The critical role of decentralised responses

Context: Strategies in tackling the COVID19 crisis must include local governments (LGs) being equipped and ?scally empowered 

Core Issues associated with local governments (LGs):

• Impact of COVID: raised 4 major challenges; economic, health, welfare/livelihood, and resource mobilization. 
• Paradigm shift in healthcare: demanded due to the spreading of the health crisis.
• Distorted function-fund flow matrix: at the lower level of governance with no clarity in the assignment of functions, functionaries and financial responsibilities to local governments 
• Unrecognized advantage: of the local governments in terms of information, monitoring and immediate action.
• Fiscal Illusion: LGs are handicapped not only because of the low finances but also due to their incapability to fully utilize their taxation potential.

• Urban local governments (ULGs), generate about 44% of their revenue from own sources as but only 5% by rural local governments (RLG) (Economic Survey 2017- 18)
• In Uttar Pradesh, Bihar, and Jharkhand, the local tax collection at the panchayat level is nil
• The share of property tax: in India, it is only 0.14% of GDP (2017-18) as against 2.1% in the Organisation for Economic Cooperation and Development (OECD) countries. 

• Low central grants: The local government grant for 2020-2021 by the 15th Finance Commission (FFC) is only 3% higher than the previous commission’s recommendation. 
• Neglect of issues: Building health infrastructure and disease control strategies at the local level find no mention in the packages announced.
• Misuse of the Disaster Management Act: as it does not recognize epidemics and may not be able to accommodate the emergency situation.

Way Forward: Equipped and Empowered Local Governments.

• Mapping functions and responsibilities: Kerala has attempted responsibility mapping besides activity mapping to ensure proper results.

• Monetize local finances: 

• Property Tax should be enhanced and rationalize all over the states.
• Land monetization and betterment levy: can be tried in the context of COVID-19.
• Corona Containment Bonds: can be issued by Municipalities and suburban panchayats.
• Engaging Diaspora: by appealing to their patriotic sentiments.
• Resurgent India Bond in 1998 could act as an example of raising funds.

• Divert suspended MPLADS funds: to the local governments, preferably to the Panchayats on a basis of a well-defined area.

• Grants: 

• A special COVID-19 containment grant to the LGs by the FFC to be distributed based on State Finance Commission’s laid criteria.
• The current ratio of basic to tied grants is 50:50. It needs a relook for freely evolving policies during the pandemic.
• Local grants should be tied to union divisible pool of taxes to ensure buoyant fund flow. (13th FC).