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What Ails Panchayati Raj – A Review of the Weak Process of Devolution in India. Abstract Two decades have elapsed since the 73rd Constitutional Amendment institutionalised Panchayati Raj as the mandatory third tier of Governance in India. Yet due to a lack of extensive devolution of the three Fs – functions, functionaries and funds, most Panchayati Raj Institutions (PRI) are still operating as poor adjuncts to the bureaucracy and higher level governments, rather than as independent self government institutions. The present paper reviews the process of devolution of power to the PRIs in India and pinpoints the main obstacles in the path of establishment of truly self governing local bodies in rural areas. On the basis of this analysis, recommendations are made for making PRIs more effective institutions of local self governance. Keywords: Panchayati Raj, Devolution, Local Self Governance Rahul Banerjee Social Activist and Development Researcher Dhas Gramin Vikas Kendra 74, Krishnodayanagar, Khandwa Naka, Indore Madhya Pradesh – 452001 1
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Panchayats and Devolution

Nov 30, 2015

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rahul banerjee

A critical evaluation of the weak process of devolution of 3Fs - functions, functionaries and funds to Panchayati Raj Institutions in India.
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Page 1: Panchayats and Devolution

What Ails Panchayati Raj – A Review of the Weak Process of Devolution in India.

Abstract

Two decades have elapsed since the 73rd Constitutional Amendment institutionalised

Panchayati Raj as the mandatory third tier of Governance in India. Yet due to a lack of

extensive devolution of the three Fs – functions, functionaries and funds, most Panchayati

Raj Institutions (PRI) are still operating as poor adjuncts to the bureaucracy and higher level

governments, rather than as independent self government institutions. The present paper

reviews the process of devolution of power to the PRIs in India and pinpoints the main

obstacles in the path of establishment of truly self governing local bodies in rural areas. On

the basis of this analysis, recommendations are made for making PRIs more effective

institutions of local self governance.

Keywords: Panchayati Raj, Devolution, Local Self Governance

Rahul Banerjee

Social Activist and Development

Researcher

Dhas Gramin Vikas Kendra

74, Krishnodayanagar, Khandwa Naka,

Indore

Madhya Pradesh – 452001

email: [email protected]

website: rahulbanerjee.notlong.com

blog: anar-kali.blogspot.com

cell no: 09425943023

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What Ails Panchayati Raj – A Review of the Weak Process of Devolution in India.

1.Introduction

The debate on the form of democracy to be followed in India dates back to the Constituent

Assembly. The debate arose because India is a large and diverse country and so there was

from the beginning the problem of ensuring the effective and widespread participation of its

citizens in public affairs. Gandhi had initially thought of autonomous village republics which

would be federated into a national government having authority and jurisdiction delegated

upwards to it from below (Gandhi, 1909). Gandhi spelled out the formal mechanism for this

to his biographer Louis Fischer, thus - "There are seven hundred thousand villages in India

each of which would be organised according to the will of the citizens, all of them voting.

Then there would be seven hundred thousand votes and not four hundred million votes. Each

village, in other words, would have one vote. The villages would elect the district

administration; the district administrations would elect the provincial administration and

these in turn would elect the President who is the head of the executive"(Fischer, 1982). This

would have been a system in which direct voting would take place only at the village level

and all the higher levels would be beholden to the villages. This was in fact similar to the

originally envisaged Soviet system proposed by the Communists in Russia wherein all power

was to vest in the small soviets or workers or cultivators and delegated upwards to higher

levels (Pirani, 2008).

However, this was a radical departure from the centralised system of top down governance

that had been put in place in India by the British and which had culminated in the

Government of India Act of 1935. The Congress party had participated in the elections and

the subsequent governments formed under this Act and so most of its leaders were in favour

of a centralised system of governance. Initiating a bottom up system of governance as

envisaged by Gandhi would have required the complete discard of the prevailing British

system and the setting up of a corresponding new bottom up administrative structure.

Consequently after considerable debate the Constitution adopted in 1951 adopted the

framework of the Government of India Act of 1935 which had a centralised system of

governance with most powers concentrated with the Union and some at the provincial level

but there was no provision in it for local governance at the village level (CAD, 1949). Instead

organisation of panchayats was put in Article 40 as a directive principle of state policy.

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This is how a situation was created wherein there arose very soon the need for devolution of

powers to the third tier of governance at the local level. The results of the top down

Community Development Programme initiated in 1952 were unsatisfactory and this led to the

formation of the Balwant Rai Mehta Committee to suggest means of effective local self

governance in 1957. This committee categorically recommended the devolution of functions,

functionaries and funds to a three tier Panchayati Raj system and the report was accepted by

the National Development Council. Thereafter there were many more committees making

similar suggestions but it was only in 1992, after an aborted attempt in 1989, that the 73rd

Constitutional Amendment Act (CAA) inserted Panchayati Raj as part IX of the Constitution

and it was established as a mandatory third tier of governance. The main reason for this

reluctance to transfer powers for local self governance after independence is the same as that

at the time of framing of the constitution – it requires a radical restructuring of the prevailing

governance institutions to ensure greater participation of the people. It is in this historical

context of reluctance on the part of centralised governments to allow local self governance,

that devolution to Panchayati Raj Institutions (PRI) has to be critically evaluated.

This paper first tests the validity in the post independence Indian context of a theory of

devolution arrived at from a review of various such theories. The report of the Government

Taskforce of 2001 on devolution is then critically discussed in detail. The status of devolution

as delineated in the State of Panchayati Raj Report 2010 is discussed thereafter. A review of

The Panchayat Empowerment and Accountability Incentive Scheme Assessments that have

been carried out over the last few years follows. Finally on the basis of this review

suggestions have been made for the future.

2. A Theory of Devolution and its Validity in the Indian Context

Worldwide there has been a significant trend towards regionalism in government resulting in

a widespread transfer of powers downwards towards regions and communities since the

decade of the 1990s (Keating, 1998). This process, which involves the creation of new

political entities and bodies at a subnational level and an increase in their content and powers,

is known as devolution (Rodriguez-Poes & Gill, 2003). Devolution has been characterised as

being made up of three factors – political legitimacy, decentralisation of authority and

decentralisation of resources (Donahue, 1997). Political legitimacy here means a mass

demand from below for the decentralisation process which is able to create a political force

for this decentralisation to take place. In many cases decentralisation is initiated by the upper

tier of government without sufficient political mobilisation for it at the grassroots level and in 3

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such cases the decentralisation process often does not fulfil its objectives. Thus, political

legitimacy arising from active mass participation at the lower level is the most important

factor in determining the extent and success of devolution. This requires an institutionalised

democracy to be in place which provides for the free expression of people's will. The extent

of this popular demand for devolution is determined by historical, cultural, societal and

economic factors.

The next important factor is the decentralisation of authority required to be able to govern

over the sub-region or community along with the decentralisation of the control over

resources to be able to exercise this authority in an effective manner. In many cases

decentralisation of authority is not accompanied by the decentralisation of resources resulting

in a weak devolution due to a lack of political legitimacy at the grassroots.

The post independence Indian context amply validates this theory. Historically the level of

mass participation in governance has been low and so there was not a strong enough support

for the radical bottom up system of democracy that Gandhi had suggested. Nor was there

mass support for the soviet system of the Communists. The social and economic exclusion of

a vast section of the people meant that even though a formal centralised democratic

framework was in place these marginalised sections could not participate freely in the

democratic processes (Chandra, 1988). Even though there was substantial economic growth

in the first decade after independence due to the import substitution thrust the benefits of this

did not percolate to the vast majority of the poor. The historically strong forces of social and

economic exclusion prevented effective land reforms from taking place and also falsified the

expectations of the planners that macro-economic growth would trickle down to the poor

(Chakraborty, 1987). Consequently there was considerable dissatisfaction among the people

from the mid-nineteen sixties as the economic growth rate slowed down and the economic

condition of the poor deteriorated further. Thus, peasant struggles, industrial workers' strikes,

student movements and environmental mass movements began to proliferate. This created a

mass upsurge from below for better governance which resulted in the introduction of

Panchayati Raj by the state governments of West Bengal and Karnataka. This process was

later adopted by other states and finally culminated in the CAA of 1992.

Even though the CAA made detailed provisions for devolution of powers and funds to the

PRIs, it did not address the problem of the conflict that would arise between a centralised 4

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system and a new local government system. In most places the political mobilisation at the

grassroots level was not strong enough to take advantage of the CAA to pressurise the state

governments to devolve enough authority and funds to the Panchayats. State Governments

are starved of funds due to the Indian federal fiscal system being skewed heavily in favour of

the Union Government, as will be detailed later. So they are reluctant to give away their

meagre own resources to the Panchayats and even exert considerable control on the funds

devolved under the Centrally Sponsored Schemes directly to PRIs. Moreover, the

bureaucracy is reluctant to come under the administrative control of the PRIs. The biggest

sructural problem was that ideally the PRIs should be planning and implementing their own

work at their level and this comes into conflict with the centralised top down administrative

and planning process. So the devolution process in India has remained a weak one as

predicted by the theory above.

3. The Task Force on Devolution 2001

The CAA had made clear provisions that the power and authority for local governance of 29

subjects mentioned in the XIth schedule would be completely devolved to the PRIs and

adequate financial provisions would be made for them. However, by the turn of the century in

the year 2000 it had become clear that in most states these provisions had not been

implemented because the state governments and the bureaucracy were reluctant to empower

the PRIs. Consequently a conference of the State Ministers of Panchayati Raj was held on

11th July 2001 in New Delhi to discuss the measures to be taken to devolve functions and

powers in accordance with the provisions of the Constitution. The conference resolved that a

Taskforce consisting of senior officers of the Central Government and the State Governments

should be set up to draw up a plan to effectively devolve functions, functionaries and funds to

the PRIs for effective local governance. This task force set up by the order no. R-

12011/2/2001-PR dated 16.7.2001 had the following terms of reference (GOI, 2001) –

(i) To analyze all the 29 ‘subjects’ mentioned in the XI Schedule of the Constitution, identify

specific activities under these subjects and suggest inter-se division of these activities among

the three tiers of Panchayats;

(ii) To suggest devolution of functions into specific operational and activity-related

responsibilities;

(iii) To suggest measures to operationalise administrative decentralisation and rationalisation

of delivery mechanisms;5

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(iv) To suggest requirement of financial resources of Panchayats to implement the functions

devolved upon them; and

(v) To suggest the manner of transfer of functions and functionaries to each tier of PRIs.

The task force in its report correctly pinpointed the most important aspect of devolution as

the restructuring of the district administration and making the government functionaries at the

district and lower levels subservient to the PRIs so that these institutions could develop their

distinct identities and reflect the aspirations of the people and carry out planning and

implementation of development in accordance with local specificities. In the absence of a

strong demand for such a crucial restructuring from below, the report exhorted the State

Governments to ensure this so as to implement the CAA provisions in letter and in spirit. The

report, thus, recommends that a separate administrative system should be put in place at the

district and intermediate panchayat level that will follow the lead of the elected PRIs at their

levels. In addition the report set out the following conditions for proper devolution –

(a) Allocation of functions, functionaries and funds and the transfer of programmes and

schemes along with budget and staff for the activities within the 29 subjects that have been

devolved to PRIs even if this means that the existing line administrative hierarchy has to be

substantially restructured.

(b) Freedom to take administrative and financial decisions at local level and control staff for

proper planning and implementation.

(c) Capacity building of elected representatives and staff. This is an extremely important

provision because there is a serious lack of expertise at the PRI level to undertake the

increased planning and administrative responsibilities envisaged.

Noting that the recommendations of the State Finance Commissions for transfer of funds to

PRIs had not been implemented by most state governments and that they had not on their

own devolved tax and non-tax levying powers to them the Task Force recommended that

laws and rules should be enacted to ensure that this was not left to executive decision making

which tended to go against the PRIs. Finally, the Task Force undertook a detailed activity

mapping exercise for each of the 29 subjects in which devolution was to take place for each

tier of PRI under the principle that the work that could be done at a particular level should be

given to that level and not to a higher level.

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4. The Sandwich Effect

The expectation of the Task Force that the State Governments would pro-actively implement

its recommendations was belied very soon and PRIs continued to languish in the absence of

devolution of powers and funds. A detailed analysis is necessary as to why there is this

reluctance on the part of State Governments to implement the provisions of Part IX of the

Constitution in letter and spirit. The Constitution has left it to the States to enact legislation

and effect administrative changes to implement its provisions because of the delicate balance

that is there between the powers of the Union and the States in the Constitution. The Union

Government has much more powers than the States and there has been a tendency on its part

to acquire more powers through legislation. One very important example being the enactment

of the Environment Protection Act 1980 which took away the lucrative power to divert forest

land for non-forest use from the State Governments. Since the Union Government is itself not

devolving important powers to the the States, the latter are wary of ceding what little powers

they have to the PRIs. The political power of the States vis-a-vis the Union Government is

much greater than that of the PRIs vis-a-vis the State Governments. So the State

Governments have consistently ignored the directives of the Union Government to implement

the Constitutional provisions with regard to Panchayati Raj without facing much opposition

from the PRIs and their elected representatives.

This scenario was confirmed by the report published in 2001 of the Task Force on Panchayati

Raj Institutions set up by the Planning Commission in 1998 to suggest ways in which PRIs

could be made more effective (Planning Commission, 2001). An important point brought out

by this other task force is that various international donor and central government sponsored

schemes tend to create parallel local governance institutions like watershed development

committees and the like and give these the responsibility of planning and implementation of

their programmes, thus, by passing the PRIs.

The World Bank too in 2001 had in its World Development Report (World Bank, 2001)

stressed that political participation was a must for proper planning and implementation of

development projects as it ensured greater accountability. However, in the development

projects that it has funded it has continually promoted the setting up of parallel institutions of

local governance rather than strengthen the PRIs. In fact the World Bank provides for the

enrolment of NGOs for the mobilisation of people at the grassroots rather than let the PRIs do

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this work. In general the NGO-PRI interface is not a very happy one (Planning Commission,

ibid).

The most important inhibiting factor against devolution, as mentioned earlier, is that the State

Governments, themselves, have limited fiscal powers and are strapped for funds most of the

time. In the fifteen years from 1989 to 2004 the fiscal deficit of the States had increased due

to higher debt burden and as a result interest payments constituted the single largest item of

revenue expenditure (Dholakia and Karan, 2005). So they have to rely heavily on grants and

transfers of their share of the taxes levied by the Union Government. This too makes the State

Governments chary of devolving fiscal powers and funds to the PRIs as this will further

erode their own financial buoyancy.

The Union Government has further compounded matters by tying up transfer of substantial

funds in innumerable Centrally Sponsored Schemes (CSS). The contribution of the Union

Government to the State Governments in 2001 was 52% as direct transfers, 30% as support to

state plans and 18% in the form of CSS (Saxena, 2004). The CSS funds were 45% of the

States' own resources. With the initiation of the Mahatma Gandhi National Rural

Employment Guarantee Scheme (MGNREGS) in 2006 the proportion of tied transfer through

CSS has gone up substantially to 75 % of the States' own resources. Consequently the State

Governments are funds starved and can initiate little development on their own. Given this

situation there is an understandable reluctance to constitute State Finance Commissions as

mandated and after that to implement their recommendations regarding funds devolution.

Finally, the Union Government has formulated guidelines that a substantial portion of the

funds for the CSS is to be spent by the PRIs and rigidly restricted the interference of the State

Governments in this regard (Planning Commission, 2011). However, the Central departments

overseeing the implementation of these CSS have not always been very diligent in ensuring

that these guidelines are adhered to. Consequently, the State Governments have got around

the CSS provisions for involvement of PRIs in implementation by retaining line control of the

bureaucracy of the various departments responsible for the implementation of the CSS and

have thus been able to indirectly have a say in the spending of these funds. This is an

important reason for the lack of adequate devolution of activities and functionaries to PRIs.

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Nevertheless, the elected members of the PRIs have been empowered over the years because

they have had some say in the planning and implementation of CSS due to the continuous

stress of the Union Government that they should be involved to ensure better utilisation of the

funds, especially in the flagship MGNREGS. This has helped in increasing the political

power of the PRIs as over the years a larger and larger number of people and especially

women have become experienced in democratic governance and development

implementation and begun creating bottom up pressure on the State Governments and

sandwiching them into reluctantly devolving more powers. The result of this three way tug of

war for sharing of power was that the Union Ministry of Panchayati Raj (MoPR) was

established on 27th May 2004 to specifically look after the implementation of the provisions

of the Constitution in this regard.

The ministry has carried out various capacity building programmes, conducted research and

evaluations and instituted reward schemes to promote devolution. It has also organised

Ministerial and lower level conferences to cajole the State Governments towards more

devolution. The new MoPR organised a conference of Chief Ministers in New Delhi on 29th

and 30th June 2004 to chalk out a roadmap to make PRIs more effective institutions of local

governance. Seven round table conferences of the Minister, MoPR and the state ministers of

Panchayati Raj were organised, thereafter, around the country on various issues and the first

one was in Kolkata on 23rd-24th July 2004 on devolution of functions, functionaries and

funds and empowerment of Gram Sabhas.

The principal recommendations of the Kolkata roundtable conference mirrored those of the

task force mentioned earlier regarding detailed activity mapping to divide work between the

state and the three tiers of PRI and corresponding devolution of functionaries and funds. A

standing committee of the Central Minister for Panchayati Raj and the State Ministers was

constituted to ensure that these recommendations were indeed implemented. A roadmap for

effective devolution was prepared by the MoPR which was to be continually evaluated to

determine how much progress was being made (MoPR, 2011a). The roadmap was as below –

1. All central ministries were to revise the guidelines for implementation of the CSS of

their ministries to include the PRIs in accordance with the activity mapping done and

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provide for funds to be devolved directly to the appropriate level of PRI for the work

to be done at that level.

2. The Central Finance Commissions and the State Finance Commissions (SFC) were to

allocate untied funds to the PRIs to improve their financial autonomy. The State

Governments had to act in accordance with the recommendations of the State Finance

Commissions that were accepted by them.

3. State Governments should complete the legislative and executive devolution process

for all the 29 subjects in the XIth schedule and also the activity mapping. The State

budgets should provide funds to the PRIs to implement the activities mapped to them

and also provide untied funds in accordance with the provisions of the SFCs.

4. The Planning Commission should also take the agency of the PRIs into account while

preparing the Five Year Plans and allocate responsibilities and funds to them.

5. Given that the elected representatives in PRIs and the staff are not likely to have the

skills to handle this enhanced level of work and funding, intensive training

programmes should be conducted to bring them upto par.

The MoPR conducts two annual independent assessments of the performance of the State

Governments on the progress on this roadmap - the State of the Panchayat Reports (SoPR)

and the calculation of a devolution index for the Panchayat Empowerment and Accountability

Incentive Scheme (PEAIS). Thus, an irreversible process of greater and greater devolution to

PRIs has been set in motion which, though slow, is an inexorable one.

5. The State of the Panchayats Reports

The fifth round table conference of Ministers in charge of Panchayati Raj, held on 28th-29th

October 2004 at Srinagar, adopted a resolution for preparation of annual reports by the States

and also for annual reports called the State of the Panchayats Reports (SoPR) by the Union

Ministry of Panchayati Raj. The first such report for 2006-07 was published by the MoPR

and it noted that (MoPR, 2007) –

1. Devolution of functions had taken place to some extent in all states and union

territories and the average was about 21 out of 29 functions.

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2. Activity mapping also had taken place in 16 States and 3 Union Territories but in

many states this had not been notified. Activity mapping was progressing tardily at

the Centre as the departments were not revising the CSSs to devolve work and

responsibility to the PRIs relating to the 29 functions and neither were they

incorporating this new framework in the new Schemes being launched. The primary

obstacle was the mindset of the bureaucracy which was against devolution of

functions to PRIs. Thus, apart from the MGNREGS, for which there are clear

provisions in the Act itself for devolution of functions and funds, the other CSSs still

had not involved the PRIs in their implementation to the extent desired.

3. The creation of dedicated Panchayat account heads in the State Budget for each of the

departments concerned with the 29 subjects to conform with the acitivities devolved

had not taken place in most cases and neither were untied funds being given in any

substantial way as a proportion of the tax receipts of the State Government. The most

notable performance in this regard was that of the state of Kerala which was giving

close to 40% of its tax receipts to the PRIs. Other states with commendable

performance in this regard were West Bengal, Karnataka and Andhra Pradesh.

4. A "big bang" approach was recommended for overcoming the sluggishness in the

devolution of 3Fs to the PRIs. The logic was that if substantial functions,

functionaries and funds were devolved at one go with accompanying investment in

capacity building and training of staff and elected representatives to handle the greatly

increased responsibilities then this big bang would blow away much of the inertia and

inexperience that were proving to be the major hurdles. The success of PRIs in Kerala

where this approach was first followed was held up as an example.

Subsequently it was felt that the SoPR should be prepared by an independent agency to

ensure greater validity of the evaluation and so in 2007-08 and 2008-09 the SoPRs were

prepared by the Institute of Rural Management Anand. These too advocated the big bang

approach as they found that there was still considerable resistance in both the Central

ministries and the State governments to devolve 3Fs and more importantly create an

alternative administrative system under the executive control of the elected representatives of

the PRIs (IRMA, 2009, 2010). The main points made in the second of these reports regarding

devolution of 3Fs are as follows –

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1. The 15 states studied revealed that on an average about 16 functions had been

devolved and activity mapping done for them. This amounted to a slippage from the

situation in 2006-07 due to the fact that many States had withdrawn the devolution to

PRIs in some departments.

2. None of the States studied had Panchayat windows in their state budgets and so there

was no devolution of funds taking place in support of the functions that had been

devolved.

3. Apart from Haryana and Punjab where Panchayats had considerable earnings from

rent on the use of common lands, the other states studied had less than 5% of their

funds from own revenues. The average annual per capita expenditure in the PRIs

remained less than Rs 1000.

4. Transfer of functionaries had not taken place in any significant manner except at the

lowest Gram Panchayat level in some states. At the higher levels the elected members

had very little or no control over functionaries and so the implementation of the CSS

also was controlled by the latter in addition to their own departmental work.

5. Externally funded programmes had set up separate village, intermediate and district

level institutions further undermining the authority of the Gram Panchayats.

The report concluded that it was difficult to say that Panchayats had evolved into institutions

of self governance as the control of functions, functionaries and funds still remained

substantially with the State Governments. Evidently the big bang approach had not been

replicated in most of the States. Though in most States there were legislative and executive

orders for devolution of functions, there was no accompanying devolution of functionaries

and funds thus rendering the orders ineffective. So much so that even the MGNREGS, which

has in built provisions for local governance and audit, was being implemented on the

directions of the bureaucracy and the State government without much involvement of the

people. Other CSS with in built PRI participation like Sarva Shiksha Abhiyan, Integrated

Child Development Scheme and the National Rural Health Mission too had been similarly

weakened.

The SoPR 2009-10 has also critically reviewed the functioning of the State Finance

Commissions (SFC). Four SFCs should have been formed and should have submitted their

reports by 2010 but in reality only three had been formed in some states. Even in these states

there was a lack of appreciation on the part of the SFCs regarding the large extent of financial 12

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devolution that was required for the PRIs to be able to function effectively. The Eleventh

National Finance Commission had classified the 29 functions given in the XIth Schedule

further as follows (GoI, 2000) –

1. Core Functions -Drinking Water,roads, culverts, bridges, ferries, waterways and

other means of communication, rural electrification, including distribution of

electricity, health and sanitation, including hospitals, primary health centres and

dispensaries, maintenance of community assets.

2. Welfare Functions - Rural housing, non–conventional energy sources, poverty

alleviation programme, education, including primary and secondary schools, technical

training and vocational education, adult and non–formal education, libraries, cultural

activities, family welfare, women and child development, social welfare, including

welfare of the handicapped and mentally retarded, welfare of the weaker sections, and

in particular, of the Scheduled Caste and the Scheduled Tribes, public distribution

system.

3. Agriculture and Allied - Agriculture, including agricultural extension,land

improvement, implementation of land reforms, land consolidation and soil

conservation, Minor irrigation, water management and watershed development,

animal husbandry, dairying and poultry, fisheries, social forestry and farm forestry,

minor forest produce,fuel and fodder, markets and fairs.

4. Industries - Small scale industries, including food processing industries, khadi,

village and cottage industries.

It is clear that even to perform the core functions properly the PRIs need considerable untied

funds as a proportion of the tax revenue collected by the state government. While for the

welfare, agriculture and industries categories, Panchayat heads would have to be created in

the State Budget for the concerned departments. The SFCs have mostly failed to provide

adequate untied funds either as lumpsum amounts or as a proportion of the revenue of the

State Government. Nor have the SFCs insisted on Panchayat heads being created in the State

Budgets to facilitate the work of the other categories. Due to a lack of collated data on the

finances of the PRIs the SFC have been handicapped in formulating proper criteria for

allocation of funds and also for decentralising the power to levy taxes. Nevertheless, there has

been little emphasis laid by the SFCs on the setting up of an extensive and reliable data base

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of PRI finances. All these problems can be traced to the reluctance on the part of State

Governments to devolve funds and the decision on their use to the PRIs.

Ideally the State Governments should enact a law setting down the constitution, selection

criteria and operational procedures of the SFCs so as to free them from executive

arbitrariness and also make it mandatory for the recommendations once accepted to be

implemented. Only such a system will ensure that adequate funds are available to the PRIs.

However, this hadn't been achieved anywhere. The MoPR issued guidelines on the formation

and functioning of the SFC and also dealt with the subject in a separate chapter on SFCs in

the model Panchayati Raj and Gram Swaraj Act (MoPR, 2009). The two most important

provisions made for SFCs in these documents are as follows –

1. There should be a permanent data and analysis cell of the SFC under a full time

Secretary level officer that will collate and analyse all the financial data related to

PRIs so as to provide a solid basis for the deliberations of the SFC. Moreover, such a

permanent secretariat would provide continuity between one SFC and the next.

2. The SFC should take into consideration all the activities devolved to the PRIs under

Schedule 11 as also the other basic activities that they have to carry out and make

adequate financial provisions for their implementation, including the provision of

adequate infrastructure and staff, by allocating a share of the own revenue of the State

Government, transfers from the State Consolidated Fund and prescribing the taxes

that can be exclusively levied by the PRIs.

The detailed review of the status of devolution in the States that follows in a later section

reveals that neither of these two important provisions have been implemented in any of the

States. A related issue is the most important need for the radical restructuring of the district

administration so as to make the government functionaries at the district and lower levels

work under the control of the elected representatives of the PRIs and make them true

institutions of local self governance. This issue has been highlighted by the second

Administrative Reforms Commission (ARC) (GoI, 2007) which has noted the reluctance of

State Governments and the bureaucracy to let PRIs become independent self governing

entities in accordance with the "principal of subsidiarity" which states that any activity that

can be done at a lower level should not be delegated to a higher level. The ARC report also 14

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blames the skewed concentration of political power at the higher levels for the prevailing

sorry state of affairs.

6. The Panchayats Empowerment and Accountability Incentive Scheme

The MoPR introduced the PEAIS from 2005-06 onwards to encourage the state governments

to bring about greater devolution of powers to the Panchayats. The basis for the evaluation is

a devolution index (DI) that is estimated by an independent agency. Initially the estimation

work was done by the National Council for Applied Economic Research upto 2008 (NCAER,

2008) and subsequently by the Indian Institute of Public Administration. The DI as it has

evolved is a comprehensive estimator that takes into account the various components of

devolution of functions, functionaries and funds and weights them according to their

importance (Alok & Chaubey, 2010). The latest estimate for 2010-11 also estimates progress

on the legal and administrative framework mandated to be put in place by the Constitution.

The estimate is based on independent field verification of the data sent by the states and so is

more authentic (MoPR & IIPA, 2011). A baseline has also now been constructed for all the

parameters for all the states so that incremental improvements can be measured in future. The

index addresses the important issue of the restructuring of administration to accord with the

paramountcy of the PRIs. In the table of questions regarding the control of functionaries, the

District Collector or Deputy Commissioner is also included and it is asked as to whether the

District Panchayat has powers of appointment, transfer and disciplining over this post. This

can only be possible in an autonomous PRI system.

However, the index is calculated mainly on the basis of data provided by the State

Governments themselves. The field verification that is done is in the best performing

Panchayats chosen by the states and so has a limited validity. Thus, there is considerable

scope for doubting whether the actual situation is as good as the indices indicate. Moreover,

the incentive amounts provided are miniscule as compared to the funds that have to be

devolved by the State governments to the PRIs for the latter to function properly as

autonomous institutions of local government. So the DI values and the PEAIS have only a

symbolic value and may not push the states to substantially increase devolution. Given the

immense scope for misreporting favourably, the chances are that the achievements will be

exaggerated by the State Governments in their reports leading to a more flattering DI.

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19 States from the mainland and 5 States from the North East, which has a separate

Panchayat system, responded to the questionnaires and the estimates show that Kerala had the

highest DI of 70.01 out of a maximum possible 100 among the mainland States. At the

bottom lay Jharkhand with a DI of 11.70 while the average DI is 40.44 which is quite low.

Sikkim tops the Northeastern States with 60.22 while Arunachal Pradesh is at the bottom

with 19.70 and the average for the Northeastern States is 39.18.

The DI has been calculated as a composite weighted average of the indices for four different

aspects of devolution- Framework, Functions, Finances and Functionaries. The framework

refers to the legislative and executive frame that has been put in place, functions refer to

those functions that have been devolved, finances refer to the financial provisions that have

been made for the PRIs to function autonomously and functionaries refer to the staff that are

exclusively under the control of the PRIs. Interestingly while the national average index value

for framework and functions are 51.32 and 50.55 respectively, for finances and functionaries

they are 37.67 and 34.67 respectively. This lagging behind in the devolution of finances and

functionaries is true of Kerala also. Thus, while some compliance has been achieved with

regard to putting in place the legal and executive framework and passing orders for the

devolution of functions, this has not been accompanied by corresponding devolution of funds

and functionaries. Actual values of DI will obviously be even lower if a more detailed,

independent and rigorous exercise is conducted.

MoPR has recently prepared a road map for Panchayats (MoPR, 2011b) based on the

recommendations of the ARC and the various task forces constituted from time to time. This

takes into consideration all the major obstacles to devolution detailed above and tries to

address them –

1. The important issue of the lack of political power of the PRI representatives is sought

to be addressed through the formation of federations of PRI representatives. Though,

this is a difficult exercise given the transient nature of the tenure of the representatives

and their party affiliations, nevertheless some specific financial provisions could

enable this. At present the representatives can voice their grievances only in periodic

meetings or training workshops. A federation would considerably increase their

political power vis-a-vis higher levels.

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2. The powers of recruitment and administrative control of all staff of PRIs and

functions devolved to them should be with the PRIs and a distinct and autonomous

administrative structure should be put in place from the district level downwards.

3. Adequate untied funds should be provided to the PRIs through NFCs and SFCs. The

CSS and Additional Central Assistance funds should be given to the PRIs for the

work in these schemes that is to be done at their level. Parallel institutions should not

be set up for implementing these programmes. A Panchayat window in state budgets

for the 29 subjects devolved to PRIs must be made mandatory.

8. Conclusions and Recommendations

The central problem that has dogged the establishment of truly autonomous local governance

through effective devolution to PRIs is the reluctance of state governments to part with the

powers of governance that they enjoy. Even the better performing state governments of

Kerala and Paschim Banga have retained substantial control of functionaries and funds and

made the PRIs subservient to them. Most States have just completed the formality of

devolving functions and mapping activities through laws, rules and executive orders but have

not followed this up with effective devolution of functionaries and funds. Despite continuous

efforts by the MoPR since its inception and several recommendations by the eleventh, twelfth

and thirteenth Central Finance Commissions, States have neither standardised the accounting

systems and data bases of PRIs so as to provide the CFCs and SFCs with a solid foundation

for recommending devolution of funds nor created Panchayat windows in the budgets of the

departments from which functions are to be devolved to the PRIs (Rao et al, 2011).

The main reason as explained in the introductory sections is that the State Governments have

limited powers as compared to the Central Government in the Indian system. If the PRIs at

the district level and below were to indeed become autonomous local governments with full

control of the departments that are to be devolved to them as per the eleventh schedule then

these departments would have very little left to do at the state level as the bulk of the staff

and activities are concentrated at the district level and below. It is true that the overall

guidance would still be provided by the higher level staff of the State departments but this

would not compare with the huge responsibility currently being shouldered by them

regarding the overall planning and implementation right down to the ground level. In other

words the Ministers, Secretaries, Directors and the like in charge of these departments at the

higher levels would lose considerable power. Moreover, the control over a substantial portion 17

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of the state tax revenue also would go to the PRIs and the State Governments would be left

with even lesser financial leeway than they have at present.

Another interesting observation made in this regard is – "Thus, it is natural that an MLA feels

insecure about a ZP member being allowed all resources and thus expanding his circle of

influence. This needs to be addressed in an imaginative manner for both to function

effectively without eroding each others mandates and functions." (State of Panchayati Raj

Report Goa 2011). This crucial clash of political interests between the State Government and

the PRIs remains unaddressed. Initially the MoPR started off with the "big bang" strategy and

now in the latest roadmap it has gone ahead with what can be called the "oceanic circle"

strategy following on the path chalked out by the second Administrative Reforms

Commission. The ARC has approvingly quoted Gandhi's concept of oceanic circles wherein

the whole governance system consists of a series of concentric circles with the village

republic at its centre delegating only as much authority to the outer circles as it wanted to

(Gandhi, 1959).

However, both these strategies have their limitations given the reality that the awareness and

mobilisation of the politicians and the people at the PRI level is much less than that of the

State level politicians. In fact what little awareness, governance skills and political power

have been garnered by politicians at the PRI level is due to the management of the increased

works and funds under the CSS and especially the MGNREGS and this too has not been

without contradictions with State level political leadership and the bureaucracy. In fact given

a situation in which presently the CSS funds are equivalent to 75% of the State Governments'

own revenues, these funds are a major bone of contention between the State Government and

the PRIs. By keeping the PRIs starved of infrastructure and manpower the State Governments

effectively ensure that the expenditure of CSS funds remains in their control. Nevertheless, as

expressed by the elected PRI representatives during the surveys, the latter are making all

efforts to tilt the balance in their favour.

One area of concern arising from this tug of war is the adverse effect it has on the provision

of civic amenities by PRIs and especially the crucial ones related to water supply and

sanitation. The highest mortality in India is due to water borne diseases and these can be

prevented by ensuring potable water supply and sanitation. With time as rural habitations

have become more congested potable water supply and sanitation have become more 18

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expensive. The capital and overhead and maintenance costs of community water supply and

sanitation systems have escalated considerably. Thus, the lack of funds with the PRIs and

especially the Gram Panchayats has adversely affected their ability to provide good water

supply and sanitation services. Even though there is a CSS on total sanitation and the 12th

Finance Commission had sanctioned funds for water sector work, nevertheless this is not

sufficient and so PRIs are failing badly in providing adequate and quality water supply and

sanitation services with grave consequences for public health in particular and the economy

in general through lost workdays.

Consequently, for effective devolution to take place and true local self governance to

materialise in the long run, there has to be a three way dialogue between the Central, State

and PRI level politicians to allay the fears of the Sate level players regarding their

marginalisation. A drastic reorganisation and redesigning of the political and administrative

system at the state level is required to accommodate strong district and lower level PRIs on

the principle of subsidiarity otherwise the model PR Act will never be accepted by the State

Governments due to the fear of their own redundancy. Ultimately there has to be greater

political pressure from the people at the grassroots as this is what has brought about the better

devolution in Kerala and Paschim Banga. However, this is a long term process which is

evolving with time and for immediate improvement in the extent of devolution the

recommendations are as follows –

1. The role of the PRIs and the State Governments in the planning and implementation

of CSS must be institutionalised properly by the central Ministries that are in charge

of them. Specifically it must be ensured that parallel institutions are not created at the

village and intermediate levels for the implementation of these schemes. This can be

achieved relatively easily and the MoPR has already initiated a process for getting this

done that has to be further mainstreamed with support from other Ministries. This will

help in building up the administrative and political capacity of the PRI representatives

and help them to exert pressure from below for greater devolution.

2. The MoPR should begin a programme of trainings for the PRI representatives to focus

on the importance of devolution of 3Fs for proper local self governance to be possible.

This will create a greater awareness regarding this important issue among the PRI

representatives and enable them to climb out of their current narrow understanding of

themselves as being beholden to the higher level authorities for funds and functions.

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3. The PEAIS exercise should be conducted with greater independent verification to

arrive at a more realistic assessment of the status of devolution than is now being

done. This will put more pressure on the State Governments to move forward with

greater alacrity on this front.

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