Devolution of powers and finances up to local levels and challenges therein

Mains Marks Booster     29th July 2023        
output themes


The idea of local self-government existed in India even in ancient times. Even if we accept it beginning as an organisational concept with Ripon's resolution, it is more than a century and two decades old.

  • Present status: The 73rd and 74th Constitutional Amendments Acts of 1992 provided constitutional status to the Panchayati Raj institutions and urban local bodies, respectively.
  • Scheduled and Tribal areas are officially exempt from Panchayati Raj. 
  • The Panchayat Extension to Scheduled Areas (PESA) Act, 1996 extends the 73rd Amendment (with some amendments and exceptions) to tribal areas in 10 Indian states.

Meaning of "devolution of power: In India, it refers to the transfer of political authority and decision-making powers from the central government to the state governments.

Evolution of Local Self Governments in India: 

Features of PRIs in India:

  • In India, the 73rd amendment act empowers a state to make provisions, by law, for the devolution of power and responsibilities upon Panchayat at appropriate level with respect to the preparation of plans for economic development and social justice and the implementation of schemes for such development and justice, including those related to matters in the Eleventh Schedule. 
  • Division of power: 11th Schedule contains 29 functional items of PRIs and the 12th Schedule to the Constitution contains 18 functional items of Municipalities.
  • The regular conduct of local elections, provide for the reservation of seats for Scheduled Castes, Schedules Tribes and women in local councils, and institute participative forums like gram sabhas in panchayats and ward committees in municipal corporations.

Structure of PRIs in India:

panchyati raj

Importance of Local Self-Government:

  • It promotes grassroots empowerment, efficient governance, and democratic participation.
  • Role in SDGs: Implementation of the SDGs requires local governments to have the best potential to act as intermediaries to facilitate partnerships.
  • Ex: Ngopa village council in northeastern Mizoram has been adjudged the best panchayat in India on the basis of nine Localisation of SDGs themes at the National Panchayat Awards
  • Localized Problem Solving: It enables local residents to identify and address their specific problems and needs, as they have first-hand knowledge of their own communities.
  • Skill Development: Local self-government provides a platform for individuals to develop leadership, management, and administrative skills that can be useful at higher levels of government.

Challenges Faced by Local Government Bodies:

  • The decline in own-tax revenue: The introduction of GST has reduced the capacity of PRIs to generate its own funds by taking away revenue sources like entertainment tax.
  • State governments are reluctant to implement the 74th amendment as Cities are economic powerhouses and state governments and political parties depend on urban land control.
  • Panchayat pati: Interference of male family members in the leadership roles of women in panchayats.
  • Policy Inconsistencies: The misalignment between higher-level government policies and local community needs can hinder effective implementation and impede local development efforts.
  • Inadequate Devolution of Powers: limiting their ability to address local needs effectively.
  • Financial Inadequate & Constraints: An RBI survey of 221 municipal corporations (2020-21) revealed that more than 70% saw a decline in revenues; in contrast, their expenditure rose by almost 71.2%.
  • OECD data show that India has the lowest property tax collection rate in the world.
    • Administrative Interference: Interference of central and state government in day to day activities. Ex. political interference brings interference over personnel management autonomy of local governments administrative.
    • Infrastructure and Service Gaps: Local governments often face challenges in providing adequate infrastructure and services, such as clean water, sanitation, and healthcare.
  • State Finance Commission: The timely appointment of the SFC, as mandated by Article 243 (I), has been neglected by numerous state governments.
  • Ex: Before March 2024, the 15th FC has mandated that States establish State Finance Commissions in order to be eligible for grants for local bodies.
  • Issues with State finance commission: SFC recommendations are not binding, and state governments often deviate from them. 
  • This has led to a lack of effective rule-based devolution of funds to local governments.

Role of the State Finance Commission (Article 243I):

  • Resource Distribution: The commission ensures a fair distribution of financial resources between the state government and local bodies, such as panchayats and municipalities.
  • Grants and Devolution: It recommends the devolution of funds from the state government to local bodies, enabling them to carry out their responsibilities effectively.
  • Financial Autonomy: The commission works towards enhancing the financial autonomy of local bodies by recommending measures for revenue generation and fiscal management.
  • It suggests the nature and extent of grants that should be provided to local bodies.
  • Budgetary Planning: The commission assists local bodies in formulating their budgets by providing guidance and recommendations on revenue projections, expenditure priorities, and fiscal discipline.
  • Review and Evaluation: It reviews the financial position, performance, and functioning of local bodies to identify areas for improvement and suggest corrective measures.
  • Accountability and Transparency: promotes accountability and transparency in the financial dealings of local bodies by emphasizing the need for proper auditing, reporting, and disclosure practices.
  • Reporting to the Governor: The commission submits its reports and recommendations to the Governor, who then presents them to the State Legislature for discussion and appropriate action.

Panchayat Devolution Index: Published by the Ministry of Panchayati Raj.

  • This Index measures and assesses how far the states have progressed in "empowering" Panchayati raj institutions (PRIs).
  • It analyses the PRI's functions, finances, and functionaries.

15th Finance Commission Recommendations

  • A total grant of Rs. 4,36,361 crore has been allocated to local governments from 2021-22 to 2025-26.
  • Grants to local bodies (other than health grants) will be distributed among states based on population and area, with 90% and 10% weightage, respectively.
  • Rs. 8,000 crore is performance-based grants for incubation of new cities and Rs. 450 crore is for shared municipal services.

Rs. 70,051 crores allocated as Health Grants for local governments.

Steps That Can Be Taken to Improve Their Performance:

    • Providing financial assistance: The state government can provide financial assistance to local bodies to help them carry out their functions.
    • Encourage Local Bodies: The 2nd ARC proposed that state governments should promote the delegation of certain tasks to external agencies, whether public or private.
    • Increased financial autonomy: A committee reviewing the 74th constitutional amendment advocated giving cities 10% of income-tax received from them as a direct revenue handout from the federal government.
    • Legislative support: The state government can pass laws that give local bodies more autonomy and power.
  • Centre Government Involvement: The central government can increase its involvement at the local level by running schemes, and launching campaigns. 
  • City administrations need functional autonomy. City administrations should receive "functions, finances, and functionaries." 
  • Setting performance standards: The state finance commission can set performance standards for local bodies. This will help to ensure that local bodies are held accountable for their performance.

Panchayats (Extension to the Scheduled Areas) act, 1996

Context: Chhattisgarh implemented the PESA rules in November 2022. Also, Madhya Pradesh has notified its PESA Rules on the occasion of Janjatiya Gaurav Divas on 15th November, 2022.

    • PESA Act: This provision extends Panchayats to Fifth Schedule Areas, benefiting the tribal population, and enabling self-governance through Gram Sabhas (village assemblies).
    • Applicable: The Fifth Schedule (Article 244(1)), applicable in 10 states. These states are Jharkhand, Chhattisgarh, Odisha, Andhra Pradesh, Gujarat, Himachal Pradesh, Madhya Pradesh, Maharashtra, Rajasthan, and Telangana.
      • In 2022, the governments of Chhattisgarh and Madhya Pradesh implemented the Panchayats Extension to Scheduled Areas (PESA) Act within their respective states.
  • The objective of the PESA Act: To empower tribal communities by recognizing their rights over land, resources, and self-governance within the scheduled areas.

Significance of the PESA Act:

  • Involving Gram Sabha: By actively involving Gram Sabha, the Act protects the tribal population from exploitation.
  • Ex: In 2013, the SC of India directed the Odisha government to seek gram sabha's permission for bauxite mining in Kalahandi and Rayagada district, referring to the PESA.
  • Democratic Decentralisation: Gram Sabhas are given significant authority by PESA to oversee all social sectors and play a critical part in approving development plans.
  • Empowerment of Tribal Communities:By granting them autonomy and self-governance over their resources, land, and local institutions.
  • Recognition of Traditional Systems: It protects the traditional systems of governance, customs, and practices of tribal communities, preserving their cultural heritage.
  • Strengthening Local Institutions:By providing them with powers to manage their own affairs and resources.
  • Conflict Resolution: Gram Sabhas are made possible under the PESA Act as a safety net over rights and surroundings in the face of internal or external conflicts.

Challenges Faced by PESA Act:

     power of gram sabha

    • Lack of Awareness: Many tribal communities are unaware of their rights and provisions under the PESA Act, which hinders its effective implementation.
    • Delayed Elections: One of the challenges faced by the PESA Act is the delay in conducting elections, which hinders the timely implementation of the act's provisions.
      • Ex: Panchayat for local governance has been delayed in the eastern Indian state of Jharkhand for more than a year because of the COVID-19 pandemic.
  • Implementation of PESA: The lack of incorporation of PESA provisions into state laws is prevalent in several states like Jharkhand, Orissa.
  • Weak Implementation Mechanisms: Inadequate infrastructure, resources, and capacity at the local level pose challenges to implementing the Act effectively.
  • Conflicts with Central Laws: There are instances where provisions of the PESA Act conflict with central laws, leading to jurisdictional disputes and confusion.
  • Limited Financial Resources: Insufficient financial resources allocated to tribal areas hinder the implementation of developmental projects and initiatives.

Way forward for PESA Act:

  • Awareness Campaigns: Conduct targeted awareness campaigns to educate tribal communities about their rights and provisions under the PESA Act.
  • Capacity Building: Providing training and resources to local institutions and authorities to strengthen their capacity for effective implementation.
  • Coordinated Efforts: Encouraging coordination between central and state governments to harmonize provisions of the PESA Act with other legislations to avoid conflicts.
  • Enhanced Funding: Allocating adequate financial resources specifically for tribal areas to support developmental projects and initiatives.
  • Monitoring and Evaluation: Expert committee from the civil society can be formed for monitoring and evaluation. Ex. Civil society for Social Audit

Conclusion: Indian governance relies on devolving authority and funds to local bodies. However, insufficient funding, capacity, and political meddling must be addressed. The central and state governments must address these issues and improve local administration in India.