (Table 10.15)
Table 10.15 shows the behaviour of Revenue Deficit, post transfers, over the
10.44
forecast period for a few alternative rates of economic growth. The transfers
that have been recommended will not upset fiscal management, since they do
not, by themselves, introduce any spurts in Revenue Deficit as a percentage of
the State Domestic Product.
234
TABLE 10.15
235
10.46 We have taken the non plan revenue surplus projected by the Eleventh
Central Finance Commission in Table 10.2. We have also assumed
that the Annual Plan will grow at a rate of 13 per cent per annum over
the award period (at the rate of growth of non-interest component of
revenue expenditure). Given that the revenue component in the Plan
continues to be 70 per cent of the total plan outlay then the revenue
deficit computed is shown in Table 10.16.
10.47 The figures arrived at in our forecast lie between those given in the
report of the CFC and those presented in the State's Memorandum to
the CFC. Generally, memoranda presented by State Governments tend
to overestimate the Expenditure figures. This is largely to prevent the
possibility of the State losing out on non plan assistance in the Award.
The Memorandum's estimate of revenue deficit for the year 1999-2000
for example is Rs.5680 cr. while the audited figures show a revenue
deficit of Rs.3625 cr. Likewise, the Finance Commissions use normative
measures of 'prescriptive' rates for various items particularly on the
expenditure side. As a result the final audited figures at the end of the
award period of the various Finance Commission and the projections
that these commissions have made in their awards differ by a very large
margin. This detracts considerably from the reliability of the
projections, particularly of revenue expenditure by the Finance
Commission.
10.48 In our own forecast, we have adopted figures, which are suggested by
the trends in the past, specifically the period 1993-94 to 1999-2000.
At the same time we neither anticipate any runaway expenditure nor
any unusual momentum in the growth of any revenue stream. At the
end, it is relevant to mention that we have avoided taking into account
the implications of a further pay revision for the employees of the
State Government through the next Pay Commission. We have done
this for two reasons. Firstly there is a recommendation of the last Pay
Commission that pay revisions should be made once in ten years as
against the existing practice of once in five years. As of now, the State
236
Government does not seem to be in favour of adopting this
recommendation of the Pay Commission. But the scales of pay, barring a
few instances, are at present fairly identical with Central Pay scale With
DA announcements reflecting the entire increase in prices, pay revisions
after every five years may cease to be a prevalent practice. Secondly, even
if a pay revision were to be implemented in the award period covered by
our report, the effect will be reflected in the last year of the award period,
which would not alter the forecasts much. In any case, the impact of
transfers suggested by us would remain at an approximately constant level
through the award period.
237
CHAPTER 11
1.1 Our report is being prepared at a time when the Eleventh Central
Finance Commission has just submitted its report to the President. The Eleventh
Central Finance Commission's report has given rise to a lively controversy on
the appropriate criteria for the inter sc distribution of resources between the
different states. These issues are outside the sphere of our concern; but the CEC
has made a number of important suggestions regarding the setting up and
functioning of State Finance Commissions, and has expressed its views on a
number of questions relating to decentralisation, on which we feel we must give
our opinion.
The CFC has pointed to an anomaly which has been exercising us as well.
This consists in the following. Article 280(3)(bb) and (c) of the
Constitution states that the CFC must make recommendations as to the
measures needed to augment the Consolidated Fund of a State to
supplement the resources of Panchayats and Municipalities in the State "on
the basis of the recommendations made by the Finance Commission of the
Stattf* (emphasis added). But the timing of the setting up of the crop of
First State Finance Commissions happened to be such that their reports
could not be made available to the Tenth Central Finance Commission and
appeared almost immediately afterwards. The only SFC reports available to
the Eleventh CFC therefore are almost five years old and hence at the end
of their time-frame of reference, they cannot conceivably be of any use
238
to the CFC in formulating its recommendations. Besides, since both CFCs
and SFCs are constituted once every five years, this problem will recur
with every CFC. In the case of Kerala for instance the first SFC's report
was submitted in February 1996 and was supposed to cover the period
1996-7 to 2000-1. This can hardly form the basis of the recommendation of
the Eleventh CFC whose report is supposed to cover the period 2000-1 to
2004-5. Thus the only SFC report available to the CFC is one whose time-
frame of reference has nearly ended; it can not possibly form the basis of
the CFC's recommendations.
11.3 The first SFC of Kerala had drawn attention to this problem.lt
had suggested that the SFCs should be constituted on a date
early enough, such that their reports could be made available six
to nine months before the CFC submits its report. It had also
drawn attention to the discrepancy that while Article 280 of the
Constitution empowered the President to appoint a CFC after
five years or "at such earlier times as the President considers
necessary" there was no such leeway provided in Article 243 (I)
dealing with the appointment of the SFCs; clearly a removal of
this discrepancy allowing for the appointment of SFCs earlier
than at the "expiration of the fifth year" can resolve the problem,
239
total picture regarding state finances, including what the states themselves
are being called upon to devolve to LSGIs. (Since the latter is governed by
the recommendations of the SFCs, the Constitution talks of the CFC’s
making its own recommendations "on the basis of the recommendations
made by the Finance Commission of the State"). This is an eminently
reasonable provision. What is more, it constitutes an anti-thesis of the "top-
down" approach and an expression of commitment to the primacy of
LSGIs: instead of SFCs taking the devolution from the Centre as a datum in
their decision-making it is the CFC that is supposed to take the devolution
to LSGIs as the datum in its decision-making. The needs of LSGIs, as
reflected in the SEC recommendations, have a primacy and constitute a
constrain within which the CFC must operate, rather than having to adjust
to what the CFC decides to devolve. An amendment deletinj this provision
therefore is not just unwarranted; it amounts to an overturning of a basic
principle.
240
amendment would remove some of the Constitutional shackles on the CFC
would still remain. There may be a case for adding "and other relevant
factors" to "on the basis of the recommendations made by the Finance
Commission of the State", but none in our view for deleting the latter.
11.7 There is however an implication of Article 280(3)(bb) and (c) which has gone
generally unnoticed. In stating that the CFC should make recommendations
regarding augmenting the Consolidated Fund of a State to supplement the
resources of the Panchayats and Municipalities on the basis of the SFC
recommendations, the Constitution implicitly suggests that the
recommendations of the SFC would be more or less binding on the state
government. There would be no point in the CFC taking the SFC
recommendations as the basis of its own award, if the latter recommendations
amounted to no more than mere pious wishes which the state government
could accept or reject at will, or, in the case of those it accepts, could give
effect to at a time of its own choice. In short, in enjoining on the CFC the need
to heed the SFC recommendations, the Constitution accords the latter a degree
of sanctity. Unfortunately, state governments have been quite cavalier in their
treatment of SFC recommendations. The CFC itself quotes instances of Action
Taken Reports on SFC recommendations not being presented to state
legislatures even two to three years after the submission of the SFC report. In
Kerala too some of the recommendations of the First SFC were rejected by the
government (e.g. the provision regarding 1 percent of State revenue,
appropriately defined, going towards the Rural and Urban Pools); and, even
with regard to the others, the necessary legislation has taken an inordinately
long time. Of course the total devolution from the state government to the
LSGIs in Kerala has been impressive and unprecedented, and has in fact gone
beyond the prevailing conception at the time of the first Finance Commission
report. This fact however was never advanced as the reason for the partial
acceptance of the SFC
241
report. We welcome the CFC's suggestion that the Action Taken Report on
the SFC's recommendations should be placed before the state legislatures
within six months of the submission of the SFC report, and urge greater
regard on the part of the state government for the spirit of the Constitutional
provision in I dealing with the recommendations of the SFC.
242
recommendations", its availability makes no difference to the rest of our
report. These funds, it must be emphasised too, should not be included in the
Plan funds which have a completely distinct existence. It is suggested that
these grants should be devolved in one instalment.
11.10 A perusal of the CFC report however makes it clear that the
process of decentralisation in Kerala has gone way beyond what
the CFC, looking perhaps at the average picture among states,
visualises. The CFC had commissioned a study by the NIRD on
rural local bodies and by NIPFP on urban local bodies. According
to the CFC, "The Study done by the NIRD reveals that the 73rd
amendment has not significantly altered the functional domain
of the panchayats at various tiers. Few states have been serious
in vesting the panchayats with the necessary powers, funds and
staff to enable them to perform the functions assigned to them
under the statutes. The Centre as well as the States have
sponsored schemes for rural people without associating
panchayats in planning and implementation." The picture in
Kerala is vastly different: not only were a whole array of assets
transferred to the LSGIs in 1995 together with staff and funds
to meet operating costs, but, under the stimulus of the Peoples'
Plan Campaign, over 35 percent of plan outlay has been given to
LSGIs to spend on projects of their choice. Precisely because of
this unique status of Kerala, the index of decentralisation
prepared by the CFC (which has to do with criteria such as when
the SFCs were set up and the extent of action on their report,
matters that have become secondary in a context where over
Rs.1000 crores are handed over every year as plan grants to
LSGIs) does not do justice to Kerala.
243
government to LSGIs, or the magnitude of assets actually transferred to
LSGIs, since this is the essence of the process of decentralisation, as
envisaged in the Constitutional Amendments, Looking only at the SFC
recommended devolution, which has in most states, for no convincing
reason (and certainly not for any Constitutionally-specified reason),
excluded plan funds from its purview, is inadequate to start with. But not
taking into account the actual devolution even with regard to the non-plan
part, but concentrating only on the state government's formal' response to
the SFC recommendations, increases further the inadequacy of the index. It
is in fact a symptom of the inadequacy of the index that a state like Kerala,
with its unique record of decentralisation, performs so poorly according to
it.
11.12 There is however a more basic sense in which Kerala's remarkable essay in
democratic decentralisation which is qualitatively different, conceptually,
from the average picture among the States in India, has not elicited the
response it deserved from the CFC. The CFC does "not find adequate
justification in the demand that a certain percentage of the funds transferred
by the States to the panchayats and municipalities be provided by the
Finance Commission". The reason is the following. On the one hand, the
mere transfer of plan schemes to LSGIs should not lead to any additional
expenditure liability on the States; on the other hand the additional financial
burden falling on the State for implementing the SFC recommendations has
to be built into the expenditure stream of the State which the CFC is already
cognisant of. (And any transfer to LSGIs over and above SFC
recommendations is outside its purview anyway). It follows then that the
CFC has to take no special note of the devolution to LSGIs by the State
government. This argument might have some cogency in the "normal"
situation, but not in the context of the democratic decentralisation
experiment in Kerala. The reasons are obvious, and are as follows.
244
11.13 With the devolution of plan funds to LSGIs, there has been a significant change
in the composition of plan investment. In particular there has been a massive
increase in road length. This change in composition is nothing to frown upon;
on the contrary, if decentralised planning is really meaningful, then it must be
reflected in some change in the composition of plan investment, for otherwise
the need to shift away from paternalistic planning would appear
correspondingly weaker. Roads in particular, and similar investments in local
infrastructure in general, require, as discussed in an earlier chapter, high levels
of maintenance expenditure. If plan funds are not to be frittered away on
maintenance expenditure (and the whole effort in Kerala at the present juncture
must be to educate the people not to fritter away plan outlays for current uses,
for which the temptation would be almost irresistibly high), then adequate
provision must be made for maintenance. The argument can be advanced, and
our Commission in fact has advanced it and accepted it in an earlier chapter,
that the State government which has transferred the plan outlay should also
meet the maintenance expenditure, since if the same outlay had been spent
through departments, it would have provided for the maintenance of the assets
anyway. Now, the CFC's argument amounts to saying that if the state
government transfers plan schemes to LSGIs and meets their maintenance
requirements, then its overall expenditure obligations do not increase. But this
presumption is incorrect since the change in the composition of plan
investment also raises the maintenance expenditure, and hence the overall
expenditure obligation of the state government. It is certainly true that in so far
as this additional obligation gets reflected in the SFC report, it would be taken
cognisance of by the CFC. But that would be almost five years from now.
Meanwhile, maintenance expenditure needs have to be met immediately, since
the roads constructed in 1997-8, the first year of enhanced plan devolution,
would be already due for re-topping (a very expensive operation) in the
coming fiscal year itself; and subsequent fiscal years would only
245
see an escalation in such expenditure. By the time the Twelfth CFC makes
some arrangement to help the state, it would already have carried a big
fiscal burden. The Eleventh CFC regrettably, in concentrating on the
average picture, has provided little succour to a state like Kerala (the
amount coming to the state from the CFC's provision for civic services is
too meagre relative to the state's requirement, which, to repeat, is highly
specific). Our Commission nonetheless has enjoined upon the state
government the task of meeting the maintenance expenditure in full. This
is an obligation which cannot be shirked merely because the Eleventh
Central Finance Commission chose not to recognise its existence.
246
CHAPTER 12
PROCEDURAL SAFEGUARDS
12.1 In the context of the considerable devolution of funds both Plan and non-Plan
suggested by this Commission, it is felt that strong procedural safeguards are
necessary both ways to ensure that the Government and the LSGIs perform
their fiscal responsibilities fair and straight. The Government has to accept the
financial entitlements of LSGIs and honour their due claim promptly. The
LSGIs have to show utmost diligence and care in utilizing public money. The
Commission would be dwelling at length on issues related to fiscal
responsibility and financial management of LSGIs in the second part of the
Report. However the Commission feels that certain procedural safeguards be
adopted immediately and would recommend the following.
247
Vehicles Tax would move out of the financial domain of LSGIs and become
state taxes. For this, appropriate amendments to the Kerala Panchayat Raj
Act, Kerala Municipality Act and Kerala j Motor Vehicles Taxation Act and
the relevant rules are needed.
12.2.3 This nine percent has to be split up into two groups viz., the General
Purpose Grant and Maintenance Grant, getting 3.5 percent and 5.5 percent
shares respectively. LSGIs should be free to spend the General Purpose
Grant for establishment expenses as well as for performing the obligatory
and other functions; the Maintenance Grant should be used exclusively for
maintenance and well-defined related requirements only. It should be made
non-divertible. Similarly the Plan funds should be used exclusively for
development purposes and again should be totally non-divertible. While
General Purpose Grant would be released fully as per entitlement and would
be allowed to be transferred to PD Accounts permitting unlimited carry
over; for the other two grants, unspent funds would lapse.
12.3.1 (1) Flow of Funds. Now Plan Funds flow to LSGIs in four quarterly
instalments. For claiming each instalment the concerned LSGI has to make
an application, to the Deputy Director in the case of Village Panchayats, to
the Heads of Department in the case of Block Panchayats and Municipalities
and to the Government in the case of District Panchayats and Corporations,
Every time an instalment is to be released prior general approval of the
Finance Department is required. This system has been found to be
cumbersome and slow since there is considerable time lag between the
preferring of a claim and the actual crediting of funds to the LSGI account. It
often happens that funds cannot be accessed when most needed.
248
12.3.1.1 In respect of sponsored schemes, both Plan and Non-plan, the
funds flow to LSGI from the Heads of Department either directly
or through district level officers. Normally it is given in one
instalment; but sometimes the release is made rather late in the
financial year. Also, there is some communication gap between
the department and the LSGI on how exactly some of the funds
can be spent, with the result that there are substantial unspent
funds lying with LSGIs from sponsored schemes.
12.3.1.2 As per the existing system, LSGIs are permitted to carry over 25
percent of their allotted Plan funds to the next financial year.
This is justified on two counts:- Firstly due to delayed releases
the last quarter get credited only towards the end of the financial
year with the result that it is not possible to spend it and carryover
becomes inevitable; secondly, the first instalment of the
succeeding year also gets delayed as various procedures are to be
followed and this necessitates LSGIs to have carry over funds so
that their expenses during the early months of the financial year
could be met. This system of carryover has not been very efficient.
249
(1) The Director of Panchayats (in the case of Village
Panchayats), the Commissioner of Rural Development (in
the case of Block Panchayats and District Panchayats) and
the Director of Municipalities in the case of Municipalities
and Corporations) would be declared as the Controlling
Officers of these grants for the LSGIs serviced by them.
250
From the first quarter 50 percent
40 percent of the quarterly allotment plus
From the second quarter
the carried over amount
From the third quarter 30 percent of the quarterly allotment and
the carried over amount
From the fourth quarter
Nil
Even if the LSGIs were to use this flexibility to the maximum the
quarterly percentage of expenditure would not exceed the following:
This arrangement would restrict runaway expenditure towards the end of the
financial year.
251
this 'regular allotment' expenditure can be permitted subject only to
the condition that the maximum permissible amount should not
exceed one-third of the quarterly allotment in the first month and
two-third of the quarterly allotment in the first two months together.
This is to regulate too much of outflow from the treasury in any
given month.
252
The Eleventh Finance Commission grant could be given in one instalment in
the first quarter of the year in the same manner as above. LSGIs can
transfer-credit the amount. Releases in subsequent years could be linked to
expenditure.
The elaborate procedures explained above would ensure that the objective of
liquidity management of government is fully met even while simplifying the
mechanism of flow of funds.
12.3.2 (2) Calculation of entitlements: For the purpose of calculating the share
of taxes due to the local governments, the accounts of the year previous to the
last one should be taken so that the accounts certified by the Accountant
General can be used.
253
12.4 REISTRATION ON CREATION OF NEW STAFF
12.4.2 An analysis of the State finances shows that there is need for
utmost care and caution in expanding the staff strength in view
of the severe financial crunch. For practical reasons, salaries and
pensions end up as the first charge on government revenues and
when the revenues are not enough, borrowing is resorted to meet
these commitments. This has dangerous implications; for, it fully
eats away the allocations for maintenance, which is so essential
for the optimum use of the good social infrastructure, which
Kerala has built up over the years. Therefore there is every reason
to economize on creation of staff and allot more resources for
the upgradation and upkeep of the assets created.
12.4.3 Of course the transferred staff are paid for by the Government; but if the
staff costs increase the first squeeze will be on funds recommended to be
earmarked to LSGIs for maintenance and probably even for Plan purposes.
Also, in the not too distant future, LSGIs would have to take on the full
responsibility of meeting the establishment costs. So too much of staff can
later prove to be a burden for the LSGIs themselves. In this context the
Commission would put forward certain basic suggestions to contain the
salary and related commitments.
254
12.4.4 Firstly any proposal by Government to create staff in institutions/ offices
transferred to LSGIs should be formulated in consultation with the concerned
LSGIs. Secondly it would be advisable to let the LSGI bear the additional cost
due to the staff creation. Thirdly it is necessary to have an independent
institutional mechanism to thoroughly analyse proposals for staff creation
either from LSGIs or Government, relating to both own staff as well as
transferred staff. What is required is a kind of Expenditure Ombudsman. Since
Kerala already has an excellent organisation in the form of a multi-member
Ombudsman created with the primary responsibility of controlling
maladministration in LSGIs, it is felt that this body could take on the
responsibility of vetting all proposals for staff creation. Since unnecessary
expenditure on staff is a kind of maladministration there is logical justification
for the Ombudsman to handle this task. Therefore the Commission would
recommend that Ombudsman for LSGIs be authorised to approve every
proposal for creation of staff either from LSGIs or from Government, in
institutions/offices transferred to LSGIs or in the original offices/institutions of
LSGIs. The approval could be based on the reasonableness of the request with
reference to need and existing norms, sustained affordability of the proposal on
the part of the State Government as well as LSGIs, implications for future,
possibility for redeployment from other local governments or from
Government, possibility of out-sourcing, potential for streamlining existing
work etc. The Council of Ministers could then take an informed decision based
on the recommendations of the Ombudsman. This institutional mechanism
would ensure that while absolutely unavoidable posts get created, there would
be an effective check on uncontrolled, ad-hoc expansion of bureaucracy. It
could bring reliability in staff creation and over a period of time give push to
efficiency and economy in the administration of LSGI responsibilities.
255
12.4.5 Alongside, Government may set up a one-time Local Government Staff
Commission, which could go into the question of scientific reallocation of
staff among LSGIs and redeployment from government to LSGIs subject to
the condition that no creation of staff would be recommended. In the latter
report it could take off from where the Committee on Decentralisation of
Powers has stopped and fully operationalise the principle of "work and
worker going together". It could also suggest measures for improving office
management through the use of modern techniques and technologies as well
as through retraining the existing staff. It could explore the possibility of
outsourcing certain kinds of work as also pooling of human resources for
access by a group of LSGIs. This Staff Commission could give its
recommendations in about a year.
1. All LSGIs should have a maintenance plan, which will spell out
both the maintenance needs and the intended expenditure for
each item.
4. All LSGIs should have a single account for crediting all their
256
entire collected income other than grants-in-aid from State or Central
Government or other agencies.
1. Secretary (Finance)
2. Secretary (Law)
3. Director of Panchayats
257
4. Director of Municipal Administration
12.6.3 This Committee would have the task of preparing amendments to Acts and
Rules and monitoring the issue of notifications and general orders. It should
prepare the Action Taken Report to be submitted to the Legislature. This
Committee could be serviced by the SFC Cell of the Finance Department.
12.7.1 The first SFC had recommended setting up of a Special Cell and
accordingly as per G.O.(MS)564/97/Fin dated 4-6-1997 a Cell
has been set up in the Finance Department. Unfortunately this
Cell has not been able to discharge its functions very effectively
with the result that there have been delays in operationalising
the recommendations of the first SFC. The fact that the second
SFC had really to struggle and spend a lot of time to get the
data and details, which could have been gathered and analysed
regularly by the SFC Cell without much difficulty, further
reinforces the need to have a small but efficient regular set up.
258
and the required class IV staff, driver etc. The Commission would like to
underline the fact that it is not suggesting any level for the posts. It is felt that
the accent should be on the quality of the person rather than his rank in the
official hierarchy.
(iii) Design formats for monitoring resource mobilization at the local level
and resource flow from Government to the LSGIs, obtain periodical
reports in the formats, collate them, analyse them and prepare
monthly statements and annual reports. This monitoring system could
be used by LSGD for taking necessary remedial action wherever
required.
(iv) Play the nodal role in organizing training programmes for LSGIs in
respect of recommendations of this Commission relating to new
systems of Budgeting, Accounting, Auditing etc.
(vi) Search, collect and store information on local government finances from
both within the State and outside the State.
(vii) Create a data bank for the use of future State and Central Finance
Commissions.
259
SUMMARY OF RECOMMENDATIOS
(1) Government may devolve to the LSGIs, Plan funds not less
than one-third the annual size of the State Plan as fixed by
the Planning Commission. This Fund is to be used by LSGIs
for planning and implementing locally relevant projects. The
secotral ceilings if any within this grant may be fixed by
Government from time to time.
(2) Five and a half percent of the annual own tax revenue of
the State Government may be devolved to the LSGIs as
Grant-in-aid for maintenance of assets under the control
of the LSGIs including the transferred assets. This
percentage may be determined on the figures certified by
the Accountant General, which normally relates to the
financial year two years before the Budget year. All
expenses related to running of institutions except wages,
supply of medicines to health institutions, educational
concessions / scholarships to students, supply of books and
consumables to schools, equipments, conducting noon-
feeding in schools, shall be borne by the LSGIs. This should
include payment of rents, repair of equipment including
vehicles, and meeting of telephone charges and vehicle
operating expenses.
260
(3) Three and a half percent of the own tax revenue of the State Government
based on the figures certified by the Accountant General could be devolved
to LSGIs as Genera Purpose Grant in lieu of assigned taxes, shared taxes and
various statutory and non-statutory grants-in-aid, both specific purpose and
general purpose. This grant-in-aid would subsume under it Basic Tax Grant,
Surcharge on Stamp Duty, Vehicle Tax Compensation, Rural Pool Grants,
the specific purpose and general purpose grants to Urban Local Bodies and
all other non-plan grants-in-aid devolved to LSGIs from the Local Self
Government Department.
3. It has to be noted that Kerala has become highly vulnerable in the context of
liberalization and globalisation. How the poor get affected by this process
needs to be specially studied.
5 For the above three streams of grants-in-aid the devolution formula and the
distribution formula are as suggested below:
261
qi = ri Pi / a ri Pi
qi - share for LSG1 i
The date of effect of the incentive system may be indicated to LSGIs well in
advance.
(b) Maintenance Grant. The maintenance grants should be based on the
current cost of replacement and the initial norms (which has to be updated
periodically) may be as follows:
262
6 The distribution of the maintenance grant could be as follows:
(1) On the basis of a price index work out what Rs.140 crores
at 2000-2001 prices would amount to for the year for which
the provision is being made. The deflator for the construc
tion sector can be utilized for this purpose.
(2) One-seventh of this amount may be kept aside for the Dis
trict and Block Panchayats and divided between them in the
ratio 19 : 1. The share of the Block Panchayat should be
divided equally among them. As regards District Panchayats,
half the share should be divided according to the ratio of
distribution of the transferred village roads and other dis
trict roads and the other half based on norms for repair of
non-road assets in their control (other than those created
after 1995)..
(5) The remaining portion of the maintenance grant i.e. the ex-
cess over Rs.140 crores at 2000-01 prices may be distrib-
uted exactly in the same manner as Plan 6rant-in-aid.
263
c) General Purpose Grant. The Government may determine as a one-time
exercise, the share of District Panchayats and Block Panchayats in the
General Purpose Grant, based on normative assessment of their
establishment cost and office expense requirements. The remaining
amount may be distributed as follows:
264
d) Eleventh Finance Commission grants may be devolved on the basis of
the population criterion in one instalment.
9
OWN RESOURCES MOBILISATION BY LSGIs
(1) For Property Tax the recommendations of the First SFC may be
operationalised and the following scheme is suggested for classifying
buildings and fixing the tax.
( c) Luxury building.
b - 1 : 1.5 : 2 : 2.5
could be - 1 : 1.5 : 2
265
(2) On no account should there be a cap on increase or a limit to decrease
when the new system is introduced.
(6) In the case of Advertisement Tax the Government may fix the minimum
rates for taxation for different kinds of advertisement for different types of
locations by issuing Advertisement Tax Rules, which could set out the
guide lines for LS6Is to assess the tax.
(8) Conversion Tax may be realized at the rate of five per cent of the capital
value in the case of conversion of paddy lands. Half this rate may be made
applicable for other kinds of conversions. In the case of conversions
without prior permission a severe penalty of ten times the Conversion
Tax should be realized in the case of conversion of paddy land and an
amount equivalent to the Conversion Tax could be realized in other cases.
266
(9) The Service Tax should be made compulsory and be linked to the cost
of performing obligatory functions and calculated as a percentage of
Property Tax.
(11) In the case of Non-tax Revenue the Government should fix the
minimum fees for various kinds of licences in the case of
Municipalities and Corporations through notification. In the case of
Village Panchayats only the minimum amount may be fixed in the
rules.
(12) In the case of licences and permits, which are renewed periodically,
25% of the licence fee may be collected as fine for delay beyond a
grace period of ten days; this pen alty may be increased by 25% for
every additional fort night of delay.
(13) There must be compulsory display by LSGIs on the spot for various
items of revenue and in the case of auctions a district level public
notice should be given in December about to all the forthcoming
auctions.
267
(ii) Licence fee under the Kerala Places of Public Resort Act.
(v) Licence fee for Brokers, Commission Agents, Weigh men and Measurers.
(vii)Licence fee for premises where animals are kept for commercial purposes.
(viii)Market fee.
(ix) Cate fee for public halting and parking places, (x) Cate fee for
slaughterhouses.
(xi) User charges for burial grounds, burning ghats and electric crematoria.
(17) The meat stalls and the right to fish in water bodies may be auctioned every year
by the concerned LSGIs after giving due publicity.
(18) Village Panchayats may auction the right to set up temporary shops in public land
just as Urban Local Governments are doing so under Section 376 of the Kerala
Municipality Act.
268
10 FOLLOW UP OF FIRST SFC RECOMMENDATIONS
(6) The question of Village Panchayats and ULBs levying daily fee
for use of poramboke may be examined and decided by Gov
ernment without further delay.
(8) Shortfall in devolution of assigned and shared taxes vis-a-vis the accepted
level may be made good by Government.
11 PROCEDURAL SAFEGUARDS
(1) Necessary amendments to the Kerala Panchayat Raj Act and the Kerala
269
Municipality Act may be made to specify the minimum shares of LSGIs, of
the Plan Grant, Maintenance Grant and General Purpose Grant.
270
(2) LSGIs should get automatic allocations at the beginning of every month.
(6) All proposals for staff creation should be cleared by the Ombudsman.
271
(8) All LSGIs should prepare annual maintenance Plans.
12 A Cell under the joint control of Finance and Local Self Government Departments
may be created for concurrent monitoring of all financial matters of LSGIs
PRABHAT PATNAIK
Chairman
Thiruvananthapuram
8th January, 2001
272
Annexure I.I
GOVERNMENT OF KERALA
NOTIFICATION
S.R.O.No.543/99.— Under clause (1) of Article 243-1 of the Constitution of India and
section 186 of the Kerala Panchayt Raj Act, 1994 (13 of 94), read with clause (1) of
Article 243-—Y of the Constitution of India, and section 205 of the Kerala
Municipalities Act, 1994 (20 of 1994), the Governor of Kerala is pleased to constitute a
Finance Commission consisting of Sri.Prabhat Patnaik, Professor, Jawaharlal Nehru
University, New Delhi as the Chairman and the following two other persons as
members, namely.—(1) Dr.K.M.Abraham, Secretary to Government, Finance
(Resources) Department
2. The Chairman and other members of the Commission shall hold office for a
period of one year from the date of this notification.
3. The Finance Commission shall review the financial position of the Panchayat
and the Municipalities and make recommendations as to -
(a) the principles which should govern, -
(i) the distribution between the State, Panchayats and the
Municipalities of the net proceeds of the taxes, duties, tolls and
fees leviable by the State, which may be divided between
them, under Part IX and part IX - A of the Constitution and the
allocation between the Panchayat at all levels and
Municipalities of their respective shares of such proceeds;
(ii) the determination of the taxes, duties, tolls and fees which may
be assigned to or appropriated by, the Panchayats and the
Municipalities;
273
(iii) the grants-in-aid to the Panchayats and the Municipalities from
the Consolidated fund of the State.
(b) the measures needed to improve the financial position of the Panchayats
and the Municipalities with reference to, -
(i) the scope for local bodies to raise institutional finance, and
suggest a framework for local self governments to take
recourse to such sources along with procedures to be followed
and limits, if necessary, to raising such resources;
(ii) need for sharing the cost of maintenance of assets and
institutions transferred to local self governments, and evolving
criteria for it, with due regard to the fiscal position of the State
Government and the local self- governments;
(iii) steps necessary for efficient financial management with
particular reference to efficiency in resource mobilization and
economy in expenditure;
(iv) settlement of claims and dues of Panchayats and Municipalities
vis-a-vis Government and Governmental agencies;
(v) procedures to be followed for smooth flow of funds to local self
Governments and ensuring proper financial accountability,
Orders regarding the terms and conditions of appointment of the Chairman and
other members of the Commission will be issued separately.
274
Annexure 1.2
GOVERNMENT OF KERALA
Finance (Administration - A) Department
NOTIFICATION
"2. The Chairman and other members of the Commission shall hold office up to
the 22nd day of June 2001."
275
Annexure 1.3
As part of the study the Commission visited the following LSGIs and had
detailed discussions with the elected representatives and officials.
Grama Panehayat, Karakulam
Block Panchayat, Anchalummood
District Panchayat, Kollam
Punalur Municipality
Corporation of Thiruvananthapuram
Annexure 1.4
Annexure 1.5
24th November, AN, 1999 Discussion of the Commission with the Chief
Engineer (Building &Local Works) and Deputy
Chief Engineer (Roads).
276
Annexure 3.1
Rupees in Thousands
SI. No. Name of Municipality Property Tax Entertainment
Tax
1 Kollam 12580 16087
2 Perinthalmanna 2504 3275
3 Thodupuzha 3822 4503
4 Palakkad 10934 19597
5 Alappuzha 7016 10405
6 Kunnamkulam 3510 5113
7 Kodungallur 2098 7065
8 Guruvayoor 3988 4488
9 Kottayam 12206 14297
10 Chalakudy 2304 5637
11 Shornur 1952 3839
12 Pala 3334 6644
13 Changanassery 5762 7621
14 Thalassery 7688 10471
15 Mavelikara 2386 2596
16 Aluva 4484 6712
17 Pathanamthitta 3034 3388
18 Vadakara 7924 8052
19 Cherthala 2315 2399
20 Tirur 3054 8794
21 Thrissur 9588 20144
277
Annexure 3.2
The Kerala Municipality Act gives ample powers to the various authorities in
common good. The Commission made a study to find out whether the Municipalities
are making full use of their authority. It was found that of the 55 Municipalities and
three Corporations only a very few have utilised the provisions sampled out. The
l). Section 335: Improper disposal of carcasses, rubbish and filth. According to
the existing provisions, the Municipality can charge a fine of Rs.500/- for this. The
For 42 Municipalities the collection was 'Nil'. Fourteen of them did not give
any reply.
2). Section 336: Allowing rubbish or filth to accumulate on premises for more
278
2. Mavelikara Rs. 124007- Rs. 170007-
279
For 42 Municipalities the collection was 'Nil'. Fourteen of them including
3. Palai Rs.135/- —
4. Vadakara Rs.500/- —
4).Section 340: Throwing rubbish or filth into public places. The Municipality
3. Palai Rs.500/- —
4. Changanassery Rs.250/- —
6. Quilandy Rs.500/- --
7. Mattannur Rs.250/-
280
8. Kannur Rs. 1750/- Rs. 1250/-
1 l.Manjeri — Rs.250/-
12.Vadakara — Rs.5750/-
The collection is 'Nil' for 41 Municipalities. Fourteen Municipalities did not give
any reply,
streets. The Municipality can charge up to Rs. 10, 0007-. The fines collected are as
given below:
Name of the Municipality. Amoun Collected
1998-1999 1999-2000
1. Thiruvalla Rs. 10007- Rs. 1000/-
281
3. Vadakara Rs.40250/- Rs.48275/-
4. Mattannur Rs.250/- --
5. Changanaserry — Rs.100/-
6 Guruvayoor — Rs.510/-
7. Kannur — Rs.3380/-
7). Section 370: Deposits etc. of things on Public Street. The Municipality can
charge up to Rs. 1000/-. The details of penalties collection are noted below: -
14.Kasargod — Rs.4800/-
15. Palai Rs.1065/- —
282
1 6.Thiruvalla Rs.1000/- Rs.1000/-
283
The collection is 'Nil' in respect 28 Municipalities. Fourteen did not respond.
3. Guruvayoor Rs.3987/- —
5. Kottayam — Rs.815/-
6. Changanssery Rs.765/- —
The Municipalities in which the collection is 'Nil' are 38 in number. No reply was
9).Section 412 (1) Tree or branch of a tree likely to fall and cause danger to
The collection is 'Nil' in respect of 40 Municipalities. Fourteen of them did not give
284
any reply.
285
10).Section 414: Dangerous quarrying. The Municipality can charge up to
Rs.5000/-.
11). Seel ion 426: Untenanted building or land, which becomes a resort of idle and
For 42 Municipalities the collection was 'Nil'. Fourteen of them did not give
any reply.
Municipality can charge up to Rs.500/-. The details of amounts collected are noted
below:-
For 42 Municipalities the collection was 'Nil'. Fourteen of them did not give
The Municipality can charge up to Rs.1000/-. The details are noted below: -
286
Name of the Municipality Amount Collected
1998-1999 1 999-2000
For 42 Municipalities the collection was 'Nil'. Fourteen of them did not give
any reply.
2. Changanssery Rs.250/- —
The following are Municipalities / Corporations which did not furnish the
details.
(l4)Kochi Corporation.
287
Annexure 3.3
Details of Plan Provisions to Panchayat_Raj /Nagarapalika
Institutions
STATE SPONSORED SCHEMES - 2000-01
(Rs.in lakhs)
implementing
LSGIs
Aariculture & Other Services
1 Strengthening of Veterinary Services 490.00 VP
10.00 Munici
Total 500.00
2 Expansion of cross-breeding facilities 2.00 VP
D
3 oultry farms & expansion of poultry production 2.00 DP
4 ntensive Pig Development Schemes 1.00 DP
5 Strengthening of goat farms 1.00 DP
6 Special Livestock Breeding Programme 95.00 VP
310.00 DP
Total 405.00
Fisheries
7 Setting up of Matsyabhavans 80.00 VP
8 Social Fishery 40.00 DP
9 Janakeeya Matsyaknshi 50.00 VP
10 Assistance for Fish Marketing and
Fish selling booths 130.00 VP
11 Education and Training 50.00 DP
12 Sanitation in Fishermen houses 80.00 VP
13 Theerajyothi in Fishermen houses 80.00 VP
14 Supply & service scheme, Alternate
Ornamental Fish Culture 20.00 VP
Total 530.00
Forestry & Wild Life
15 Enhanced Contribution of Forest to Community
Welfare
Community Development and Panchavat Rai 50.00 VP
16 Strengthening of Block Administration 100.00 BP
17 Solid Waste Disposal problem in Panchayats 215.00 VP
18 Kudumbasree 350.00 VP
Total 665.00
Irriqation and Flood Manaqement
19 Minor Irrigation Class - II 300.00 VP
200.00 DP
Total 500.00
288
(Rupees in Lakhs)
implementing
LSGIs
Drainaae & Flood Manaqement
Total 124.80
24 32.00 DP
7.00 Munici.
Better Education facilities to SC Students 1.00 Corpn.
Total 40.00
25 26.10 VP
3.20 Munici.
Pre-prirnary Education to SC children 0.70 Corpn.
Total 30.00
Development of Scheduled Tribes 12.00
Better Education facilities to ST Students
26
Assistance for marriage of ST Girls
27
Note: Provisions for Special Component
Plan and Tribal Sub Plan are shown under
Rural Development Sector
28 Urban Environmental
29 Improvements Solid waste
289
Annexure 3.4
DETAILS OF NON-PLAN SPECIFIC PROGRAMMES 2000-2001
implementing
LSGIs
1 Renewal of Transport 1159.00 DP
2 Ordinary Repairs of Roads and Bridges 347.70 DP
3 Special repairs to roadside bridges 579.50 DP
4 Flood damage repairs 231.79 DP
5 Mid-day meals 2500.00 VP
150.00 DP
150.00 MP
150 00 Corpn
Total 2950.00
6 Free supply of writing aids and text books to Primary Students 20.00 VP
7.00 2.50 MP
Corpn.
Total 29.50
6277.00 VP
506.00 MP
Unemployment allowance
7 217.00 Coprn.
Total 7000.00
8 1193.59 VP
137.50 MP
Pension Scheme for Physically handicapped, disabled and mentally 66.00 Corpn.
retarded persons-
Total 1397.09
155.59 DP
9 17.00 MP
Orphanage grant-in-aid 21.00 Corpn.
Total 193.59
10 Financial help to widows towards marriage expenses of daughters 77.00 VP
22.00 MP
11.00 Corpn.
Total 110.00
11 1675.47 VP
208.15 MP
Destitute pension 94.07 Corpn.
Total 1977.69
3437.13 VP
12
260.40 MP
Agricultural Workers' Pension
22.47 Corpn.
Total 3720.00
268.70 VP
13 28.00
MP
10.28
National old age pension scheme Corpn.
Total 306.98
14 Production incentive to Paddy Growers VP
1014.20 MP
47.60 Corpn.
Total 1061.80
290
15 Maintenance of Village roads by Community Development
Department VP
202.00
16 Grant -in- aid to TVPM Corporation Towards Addl. Expenditure
on lighting the 12.00 Corpn.
Highways in the City
291
Annexure 3.5 -2
ABSTRACT OF TOTAL RECEIPTS OF VILLAGE PANCHAVATS UNDER OWN REVENUE
ITEM 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99
Amount PTR Amount PTR Amount PTR Amount PTR Amount PTR Amount PTR
1. Direct Tax 424833 36.01 508497 41.00 514801 37.15 598555 28.51 640555 26.54 725875 27.94
2. Assigned Tax 312397 26.48 290215 23.40 273655 19.75 524871 25.00 443871 1839 445450 17.15
3.Shared tax 90790 7.70 25040 2.02 216874 15.65 329101 15.68 382328 15.84 364809 14.04
4. Non Tax Revenue 206235 17.48 235087 22.99 310105 22.38 464567 22.13 605721 25.10 749003 20.83
5.General purpose grant 26785 2.27 29438 2.37 23475 206 28714 1.37 0 0.00 0 0.00
6.Specific Purpose grant 118370 10.03 101567 8.19 41436 2-99 153001 7.29 175162 7.26 15200 0-59
Total 1179411 99.98 1239845 99.98 1385347 9998 2098810 99.97 2247636 93.12 2300337 88.55
Annexure 3.5 - 3
PERCENTAGE SHARE OF TAXES TO DIRECT TAXES ( VILLAGE PANCHAYATS)
Annexure 3.5 -4
% Over
ITEM 1995-96 1996- 93-94
1993-94 1994-95 97 1997-96 1998-99
Amount Amount % Amount % Amount % Amount % Amount %
i.Property Tax 222671 265503 19.24 256590 -3.36 293864 14.53 296160 0.78 344370 16.28 54.65
ii.Profession tax 118869 148522 24.95 159679 7.51 190383 19.23 220324 15.73 259089 1759 11.96
iii.Ent: & Add' Ent. 65186 73027 12.03 79458 8.81 89976 13.24 99585 10.68 97114 -2.48 48.98
iv.Advertisement Tax 1134 810 395 -51.29 876 122.05 1960 12370 939 -52.11 -17.20
v.Service tax 10987 14368 30.77 12647 -11.98 14428 14.09 16546 14.68 18192 9.94 65.58
vi.Show tax & 2661 3376 26.87 3142 -6-95 4653 48.10 3409 -26.74 3832 12.42 44.01
surcharge on ST
vii. Land conversion 695 418 -39.85 262 -37.31 80 -69.65 155 94.68 64 -58.39 -90.73
viii.Surcharges 541 622 15.02 543 -12.68 555 2.17 559 0.78 530 -2,02
ix.Land cess 2089 1850 2085 12.71 3741 79.39 1857 -50.36 1746 -5.98 -16,44
Total 424833 509497 1969 514801 1 .24 598555 16.27 640555 7.02 725875 13.32 70.86
294
Annexure 3.5-5
PERCENTAGE INCREASE OF OWN REVENUE OVER PREVIOUS YEARS (VILLAGE PANCHAYATS)
295
Annexure 3.5 -8
TOTAL EXPENDITURE OF VILLAGE PANCHAYATS - YEAR
WISE (Excluding expenditure under People's Plan Campaign)
ITEM 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99
AM PTE AM PTE AM PTE AM PTE AM PTE AM PTE
1.GENERAL 870709 983411 1070639 1461619 1837705 1880212
ACCOUNT
1.Management &
Collection
i.Salary / Honararium 32442 2.52 31216 2.11 57160 3.55 108938 5.16 109589 3.78 163645 6.01
etc. of Office bearers
ii.Establishment of cost 329140 25.59 365379 24.73 408694 25.40 462937 21.91 513570 17.72 604873 22.21
of secretaries & staff
iii. Other Office expense 46793 3.64 73448 4.97 63586 3.95 84656 4.01 112838 3.89 132814 4.88
2. Education &
Culture
i. Salary and other 6539 0.51 7113 0.48 8302 0.52 10773 0.51 12004 0.41 14307 0.53
expenses
ii.Other charges 21924 1.70 23151 1.57 24254 1.51 26252 1.24 36591 1.26 36540 1.34
3. Public Works
i. Establishment Cost 6914 0.54 7617 0.52 8648 0.54 9843 0.47 13471 0.46 17493 0.64
ii. Maintanance 217762 16.93 248689 16.83 262953 16.34 388736 18.40 496238 17.12 381123 13.99
4. Irrigation
i.Maintanance 8904 0.69 10518 0.71 8404 0.52 12800 0.61 14477 0.50 10306 0.38
5.Core Function
(a).Sanitation &
drainage
i.Establishment Charge 20364 1.58 21061 1.43 27266 1.69 35521 1.68 37541 1.30 35775 1.31
ii.Maintanance 7260 0.56 7095 0.48 7905 0.49 16617 0.79 17515 0.60 16737 0.61
(b) Water Supply
i.Maintanance 13451 1.05 19627 1.33 25695 1.60 64588 3.06 68397 2.36 55819 2.05
ii.Other petty works 4201 0.33 4413 0.30 5216 0.32 9346 0.44 10962 0.38 8953 0.33
(c) Street Lighting
i.Current Charge 77290 6.01 79930 5.41 80874 5.03 92422 4.37 109083 3.76 106777 3.92
ii.Other Charge 2769 0.22 2591 0.18 3326 0.21 6558 0.31 10657 0.37 8708 0.32
6.Medical Service
i.Establishment Charge 766 0.06 798 0.05 798 0.05 815 0.04 889 0.03 1039 0.04
ii. Operational Cost 316 0.02 207 0.01 504 0.03 502 0.02 802 0.03 1192 0.04
iii. Maintanance Charge 733 0.06 1187 0.08 1041 0.06 1155 0.05 1063 0.04 1084 0.04
iii. Other Charges 1865 0.14 1649 0.11 2320 0.14 3711 0.18 4802 0.17 8319 0.31
7. Ferry Service
i. Establishment 2079 0.16 2150 0.15 2627 0.16 3357 0.16 3820 0.13 3940 0.14
ii. Other Charges 1140 0.09 1007 0.07 1115 0.07 1650 0.08 2768 0.10 11562 0.42
8. Remunarative
Enterprises
i. Establishment 159 0.01 163 0.01 415 0.03 2062 0.10 1572 0.05 1973 0.07
Charge
ii.Maintanance` 502 0.04 584 0.04 50 0.00 366 0.02 1137 0.04 1782 0.07
iii.Other Charges 1422 0.11 835 0.06 958 0.06 939 0.04 2562 0.09 13840 0.51
9. Social welfare
i.Family welfare etc 4918 0.38 4644 0.31 4340 0.27 11641 0.55 12488 0.43 13377 0.49
ii. Housing 22240 1.73 28941 1.96 28912 1.80 40969 1.94 76356 2.63 39168 1.44
iii. Other Charges 5168 0.40 5989 0.41 6685 0.42 12884 0.61 29660 0.93 26375 0.97
10. Town Planning
i. Establishment 184 0.01 289 0.02 41 0.03 2062 0.10 3820 0.13 3940 0.14
Charges
ii. Maintanance 1406 0.11 1155 0.08 1851 0.12 213 0.01 2349 0.08 609 0.02
iii.Other Charges 1658 0.13 1509 0.10 1319 0.08 1466 0.07 3518 0.12 2762 0.10
11.Land Development
i. Land Development 1324 0.10 847 0.16 1877 0.12 2103 0.10 6686 0.23 997 0.04
ii. Other Charges 29069 2.26 29611 2.00 23499 1.46 47618 2.25 26718 4.37 158027 5.80
II CAPITAL 345501 26.86 396272 26.82 431665 26.83 558158 26.41 854837 29.50 522240 19.17
ACCOUNT
1.Management 36913 2.87 43267 2.93 40343 2.51 42441 2.01 63918 2.21 71183 2.61
2. Public Works 262142 20.8 296495 20.05 327224 20..34 437309 20.70 703454 24.57 366445 13.45
3.Remurative Asset 7042 0.55 8463 0.5 11486 0.71 13694 0.65 14924 0.51 12468 0.46
296
4. Creation of asssets 1834 0.14 1315 0.09 2456 0.15 5940 0.28 7834 .027 9079 0.33
to govt dept
5. Others 4079` 0.32 8446 0.57 6551 0.41 9575 0.45 11448 0.40 13475 0.49
6. Loan refund 33491 2.60 38586 2.61 43605 2.71 49198 2.33 53260 1.84 49593 1.82
III. DEBT HEADS 70172 5045 97624 6.61 106673 6.63 93299 4.42 205624 7.09 321382 11.80
1. Refund of Deposit
i Shop Rooms 39951 3.07 40129 2.72 2176 2.62 51814 2.45 61987 2.14 65084 2.39
ii. Buildings 1979 0.15 1391 0.09 1639 0.10 1972 0.09 1572 0.05 4128 0.15
iii. Others 6742 0.52 8191 0.55 9111 0.57 9526 0.45 18807 0.65 33794 1.24
2. Library Cess 2428 0.19 2868 0.19 2260 0.14 8975 0.42 11348 0.39 8258 0.30
3. Surcharge to 69 0.01 113 0.1 33 0.00 123 0.01 172 0.01 1185 0.04
block/district
4. Sales tac etc 6985 0.54 6634 0.45 6001 .0.37 7805 0.37 9951 0.34 11681 0.43
5. Others 12417 0.97 38299 2.5* 75452 2.82 13085 0.62 101788 3.51 197253 7.24
Total 1286376 100.00 1477307 100.00 1608975 100.00 2113076 100.00 2898166 100.00 2723834 100.00
NB:- date of 976 Village Panchayats
AM:- Rupees in Thousand
PTE:- Percentage to Total Expenditure
PERCAPITA EXPENDITURE OF VILLAGE PANCHAYATS-YEAR WISE
(Excluding expenditure under People’s Plan Campaign) Annexure 3.5-9
1. Management & Collection 870703 33.97 983411 37.77 1070638 40.47 1461619 54.36 1837705 67.22 1880212 67.63
(i) Salary /Honararium etc of
Office beares 32442 1.27 31216 1.20 57160 2.15 108938 4.05 109589 4.01 163645 5.89
(ii) Establishment of cost of
secretaries & staff 329140 12.84 365379 14.03 408694 15.45 462937 17.22 513570 18.79 604873 21.76
(iii) Other office expenses 46793 1.83 73448 2.82 63586 2.4 84656 3.15 112838 4.13 132814 4.78
2. Education & Culture
(i) Salary and other expenses 6539 0.26 7113 0.27 8302 0.31 10773 0.4 12004 0.44 14307 0.51
(ii) Other Charges 21924 0.86 23151 0.89 24254 0.92 26252 0.98 36591 1.34 36540 1.31
3. Public Works
(i) Establishment Cost 6914 0.27 7617 0.29 8648 0.66 9843 0.37 13471 0.49 17493 0.63
(ii) Maintanance 217762 8.5 248389 9.55 262953 9.94 388736 14.46 496238 18.15 381123 13.71
4. Irrigation
(i) Maintanance 8904 0.35 10518 0.4 8408 0.32 12800 0.48 14477 0.53 10306 0.37
5. Core Function
(a) Sanitation & drainage
(i) Establishment Charges 20364 0.79 21061 0.81 27266 1.03 35521 1.32 37541 1.37 35775 1.29
(ii) Maintanance 7260 0.28 7095 0.27 7905 0.3 16617 0.62 17515 0.64 16737 0.6
(b) Water Supply
(i) Maintanance 13451 0.52 19627 0.75 25695 0.97 64588 2.4 68397 2.5 55819 2.01
(ii) Other petty works 4201 0.16 4413 0.17 52156 0.2 9346 0.35 10962 0.4 8953 0.32
(c) Street lighthing
(i) Current Charge 77290 3.02 79930 3.04 8074 3.06 92422 3.44 109083 3.99 106777 3.84
(ii) Other Charges 2769 0.11 2591 0.1 3326 0.13 6558 0.24 10657 0.39 8708 0.31
6. Medical Service
(i) Establishment Charges 766 0.03 798 0.03 798 0.03 815 0.03 889 0.03 1039 0.04
(ii) Operational Cost 316 0.01 207 0.01 504 0.02 502 0.02 802 0.03 1192 0.04
(iii) Maintanace Charge 733 0.03 1187 0.05 1041 0.04 1155 0.04 1063 0.04 1084 0.04
(iv) Other Charges 1865 0.07 1649 0.06 2320 0.09 3711 0.14 4802 0.18 8319 0.3
7. Ferry Service
(i) Establishment Charges 2079 0.08 2150 0.08 2627 0.1 3357 0.12 3820 0.14 3940 0.14
(ii) Other Charges 1140 0.04 1007 0.04 1115 0.04 1650 0.13 2768 0.1 11562 0.42
8. Remunarative Enterprises
297
(i) Establishment Charges 159 0.01 163 0.01 415 0.02 2062 0.08 1572 0.06 1973 0.07
(ii) Maintanance 502 0.02 584 0.02 50 0.00 366 0.01 1137 0.04 1782 0.06
(iii) Other Charges 1422 0.06 835 0.03 958 0.04 939 0.03 2562 0.09 13840 0.5
9. Social Welfare
(i) Family Welfare etc 4918 0.19 4644 0.18 4340 0.16 11641 0.43 12488 0.46 13377 0.48
(ii) Housing 22240 0.87 28941 1.11 28915 1.09 40969 1.52 76356 2.79 39168 1.41
(iii) Other Charges 5168 0.2 5989 0.23 6685 0.25 12885 0.48 26990 0.99 26375 0.95
10. Town Planning
(i) Establishment Charges 184 0.01 289 0.01 41 0.11 183 0.04 254 0.01 296 0.01
(ii) Maintanance 1406 0.05 1155 0.04 1851 0.07 213 0.04 2349 0.09 609 0.02
(iii) Other Charges 1658 0.06 1509 0.06 1319 0.05 1466 0.05 3518 0.13 2762 0.1
11. Land Development
(i) Land development 1324 0.05 847 0.03 1877 0.07 2103 0.08 6686 0.24 997 0.04
(ii) Other cahrges 29069 1.13 29611 1.14 23499 0.89 47618 1.77 126718 4.64 158027 5.68
II. CAPITAL ACCOUNT 345501 13.48 396272 15.22 431665 16.32 558158 20.76 854837 31.27 522240 18.78
1. Management 36913 1.44 43267 1.66 40343 1.52 42441 1.58 36918 2.34 71183 2.56
2. Public Works 262142 10.23 296195 11.38 327224 12.37 437309 16.26 703454 25.73 366442 13.18
3. Remunarative Assets 7042 0.27 8463 0.33 11486 0.43 13694 0.51 14925 0.55 12468 0.45
4. Creation of assets to govt
dept 1834 0.07 1315 0.05 2546 0.09 5940 0.22 7834 0.29 90790 0.33
5. Others 4079 0.16 8446 0.32 6551 0.25 9575 0.36 11448 0.472 13475 0.48
6. Loan Refund 70172 2.74 97624 3.75 106673 4.03 93299 3.47 205624 7.52 321382 11.56
III. DEBT AHEADS
1 Refund of Deposits
(i) Shop rooms 39551 1.54 40129 1.54 42176 159 51814 1.93 61987 2.27 65084 2.34
(ii) Buildings 1979 0.28 1391 0.05 1639 0.06 1972 0.07 1475 0.06 4128 0.15
(iii) Others 6742 0.26 8191 0.31 9111 0.347 9526 0.35 18807 0.69 33794 1.22
2. Librarary cess 2428 0.29 2868 0.11 2260 0.09 8975 0.33 11348 0.42 8258 0.3
3. Surcharge to block /district 69 0.00 113 0.00 33 0.00 123 0 172 0.01 1185 0.04
4.Sales Tax etc 6985 0.00 6634 0.00 6001 0.00 7805 0 9951 0.00 11681 0.00
5. Others 12417 0.00 38299 0.00 45450 0.00 13085 0 101788 0.00 197253 0.01
TOTAL 1286376 50.19 1477307 56.74 1608975 60.82 2113076 78.58 2898166 106.02 2723834 97.98
298
A.LICENCE FEES 16486 1.86 20884 2.17 25049 2.24 29167 1.64 30401 1.97 37579 2.3
(i) D&O Licence 5517 0.62 5805 0.6 6224 0.56 6610 0.37 9183 0.59 12222 0.75
(ii) P F A 309 0.03 363 0.04 355 0.03 347 0.02 386 0.02 374 0.02
(iii) Cinematograph 102 0.01 113 0.01 955 0.01 98 0.01 100 0.01 136 0.01
(iv) Place of public resort 71 0.01 100 0.01 93 0.01 126 0.01 134 0.01 110 0.01
(v) Private slaughter house 20 0 200 0.02 79 0.01 745 0.04 189 0.01 590 0.04
(vi)Private market 28 0 29 0 25 0 25 0 434 0.03 779 0.05
(vii) Ocupation of purampoke 248 0.03 695 0.07 472 0.04 475 0.03 833 0.05 470 0.03
(viii) Cart stand/halting places 508 0.06 811 0.08 979 0.09 470 0.03 783 0.05 799 0.05
(ix) Dogs & Pigs 7 0 39 0 1 0 3 0 10 0 724 0.04
(x) Building permits 9676 1.09 12729 1.32 16725 1.49 20268 1.14 18349 1.19 21375 1.31
B. RAGISTRATION FEES 286 0.03 262 0.03 417 0.04 390 0.02 620 0.04 612 0.04
(i) Private hospital 2 0 4 0 5 0 5 0 29 0 54 0
(ii) Private paramedical Intn 0 4 0 4 0 6 0 29 0 46 0
(iii) Tutorial & parallel colleges 0 0 0 0 0 3 0
(iv) Contractors regn 149 0.02 90 0.01 145 0.01 101 0.01 112 0.01 184 0.01
(v) Births & death regn 84 0.01 86 0.01 97 0.01 112 0.01 120 0.01 200 0.01
(vi) Arch:/ engineers regn 51 0.01 78 0.01 166 0.01 166 0.01 330 0.02 125 0.01
C.GATE FEES 24160 2.72 28505 2.96 32316 2.88 47554 2.68 42008 2.72 46517 2.85
(i) Private market 10361 1.17 11180 1.16 13638 1.22 14856 0.84 16448 1.06 16544 1.01
(ii) Public slaughter houses 1298 0.15 1672 0.17 1645 0.15 1865 0.1 1787 0.12 2092 0.13
(iii) Cart stand bus stand 8267 0.93 9712 0.01 10035 0.9 12357 0.7 13320 0.86 15362 0.94
(iv) Comfort station 1307 0.15 2212 0.23 2635 0.24 3333 0.19 3645 0.24 3960 0.24
(v) Cloak room 165 0.93 4 0 0 63 0 93 0.01 163 0.01
(vi) River sand 2762 0.15 3725 0.39 4363 0.39 15080 0.85 6717 0.43 8396 0.51
D.USER CHARGES 82610 0.02 82756 8.6 94165 8.4 107035 6.02 126105 8.16 140513 8.6
(i) Search fee 118 0.31 204 0.02 135 0.01 230 0.01 163 0.01 211 0.01
(ii) Extract fee 282 8.19 280 0.03 291 0.03 333 0.02 361 0.02 416 0.03
(iii) Service cahrges 4522 0.01 4998 0.52 5540 0.49 6718 0.38 8249 0.53 9294 0.57
(iv) Municipal property 67587 0.03 76172 7.91 87073 7.77 97466 5.49 113828 7.36 125519 7.68
(v) Water charge 91 0.51 1053 0.11 1126 0.1 2288 0.13 3504 0.23 5073 0.31
(vi) Connetion Charge 10 7.62 49 0.01 0 0 0 0
E.OTHER SOURCES 72466 0.01 57947 6.02 71842 6.41 86446 4.86 142181 9.2 150735 9.23
(i) Conrtib & donation 74 0 0.46 953 0.09 6102 0.34 31843 2.06 46136 2.82
(ii) Endowment & Interest on End. 13068 8.17 4406 0.8 5611 0.5 7936 0.45 7159 0.46 4691 0.29
(iii) Fine & Penalitite 3466 0.01 7726 0.02 7557 0.67 5163 0.29 7724 0.5 9099 0.56
(iv) Cattle Pound 83 1.47 145 0 184 0.03 129 0.01 100 0.01 129 0.01
(v) Fishing 0.39 0.04 0 159 0.01 74 0 3 0
(vi) Usufructs 434 0.01 425 0.25 424 0.04 201 0.01 178 0.01 80 0
(vii) Lease of land 2243 0 2426 0.03 3378 0.3 4539 0.26 4338 0.28 5933 0.36
(viii) Library 229 0.05 244 0.01 377 0.03 339 0.02 341 0.02 338 0.02
(ix) Ferry service 126 0.25 91 4.41 77 0.01 100 0.01 133 0.01 119 .0.01
(x) Others 52743 0.03 42484 9.38 53281 4.75 61778 3.48 90291 5.84 84407 5.61
III. GRANT IN AID* 105014 0.01 90322 0.74 121428 10.83 676410 38.07 274702 17.77 206479 12.63
(i) General purpose grant 7138 5.95 7131 0.75 7131 0.64 6449 0.36 6442 0.42 6451 0.39
(ii) Specific purpose grant 6585 11.84 7175 1.14 6453 0.58 7827 0.44 10985 0.71 9880 0.6
(iii) Other grants 16243 0.8 10971 2.15 7483 0.67 20757 1.17 19440 1.26 17702 1.08
(iv) State sponsered schemes 26006 0.74 20661 4.61 30386 2.71 547804 30.83 58650 3.79 21041 1.29
(v) Centrally sponsered schemes 49042 1.83 44384 9.79 69975 6.24 93573 5.27 179185 11.59 151405 9.26
IV. LOANS 88955 2.93 94301 2.17 65144 5.81 49877 2.81 72845 4.71 94255 5.77
(i) Government 27825 5.53 20865 7.62 36722 3.28 29015 1.63 33182 2.15 7494 0.46
(ii) Others 61130 10.03 73406 16.08 28422 2.54 20865 1.17 39663 2.57 86761 5.31
V. DEBT 120940 3.14 154832 9.15 171788 15.33 181804 10.22 233413 15.1 278121 17.01
(i) Deposit 66177 7.46 88122 1.99 94556 8.44 89276 5.02 119039 7.7 161974 9.91
(ii) Advance 17017 1.92 19121 0.15 17573 1.57 17102 0.96 21825 1.41 24266 1.48
(i) LIbrary Cess 1264 0.14 1453 3.14 5929 0.53 7485 0.42 8651 0.56 9830 0.6
299
(ii) Provident fund/ pension fund 25774 2.91 30248 1.65 38431 3.43 45809 2.58 52583 3.4 61336 375
(iii) Sales tax/Income tax etc 10708 1.21 15888 100 15299 1.37 21932 123 31315 2.03 20715 1.27
TOTAL 886245 100 962787 1121161 100 1777586 100 1547111 100 1635394 100
AM:-Amount PTR:- Percentage to total revenue * Excluding gratn in aid for people’s campaign
300
Annexure3.6- 2
ABSTRACT OF TOTAL RECEIPTS OF MUNICIPALITIES UNDER OWN REVENUE
Itern 1393-94 1994-95 1995-96 1996-97 1997-98 1998-99
Annexure3.6-3
PERCENTAGE SHARE OF TAXES TO DIRECT TAX (MUNICIPALITIES)
Item 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99
Amount PDT Amount PDT Amount PDT Amount PDT Amount P DT Amount
A. DIRECT TAX
(I) Property & service Tax 134679 43.59 144739 43,10 158677 41 59 182536 42.12 202952 42.30 223292 44 .10
(M) Prolesslon tax 22663 7.34 27326 8.14 29704 7.79 36828 8.50 39588 8.25 47704 9.42
(IN) Advertisement Tax 1854 0.60 2002 0.60 2499 0.66 2922 0 67 3034 0.63 3641 0.72
(iv) Ent: 8 Add: Ent: Tax 148690 48.13 160865 47.90 189353 49 63 209251 46.29 233000 48.57 230395 45.50
(v) Show tax & S C on ST 822 0.27 837 0.25 961 0.25 962 0 22 975 0.20 915 0.18
(vi) Land conversion 215 0.07 49 0,01 293 0.08 850 0.20 200 0.04 373 0.07
(vii) Timbertax 0.00 0.00 0.00 0.00 0 00 0.00
(viii) Tax on animals & vehicles 16 0.01 0,00 27 0.01 1 0.00 0.00 2 0.00
Total 308939 100.00 335818 100.00 381514 100.00 433350 100.00 479749 100.00 506322 100.00
AM -Amount In Rs.Thousand
Anncxure 3.6-4
PERCENTAGE INCREASE OF TAXES OVER PREVIOUS YEAR (MUNICIPLITIES)
Items 1993- 1994- % 1995- % 1996- % 1997- % 1998- % % Over
94 95 96 97 98 99 93-94
(I) Property & service Tax 134679 144739 7.47 158677 9.63 182536 15.04 202952 11.18 223292 10.022 65.80
(II) Profession tax 22663 27326 20.58 29704 C.70 36828 23.98 39588 7.49 47704 20.50 110.49
(III) Advertisement Tax 1854 2002 7.98 2499 24.83 2922 16.93 3034 3.83 3641 20.01 96.39
(iv) Ent: & Add: Ent: Tax 148690 160865 8.19 189353 17.71 209251 10.51 233000 11.35 230395 -1.12 54.95
(vi)l Show tax & surcharge 822 837 1.82 961 14.81 962 0.10 975 1.35 915 -6.15 11.31
on ST
(vi) Land conversion 215 49 293 497.96 850 190.10 200 -76.47 373 96.50 73.49
(vii)Timbertax
(viii)Tax on animals & 16 -100.00 27 1 -96.30 -100.00 2 -87.50
vehlcles
Total 308939 335818 8. 70 381514 13.61 433350 13.59 479749 10.71 506322 5.54 63.89
301
Annexure 3.6-5
PERCENTAGE INCREASE OF OWN REVENUE OVER PREVIOUS YEAR (MUNICIPALITIES)
Item 1993- 1994- % 1995- % 1996- % 1997- % 1198- % °° over 93-
94 95 96 97 98 99 94
1.Direct Tax 308939 335818 8.70 38154 13.61 433350 13.59 479749 10.71 506322 5.54 63.89
2. Assigned Tax 47789 89498 87.28 69998 -21.79 101774 45.40 96439 -5.24 100452 4.16 10.20
3. Shared Tax 28600 7662 -73.21 87500 1042.00 63979 -26.88 48648 -23.96 73609 51 31 157.37
4. Licence Fee 16486 20884 26.68 25049 19.94 29167 16.44 30401 4.23 37579 23,61 127.94
5. Registration Fee 286 262 -8 39 417 59.16 390 -6.47 620 58.97 612 -1.29 113.99
6. Gate Fees 24160 28505 17.98 32316 13.37 47554 47.15 42008 -11.66 46517 10.73 92.54
7. User Charges 72610 82756 13.97 94165 13.79 107035 13.67 126105 17. 82 140513 1 43 93.52
8. Other Sources 72466 57946. -20.04 71842 23.98 86446 20.33 142181 64.47 150935 6. 6 108.28
9. General Purpose Grant 7138 71315 -0.10 7131 0.00 6449 -9.56 6442 -0.11 6451 0.14 -9.62
11. Specific Purpose Grant 6585 7175 8.96 6453 -10.06 7827 21.29 10985 40.35 9880 - 0.06 50.04
Total 585059 637638 89S 776385 21.76 883971 13.86 983S78 11.27 1072870 9.08 83.38
Annexure 3.6- 6
SHARE OF DIRECT TAXES IN TOTAL OWN REVENUE (MUNICIPALITIES)
Items 1993-94 1994-95 1995-96 1996-97 1997-96 1998-99
AM PTOR AM PTOR AM PTOR AM PTOR AM PTOR AM PTOR
1.Property & Service 134679 2302 144739 22.70 158677 20.44 182536 20.65 202952 20.63 223292 20.81
2.Professional Tax 22663 3.87 27326 4.29 29704 3.63 36828 4.17 39588 4.02 47704 4.45
3.Advertisement Tax 1854 032 2002 0.31 2499 0.32 2922 0.33 3034 0.31 3641 0.34
4. Ent & Add.Ent tax 148690 25.41 160865 25.23 189353 24.39 209251 23.67 233000 23.69 230395 21.47
5. Show Tac & SC on ST 822 0.14 837 0.13 961 0.12 962 0.11 975 0 10 915 0.09
6. Land Conservation 215 004 49 001 293 0.04 850 0.10 200 0,02 373 0.03
7. Timber Tax 000 000 0.00 0.00 0 00 0.00
8. Tax on Animals & 16 0.00 000 27 0.00 1 0.00 0.00 2 0,00
Vehicles
9.(Direct Taxes) 308939 5280 335818 52.67 381514 49.14 4333SC 4902 479749 48.78 506322 47.19
Own Revenue 535053 10000 63763? 100.0C 776385 100.0C 883971 100.0C 983570 100.00 1072870 100.00
AM:- Amount in Rs Thousand
PTOR:- Percantege of Total Own Revenue
Annexure 3.6-7
SHARE OF ITEMS UNDER OWN REVENUE (MUNICIPALITIES)
Item 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99
AM POR AM POR AM POR AM POR AM POR AM POR
1. Direct Tax 308939 52.8 335818 52.67 381514 49.14 43350 49.02 479749 48.78 506322 47.19
2. Assigned Tax 47789 8.17 89498 14.04 69998 9.02 101774 11.51 96439 9.8 100452 9.36
3. Shared Tax 28600 4.89 7662 1.2 87500 11.27 63979 7.24 48648 4.95 73609 6.86
4. Licence Fees 16486 2.82 20884 3.28 25049 3.23 29167 3.3 30401 3..09 37579 3.5
5. Registration Fees 286 0.05 262 0.04 417 0.05 390 0.04 620 0.06 612 0.06
6.Gate Fees 24160 4.13 28505 4.47 32316 4.16 47554 5.38 42008 4.27 46517 4.34
7. User Charges 72610 12.41 82756 12.98 94165 12.13 107035 12.11 126105 12.82 140513 13.1
8. Other Sources 72466 12.39 57947 9.09 71842 9.25 86446 9.78 142181 14.46 150935 14.07
9. General Purpose Grant 7138 1.22 7131 1.12 7131 0.92 6449 0.73 6442 0.65 6451 0.6
10. Specific Purpose Grant 6585 1.13 7175 1.13 6453 0.83 7827 0.89 10985 1.12 9880 0.92
Total 585059 100 637638 100 776385 100 883971 100 983578 100 1072870 100
AM:- Amount in Rs Thousand
POR:- Percantege on Own Revenue
302
Annexure 3.6-8
TOTAL EXPENDITURE OF MUNICIPALITIES 1993-94 TO 1998-99
(Excluding expenditure under People’s Plan Campaign)
Item 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99
Amount PTE Amount PTE Amount PTE Amount PTE Amount PTE Amount PTE
I. GENERAL ACCOUNT 387917 51.17 446416 51.16 508447 52.85 606807 48.26 671257 45.52 729958 48.68
1. Management & Collection 100838 13.3 114656 13.14 128047 13.31 160074 12.73 186863 13.67 196871 13.13
(1) Salary /Honararium etc Office 6608 0.87 6491 0.74 9675 1001 15574 1.24 16229 1.1 23157 1.54
(2) Establilshment Cost of
Secretaries & Staff 75241 9.92 86791 9.95 92776 9.64 111423 8.86 128501 .8.71 137448 9.17
(3) Other expenses 18989 2.5 21374 2.45 25596 2.66 33077 2.63 42133 2.86 36266 2.42
2. Public Work 81951 10.81 96520 11.06 112849 11.73 127719 10.16 135121 9.16 142749 9.52
(1) Establishment charge 31960 4.11 34572 3.96 39077 4.06 45200 3.59 51721 3.51 53934 3.6
(2) Maintanance of
Roads.Bridges,Park& Gardens 37255 4.91 49280 5.65 58773 6.11 66094 5.26 67379 4.57 75097 5.01
(3) Contigenies 12736 1.68 12668 1.45 14999 1.56 16425 1.31 16021 0.09 13720 0.91
3.(a) Town Planning 5878 0.78 7200 0.83 16800 1.75 8347 0.66 10273 0.7 12580 0.84
(1) Establishment charge 5818 0.77 6866 0.79 9041 0.94 8043 0.64 9688 0.66 11692 0.78
(2) Other Charges 60 0.01 334 0.04 7759 0.81 304 0.02 585 0.04 888 0.06
3.(b) Land Development 1236 0.16 2411 0.28 1062 0.11 6872 0.55 3723 0.25 18634 1.24
(1)Town survey establishment cost 302 0.04 1495 0.17 743 0.08 1069 0.09 784 0.05 449 0.03
(2) Other Charges 934 0.12 916 0.1 319 0.03 5803 0.46 2939 0.2 18185 1.21
4. Education & Culture 4355 0.57 5255 0.6 5857 0.61 6864 0.55 7739 0.52 8393 0.56
(1) Establishment charge 2446 0.32 2975 0.34 3594 0.34 4021 0.32 4240 0.29 4906 0.33
(2) Other Charges 1909 0.25 2298 0.26 2563 0.27 2843 0.23 3399 0.23 3487 0.23
5. Water Supply 4923 0.65 24955 2.86 27958 2.91 38863 3.09 30966 2.1 36738 2.45
(1) Establishment cost 1254 0.17 1210 0.14 1379 0.14 1555 0.12 2134 0.14 1131 0.08
(2) Maintanace 2738 0.36 22210 2.55 23258 2.42 33667 2.68 23583 1.6 31998 2.13
(3) Other Petty Works 931 0.12 1535 0.18 3321 0.35 3641 0.29 5249 0.36 3609 0.24
6. Public Health 139900 18.45 140857 16.14 159736 16.6 192105 15.28 216960 14.71 226853 15.13
(1) Establishment charge 123167 16.25 128181 14.69 143611 14.93 165653 13.17 197407 13.39 205074 13.68
(2) Operational Cost 12556 1.66 9673 1.11 12975 1.35 22508 1.79 15774 1.07 16580 1.11
(3) Maintanance Charge 34 0 215 0.02 323 0.03 366 0.03 124 0.01 271 0.02
(4) Other Charges 4143 0.55 2877 0.32 2827 0.29 3578 0.28 3655 0.25 4928 0.33
7. Street Lighthing 27930 3.68 31270 3.58 31911 3.32 37085 2.95 42409 2.94 45721 3.05
(1) Establishment charge 156 0.02 122 0.01 292 0.03 1134 0.09 1470 0.1 1080 0.07
(2) Current Charge 25415 3.35 28421 3.26 29862 3.1 31316 2.49 34742 2.36 35883 2.39
(3) Other Charges 2359 0.31 2727 0.31 1757 0.18 4635 0.37 7197 0.49 8758 0.58
8. Municipal Properties 4023 0.53 4416 0.51 3894 0.4 3889 0.55 8151 0.55 9408 0.63
(1) Establishment charge 1743 0.23 1602 .0.18 1684 0.18 1950 0.16 3365 0.23 3368 0.22
(2) Maintanance 2280 0.3 2814 0.32 2210 0.23 4939 0.39 4786 0.32 6040 0.4
9. Other Expenditure 9347 1.23 11986 1.37 11900 1.24 10037 0.8 17110 1.16 15168 1.01
(1) Audit Fee 619 0.08 409 0.05 1726 0.18 461 0.04 1316 0.09 2354 0.16
(2) Interest on borrowings' 8728 1.15 11577 1.33 10174 1.06 9576 0.76 15794 1.07 12814 0.85
10 . Extra Ordinray Items 7536 0.99 6890 0.79 8433 0.88 11952 0.95 10942 0.74 16843 1.12
(1) Reception to important 622 0.08 1556 0.18 1145 0.12 2687 0.21 2245 0.15 2949 0.2
(2) Grants, Awards etc 6914 0.91 5334 0.61 7288 0.76 9254 0.74 8697 0.59 13894 0.93
II CAPITAL ACCOUNT 268270 35.38 291591 33.41 317510 33.01 470273 37.4 565250 38.33 493510 32.91
1. Management 24299 3.21 19772 2.27 22392 2.33 25510 2.03 37730 2.56 30519 2.04
2. Loan Repayment 37057 4.89 41106 4.71 44864 4.66 55774 4.44 52692 3.57 51437 3.43
3. Plan Schemes 185452 24.46 201361 23.07 228505 23.75 355479 28.27 429708 29.14 369832 24.66
(a) Communication 81486 10.75 87739 10.05 108802 11.31 178455 14.19 221366 15.01 177216 11.82
(b) Town Improvement 65510 8.64 63901 7.32 58672 6.1 85398 6.79 88243 5.98 73303 4.89
Govt.Sponsered Programmes 0 0 0 0 0 0
(a) Town Improvement Scheme 19027 2.51 22582 2.59 41219 4.28 51323 4.08 68126 4.19 63368 4.23
303
(b) Poverty Allevation 19429 2.56 27139 3.11 19812 2.06 40303 3.21 58273 3.95 55945 3.73
4. Education 1230 0.16. 2149 0.25 1505 0.16 1407 0.11 4521 0.31 1189 0.08
5. Water Supply &drainage 12054 1.59 13422 1.24 8079 0.84 14271 1.13 23856 1.62 20638 1.38
(a) New water supply schemes 1559 0.21 863 0.1 2028 0.21 4491 0.36 8052 0.55 4137 0.28
(b) Deposits to water authority 456 0.06 3440 0.39 1648 0.17 1433 0.11 3182 0.22 2114 0.14
(c) Surface Darinage 10039 1.32 9119 1.04 4403 0.46 8347 0.66 12622 0.86 14387 0.96
6. Public Health 1760 0.23 4895 0.56 3600 0.37 6509 0.52 7553 0.51 5727 0.38
(a) Building &Vehicles, equipment 1302 0.17 4081 0.47 3111 0.32 6440 0.51 7440 0.5 5107 0.34
(b) Solid Waste Management 458 0.06 811 0.09 489 0.05 69 0.01 113 0.1 620 0.04
7. Street Lighthing 4865 0.64 4053 0.46 6946 0.72 8513 0.68 7328 0.5 12001 0.8
8. Endowment and Investments 1553 0.2 4833 0.55 1619 0.17 2810 0.22 1862 0.13 2167 0.14
III. DEBT HEADS 101962 13.45 134656 15.43 136033 14.14 180290 14.34 238199 16.15 276128 18.41
(1) Refund of Deposit 33848 4.46 47102 5.4 42408 4.41 47539 3.78 65832 4.46 104204 6.95
(2) Advance Recoverd 16605 2.19 18742 2.15 20809 2.16 23001 1.83 25406 1.72 20052 1.34
(3) PF/Pension fund 34591 4.56 41457 4.75 44812 4.66 72242 5.75 73475 4.98 90184 6.01
(4) Sinking Fund 3103 0.41 3829 0.44 3608 0.38 5310 0.42 10689 0.72 5953 0.4
(5) Library Cess 1497 0.2 12794 1.47 8248 0.86 5582 0.44 6858 0.47 6967 0.46
(6) Sales Tax 6569 0.87 6135 0.7 8300 0.86 15402 1.22 30649 2.08 32240 2.15
(7) Others 5749 0.76 4597 0.53 7848 0.82 11214 0.89 25300 1.72 16528 1.1
TOTAL 758149 100 872663 100 961990 100 1257370 100 1474706 100 1499596 100
Annexure 3.6-9
PERCAPITA EXPENDITURE OF MUNICIPALITIES
304
(1) Establishment charge 123167 44.81 128181 46.11 143611 51.08 165653 58.25 197407 68.62 205074 70.46
(2) Operational Cost 12556 4.57 9673 3.48 12975 4.62 22508 7.92 15774 5.48 16580 5.7
(3) Maintanance Charge 34 0.01 215 0.08 323 0.11 366 0.13 124 0.04 271 0.09
(4) Other Charges 4143 1.51 2877 1..00 2827 1.01 3578 1.26 3655 1.27 4928 1.69
7. Street Lighthing 27930 10.16 31270 11.25 31911 11.35 37085 13.04 42409 15.09 45721 15.71
(1) Establishment charge 156 0.06 122 0.04 292 0.1 1134 0.4 1470 0.51 1080 0.37
(2) Current Charge 25415 9.25 28421 10.22 29862 10.62 31316 11.01 34742 12.08 35883 12.33
(3) Other Charges 2359 0.86 2727 0.98 1757 0.62 4635 1.63 7197 2.5 8758 3.01
8. Municipal Properties 4023 1.46 4416 1.59 3894 1.39 3889 2.42 8151 2.83 9408 3.23
(1) Establishment charge 1743 0.63 1602 0.58 1684 0.6 1950 0.69 3365 1.73 3368 1.16
(2) Maintanance 2280 0.83 2814 1.01 2210 0.79 4939 1.74 4786 1.66 6040 2.08
9. Other Expenditure 9347 3.4 11986 4.31 11900 4.23 10037 3.53 17110 5.95 15168 5.21
(1) Audit Fee 619 0.23 409 0.15 1726 0.61 461 0.16 1316 0.46 2354 0.81
(2) Interest on borrowings' 8728 3.18 11577 4.16 10174 3.62 9576 3.37 15794 5.49 12814 4.4
10 . Extra Ordinray Items 7536 2.74 6890 2.48 8433 3..00 11952 4.2 10942 3.8 16843 5.79
(1) Reception to important 622 0.23 1556 0.56 1145 0.41 2687 0.94 2245 0.78 2949 1.01
(2) Grants, Awards etc 6914 2.52 5334 1.92 7288 2.59 9254 3.26 8697 3.02 13894 4.77
II CAPITAL ACCOUNT 268270 97.59 291591 104.9 317510 112.9 470273 165.37 565250 196.49 493510 169.6
1. Management 24299 8.84 19772 7.11 22392 7.96 25510 8.97 37730 13.12 30519 10.49
2. Loan Repayment 37057 13.48 41106 14.79 44864 15.96 55774 19.61 52692 18.32 51437 17.67
3. Plan Schemes 185452 67.47 201361 72.44 228505 81.28 355479 125.01 429708 149.37 369832 127.1
(a) Communication 81486 29.64 87739 31.56 108802 38.7 178455 62.75 221366 76.95 177216 60.89
(b) Town Improvement 65510 23.83 63901 22.99 58672 20.87 85398 .30.03 88243 30.67 73303 25.19
Govt.Sponsered Programmes 0..00 0..00 0..00 0..00 0..00 0..00
(a) Town Improvement Scheme 19027 6.92 22582 8.12 41219 14.66 51323 18.05 68126 21.49 63368 21.77
(b) Poverty Allevation 19429 7.07 27139 9.76 19812 7.05 40303 14.17 58273 20.26 55945 19.22
4. Education 1230 0.45 2149 0.77 1505 0.54 1407 0.49 4521 1.57 1189 0.41
5. Water Supply &drainage 12054 4.39 13422 4.83 8079 2.87 14271 5.02 23856 8.29 20638 7.09
(a) New water supply schemes 1559 0.57 863 0.31 2028 0.72 4491 1.58 8052 2.8 4137 1.42
(b) Deposits to water authority 456 0.17 3440 1.24 1648 0.59 1433 0.5 3182 1.11 2114 0.73
(c) Surface Darinage 10039 3.65 9119 3.28 4403 1.57 8347 2.94 12622 4.39 14387 4.94
6. Public Health 1760 0.64 4895 1.76 3600 1.28 6509 2.29 7553 2.63 5727 1.97
(a) Building &Vehicles,equipment 1302 0.47 4081 1.47 3111 1.11 6440 2.26 7440 2.59 5107 1.75
(b) Solid Waste Management 458 0.17 811 0.29 489 0.17 69 0.02 113 0.04 620 0.21
7. Street Lighthing 4865 1.77 4053 1.46 6946 2.47 8513 2.99 7328 2.55 12001 4.12
8. Endowment and Investments 1553 0.56 4833 1.74 1619 0.58 2810 0.99 1862 0.65 2167 0.74
III. DEBT HEADS 101962 37.09 134656 48.44 136033 48.39. 180290 63.4 238199 82.8 276128 94.87
(1) Refund of Deposit 33848 12.31 47102 16.94 42408 15.08 47539 16.72 65832 22.83 104204 35.8
(2) Advance Recoverd 16605 6.04 18742 6.74 20809 7.4 23001 8.09 25406 8.83 20052 6.89
(3) PF/Pension fund 34591 12.58 41457 14.91 44812 15.94 72242 25.4 73475 25.54 90184 30.99
(4) Sinking Fund 3103 1.13 3829 1.38 3608 1.28 5310 1.87 10689 3.71 5953 2.05
(5) Library Cess 1497 0.54 12794 4.6 8248 2.93 5582 1.96 6858 2.38 6967 2.39
(6) Sales Tax 6569 2.39 6135 2.21 8300 2.95 15402 5.42 30649 16.65 32240 11.08
(7) Others 5749 2.09 4597 1.65 7848 2.79 11214 3.94 25300 8.79 16528 5.68
TOTAL 758149 275.8 872663 313.9 961990 342.2 1257370 442.16 1474706 512.63 1499596 515.2
305
Annexure 3.6-10
Annexure 3.7-1
TOTAL RECEIPTS OF MUNICIPAL CORPORATIONS 1993-94 to 1998-99
(Rupees in Tthousands)
1993-94 1994-95 1995-96 1996-97 1997-98 1998-99
Item AM PTR AM PTR AM PTR AM PTR AM PTR AM PTR
I. TAX REVENUE 312021 67.55 357217 62.04 460147 66..30 413807 48.82 461215 55.16 555297 61.41
A. DIRECT TAX 232958 50.44 249079 43.26 294470 42.43 310926 36.68 340361 40.71 397340 43.94
(i) Propety & serivce Tax 137017 29.66 147600 25.63 182092 26.24 189803 22.39 197693 23.64 241597 26.72
(ii) Profession tax 11756 2.55 18017 3.13 19471 2.81 20413 2.41 23483 2.81 32947 3.64
(iii) Advertisement Tax 1527 0.33 1885 0.33 2216 0.32 2889 0.34 4265 0.52 4242 0.47
(iv) Ent& Add Ent.Tax 81746 17.1 81059 14.08 90033 12.97 97357 11.49 114014 13.64 117888 13.04
(v) Show Tax & SC on ST 521 0.11 341 0.06 377 0.05 337 0.04 509 0.06 389 0.04
(vi) Land Conversion 202 0.02 180 0.02
(vii)Timber Tax 391 0.08 177 0.03 281 0.04 126 0.01 93 0.01 97 0.01
(viii) Tax on animals & vehicles 1 2
B.ASSIGNED TAX
(i) Duty on transfer of property 69063 14.95 58138 10.1 125677 18.11 72881 8.6 94554 11.31 120457 13.32
C. SHARED TAX
Vahicle Tax Compensation 10000 2.17 50000 8.68 40000 5.76 30000 3.54 26300 3.15 37500 4.15
II. NON-TAX REVENUE 76691 16.6 93751 16.28 100026 14.41 116111 13.7 149774 17.91 128229 14.18
A.LICENCE FEES 16003 3.46 16431 2.85 30364 4.37 34817 4.11 35097 4.2 38783 4.29
(i) D&O Licence 2863 0.62 3021 0.52 5848 0.84 6343 0.75 8351 1..00 9272 1.03
(ii) P F A 123 0.03 119 0.02 242 0.03 250 0.03 284 0.03 332 0.04
(iii) Cinematograph 20 22 48 21 21 21
(iv) Place of public resort 63 0.01 62 0.01 76 0.01 83 90 0.01 96 0.01
306
(v) Private slaughter house 1 9 6 2 1
(vi)Private market 1365 0.3 9
(vii) Ocupation of purampoke 9 16 28 35 46 59
(viii) Cart stand/halting places 5
(ix) Dogs & Pigs 2
(x) Building permits 11556 2.5 13181 2.29 24113 3.47 28079 3.31 26303 3.15 29000 3.21
B. RAGISTRATION FEES 67 0.01 220 0.04 217 0.03 263 0.03 373 0.04 339 0.04
(i) Private hospital 10 4
(ii) Private paramedical Intn 1 5
(iii) Tutorial & parallel colleges
(iv) Contractors regn 19 29 27 25 27 70
(v) Births & death regn 40 155 0.03 139 0.02 113 0.01 260 0.03 172 0.02
(vi) Arch:/ engineers regn 8 36 51 125 0.01 75 88
C.GATE FEES 4542 0.98 7454 1.31 7446 1.07 9436 1.11 12911 1.54 11898 1.32
(i) Private market 2333 0.51 4086 0.71 3848 0.55 5185 0.61 6984 0.84. 5818 0.64
(ii) Public slaughter houses 1125 0.02 419 0.07 790 0.11 629 0.07 770 0.09 978 0.11
(iii) Cart stand bus stand 1652 0.36 1710 0.3 1220 0.18 1962 0.23 3309 0.4 2973 0.33
(iv) Comfort station 139 0.03 1046 0.18 1344 0.19 1400 0.17 1541 0.18 1722 0.19
(v) Cloak room 306 0.07 284 0.05 244 0.04 260 0.03 307 0.04 407 0.05
(vi) River sand
D.USER CHARGES 21881 4.74 27740 4.82 30447 4.39 32981 3.89 37229 4.45 39065 4.32
(i) Search fee 43 34 35 34 36 50
(ii) Extract fee 114 0.02 74 0.01 106 0.02 77 222 0.03 107 0.01
(iii) Service cahrges 188 0.04 386 0.07 571 0.08 561 0.07 746 0..09 932 0.1
(iv) Municipal property 21529 4.66 23109 4.01 29726 4.28 32308 3.81 36225 4.33 37976 4.2
(v) Water charge 7 6 9 1
(vi) Connetion Charge 4131 0.72
E.OTHER SOURCES 34198 7..40 41815 7.26 31552 4.55 38614 4.56 64164 7.67 38144 4.22
(i) Conrtib & donation 18 30 58 0.16 15591 1.86 5144 0.57
(ii) Endowment & Interest on End. 1 1340 1
(iii) Fine & Penalitite 761 0.16 2489 0.43 2437 0.35 15 0.16 2195 0.26 2260 0.25
(iv) Cattle Pound 26 34 15 15 16
(v) Fishing
(vi) Usufructs 45 67 0.01 100 0.01 60 93 0.01 143 0.02
(vii) Lease of land 2025 0.44 4008 0.7 5088 0.73 4873 0.57 5344 0.64 5286 0.58
(viii) Library 488 0.07 968 0.11 1126 0.13 1158 0.13
(ix) Ferry service 1935 0.42 2114 0.37 2117 0.31 2524 0.3 2761 0.33 2632 0.29
(x) Others 29388 6.36 33073 5.74 21248 3.06 27466 3.24 37038 4.43 21535 2.38
III. GRANT IN AID* 17416 3.77 46857 8.14 51676 7.45 250167 29.51 62733 7.5 63332 7..00
(i) General purpose grant 3181 0.69 3017 0.52 3017 0.43 3017 0.36 3017 0.36 3017 0.33
(ii) Specific purpose grant 4710 1.02 7082 1.23 6799 0.98 8842 1.04 5104 0.61 1350 0.15
(iii) Other grants 8678 1.88 2400 0.42 14810 2.13 23752 2.8 3028 0.36 7032 0.78
(iv) State sponsered schemes 847 0.18 29856 5.18 5758 0.83 175786 20.74 4482 0.54 3000 0.33
(v) Centrally sponsered schemes 4502 0.78 21292 3.07 38770 4.57 47102 5.63 48933 5.41
IV. LOANS 5845 1.27 9337 1.62 7694 1.11 9997 1.18 58261 6.97 22461 2.48
(i) Government 714 0.15 1333 0.16 253 0.03 126 0.01
(ii) Others 5131 1.11 9337 1.62 7694 1.11 8664 1.02 58008 6.94 22335 2.47
V. DEBT 49848 10.79 68916 11.97 77922 11.23 77405 9.13 103891 12.42 134679 14.89
(i) Deposit 6651 1.44 7731 1.34 4277 0.62 3989 0.47 5387 0.64 8400 0.93
(ii) Advance 10285 2.23 8603 1.49 16399 2.36 18683 .2.20 13963 1.67 12267 1.36
(i) LIbrary Cess 953 0.21 863 0.15 5608 0.81 5976 0.7 7099 0.85 15008 1.66
(ii) Provident fund/ pension fund 18063 3.91 34459 5.98 37795 5.45 28055 3..31 46487 5.56 55306 6.12
(iii) Sales tax/Income tax etc 13896 3.01 17260 3 13843 1.99 20702 2.44 30955 3.7 43698 4.83
TOTAL 461821 100 576078 100 697465 100 867487 102 835874 100 903998 100
AM -Amount
PTR - Percentage to total revenue
* Excluding grant in aid for peoples' plan campaign
307
Annexure 3.7-2
ABSTRACT OF TOTAL RECEIPTS OF MUNICIPAL CORPORATIONS UNDER OWN REVENUE
PERCENTAGE INCREASE OF TAXES OVER PREVIOUS YEAR (MUN CORPORATIONS) Annexure 3.7-4
(Rs. in Thousand)
Items 1995- 1996- 1997- 1998-
1993-94 1994-95 % 96 % 97 % 98 % 99 % & Over
(I) Property & service Tax 137017 147600 7.72 182.92 23.37 18980 4.23 19769 4.16 24159 22.21 76.33
(II) Profession tax 11756 18017 53.26 19471 8.07 20413 4.84 23483 14.04 32947 40.3 180.3
(III) Advertisement Tax 1527 1885 23.44 2216 17.56 2889 30.37 4365 51.09 4242 -2.82 177.8
(iv) Ent: & Add: Ent: Tax 81746 81059 -0.84 90033 11.07 97357 8.13 11401 17.11 11788 3.4 44.21
(vi)l Show tax & surcharge on ST 521 341 -34.55 377 10.56 337 -10.61 509 51.04 389 -23.58 -25.34
(vi) Land conversion 202 180 -10.89
(vii)Timbertax 391 177 -54.73 281 58.76 126 -55.16 93 -26.19 97 4.3 -75.19
(viii)Tax on animals & vehlcles 1 2 100.00
Total 232958 249079 6.92 294470 18.22 31092 5.59 34036 9.47 39734 16.74 70.56
308
Annexure 3.7 -5
PERCENTAGE INCREASE OF OWN REVENUE OVER PREVIOUS YEAR (MUN CORPORATIONS)
(Rs in Thousands)
Annexure 3.7 -6
SHARE OF TAXES IN TOTAL OWN REVENUE (MUN CORPORATIONS)
Annexure 3.7 -7
SHARE OF ITEMS UNDER OWN REVENUE (MUN. CORPORATIONS)
309
9. General Purpose Grant 3181 0.8 3017 0.65 3014 0.53 3017 0.56 3017 0.49 3017 0.44
10. Specific Purpose Grant 4710 1.09. 7082 1.54 6799 1.19 8842 1.63 5104 0.82 1350 0.2
Total 396603 100 461067 100 569989 100 541777 100 619110 100 687893 100
AM - Amount in Rs Thousand
POR - Percentage on Own Revenue
Annexure 3.7-8
TOTAL EXPENDITURE OF MUNICIPAL CORPORATIONS 1993-94 TO 1998-99
(Excluding expenditure under People’s Plan Campaign)
Item 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99
Amount PTE Amount PTE Amount PTE Amount PTE Amount PTE Amount PTE
I. GENERAL ACCOUNT 260.85 62.13 265454 47.58 328938 52.38 376970 52.93 412640 53.05 435910 48.82
1. Management & Collection 42447 10.13 50363 9.03 604593 9.63 67554 9.48 73394 9.44 83731 9.38
(1) Salary /Honararium etc Office 1290 0.31 580 0.1 1210 0.19 2507 0.35 2471 0.32 3235 0.36
(2) Establilshment Cost of Secretaries
& Staff 32213 7.69 39428 7.07 45628 7.27 49428 6.94 55124 7.09 64526 7.23
(3) Other expenses 8944 2.13 10355 1.86 13621 2.17 15619 2.19 15799 2.03 15970 1.79
2. Public Work 61604 14..70 53078 9.51 56747 9.04 77498 10.88 83569 10.74 91439 10.24
(1) Establishment charge 16398 3.91 19130 3.43 20804 3.31. 26168 3.67 34238 4.4 33514 3.75
(2) Maintanance of Roads.Bridges
,Park& Gardens 38313 9.14 29820 58.34 33320 5.31 48184 6.76 45177 5.81 49096 5.5
(3) Contigenies 6893 1.64 4128 0.74 2623 0.42 31146 0.44 4154 0.53 8829 0.99
3.(a) Town Planning 2986 0.71 2830 0.51 5452 0.87 4262 0.6 5446 0.7 6892 0.77
(1) Establishment charge 2657 0.63 2663 0.48 3414 0.54 3882 0.55 5000 0.64 5231 0.59
(2) Other Charges 329 0.08 167 0.03 2037 0.32 377 0.05 446 0.06 1661 0.19
3.(b) Land Development 315 0.08 32 0.01 667 0.11 692 0.1 174 0.02 1457 0.16
(1)Town survey establishment cost 30 0.01 7 0..00 644 0.1 657 0.09 17 0..00 22 0..00
(2) Other Charges 258 0.07 25 0..00 23 0..00 35 0..00 157 0.02 1435 0.16
4. Education & Culture 930 0.22 1084 0.19 1426 0.23 1260 0.18 1732 0.22 2728 0.31
(1) Establishment charge 701 0.17. 851 0.15 807 0.13 787 0.11 1082 0.14 1026 0.11
(2) Other Charges 229 0.05 230 0.04 619 0..10 473 0.07 650 0.08 1702 0.19
5. Water Supply 5759 1.37 19708 3.53 43660 6.95 26293 3.69 37688 4.85 42883 4.8
(1) Establishment cost 188 0.04 0 0 745 0.12 744 0.1 555 0.07 705 0.08
(2) Maintanace 50 0.01 15007 2.69 31666 5.04 18401 2.58 29593 3.8 31410 3.52
(3) Other Petty Works 5521 1.32 4701 0.84 11249 1.79 7148 1 7540 0.97 10768 1.21
6. Public Health 120689 28.8 112549 20.17 126053 20.07 166633 23.39 164081 21..10 160925 18.02
(1) Establishment charge 99588 23.76 87559 15.69 99805 15.89 114214 16.04 133906 17.22 128665 14.41
(2) Operational Cost 18275 4.36 24465 4.38 25219 4.02 27624 3.88 29203 3.75 30851 3.45
(3) Maintanance Charge 210 0.05 109 0.02 95 0.02 151 0.02 158 0.02 503 0.06
(4) Other Charges 2616 0.62 419 0.08 934 0.15 24644 3.46 814 0.1 906 0.1
7. Street Lighthing 16997 4.06 16388 2.94 26645 4.24 15718 2.21 28190 3.62 17162 1.92
(1) Establishment charge 84 0.02 50 0.01 128 0.02 71 0.01 73 0.01 49 0.01
(2) Current Charge 16685 3.98 15243 2.73 18621 2.96 15282 2.15 17872 2.3 15363 1.72
(3) Other Charges 228 0.05 1095 0.2 7896 1.26 365 0.05 10245 1.32 1750 0..20
8. Municipal Properties 2930 0.7 5281 0.95 3996 0.64 4464 0.63 11261 1.45 7902 0.88
(1) Establishment charge 68 0.02 546 0.1 369 0.1 274 0.04 119 0.02 99 0.01
(2) Maintanance 2862 0.68 4735 0.85 3357 0.53 4190 0.59 11142 1.43 7803 0.87
9. Other Expenditure 5728 1.37 2013 0.36 1502 0.24 2047 0.29 5784 0.74 19401 2.17
(1) Audit Fee 0 0..00 397 0.07 490 0.08 0 0..00 4322 0.56 506 0.06
(2) Interest on borrowings' 5728 1.37 1616 0.29 1012 0.16 2047 0.29 1462 0.19 18895 2.12
10 . Extra Ordinray Items 0 0..00 2131 0.38 2332 0.37 10549 1.48 1321 0.17 1390 0.16
(1) Reception to important 0 0..00 20 0..00 0 0..00 412 0.06 0 0..00 349 0.04
(2) Grants, Awards etc 0 0..00 2111 0.38 2332 0.37 10137 1.42 1321 0.17 1041 0.12
II CAPITAL ACCOUNT 100146 23.89 177281 31.77 177936 28.33 216179 30.35 249533 32.08 320731 35.92
1. Management 18371 4.38 20322 3.64 27556 4.39 39694 5.57 36987 4.76 25176 2.82
2. Loan Repayment 3916 0.93 6187 1.11 5352 0..85 5664 0.80. 5272 0.68 2697 0.3
3. Plan Schemes 45458 10.85 205817 18.97 78676 12.53 84068 11.8 117402 15.09 223492 25.03
310
(a) Communication 30222 7.21 78514 14.02 41993 6.69 63038 8.85 89749 11.54 92667 10.38
(b) Town Improvement 8778 2.09 19334 3.47 26585 4.23 12371 1.74 20412 2.62 94302 10.56
Govt.Sponsered Programmes 0..00 0..00 0..00 0..00 0..00 0..00
(a) Town Improvement Scheme 0 0..00 0 0..000 7900 1.26 3693 0.52 4267 0.55 33403 3.74
(b) Poverty Allevation 6458 1.54 2869 1.48 2198 0.35 4966 0.7 2974 0.38 3120 0.35
4. Education 2674 0.64 1353 0.24 4970 0.79 1313 0.18 2653 0.34 5338 0.6
5. Water Supply &drainage 19319 4.61 26795 4..80 41341 6.58 45121 6.33 49970 6.42 43516 4.87
(a) New water supply schemes 0 0..00 724 0.13 478 0.08 439 0.06 1610 0.21 1738 0.19
(b) Deposits to water authority 160 0.05 118 0.02 9387 1.49 97 0.01 119 0.02 0 0..00
(c) Surface Darinage 19129 4.56 25953 4.65 31476 5.01 44585 6.26 48241 6.2 41778 4.68
6. Public Health 835 0.2 7729 1.39 10068 1.6 16075 2.26 19203 2.47 3895 0.44
(a) Building &Vehicles,equipment 835 0.2 5538 0.99 9538 1.52 7711 1.08 13073 1.68 3160 0.35
(b) Solid Waste Management 0 0..00 2191 0.39 530 0.08 8364 1.07 6130 0.79 735 0.08
7. Street Lighthing 9573 2.28 9075 1.63 8828 1.41 24244 3.4 18045 2.32 16617 1.86
8. Endowment and Investments 0 0..00 3 0..00 1145 0.18 0 0..00 1 0..00 0 0..00
III. DEBT HEADS 58583 13.98 115224 20.65 121162 19.29 119119 16.72 115590 14.86 136337 15.27
(1) Refund of Deposit 5301 1.26 14146 3.08 6120 0.97 3197 0.45 1945 0.25 18105 2.03
(2) Advance Recoverd 13027 3.11 28687 4.96 24010 3.82 31906 4.48 23396 3.01 21475 2.4
(3) PF/Pension fund 28034 6.69 51459 9.22 62853 10.01 54256 7.62 616642 7.93 72086 8.07
(4) Sinking Fund 561 0.13 2652 0.48 72 0.01 0 0..00 43 0.01 128 0.01
(5) Library Cess 382 0.09 500 0.09 800 0.13 700 0.1 1000 0.13 0 0..00
(6) Sales Tax 653 0.16 1274 0.23 2315 0.37 4410 0.62 5189 0.67 4322 0.48
(7) Others 10625 2.54 14476 2.59 24992 3.98. 24650 3.46 22355 2.87 20221 2.26
TOTAL 419114 100 557959 100 628036 100 712268 100 777763 100 892978 100
Annexure 3.7-9
311
(1) Establishment cost 188 0.12 0 0..00 745 0.47 744 0.47 555 0.35 705 0.44
(2) Maintanace 50 0.03 15007 9.63 31666 20.16 18401 11.62 29593 18.53 31410 19.51
(3) Other Petty Works 5521 3.57 4701 3.02 11249 7.16 7148 4.51 7540 4.72 10768 6.69
6. Public Health 120689 78.08 112549 72.23 126053 80.24 166633 105.21 164081 102.76 160925 99.96
(1) Establishment charge 99588 64.43 87559 56.19 99805 63.53 114214 72.11 133906 83.86 128665 79.92
(2) Operational Cost 18275 11.82 24465 15.7 25219 16.05 27624 17.44 29203 18.29 30851 19.16
(3) Maintanance Charge 210 0.14 109 0.07 95 0.06 151 0.1 158 0..10 503 0.31
(4) Other Charges 2616 1.69 419 0.27 934 0.59 24644 15.56 814 0.51 906 0.56
7. Street Lighthing 16997 11..00 16388 10.52 26645 16.96 15718 9.92 28190 17.65 17162 10.66
(1) Establishment charge 84 0.05 50 0.03 128 0.08 71 0.04 73 0.05 49 0.03
(2) Current Charge 16685 10.79 15243 9.78 18621 11.85 15282 9.65 17872 11.19 15363 9.54
(3) Other Charges 228 0.15 1095 0.7 7896 5.03 365 0.23 10245 6.42 1750 1.09
8. Municipal Properties 2930 1.9 5281 3.39 3996 2.54 4464 2.82 11261 7.05 7902 4.91
(1) Establishment charge 68 0.04 546 0.35 369 0.41 274 0.17 119 0.07 99 0.06
(2) Maintanance 2862 1.85 4735 3.04 3357 2.14 4190 2.65 11142 6.98 7803 4.85
9. Other Expenditure 5728 3.71 2013 1.29 1502 0.96 2047 1.29 5784 3.62 19401 12.05
(1) Audit Fee 0 0..00 397 0.25 490 0.31 0 0..00 4322 2.71 506 0.31
(2) Interest on borrowings' 5728 3.71 1616 1.04 1012 0.64 2047 1.29 1462 0.92 18895 11.74
10 . Extra Ordinray Items 0 0..00 2131 1.37 2332 1.48 10549 6.66 1321 0.83 1390 0.86
(1) Reception to important 0 0..00 20 0.01 0 0..00 412 0.26 0 0..00 349 0.22
(2) Grants, Awards etc 0 0..00 2111 1.35 2332 1.48 10137 6.4 1321 0.83 1041 0.65
II CAPITAL ACCOUNT 100146 64.79 177281 113.77 177936 113.26 216179 136.49 249533 156.27 320731 199.23
1. Management 18371 11.89 20322 13.04 27556 17.54 39694 25.06 36987 23.16 25176 15.64
2. Loan Repayment 3916 2.53 6187 3.97 5352 3.41 5664 3.58 5272 3.3 2697 1.68
3. Plan Schemes 45458 29.41 205817 67.91 78676 50.08 84068 53.08 117402 73.52 223492 138.83
(a) Communication 30222 19.55 78514 50.19 41993 26.73 63038 39.8 89749 56.21 92667 57.56
(b) Town Improvement 8778 5.68 19334 12.41 26585 16.92 12371 7.81 20412 12.78 94302 58.58
Govt.Sponsered Programmes 0..00 0..00 0..00 0..00 0..00 0..00
(a) Town Improvement Scheme 0 0..00 0 0..000 7900 5.03 3693 2.33 4267 2.67 33403 20.75
(b) Poverty Allevation 6458 4.18 2869 5.31 2198 1..40 4966 3.14 2974 1.86 3120 1.94
4. Education 2674 1.73 1353 0.87 4970 3.16 1313 0.83 2653 1.66 5338 3.32
5. Water Supply &drainage 19319 12.5 26795 17.2 41341 26.31 45121 28.49 49970 31.29 43516 27.03
(a) New water supply schemes 0 0..00 724 0.46 478 0.3 439 0.28 1610 1.01 1738 1.08
(b) Deposits to water authority 160 0.12 118 0.08 9387 5.98 97 0.06 119 0.07 0 0..00
(c) Surface Darinage 19129 12.38 25953 16.65 31476 20.04 44585 28.15 48241 30.21 41778 25.95
6. Public Health 835 0.54 7729 4.96 10068 6.41 16075 10.15 19203 12.03 3895 2.42
(a) Building &Vehicles,equipment 835 0.54 5538 3.55 9538 6.07 7711 4.87 13073 8.19 3160 1.96
(b) Solid Waste Management 0 0..00 2191 1.41 530 0.34 8364 5.28 6130 3.84 735 0.46
7. Street Lighthing 9573 6.19 9075 5.82 8828 5.62 24244 15.31 18045 11.3 16617 10.23
8. Endowment and Investments 0 0..00 3 0..00 1145 0.73 0 0..00 1 0..00 0 0..00
III. DEBT HEADS 58583 37.9 115224 73.94 121162 77.12 119119 75.21 115590 72.39 136337 84.69
(1) Refund of Deposit 5301 3.43 14146 11.02 6120 3.9 3197 2.02 1945 1.22 18105 11.25
(2) Advance Recoverd 13027 8.43 28687 17.77 24010 15.28 31906 20.14 23396 14.65 21475 13.34
(3) PF/Pension fund 28034 18.14 51459 33.02 62853 40.01 54256 34.26 616642 38.62 72086 44.78
(4) Sinking Fund 561 0.36 2652 1.7 72 0.05 0 0..00 43 0.03 128 0.08
312
(5) Library Cess 382 0.25 500 0.32 800 0.51 700 0.44 1000 0.63 0 0..00
(6) Sales Tax 653 0.42 1274 0.82 2315 1.47 4410 2.78 5189 3.25 4322 2.68
(7) Others 10625 6.87 14476 9.29 24992 15.91 24650 15.56 22355 14..00 20221 12.56
TOTAL 419114 271.15 557959 358.06 628036 399.76 712268 449.7 777763 487.07 892978 554.69
313
Annexure 4. I
314
B. Institutions and Posts transferred to Block Panchavats.
315
C. Institutions and posts transferred to District Panchavats
1. Agriculture Department (i) Two posts of Deputy Director and auxiliary posts.
(ii) The post of District Soil Conservation officer and
auxiliary posts.
(iii)One Assistant Executive Engineer and connected posts.
(iv) Soil Testing Laboratory of the respective places.
(v) Mobile Soil Testing Laboratory. (vi)District Sales
Counter
(vii) District Agriculture Farm/Coconut nursery (These
institutions which are transferred to District Panchayat
should serve other districts also where such institutions do
not exist).
2. Animal Husbandry Veterinary Polyclinic, ICDP area office, Mobile Veterinary
Department Dispensary, Mobile Farm Unit, Clinical Laboratories not
attached to District Veterinary Centres, (the services of
mobile units and clinical laboratories should be extended to
urban areas also)
3. Fisheries Department The fisheries Schools of respective places.
Now all the District level officers have been transferred to the District Panchayats
along with staff. District Hospitals arealso with the District Panchayats
316
D. Institutions and posts transferred to Municipal Councils/Municipal
Corporations
317
Annexure 4.2.1
PHYSICAL ACHIEVEMENT OF THE PROJECTS EXECUTED BY THE
PANCHAYATS UNDER PEOPLE'S PLAN CAMPAIGN
318
(I) 8 metres wide 47890.15 37696.963 52332 6739.85 8608.52 4230.76 3085.31 61 104.55
(ii) 6 to 8 metres wide 71738.903 101178.16 63095 1482.17 5314.91 5509.68 2657.83 895.715 2117.8
(iii) less than 6 metres wide 155221.205 120720.36 2812661.00 5799.02 3123.08 3198.92 8587.8 102.691 5.6
(b) Metalled Road
(I) 8 metres wide 50899 55317.432 32075 848.19 3729.76 1335.39 3124.2 2753.2 17472
(ii) 6 to 8 metres wide 80481.94 86742.408 72607 52.35.27 6546.53 1861.48 995.69 143.61 1.01
(iii) less than 6 metres wide 88568.971 74H43.774 11105.83 5563 577.64 371.8 23218 30.02 5910
(c) Tarred Roads
(I) 8 metres wide 43059.41 140131.49 63 1 73 12645.2 13353 14747.71 872.79 14515.7 345.48
(ii) 6 to 8 metres wide 104653.612 121529.54 172892 5876.51 10534.65 7821.1 534.9 289.98 41.6
(iii) Less than 6 metres wide 124699.883 139311.75 141308 6669.56 2833.88 1549.31 213151 287.755 18974.24
No. of new culverts constructed 5921.415 1355.928 1279 255 432 355 61 31200.5 48
No. of bridges constructed 339 601.05 416 27 57 7 89 26
No. of Institutions registered under 249.25 52 186 23 73 22 0 52 0
charitable
Plinth Area of School Building
constructed 13755.13 24395.06 26761 7328.55 14183.17 17870.69 22137.51 0 7812.08
No. of Annanavadi Buildings 2091 729 1830 115 325 134 23 77198.81 54
constructed
Plinth Area of Hospital Building 28985.06 66067.53 38113 106868.87 7200.04 19416.39 339.49 58 2846
constructed
Plinth Area of Office Building 10642.21 36039.02 225419 6005.42 13429.7 20668.5 4986 917 2951.8
constructed
Plinth Area of Marketting Complex 92135.52 11417.95 44558 149.5 3252.52 1450.52 0 12187 600
constructed
Area of land acquired (in Hectres) 6992.5711 2322.7751 10412 .666 199.43 23470.54 79.85 3.23 2189.61 3.2
319
Details of physical achievements under Peoples' Plan Compaign (Municipalities)
SI 1997-98 Total 1998-99 Total 1999-2000 Total
No Items GS SCP TSP Total GS SCP TSP Total GS SCP TSP Total
I Fallow land made cultivable (in hectres) 1860 252 0 2112 109 4 0 1141 154 49 0 159
2 Distribution of Seedings (Number of beneficiaries) 137874 7203 50 14512 59750 438 10 64140 3445 1 105 10 35566
Distribution of Fertilizers/Insecticides
3 (Numberof beneficiaries) 43558 2803 62 46423 15327 474 15 15816 34818 677 2 35516
4 No of new tractors for agriculture 11 0 0 11 4 0 0 4 4 0 0 4
5 No. of new trillers for agriculture 7 1 0 8 9 0 0 9 18 1 0 19
6 No. of coconut trees cut and removed due lo
disease (Financial assistance given only) 35823 1757 30 37610 17064 1921 43 19028 16593 572 14 17179
7 No. of calves distributed 2624 1068 1 3693 787 690 6 1483 631 195 0 826
8 No of lambs distributed 7347 1664 12 9023 458 245 0 703 296 90 0 386
9 No. of chiks distributed 100581 14177 6 114764 31888 2546 24 34458 11105 485 0 11590
10 No. of cattle pound constructed 1204 245 0 1449 1744 239 0 1983 1069 65 0 1134
11 No. of tailoring machines distributed 1071 1205 0 2276 217 30 0 247 155 10 0 165
12 No. of industrial units started 6461 39 0 6500 301 32 334 245 29 0 274
13 No of persons newly employed in industrial units 777 202 12 991 1746 315 14 2075 842 63 1 906
14 No.of house-sites provided for weaker sections 119 138 8 265 248 151 59 453 355 295 35 685
15 No. of houses constructed for weaker sections 2006 1905 91 4002 4150 1995 14 6159 9218 2795 23 12036
16 No.of houses of weaker sections repaired 1760 1710 27 3497 3386 771 34 4191 5279 1597 10 6886
17 No. of toilets constructed 3853 4288 42 8183 4556 956 27 5539 5878 1112 25 7015
18 No. of houses electrified 968 2355 14 3337 2227 819 13 3059 1898 760 6 2664
19 No of smokeless chulas distributed 5808 601 0 6409 493 75 0 568 409 52 0 461
20 No. of wells newly constructed 705 200 1 906 1249 203 14 1466 1847 327 0 2174
21 No of new street taps installed 595 111 4 710 793 47 2 842 1876 2Q 0 1914
22 No. of private taps installed 122 31 0 153 342 167 0 509 610 55 0 665
23 No. of street lights installed 1563 90 0 1653 2614 125 0 2739 3801 220 10 4031
11
24 No. of tanks renovated 39 0 48 133 3 1 137 94 33 1 128
25 No.of pump sets installed 572 51 0 623 693 56 0 749 1022 42 1 1065
26 (ii) 6 to 8 metres wide 3702 7 1 3710 1084 17 1 1102 3107 2 1 3110
27 (I) 8 metres wide 42 9 1 52 37 6 1 44 350 14 0 364
28 (iii) less than 6 metres wide 4135 5 0 4140 262 0 0 262 1852 741 0 2593
29 (I) 8 metres wide 31 9 0 40 23 5 0 28 884 10 0 894
30 (ii) 6 to 8 metres wide 37 17 0 54 170 3 0 173 20 1 0 21
31 (iii) less than 6 metres wide 25397 669 0 26066 2883 1189 0 4072 3804 507 0 4311
320
32 (I) 8 metres wide 26 3 0 29 31 6 0 37 33 4 0 37
33 (ii) 6 to 8 metres wide 213 1 0 214 25 3 0 28 168 0 0 168
34 (iii) less than 6 metres wide 2720 144 0 2864 4327 1106 1 5434 4409 142 0 4551
35 No. of new culverts constructed 62 2 0 64 38 3 0 41 41 2 0 43
36 No of bridges constructed 2 0 0 2 3 1 0 4 5 1 0 6
37 No. of Co-operative Societies for which
financial assistance rendered 24 3 1 28 24 6 1 31 18 5 1 24
38 No. of Institutions registered under charitable 7 3 0 10 5 3 0 8 9 1 0 10
39 Plinth Area of School Building constructed (plinth 3898 0 2 3900 6705 0 0 6705 5671 0 0 5671
40 No. of Anganavadi Buildings constructed 60 3 0 63 43 4 0 47 195 2 0 197
41 Plinth Area of Hospital Building constructed
including extension (in sq.m.) 2984 0 0 2984 4096 0 0 4096 9645 0 0 9645
42 Plinth Area of Office Building constructed including 200 0 0 200 3274 0 0 3274 5220 8000 0 13220
43 Plinth Area of Marketting Complex
constructed in sq m) 0 0 0 0 5382 0 0 5382 9225 0 0 9225
44 Area of land acquired (in Hectres) 81 48 0 129 185 0 0 185 122 72 0 194
Details of Physical achivements under People’s Plan Campaign (Corporations) Annexure 4.2.3
321
units
No.of house-sites provided for weaker
14 sections 0 0 0 51 0 454 0 18 0 22 0 27
No. of houses constructed for weaker
15 sections 413 51 0 886 2041 393 2 2495 1776 251 0 2028
16 No.of houses of weaker sections repaired 228 468 5 411 2100 428 3 2495 2340 435 0 2780
17 No. of toilets constructed 1485 173 10 2188 1307 48 1 1738 1198 350 0 1550
18 No. of houses electrified 540 683 20 611 183 0 0 232 0 41 0 41
19 No of smokeless chulas distributed 1375 71 0 1397 0 33 0 0 0 0 0 0
20 No. of wells newly constructed 19 20 2 19 40 0 0 73 15 5 0 20
21 No of new street taps installed 0 0 0 0 27 150 20 27 0 0 0 0
22 No. of private taps installed 968 0 0 1200 810 0 0 980 40 0 0 40
23 No. of street lights installed 750 230 2 750 744 0 0 744 131 0 0 131
24 No. of tanks renovated 0 0 0 0 0 0 0 0 0 0 0 0
25 No.of pump sets installed 340 0 0 340 0 0 0 0 0 0 0 0
26 (ii) 6 to 8 metres wide 0 0 0 0 0 0 0 0 1800 0 0 1800
27 (I) 8 metres wide 0 0 0 0 0 0 0 0 0 0 0 0
28 (iii) less than 6 metres wide 6 0 0 6 0 0 0 0 0 0 0 0
29 (I) 8 metres wide 0 0 0 0 0 0 0 0 800 0 0 800
30 (ii) 6 to 8 metres wide 0 0 0 0 0 0 0 0 0 0 0 0
31 (iii) less than 6 metres wide 4824 0 0 4824 4643 0 0 4643 976 0 0 976
32 (I) 8 metres wide 0 0 0 0 265 0 0 265 7462 0 0 7462
33 (ii) 6 to 8 metres wide 7260 0 0 7260 5385 0 0 5385 2775 0 0 2775
34 (iii) less than 6 metres wide 33198 0 0 33198 22873 0 0 22873 5219 0 0 5219
35 No. of new culverts constructed 12 0 0 12 10 0 0 10 11 0 0 11
36 No of bridges constructed 0 0 0 0 0 0 0 0 0 0 0 0
No. of Co-operative Societies for which
37 financial assistance rendered 14 1 0 15 3 0 0 3 38 0 4 42
No. of Institutions registered under charitable
38 societies act 0 0 0 0 0 0 0 0 0 0 0 0
Plinth Area of School Building constructed
(plinth area in sq.m.)
39 816 0 0 816 546 0 0 546 4380 0 0 4380
40 No. of Anganavadi Buildings constructed 37 0 0 37 6 0 0 6 4 0 0 4
Plinth Area of Hospital Building constructed
41 including extension (in sq.m.) 300 0 0 300 0 0 0 0 200 0 0 200
Plinth Area of Office Building constructed
42 including extension (in sq.m) 1000 0 0 1000 0 0 0 0 0 0 0 0
Plinth Area of Marketing Complex constructed
43 in sq.m) 0 0 0 0 520 0 0 520 287 0 0 287
322
44 Area of land acquired (in Hectres) 4 0 0 4 5 0 0 5 3 0 0 3
323
Annexure 4.3
FUNCTIONS OF LOCAL SELF GOVERNMENT INSTITUTIONS
1. VILLAGE PANCHAYAIS
A. Mandatory functions of Village Panchayats
1. Regulation of building construction.
2.Protection of public land from encroachment
3.Protection of traditional drinking water sources.
4. Preservation of ponds and other water bodies
5. Maintenance of water-ways and canals under their charge
6. Collection and disposal of solid waste and control of liquid waste disposal.
7. Storm water drainage
8. Maintenance of environmental hygiene
9. Management of markets
10. Vector control
11. Regulation of slaughtering of animals and sale of meat, fish and other
perishable food items.
12. Regulation of eating establishments
13. Prevention oj food adulteration,
14. Maintenance of roads and other public assets
15. Street lighting and their maintenance.
16. Immunization
17. Carrying into effect national and State level strategies and
programmes for disease prevention and control.
18. Opening and maintenance of burial and burning grounds.
19. Licensing of dangerous and offensive trades
20. Registration of births and deaths.
21. Provide bathing and washing ghats
22. Providing ferries,
23. Provide parking space for vehicles
24. Provide waiting-sheds for travelers
25. Provide toilet facilities in public places
26. Regulate conduct of fairs and festivals.
27. Licensing of pet dogs and destroying strav dogs.
B. General functions
1. Collection and updating of essential statistics.
2. Organising voluntary labour and contribution for community works.
3. Carrying out campaigns for thrift.
4. A warencss building on control of social evils like drinking, consumption of
narcotics, dowry and abuse of women and children.
5. Ensuring maximum people's participation in all stages of development.
6. Organising relief during natural calamities.
7. Inculcating environmental awareness and motivating local action
for environmental npgradalion.
8. Promoting co-operatives.
9. Enhancing communal harmony.
10. Mobilizing local resources in cash and in kind, including free surrender of
land for development purposes.
11. Spreading legal awareness among the weaker sections.
12. Campaigning against economic crimes
13. Organising neighbourhood groups and self-help groups with focus on the
poor.
14. Awareness building on civic duties
324
Sector-wise distribution o responsibilities
I. AGRICULTURE
1. Bring into cultivation waste lands and marginal lands
2. Bring ahoiit an optimum utilisation of land
3. Soil conservation
4. Production of organic manure.
5. Establishment of nurseries.
6. Promotion of co-operative and group farming.
7. Organising self-help groups among cultivators
8. Promotion of horticulture and vegetable cultivation,
9. Fodder development
10. Plant protection.
11. Seed production
12. Farm mechanisation.
13. Management of Krishi Bhavans.
IV. FISHERIES
1.Development of fisheries in ponds and fresh water and brackish water
fish culture, mari culure.
2. Fish seed production and distribution.
3. Distribution of fishing implements.
4. Fish marketing assistance.
5. Provision of basic minimum services for the families of fishermen
6. Welfare schemes for fishermen.
V. SOCIAL FORESTRY
/. Raising of fodder, fuel and fruit trees
2. Organising campaigns for tree planting and environmental
awareness.
3. Afforestation of waste lands.
VI. SMALL SCALE INDUSTRIES
/. Promotion of cottage and village industries
2. Promotion of handicrafts
325
3. Promotion of traditional and mini industries
VII. HOUSING
1. Identification of homeless people and poramboke dwellers and
provide house sites and houses.
2. Implementation of rural housing programmes.
3. Implementation of shelter upgradation programmes.
/. Street lighting
2. Promotion of bio-gas.
X. EDUCATION
/. Management of Government pre-primary schools and Government
primary schools.
2. Literacy programme's.
XL PUBLIC WORKS
/. Construction and maintenance of village roads within the village
panchayat,
2. Construction of buildings for institutions transferred.
IV. FISHERIES
Development of traditional landing centres.
VIII. EDUCATION
Management of Industrial Training Institutes.
328
A. General functions of District Panchayats
1. Mobile the technical expertise available from
government and non-government institutions.
2. Provide technical service to the Block Panehayats and Village
Panchayats and the Municipalities,
3. Prepare plans after taking into account the plans of (he Village
Panehayats and Block Panehayats lo avoid duplication and to provide
backward and forward linkage.
I. HOUSING
1. Housing complex and infrastructure development.
2. Mobilizing housing finance.
[V. EDUCATION
1. Management of Government high schools (including LP section and
UP section attached to high
schools)
2. Management of Government higher secondary schools.
3. Management of Government technical schools.
4. Management of vocational training
centres and polytechnics.
5. Management of vocational Higher
Secondary schools.
6. Management of District Institute for Education and Training.
7. Co-ordinate centrally and Stale sponsored programmes related to
education.
V. PUBLIC WORKS
1. Construction and maintenance of all district roads other than State
Highways, National Highways
and Major District Roads.
2. Construction of buildings for institutions transferred.
VI PUBLIC HEALTH AND SANITATION
!. Management of district hospital in all systems of medicine.
2. Selling up of centres lor care of special categories of disabled and
mentally ill people.
3. Co-ordination of centrally and State Sponsored programme at the
district level.
XI. CO-OPERATIVES
1. Organisation of co-operatives within the jurisdiction of District
Panchayats.
2. Payment of Government grants and subsidies toco-operatives within
the jurisdiction."
IV. MUNICIPALITIES AND MUNICPAL CORPORATIONS
A. Mandatory functions of Municipalities
1. Regulation of building construction
2. Protection of public land from encroachment
3. Protection of traditional drinking water sources
4. Preservation of ponds and other water
bodies
5. Maintenance of water-ways and canals under their charge
6. Collection and disposal of solid waste and control of liquid waste
disposal
7. Storm water drainage
8. Maintenance of environmental hygiene
9. Management of markets
10. Vector control
11. Regulation of slaughtering of animals and sale of meat, fish and
other perishable food items
12. Regulation of eating establishments
13. Prevention of food adulteration
14. Maintenance of roads and other public assets
15. Street lighting and their maintenance
16. Immunisation
17. Carrying into effect national and State-level strategies and
programmes for disease prevention and control
18. Opening and maintenance of burial and burning grounds
19. Licensing of dangerous and offensive trades and industries
20. Registration of births and deaths
21. Provide bathing and washing ghats
22. Provision of ferries
23. Provide parking space for vehicles
24. Provide waiting-sheds for travellers
331
25. Provide toilel facilities in public places
26. Regulate conduct of fairs and festivals
27. Licensing of pet dogs and destroying stray dogs
28. Provision of basic minimum service in slums
29. Amenities for pedestrians including foot path and road crossing
facilities
30. Preparation of detailed town plans and action,plan for,phased
implementation
B. GENERAL FUNCTIONS
1.Collection and updating of essential statistics
2.Organising voluntary labour and contribution for community works
3.Carrying out campaigns for thrift
4.Awareness building on control of social evils like drinking,
consumption of narcotics, dowry and abuse of women and
children
5.Ensuring maximum people's participation in all
stages of development
6. Organising relief during natural calamities
7. Including environmental awareness and motivating local action
for environmental upgradation .
8.Promoting co-operatives
9.Enhancing communal harmony
10. Mobilising local resources in cash and in kind, including free
surrender of land for development purposes
11. Spreading legal awareness among the weaker sections
12. Campaigning against economic crimes
13. Organising neighborhood groups and self-help groups with focus
on the poor.
14. Awareness building on civic duties
XII AGRICULTURE
1. Bring into cultivation wastelands and marginal lands
2. Bring about an optimum utilisation of land
3. Soil conservation
4. Production of organic manure
5. Establishment of nurseries
6. Promotion of co-operative and group farming
7. Organising self-help groups among cultivators
8. Promotion of horticulture and vegetable cultivation
9. Fodder development
10.Plant protection
11.Seed production
12.Farm mechanisation
13.Management of Krishi Bhavans.
14.Conduct of agricultural exhibitions
IV. FISHERIES
333
1.Development of fisheries in ponds and fresh waster and brackish waster
fish culture
2.Fish seed production and distribution
3.Distribution of fishing implements
4.Fish marketing assistance
5.Provision of basic minimum services for the families of fishermen
6.Welfare schemes for fishermen
7.Development of traditional landing centres
8.Management of fisheries schools
V.SOCIAL FORESTRY
1. Raising of fodder, fuel and fruit trees
2. Organising campaigns for tree planting and environmental awareness
3. Afforestation of waste lands
VI. SMALL SCALE INDUSTRIES
334
V. EDUCATION
1.Management of Government pre-primary schools. Government primary
schools and Government High Schools.
2. Literacy programmes
3. Management of Industrial Training Institutes in the municipal area
4.Management of Government higher secondary schools in the municipal area
5.Management of Government technical schools in the municipal area
6.Management of vocational training centres and poly technics in the municipal
area
7.Management of vocational higher secondary schools in the municipal area
XL PUBLIC WORKS
I. Construction and maintenance of roads within the Municipality other
than National Highways. State Highways and Major Districts Roads
2. Construction of buildings for institutions including those got
transferred from Government
4. Sill upgradation of the poor for self employment and wage employment
for people below poverty line
5. Providing infrastructure for self-employment programmes
XV. SCHEDULED CASES AND SCHEDULED TRIBES DEVELOPMENT
1. Beneficiary oriented schemes under SCP and TSP
2. Management of nursery school for Scheduled Castes and Scheduled
Tribes
3. Provision of basic amenities in Scheduled Castes and Scheduled Tribes
4. Assistant to Scheduled castes and Scheduled Tribes Students
5. Discretionary assistance to Scheduled Castes and Scheduled
Tribes in need
6. Management or pre-matric hostels in the municipal area
7. Promoting Scheduled Castes and Scheduled Tribes co-opcralives
8. Management of post matrie hostels in the municipal area
9. Management of vocational training centres for Scheduled Castes and
Scheduled Tribes in the municipal area
XVI. SPORTS AND CULTURAL AFFAIRS
I Construction of play grounds and stadiums
XVII. PUBLIC DISTRIBUTION SYSTEM
1 Examination of complaints against the public distribution system
and taking of remedial measures
2 Organisation of campaigns against weights and measures offences
3 General supervision and guidance of rational shops and maveli
stores and other public distribution centres and if necessary starting
new public distribution centres
336
Annexure 5.1
Status of implementation of the recommendations of the First SFC
1) Relating to Devolution of Funds
6 25% of funds for centrally sponsored anti- Accepted. The entire funds are given to
poverty programmes to be at the disposal the LSGIs.
of LSGIs.
7 One per cent of State Revenues to be Not accepted.
distributed among urban and rural pools.
8 Maintenance grants calculated at current Not accepted.
replacement cost and suitably scaled up for
price escalation to be given to LSGIs.
9 50% of trie maintenance cost to be sought The II11 Finance Commission'has not
from Government of India. agreed to it.
The 1llh Finance Commission has not
agreed to it. Share of LSGIs has been
10. 5% (if the Central revenues to go to LSGIs. fixed at about 3 % of Central revenues.
337
2) Relating to augmentation of resource mobilization by LSGIs
338
3) Relating to rationalization of fiscal systems of LSGIs.
a) General points.
340
4) Miscellaneous Issues.
Implemented
I. Creation of a special Cell in
.
Finance Department.
Expert Group to go into format of The task has been entrusted to Institution-
budget and /elated matters auditing of Public Auditors of India.
and
including accounting.
4. LSGIs to be empowered to Implemented as part of People's Planning
execute Civil works without Campaign.
intervention of Government
agency.
5. The Rural Development Board Necessary amendments to the Act made.
should only be a funding
agency.
6. Rural Development Board and Accepted - but not operationalised.
KUDFC to have soft loan
windows.
In 1998-99 the Government of Kerala transferred a total sum of Rs. 950 crores
to the local bodies as plan grants. Of the total plan grants, 75.37 per cent was
allocated to the general sector, 20.53 per cent as the special grants for scheduled
castes and 4.10 per cent as special grants for the scheduled tribes. In the general
sector, the rural local bodies were given Rs. 426 crores and urban local bodies
were given Rs. 107 crores. The general sector component of grant was
distributed on the basis of the following five criteria suggested by the Working
Group on Evolving Formula for Inter-se Distribution of Plan Grants to Local
Bodies (also see Table 3.29, Chapter 3).
ARj = (Pj.rj/Σ(Pj.rj))R
where ARj is the allocation by the resource effort criterion for j local
body, R is the total amount allocated by the revenue effort criterion, PJ is
the population of 11th panchayat and rj is the percentage increase in own
revenue of the jth panchayat with an upper limit. Set j includes only
those local bodies that increased their own revenue in the previous year.
This exercise calculates the inter se distribution of plan funds for year
1998-99 for gram panchayats, municipalities and municipal corporations using
the proposed formula and compares the pattern of allocation with the
allocations based on the existing formula.
343
As mentioned before, a lower limit of zero per cent increase is applied to the
local bodies that show a reduction in their own revenue over the previous
year.
Gram Panchayats:
In this exercise the proposed formula was applied for estimating the
allocations for 973 panchayats for which data are available for 1998-99.
Table I shows the amount of plan grant for the gram panchayats for 1998-99
divided on the basis of the existing formula and on the basis of the proposed
formula. In comparison with the own revenues in 1997-98, 896 panchayats
registered an increase in their own revenues. Therefore, as per the proposed
revenue effort criterion, 8.96 percent of the plan funds (Rs. 3582 lakhs)
would have been divided only among the 896 panchayats that increased
their revenue. Correspondingly, 56.04 per cent of the plan grant (Rs. 22403
lakhs) would have been divided on the basis of population criterion.
For the purpose of this exercise, we tried three levels of upper limits
011 the extent of increase in own revenue (r,): 20 per cent. 25 per cent and
30 per cent. Table 2 compares the estimated plan grants with the grants as
per the existing formula. When the upper limit on increase in own revenue
was assumed to be 30 per cent, a total of 835 panchayats were rewarded for
344
increasing their n\\n revenue. Given the non-SC/ST populations and extent
of increase of own ivu'nue of different panchayats in 1998-99. a panchayat
needed to increase its
345
revenue hy at least 18.1 percent Σ (pi.ri)/ Σ pi) to maintain its level of plan
grants. There were 138 panchayats that did not increase their own revenues in
1998-99 hy ihis extent. This includes 77 panchayats showing a decline in the
own revenue and 61 panchayats that increased the revenue hut hy less than
26.76 percent. The revision of formula lor inler-se distribution led to an
increase in plan granl for S3 5 oin of 973 panchayats. The median change in
the plan grants because of the revision in the formula was an increase of 0.39
lakhs. The highest increase in the plan grants was 1.21 lakhs and the highest
reduction was 7.68 lakhs. In proportional terms, the highest increase in plan
grants was 1.40 per cent and the highest reduction was I 1.54 per cent.
346
because of inclusion of a revenue effort criterion.
347
Table 3. Comparison of plan grants to gram panchayats allocated by the
proposed formula with the allocations by the Working Group formula lor the
year 1998-99 (10 per cent allocation by revenue effort criterion)
Difference in plan grants Upper limit of increase in
own revenue
20 per 25 per 30 per-
cent cent cent
Median (Rs. lakhs) 0.34 0.37 0.39
Maximum increase (Rs. lakhs) 1 .05 1.14 1.21
Maximum proportional increase (percent) 1.25 1.31 1.40
Maximum decline (Rs. lakhs) 7.68 7.68 7.68
Minimum proportional decline (percent) 11.54 1 1 .54 11
Coefficient of variation of per capita grants (cov .190697 .19075 .190861
for allocations by existing formula = 0.189144)
No. of panchayats with lower grants 116 131 138
Number of panchayats with increase in revenue but 39 54 61
lower grants
Minimum percentage increase in own revenue for 18.10 22.45 26.76
a panchayat to maintain the level of its plan grant
in comparison with the existing criterion
Number of panchayats with an increase in 851 838 822
revenue greater than the upper limit
348
Figure I. Distribution of panchayats by extent of inerease in plan
allocations and per capita own revenue
Note: Based on 30 per cent upper limit on the extent of increase in own
revenue.
R= (0. l())p.n/N, where P is the total plan grant for a particular tier, n is the
number of municipalities/municipal corporations showing
an increase in the own revenue over the previous year, and
N is the total number of municipalities/municipal
corporations.
A similar exercise as done for the panehayats was also carried out for
the urban local bodies to see the pattern of plan allocations for municipalities
and municipal corporations for the year 1998-99.
Municipalities:
350
Table 5: Plan grants for municipalities distributed by the Working Group
formula and the proposed formula
The plan grants for the municipalities were estimated with upper
limit on the increase in own revenue at 10 per cent, 20 per cent, 25 per cent
and 30 per cent. When the upper limit on the increase in own revenues was
assumed to be at 30 per cent, the municipalities that increased their revenues
more than 9.74 per cent were rewarded on account of the revenue effort
criterion. This benefited a total of 30 municipalities. The plan allocations of
the rest of the 25 municipalities decreased correspondingly. The
municipalities that faced a reduction in plan allocation include 18
municipalities whose own revenues declined in 1Q98-99 over the previous
year and 7 municipalities that increased their revenue by less than 9.74 per
cent. The highest reward in plan grant of a municipality was about Rs. 29.9
lakhs. Among the municipalities that did not increase their revenue, the
highest decline in plan grants was Rs. 9.98 lakhs. In proportional terms, the
highest increase was 27.66 per cent and highest reduction was 9.98 per cent.
351
Table 6. Comparison of plan grants to municipalities allocated by the
proposed formula with the allocations by the Working Group formula for the
year 1998-99 (10 per eenl allocation hy revenue effort criterion)
Upper limit of increase in
own revenue
30 per 25 pei- 20 pei- 10 pei-
cent cent cent cent
Difference In plan grants
Median (Rs. lakhs) 1.07 1.37 1.82 3.16
352
Figure 2. Distribution of municipalities by extent of increase in plan
allocations and per capita own revenue
Municipal Corporations:
Of the three municipal corporations in the state, two corporations increased their
revenue in 1998-99 over the previous year. Therefore, allocation by the proposed formula
would require that 6.67 per cent of the total plan grant (-10x2/3 per cent, 241.59 lakhs) be
distributed by the revenue effort criterion onlv to these two corporations.
Table 8. Plan grants for municipal corporations distributed by the Working Group formula
and the proposed formula
Working Group Formula Proposed Formula
Weightage Amount (Rupees Weightage Amount
lakhs) (Rupees
lakhs)
Population(non SC/ST) 75 2716.54 68.33 2474.95
Area 5 181.10 5.00 181.10
Houses without latrines' and 20 724.41 20.00 724.41
houses without electricity
353
Annexure 9.1
PROPOSED RATE OF PRESUMPTIVE PROFESSION TAX IN RESPECT OF SELF EMPLOYED PERSONS EXCERSING
PROFESSION/ TRADE/ ART/CALLING
Proposed
Proposed minimum minimum rate in Proposed minimum rate in
rate in panchyat municipality Corporation
Category Category Category
Items to be classified A B C A B C A B C
Areted waters-Manufactering 100 75 50 200 150 75 300 200 100
Aloe fibre and yearn-Storing,Packaging,Pressing,Cleansing, 100 75 50 120 100 60 200 150 100
Preparing or manufacturing by any process whatsover
Aluminium -Manufacturing Storing, Selling 150 100 50 200 150 100 500 300 175
Ammunition- storing,Packaging,Pressing,Cleansing 1000 750 500 3000 2000 1000 5000 3000 2000
,Preparing or manufacturing by any process whatsover
Arecanuts-Soaking of 100 50 25 100 75 50 300 150 75
Articles made of flour-Baking,Preparing,Keeping, Storing for
human consumption 100 75 50 200 150 100 300 200 150
(for other than domestic or sifting)
Ahses storing,packing,pressing,cleaning,preparing or
manufacturing by any process 75 50 25 100 75 50 150 100 75
whatever dumping or sifting
Audio Cassette- Recording,storing.selling 300 200 150 300 200 150 500 300 200
Automobile oil and lubricants-Mixing ,storing,selling 300 200 150 300 200 150 500 300 200
Automobile Spare parts-Manufacturing,storing, selling 300 225 175 500 300 200 750 500 250
Automoblie tyre and tube-Manufacturing,storing,selling 400 300 200 400 300 200 600 400 250
Bamboos-Storing for sale,hire or manufacture 75 50 25 100 75 50 150 100 75
Bathis-Manufacture,storing,selling 100 75 50 125 100 75 200 150 100
Bettals-Storing,.selling 75 50 25 75 50 25 100 75 50
Battery- Manufacturing,storing,selling 300 200 100 500 300 150 600 400 200
Biscuts-Baking,preparing,keeping,or storing for human
consumption(other than for domesticuse 150 100 50 450 300 150 600 400 200
Blood-Storing,packing,pressing,cleaning,preparing,or
manufacturing by any process whatsoever 75 50 25 100 75 50 125 100 75
Bones-Storing,crushing,selling 350 250 150 400 300 200 600 350 250
Book- Manufacturing,storing,selling 500 300 150 500 300 150 600 400 200
Bread-Baking,preapring,keeping,storing for human
consumption (other than domestic use) 150 100 50 150 100 50 150 100 50
Bricks- Manufacturing, atoring for sale 300 200 100 300 200 100 500 300 150
Beuty Parlour- Management 500 450 400 600 500 450 750 600 500
Building meterial-Manufacturing, storing,selling 300 200 100 400 250 150 750 500 200
355
Camphor -Storing,packing,pressing,cleaning,preapring or
manufacturing by any process 35 25 15 75 50 24 150 100 50
whatsover or bolling
Candles-Packing,pressing,cleaning,manufacturing, by any
process whatsoever 75 50 25 100 70 40 150 100 50
Carpets-Manufacturing, storing for sale 150 100 75 300 200 100 500 300 150
Cashewnuts and its Kernel-Storing,packing,preparing or
manufacturing by any process whatsoever 1000 500 200 1000 500 200 1500 750 300
Cattle feeds-Manufacturing,mixing,packing,storing selling 150 100 50 300 200 100 500 300 150
Cat gut-Storing, packing,pressing, cleansing,preapring 125 100 75 150 125 100 200 150 125
Cable TV Opreation 500 300 150 750 500 250 1000 750 500
Cement-Manufacturing,packing,storing 500 250 150 500 250 150 750 500 250
Charcoa-Dumping, sifting,selling or storing 150 100 50 250 150 75 300 200 100
Chemicals- Storing,packing,pressing,cleansing,preapring or
manufacturing for processwhatsoever 200 125 75 250 175 100 500 200 150
Chillies,Corriamdum,Turmeric, etc-Granting by mechinary 300 250 200 300 250 200 500 300 250
Chillies,Corriamdum,Turmeric, etc-(dried)-
Storing,packing,sellling (tried) 300 250 200 300 250 200 500 300 250
Clorite mixture-Storing,paking,pressing,cleansing,preparing
or manufacturing by any process whatsoever 150 100 75 300 200 100 500 250 150
Cinders-Storing,packing,pressing,cleansing,preapring or
manufacturing by any process whatsoever 100 75 50 100 75 50 125 100 75
Cloths- Dyeing,storing,selling 400 300 200 500 350 250 1500 1000 50
Coal-Dumping,sifting,selling or storing 150 100 50 250 125 75 300 200 100
Cocont fibre-Storing,packing,pressing,cleansing preparing or
manufacturing by any process whatsoever 200 125 75 300 150 100 500 300 150
Cocont husks and cadjan leaves-soaking of 200 125 75 300 150 100 500 300 150
Coconut shells-Storing 200 150 75 300 200 100 500 300 150
Coffee- Processing, grinding,packing,storing, selling 175 150 125 200 175 150 500 300 200
Coir yarn-Storing,packing, pressing, cleansing, preparing or
manufacturing by any process whatsoever 125 100 75 300 200 100 500 300 150
Combusite meterials- Storing 500 400 200 750 500 250 1000 750 500
Comsumables-Baking,Preapring,keeping ,or storing for
human consumption(othet than for doemsticuse) 150 125 75 300 150 100 500 250 150
Condiments- Manufacturing 150 100 50 150 100 50 300 150 100
Confectionary-Baking,preparing,keeping, or storing for
human consumption(otherthan domestic use) 300 200 100 500 300 150 750 400 200
Copra-Preparing,or storing or selling wholesale 200 125 75 300 150 100 500 300 150
Cotton,cotton refuse,cotton seed-
Storing,packing,pressing,cleaning, prearing or
manufacturing by any process whatsoever 400 225 125 500 300 150 750 500 200
Cow-dung cakes-
Storing,packing,pressing,cleansing,prearing or manifacturing
by any proces whatsoever 75 50 25 150 100 50 150 100 50
356
Fat-Storing,packing,pressing,cleansing,preparing or
manufacturing by any process whatsoever 200 125 75 250 150 100 300 200 150
Fire wood-Selling or storing 150 100 75 300 200 100 750 500 250
Fire works-Storing ,packing,pressing,cleansing,preparing or
manufacturing by any process whatsoever 1000 500 250 1500 1000 500 3000 2000 1000
Fish-Storing ,packing,pressing,cleansing,preparing or
manufacturing by any process whatsoever 150 125 75 300 200 100 500 300 150
Fish oil -Storing ,packing,pressing,cleansing,preparing or
manufacturing by any process whatsoever 150 125 75 200 150 100 500 300 200
Flax-Storing ,packing,pressing,cleansing,preparing or
manufacturing by any process whatsoever 150 125 75 200 150 100 500 300 200
Fileshing-Storing ,packing,pressing,cleansing,preparing or
manufacturing by any process whatsoever 150 125 75 200 150 100 500 300 200
Flour -Storing ,packing,pressing,cleansing,preparing or
manufacturing by any process whatsoever 250 150 100 300 200 150 500 300 200
Flowers-Storing,processing,selkling 250 150 75 300 200 100 400 250 150
Frozen food- Storing or sellling 250 1775 125 500 250 150 600 400 200
Fuel-Using for any industrial purpose 350 200 125 500 250 150 600 400 200
Fulminate of mercury- Storing,packing,cleansing,preparing
or manufacturing by any process whatsoever 500 250 150 600 400 200 750 500 250
Fruits- Using for any industrial purpose 300 200 100 500 300 150 600 350 250
Furniture-Making or storing for sale or lending 300 200 100 600 400 200 750 500 250
Gas- Storing ,packing,pressing,cleansing,preparing or
manufacturing by any process whatsoever 500 300 150 500 300 150 600 400 200
Ghee- Storing ,packing,pressing,cleansing,preparing or
manufacturing by any process whatsoever 200 125 75 300 150 100 350 250 150
Gold-Refining,storing,selling 2000 1000 500 4000 2500 1000 5000 3000 1500
Grain- Storing,selling 300 150 100 500 300 150 600 400 200
Grass-Storing 150 100 50 200 150 100 250 200 150
Gram-Husking by mechinary 125 100 75 200 150 100 250 200 150
Grioundbut-Selling or storing 100 75 50 150 100 75 200 150 100
Gum Ctotton- Storing ,packing,pressing,cleansing,preparing
or manufacturing by any process whatsoever 125 100 75 200 150 100 250 200 150
Gunny bag- Storing ,packing,pressing,cleansing,preparing or
manufacturing by any process whatsoever 100 75 50 150 100 75 200 150 100
Gum powde keeping ,packing,pressing,cleansing,preparing
or manufacturing by any process whatsoever 3000 2000 1000 3000 2000 1000 5000 3000 1500
Hair-Storing,packing,cleaning, preparing or manufacturing
ybbbb6 sny process whatsoceevee 125 100 75 250 150 100 300 175 124
Hard ware- manufcaturing. storing.selling 600 400 200 750 500 250 1000 600 300
Hay-Selloing or storing 125 100 50 150 125 100 175 150 124
Haides- Manufacturing,storing.packing.pressing,cleansing 300 200 100 400 300 150 500 350 200
Hemp- Storing,packing,pressing, cleansing,preparing or
manufacturing by any process whatsoever 200 150 100 250 200 150 400 300 200
Hoops-Storing,packing,pressing, cleansing,preparing or
manufacturing by any process whatsoever 500 300 150 750 500 250 1000 600 300
Honey-Storing,selling 100 75 50 100 75 50 125 100 75
Horns-Storing,packing,pressing, cleansing,preparing or
manufacturing by any process whatsoever 300 200 100 400 300 150 500 350 200
Hospitals-Running,storing,tincture,phrarmacutical items 2500 1500 750 3000 2000 100 5000 3000 1500
Ice-Manufacturing 400 200 125 500 300 150 750 400 200
Imation gold-Manufacturing, storing,selling 400 250 150 600 400 200 750 500 250
Jaggery-Storing,packing,pressing, cleansing,preparing or
manufacturing by any process whatsoever 300 200 100 400 300 150 500 400 200
Jewels-Manufacturing,storing,selling 1500 1000 500 1500 1000 500 3000 2000 1000
Jute-Storing,packing,pressing, cleansing,preparing or
manufacturing by any process whatsoever 150 125 75 200 150 100 250 300 150
Kakhi- Preparing 150 125 75 200 150 100 250 200 150
Lac-Storing,packing,pressing, cleansing,preparing or
manufacturing by any process whatsoever 150 125 75 200 150 100 250 200 150
Lead- Melting 150 125 75 200 150 100 250 200 150
Leather-Storing,packing,pressing, cleansing,preparing or
manufacturing by any process whatsoever 500 300 200 750 500 250 1000 600 300
357
Proposed minimum rate in Proposed minimum Proposed minimum
panchyat rate in municipality rate in Corporation
Category Category Category
Items to be classified A B C A B C A B C
LIme-Storing,selling,packing,pressing,cleaning,preapring or
manufacturing by any process whatsoever 75 50 25 75 50 25 100 75 50
Lime Shells-
Storing,selling,packing,pressing,cleaning,preapring or
manufacturing by any process whatsoever 100 75 50 150 100 75 250 150 100
Manure-Storing,selling,packing,pressing,cleaning,preapring
or manufacturing by any process whatsoever 125 100 75 250 150 100 500 300 150
Machinary-Using for any industrial purpose 600 400 200 750 500 250 1000 750 500
Marbles-Manufacturing,storing,selling 750 500 250 800 600 300 1200 800 600
Matches-Storing,selling,packing,pressing,cleaning,preapring
or manufacturing by any process whatsoever 200 150 75 300 200 100 500 300 150
Meat-Storing,selling,packing,pressing,cleaning,preapring or
manufacturing by any process whatsoever 400 200 100 500 300 150 600 400 200
Metals- Including precious metals-
beating,breaking,hammering,castig 250 150 75 350 200 150 500 400 200
Medicine- Manufacturing, storing,selling 350 250 150 400 300 200 500 350 250
Metal Crushing- Crushing,storing, selling 3000 2000 1000 3000 2000 1000 5000 3000 1500
Milk and milk product-Storing,manufacturing,selling 400 200 100 500 300 150 750 500 250
Molases-Storing,selling,packing,pressing,cleaning,preapring
,manufacturing 200 150 100 250 200 150 400 300 200
Mosaic-Manufacturing,polishing,storing,selling 750 500 200 800 600 300 1200 800 600
Motor car-Storing,selling,servicing,reapiring,paintinf 750 500 200 900 600 300 1000 800 400
Motor car electrical appliances-Manufacturing,storing,selling 300 200 100 400 300 200 500 350 250
Motor car paint and accessaries-Manufacturing,storing,
selling 300 200 100 400 300 200 500 350 250
Microphone and loud speaker-Manufacturing,storing,selling 400 300 200 500 400 300 600 450 350
Musical Instruments- Manufacturing,selling,storing 200 150 100 300 200 150 500 300 200
Notrocompund-Storing
,selling,packing,pressing,cleaning,preapring or
manufacturing by any process whatsoever 400 300 200 500 400 300 600 450 350
Notro-glycrine-
Storing,selling,packing,pressing,cleaning,preapring or
manufacturing by any process whatsoever 400 300 200 500 400 300 600 450 350
Nitro-mixture-
Storing,selling,packing,pressing,cleaning,preapring or
manufacturing by any process whatsoever 400 300 200 500 400 300 600 450 350
Offal-Storing,selling,packing,pressing,cleaning,preapring or
manufacturing by any process whatsoever 150 125 75 200 150 100 250 200 150
Oil-Storing,selling,packing,pressing,cleaning,preapring or
manufacturing by any process whatsoever 600 400 200 750 500 250 1000 600 300
Office equippments-Manufacturing,packing,storing,selling 400 251 150 500 350 250 600 400 300
Optical-Manufacturing,storing , polishing,selling 500 300 200 600 400 300 750 450 350
Paddy-Boiling or husking by machinery 300 200 150 400 300 200 500 350 250
358
Paper-,packing,pressing,cleaning,preapring or
manufacturing by any process whatsoever 300 200 150 400 300 200 500 350 250
Paints-Manufacturing,storing,selling 600 400 200 750 500 250 1000 600 300
Plantain leaves- Storing, selling 75 50 25 100 75 50 125 100 75
Pesticides-Manufaturing,mixing, storing,selling 400 250 150 500 350 250 750 600 300
Petrolium products-
Storing,selling,packing,pressing,cleaning,preapring or
manufacturing by any process whatsoever 1250 750 300 1500 1000 500 2000 1500 1000
Pitch-Storing,selling,packing,pressing,cleaning,preapring or
manufacturing by any process whatsoever 350 250 150 400 300 200 500 350 250
Pottery-Storing,selling,packing,pressing,cleaning,preapring
or manufacturing by any process whatsoever 300 200 100 400 300 150 750 400 200
Photoghraph meterial-Manufacturing,precessing,storing 400 250 150 500 350 250 600 400 300
Photo frame and laminating-
Manufacturing,preapairing,storing,selling 400 300 200 500 350 250 600 400 300
Plastic meterials-Manufcaturing,. storing,selling 600 400 150 800 500 250 1000 750 300
Private hospitals/Paramedical Institutions&Lab-Management 800 600 400 1000 750 500 1500 1000 750
Radio- Manufacturing, Assembling,servicing,and repairing 600 400 200 750 500 250 1000 750 500
reddy made Garments- Manufacturing, storing ,selling 250 150 75 400 250 100 500 300 150
Resin(including rosin)-
Storing,selling,packing,pressing,cleaning
,preapring or manufacturing by any process whatsoever 200 100 75 300 150 100 400 250 150
Refrigerator-Storing,repairing,selling 750 500 300 1000 750 500 1500 1000 750
restorant,Canteen,Coffee,hotel,Tea shop(including cool bar) 750 500 250 1000 750 500 2000 1500 1000
Rose water-manufacturing,storing,selling 75 50 25 100 75 50 150 100 75
Rubber goods-Manufacturing, storign,selling 300 250 150 400 300 200 50 350 250
Rubber stamp- Manufacturing,storing,selling 200 100 75 250 150 100 300 200 150
Rugs-Storing,selling,packing,pressing,cleaning,preapring or
manufacturing by any process whatsoever 200 100 75 250 150 100 300 200 150
Sago-Manufacturing, or distilling 150 125 75 250 150 100 400 250 150
saltpeter- toring,selling,packing,pressing,cleaning,preapring
or manufacturing by any process whatsoever 400 250 150 500 300 200 750 500 250
Sandal-Processing,storing,selling 600 4000 200 750 500 250 1000 750 500
Sanitary and plumbing meterials-
Manufacturing,storing,selling 600 4000 200 750 500 250 800 600 300
Seekai-Powedering,storing,selling 300 200 100 500 300 150 600 400 200
Shellac-Storing,selling,packing,pressing,cleaning,preapring
or manufacturing by any process whatsoever 400 300 200 500 350 250 650 450 300
Silks-Storing,selling,packing,pressing,cleaning,preapring or
manufacturing by any process whatsoever 600 400 200 750 500 250 1000 600 300
Items to be classified A B C A B C A B C
Skins-Storing,selling,packing,pressing or manufacturing by
any process whatsoever 200 150 100 250 200 150 300 250 200
Soap-,packing,pressing or manufacturing by any process
whatsoever 400 250 150 600 400 250 750 500 300
Soft drink- Manufacturing, Storing,selling 150 100 75 200 150 100 250 175 125
Spirit/Foriegn liquid-Storing,selling,packing,pressing or 1500 1000 750 2000 1500 1000 5000 3000 1500
359
manufacturing by any process whatsoever
Stainless steel- manufacturing,.storing,selling 400 300 200 500 350 250 600 400 300
Steel-Manufacturign,storing,selling 600 400 250 750 550 460 1000 750 600
Stiching-Tailoring,manufacturing 125 100 75 150 125 100 250 200 150
Stiching meterials-Manufacturing,storing,selling 125 100 75 150 125 100 750 200 150
Sugar-Storing,selling,packing,pressing or manufacturing by
any process whatsoever 400 300 200 500 400 0.3 500 500 400
Sugar-candy-Packing,pressing ,cleansing,prepairing or 350 250 150 400 300 200 750 350 250
Sulphur-Storing,selling,packing,pressing or manufacturing
by any process whatsoever 400 300 200 500 400 300 750 500 400
Surki-Storing,selling,packing,pressing or manufacturing by
any process whatsoever 400 300 200 500 400 300 500 500 400
Sweet-meats-Baking,preparing,keeping or storing, for
human consumption (other than domestic use) 300 200 150 350 300 250 400 400 300
Tallow-Storing,selling,packing,pressing or manufacturing by
any process whatsoever 250 200 150 300 250 200 3000 350 250
Tar-Storing,selling,packing,pressing or manufacturing by
any process whatsoever 2000 1000 500 2000 1000 500 500 200 1000
Tea- Processioning.packing,storing,selling 300 200 150 400 300 200 2000 350 250
Television set,VCP,VCR-Storing,selling.lending
reapiring,Tatching meterials storing or selling 1500 1000 750 1500 1000 750 800 1500 1000
Textile-Manufacturing,storing.selling 600 400 200 750 500 250 500 600 300
Tachting meterial 250 200 150 300 250 200 2500 300 250
Three Wheelers and two wheelers-
Manufacturing,storing,selling,serving ,repairing 2000 1500 1000 2000 1500 1000 8000 2000 1500
Tiles-Manufacturing 5000 3000 2000 5000 3000 2000 2000 5000 3000
Timber-Selling or storing 1000 750 500 1000 750 500 500 1500 1000
Tobao(including snuff,cigerates,ciggerates and beedies)-
Storing,selling,packing,pressing or manufacturing by any
process whatsoever 400 300 200 400 300 200 150 3530 250
Tuber crops-Storing,selling,preparing 100 75 50 125 100 75 250 125 100
Trupentine-Storing,selling,packing,pressing or
manufacturing by any process whatsoever 150 125 100 150 125 100 1000 200 150
Tyre-Manufacturing,storing,sellingretreadings,vuclanizing 600 500 400 700 600 500 600 750 600
Umberlla-Manufacturign,storing,selling 350 200 100 500 250 150 500 300 200
Upholstery meterials- Manufacturing,storing,selling 300 250 150 400 300 200 600 350 250
Vegetables-Storing,selling 400 250 100 500 300 150 600 350 200
Vedio Cassette-Recording,storing,selling 400 300 200 500 350 250 600 400 300
Watch-manufacturing,storing,selling,lending 400 250 150 500 300 200 500 400 250
Wooden Carvings-Manufacturing,polishing,storing,selling 300 250 150 400 300 200 500 350 250
Wool 300 250 150 400 300 200 500 350 250
Yarn-Dyeing 100 150 100 250 200 150 500 300 200
Guiding or electro-plating 150 100 50 200 150 75 300 200 100
Keeping a shaving or hair dressing saloon 75 50 25 75 50 25 100 75 50
Keeping and maintaning Kalyanamandapam or Auditorium
or hall where marriages are conducted with provision for
catering 5000 4000 3000 6000 5000 4000 7500 6000 5000
360
Keepign together pigs,or ten or more sheep or goats ro two
or more buffalloes or ten or more head of cattle 150 100 50 150 100 50 200 150 100
Manufacturing articles from which offensive or unwhole-
some smells,fume,dust or noise arise 400 350 250 500 400 300 600 450 350
Washing soiled cloths and keeping soiled cloths for purpose
of washing them and keeping washed clothes 125 100 75 150 125 100 250 200 150
Installation exceeding thirty HP hut not exceeding forty HP 400 - 600 900
Inslallalinn exceeding forty HP hut not exceeding fifty HP 500 - 750 1 250
retaliation exceeding fifty HP hut not exceeding hundred HP 1000 150 1 500 2250
Installation exceeding hundred HP (existing in Municipality - 200 - -
Installation exceeding hundred HP hut not exceeding two hundred HP 2000 - 3000 4500
Installation exceeding two hundred HP hut not exceeding five hundred HP - - 4500 6000
361
Installation exceeding two hundred HP hut not exceeding five hundred HP 2000 4000
362
Annexure 9.3
EXISTING AND PROPOSED FEE FOR PERMISSION FOR CONSTRUCTION
AND RECONSTRUCTION OF BUILDINGS, INSTALLATION OF MACHINERY
etc. FOR CINEMATOGRAPHIC EXHIBITIONS
S. 6 of the Kerala Cinemas (Regualtion) Act, 1958 read with Rule 1901 of The Kerala
Cinemas (Regulation) Rules, 1988
363
G Conversion of
Rs. 30 /M2 Rs. 50 / M2
Poof
364
Annexure 9.4
(II) Renewal of existing Not exceeding one Not exceeding one Not exceeding one thirc
licence third of the income third of the income of the income that the
that the licensee has that the licensee licensee has earnec
earned from the has eamec from from the market during
market during the the market during the the previous year
previous year previous year subject to the minimum
of Rs. 2000 in the case
of market area not
exceeding 0.1 hectare,
Rs. 4000 in case of
market area not
exceeding 0.2 hectare
and Rs. 5000 in the
case of market
exceeding 0.2 hectare
365
Annexure9.5
EXISTING AND PROPOSED LICENCE FEE UNDER THE PLACES OF PUBLIC
RESORT ACT
Kerala Places of Public Resort Act 1963 read with Rule 28 of Kerala Places of Public Resort Rules 1965
: Item Existing Rate Rs Proposed Minimum Rate Rs
Township/
Municipality/
Municipality/Corp Panchayst Panchayat
Corporation
oration
1. For the grant or renewal of licence for one year in respect
of Perrnanent building
a) For an area of 100 Sq. meters or less 75 20 2000 1500
b) For every additional 50 Sq. meters or fraction
37.50 10 1000 750
there of
2. For the grant or renewal of temporary licence in respect of
permanent building
Rs. 850 per
3s 900 per mensem or mensem or
Rs. 20 per mensem mensem or Re. Rs. 30 per day 29 per day
a) For an area of 100 Sq. meters or less
or Rs. 21- per day subject o a minimum ubject to a
00 minimum of
00
Rs. 7.50 per Rs. 3 per
b) For every additional 50 Sq. meters or fraction 3s. 450 per mensem Rs. 425 or
mensem or Re. 1 mensem or Ps.
there of or Is. 15 per day Rs 4 per day
per day 50 per day
3. For the grant or renewal of a temporary licence in
a temporary building
Rs. 750 per
3s. 800 per mensem mensem or
Rs. 75 per mensem Rs. 27 per day 25 per day
a) For an area of 100 Sq. meters or less mensem or Re.
or Rs. 2 per day subject o a minimum subject to a
100 minimum of
100
b) For every additional 50 Sq. meters or fraction Rs. 37. 50 per Rs. 10 per Rs. 375 per
Rs. 400 per mensem
mensem or Re mensem or Ps. mensem or
thereof 1 per day 50 per day or 3s. 14 per day
Rs. 13 per
4. For the grant or renewal of a licence for one year in
t
of an enclosure without any roof or superstructure
a) For an area of 100 Sq. meters or less 75.00 750 600 500
b) For every additional 50 Sq. meters or fraction 7.50 3.75 300 250
thereo
5. For the grant or renewal of a temporary licence for an
enclosure without any roof or superstructure
Rs. 300 per
b) For every additional 50 Sq meters or fraction Rs. 3.75 per Rs. 1.75 per Rs. 150 per
Rs. 200 per mensem o
mensem or Re. 1 mensem or Ps. mensem or
thereof pe day 50 per day Rs. 7 per day Rs. 5 per day
366
Annexure 9.6
RATE OF LICENCE FEES FOR KEEPING ANIMALS FOR COMMERCIAL PURPOSES
Proposed Minimum
Existing Rate in Rate for Panchayat /
Item Municipality/ Municipality/
Corporation Corporation
367
Annexure 9.7
EXISTING AND PROPOSED RATE OF GATE FEE FOR PUBLIC AND PRIVATE MARKETS
S. 221 and 223 of the Kerala Panchayat Raj Act 1994
S. 452 of the Kerala Municipality Act 1994
Sheep, Goat 2 5
Ass, Pig 3 5
Cow bull, buffalo 5 25
368
Poultry (grown up fowls) 1 1
369
Annexure 9.8
EXISTING AND PROPOSED RATE FOR PUBLIC HALTING AND PARKING
PLACES
S. 227 and 228 Kerala Panchayat Raj Act 1994 S. 472 of Kerala Municipalities
Act 1994
Minimum Rate
Existing Rate in Proposed for
Item Existing Rate in Panchayat Municipali ty/ Panchayat /
Corporation Municipality /
Corporation
Maximum fee Maximum fee
for a period for a period nut
not exceeding exceeding 24
24 hrs hrs
(a) Fee for use of Halting place/Cart stand if no if amenities, if amenities
amenities are are provided are provided
provided or not
Council fixes
the rate as it
(i) For Every hand - drawn Cart rickshaws, Cycle is not
or Cycle rickshaws 1 2 5
prescribed in
the Act
(ii) Auto rickshaws 2 3 10
370
b) Double Room 40 50
(d) Fee for stay per day 5 15
Annexure 9.9
EXISTING AND PROPOSED RATE OF RENT AND FEE FOR SLAUGHTERING ANIMALS IN
PUBLIC AND PRIVATE SLAUGHTER HOUSES
371
ACTION TAKEN REPORT ON THE FIRST
Recommendation No.2:
Devolution of Funds:
Recommendation No.2(1)
"Government may devolve to the LSGls, Plan funds (excluding State Sponsored Schemes)
not less than one-third the annual size of the State Plan as fixed by the Planning Commission. This fund
is to be used by LSGIs for planning and implementing locally relevant projects. The sectoral ceilings,
if any, within this grant may be fixed by Government from time to time"
Action Taken:
The State Government has decided that the question of transferring one third of the
State's plan funds to LSGIs may be deferred for further examination. Nevertheless the State
Government has been making substantial allocations. For example, out of the State plan
outlay for the current year (2OO4-O5) ofRs.480O crore (including loan from the ADB), an
amount of Rs.l35O crore has been provided in the Budget for devolving among LSGIs as Plan
Grant This is one of the highest percentages for any state.
Recommendation No.2(2)
"Five and a half percent of the annual own tax revenue of the State Government may be
devolved to the LSGIs as Grant-in-aid for- maintenance of assets under the control of the LSGIs
including the transferred assets. This percentage may be determined on the figures certified by the
Accountant General, which normally relates to the financial year two years before the Budget year.
All expenses related to running of institutions except wages, supply of medicines to health institutions,
educational concessions / scholarships to students, supply of books, equipments and consumables to
schools and conducting noon-feeding in schools, shall be borne by the LSGIs. This should include
payment of rents, repair of equipment including vehicles, and meeting of telephone charges and
vehicle operating expenses."
Action Taken:
This recommendation has been accepted by Government From 1-4-2OO4
separate provision has been made in the Budget towards maintenance grant For
2004-05, the provision is Rs.273.66 crore for Panchayats and Rs.52.13 crore for
Municipalities and Corporations.
Recommendation No. 2(3)
''Three and a half percent of the own tax revenue of the State Government based on the figures
certified by the Accountant General could be devolved to LSGIs as General Purpose Grant, in
lieu of assigned taxes, shared taxes and various statutory and non-statutory grants-in-aid, both
specific purpose and general purpose. This grant-in-aid would subsume under it Basic Tax Grant.,
Surcharge on Stamp Duty, Vehicle Tax Compensation, Rural Pool Grants, the specific purpose and
general purpose grants to Urban Local Bodies and all other non-plan grants-in-aid devolved to
LSGIs from the Local Self Government Department."
Action Taken;
The recommendation has already been accepted by the Government From 1-4-2OO4
separate provision has been made in the Budget towards Genera/ Purpose Grant. For
20O4-O5 the provision is Rs. 174.15 crore for Panchayats and Ks.31.17 crore for
Municipalities and Corporations.
Recommendation No.3
"The Eleventh Finance Commission grants to LSGIs should be passed down as such, over and above
the grants suggested above."
Action Taken:
The recommendation has been accepted with the modification that the grant due for
LSGIs may be devolved as part of plan grant but shown separate/y for each LSGI.
Plan Grant-in-Aid:
" The existing devolution formula as well as the distribution formula may continue. However up to
ten percent of the non-SCP/TSP Funds may be distributed as an incentive for increased own revenue
mobilization by the Village Panchayats and the Urban Local Bodies. The actual percentage to be
distributed as incentive grant-in-ajd should be the same as the percentage of Village Panchayats
and .Urban Local Bodies 'showing an increase in own revenue. And this amount could be shared
as per the formula given below:
0i = ri . P i /I ri . Pi
0i - share for LSG1 i
ri - percentage increase in its revenue
Pi - Population of the LSGI
The date of effect of the incentive system may be indicated to LSGls well in advance."
Action Taken:
The recommendation has been accepted. This will be reflected in the 2005-O6 allocation
to LSGIs,
Recommendation No.4(b)
Maintenance Grant:
"The maintenance grants should be based on the current cost of replacement" and the
initial norms (which has to be updated periodically) may be as follows:
i) Maintenance of buildings constructed before 1-4-1967 - 3% of capital cost.
ii) Maintenance of buildings constructed after 1-4-1967 - 2% of capital cost
iii) Current construction cost - Rs.400/- per Sq.ft.
iv) Frequency of resurfacing of black-top/WBM Roads - Once in five years,
v) Annual repair expenditure of Blacktop roads - Rs.25,0007- per K.M.
vi) Annual repair expenditure of WBM roads - Rs.23,000/-per K.M.
vii) Annual repair expenditure of Unsurfaced roads - Rs.2000 per K.M
viii) Cost of re-surfacing black-top roads (3.8 Metre width) - Rs.1.65 lakhs per K.M
ix) Cost of resurfacing WBM roads (3.8 Metre width) - Rs.1.84 lakhs per K.M."
Action Taken;
Recommendation No.6;
1. On the basis of a price index work out what Rs.140 crores at 2000-
2001 prices would amount to for the year for which the provision is
being made. The deflator for the construction sector can be utilized
for this purpose.
2. One-seventh of this amount may be kept aside for the District and
Block Panchayats and divided between them in the ratio 19:1. The
share of the Block Panchayat should be divided equally among them.
As regards District Panchayats, half the share should be divided
according to the ratio of distribution of the transferred village roads
and other district roads and the other half based on norms for repair
of non-road assets in their control (other than those created after
1995).
5. The remaining portion of the maintenance grant i.e. the excess over
Rs,140 crores at 2000-01 prices may be distributed exactly in the
same manner as Plan Grant-in-aid."
Action Taken;
Recommendations has been accepted.
Action Taken:
Recommendation has been accepted.
Recommendation No. 7
Recommendation No.8
"In order to avoid hardships during transition period, it is recommended that no Village
Panchayat or ULB should experience a real shortfall in its receipts on account of these transfers
compared to the previous year."
Action Taken:
Recommendation has been accepted.
EFC Grants:
"Eleventh Finance Commission grants may be devolved on the basis of the population criterion
in one instalment"
Action Taken:
Recommendation has been accepted. The devolution will be subject to release of
grant from Gort. of India. The formula will be the same as for Plan Grant.
-*
Recommendation No.9:
"For Property Tax the recommendations of the First SFC may be operationalised
and the following scheme is suggested for classifying buildings and fixing the tax.
Recommendation No.9(3)
"A dual system of numbering is suggested so that incomplete buildings can get a provisional
Action Taken
Municipalities
and Municipal
Corporations)
Rs
Government has decided that Entertainment Tax be introduced only for cable and
not for internet. Action to amend the Entertainment Tax Act and Rules is being taken by the
Local Self Government Department
"In the case of Advertisement Tax the Government may fix the minimum rates for taxation
for different kinds of advertisement for different types of locations by issuing Advertisement Tax
Rules, which could set out the guidelines for LSGIs to assess the tax."
Action Taken.
Suggest/on has been accepted. Rules are being amended.
Action Taken
Recommendation has been accepted. Rules are being amended.
Recommendation No.9 (8)
"Conversion Tax may be realized at the rate of five per cent of the capital value in the case of
conversion of paddy lands. Half this rate maybe made applicable for other kinds of conversions. In
the case of conversions without prior permission a severe penalty of ten times the Conversion Tax
should be realized in the case of conversion of paddy land and an amount equivalent to the
Conversion Tax could be realized in other cases."
Action Taken:
Recommendation has been accepted. However, it has been made clear that the
rate specified in the Recommendation will be the post-conversion rate. Relevant Act
(including KLU Act) and Rules will be amended.
"The Service Tax should be made compulsory and be linked to the cost of performing obligatory
functions and calculated as a percentage of Property Tax."
Action Taken:
Recommendation has been accepted. Changes in Act and Rules are required.
This will be pursued.
Action taken:
Recommendation has been accepted. Act and Rules have to be amended for which
action is in progress.
In the case of Non-tax Revenue the Government should fix the minimum fees for various
kinds of licences in the case of Municipalities and Corporations through notification. In the case of
Village Panchayats only the minimum amount may be fixed in the rules."
Action Taken:
It is observed as per Annexure 9.2 that storing and selling of various items In a single
premises attracts levy of fees for each of the items. This may lead to difficulty in fixing
license fees in the case of large shops like Margin Free shops/Departmental stores
etc. Margin Free shops/Departments/ stores are premises where most of the items under
provisions and stationery are stored and sold. Therefore, items which are coming under
provisions and stationery, hardwares including plumbing, sanitary items, building
materials etc. cart be grouped together in two groups and single license fees
according to the size of the trade can be levied. It has been decided that the
following shall be the classifications:
Provisions & Stationery: Chillies, Corriander, grains, tea, coffee, sugar, jaggery, flour
items, turmeric, edible oils, spices, common salt, potato, onion, cattle feeds, cashew nuts
etc. Soap, Talcum powder, Cosmetics, Plastic items, biscuits/ sweets, meats, squash,
polythene item, candles, disinfectants etc. Baby food, fancy goods, matches, cigarettes,
beedies, snuff, toys, rubber goods, bathies, office equipments, paper, rose water, batteries
other than for motor vehicles etc. The rate applicable to them may be as follows:
A B C
Panchayats- Rs.1500 Rs.lOOO Rs.500
Municipality - Rs.2000 Rs.1500 Rs.1000
Municipal Corporations -Rs.25OO RS..2OOO Rs.1500
Hardwares including plumbing materials, steel and steel rods, wash basin, closet,
paint, turpentine, AC sheet, light roof sheet, PVC/ Tin/Aluminium sheet, Fibre sheet,
glazed tiles etc.
The following rates may be made applicable to them.
A B C
Panchayats - Rs.l500 Rs.1200 Rs.800
Municipality - Rs.2250 Rs.1500 Rs.lOOO
Municipal Corporations- Rs.2800 Rs.2OOO Rs.1200
In other cases, the licence fees as recommended vide Annexure 9.2 of the SFC Report has
been accepted.
Recommendation No:9(12)
"In the case of licences and permits, which are renewed periodically, 25% of the licence
fee may be collected as fine for delay beyond a grace period often days; this penalty may be
increased by 25% for every additional fortnight of delay."
Action Taken:
Recommendation has been accepted.
"There must be compulsory display by LSGIs on the spot for various items of revenue and in
the case of auctions a district level public notice should be given in December about all the
forthcoming auctions."
Action Taken:
Recommendation has been accepted.
Recommendation No:9(14)
"For trade licences the present practice in Village Panchayats of calculation based a turnover
may be done away with and for both Village Panchayats and Urban Local Bodies, Government
could notify the minimum rates for each trade with separate rates in each category for small,
medium and large establishments."
Action Taken:
Recommendation has been accepted.
Recommendation No:9(15)
Action Taken:
Suggestion has been accepted.
Action Taken:
Proposal has been accepted.
Recommendation No:9(17)
"The meat stalls and the right to fish in water bodies may be auctioned every year by the concerned
LSGIs after giving due publicity."
Action Taken:
" Village Panchayats may auction the right to set up temporary shops in public land just as
Urban Local Governments are doing so under Section 376 of the Kerala Municipality Act. "
Action Taken:
Recommendation has been accepted. It has also been decided that the maximum
period for occupation shall be limited to 15 days during each fair/festival taking
place in the local limit without any right over the land. Auction shall be for individual
shops. Permission for occupation of the land will be allowed only on furnishing a written
agreement in stamp paper of appropriate value to the effect that the temporary structure if any
put up by the licensee shall be removed by him. Failure to comply with this shall entail
removal of the structure by the local body concerned forfeiting his security amount and at
his risk and cost.
Recommendation No.10(1):
"Rules for levy of Advertisement Tax in Village Panchayats and ULBs may be issued immediately"
Action Taken:
Recommendation has been Accepted (See decision 9(6) ). Local Self
Government Department is taking action.
Recommendation No.10(3)
"Tax mapping may be done immediately and unique premises numbering system
introduced."
Action Taken:
Recommendation has been accepted. Local Self Government Department is taking
further action.
Recommendation No.10(4)
"A single financing agency for LSGIs may be set up by merging KUDFC and the Rural
Development Board."
Action Taken:
Recommendation has been accepted. Action is being taken by the Local Self
Government Department.
''The question of Village Panchayats and ULBs levying daily fee for use of poramboke may be
examined and decided by Government without further delay."
Action Taken:
Recommendation has been accepted. Further action is being taken by the Revenue
Department.
"Shortfall in devolution of assigned and shared taxes vis-a-vis the accepted level may be made
good by Government."
Action Taken:
Recommendation has been accepted. Since the arrears have been almost cleared
further action is not necessary.
Recommendation No.11
Procedural Safeguards
"Necessary amendments to the Kerala Panchayat Raj Act and the Kerala Municipality Act may
be made to specify the minimum shares of LSGIs, of the Plan Grant, Maintenance Grant and General
Purpose Grant."
Action Taken:
Recommendation has been accepted. At present, the charges for noon-feeding for
pupils are met from the pro vision set apart under the head of account for Education
Department and the purchases are from Civil Supplies Corporation. Since difficulties are
being experienced both in the Education Department and LSGIs to settle accounts with the
Civil Supplies it has been decided that the fund may devolve to LSGIs. They may decide the
source of purchase subject to observation of rules.
Recommendation No.ll(2)
Action Taken:
It has been decided that the recommendation need not be pursued since Orders have
already been issued for ensuring automatic release of funds to the LSGIs by the Local Self
Government Department
"A survey of assets transferred to LSGIs as well as assets owned by them may be carried out
to calculate the standard spending assessment for maintenance purposes and the result of the study
should be utilized for devolution of maintenance funds."
Action Taken:
Recommendation has been accepted.
Recommendation No.11(4)
"A separate Budget document indicating LSGI-wise distribution of the three streams of
grants-in-aid and grants-in-aid for pensions and for noon feeding may be prepared. For other grants-
in-aid, district-wise figures may be indicated along with formula for devolving them to individual
LSGIs.
Action Taken;
Recommendation has been accepted. Planning Department is taking further action.
" A legislative provision may be introduced for indexing non-tax revenue items, and taxes
like Property Tax, Advertisement Tax and Service Tax. Two-yearly revisions are recommended
for non-tax licence items and Advertisement Tax based on Consumer Price Index for non-manual
workers for Thiruvananthapuram in the case of Urban Local Bodies and Consumer Price Index for
agricultural labourers for the state in the case of Village Panchayats; four-yearly revision may be
done for Professional Tax and Service Tax."
Action Taken:
Recommendation has been accepted.
Action Taken:
It has been decided that this recommendation need not be pursed in view of the fact
that the size of Ombudsman has been reduced to one.
Action taken
Recommendation No.11(8)
Action Taken:
Recommendation has been accepted.
Recommendation No.11(10)
"Village Panchayats, Municipalities and Corporations should have a single account for
crediting all their own revenues."
Action Taken:
"In the case of Plan Grant-in-aid and Maintenance Grant-in-aid, bill system of drawing from
treasuries should be introduced in the place of PD Accounts."
Action Taken:
On the basis of the decision of the Council of Ministers in agenda item No. 2O96
dated 2-7-2003 orders have already been issued in G. O(P) 381/2003/Fin dated 9-7-20O3 for
introducing bill system in the LSGIs with effect froml-4-2OO4. For 20O4-05, a special
dispensation has been made from June 2O04 till 30-9-2004.
"An Empowered Committee under the Chief Secretary may be set up to follow-up the accepted
recommendations and implement them fully."
Action Taken:
Recommendation No.12
"A Cell under the joint control of Finance and Local Self Government Departments may be
created for concurrent monitoring of all financial matters of LSGIs."
Action Taken:
"A Cell in the Finance Department is already monitoring all financial matters
of LSGL The Local Self Government Department will also be associated for
concurrent monitoring ".