Chapter 4

SOURCES OF FUNDS IN SAMPLE GRAMA

PAIVCHAYATS

In the previous chapter wc: discussed the status of panchayat finance in

Kerala since decentralization anti panchayati raj and also highlighted various

issues. A more indepth analysis is difficult with the macro level data. Hence

for a detailed examination of the sources of funds and expenditure 30 sample

panchayats were drawn and their trends, status and composition are discussed

in the next two chapters. The culrent chapter discuss the sources of funds and

the succeeding chapter examines the expenditure pattern.

The classification of panchayats in to special grade, first grade, second

grade & third grade was done in 1983 based on their income. As per this

classification there are 340 special grade panchayats, 435 first grade

panchayats, 206 second grade panchayats and 10 third grade panchayats

making a total of 99 1 grama panchayats. When income and expenditure of the

panchayats were analysed it was observed that there was no significant

difference between the first grade, second grade and third grade panchayats.

But there was so111e observable difference between that of special grade and

other category of panchayats. Therefore for the purpose of our study these

panchayats were classified as srecial grade and lower grade including all the

others. As we know, out of the 991 grama panchayats 113'~ are special grade

and 213 are lower grade. And hmce to have a proportional representation 10

special grade and 20 lower grade panchayats were taken as representative

samples for the study. The samples covered almost all the regions, viz,

midland, coastal, hilly, high ranges, etc.

The samples include Poomangalam grama panchayat of Thrissur

district with a population of 11!)05 and Munnar grama panchayat of Idukki

district with a population of (18205. considering the geographical zones

covered by the sample panchaya1.s; it may be seen that 8 panchayats are from

hilly regions, 13 panchayats are ikom midland four are from coastal areas and

5 are from the high ranges. Agriculture is the main activity of the sample

panchayats. Marine fishing and nland fishing are seen in coastal panchayats

and in panchayats near backwaters. In the high ranges people are employed in

tea, coffee, spices, etc. plantatisns. In the hilly and midland regions rice,

coconut, arecanut, pepper, rubber banana, etc. are cultivated. Generally in

panchayats majority of the people are engaged in agriculture and allied

activities.

It may be noted that 8 panchayats are located more than 50 kms from

the district headquarters, 15 panchayats are located between 25 and 50 kms,

and 7 panchayats are located within 25 kms.

In the preceding paragraphs an attempt is made to examine the

generation of funds in the samplt: panchayats consisting of 20 lower grade and

10 special grade panchayats.

Table 4.1

Profile of 2C' lower grade panchayats

SI. 1 No. Name of

panchayat Code I No. I Block District

features Land I activities Main I 1 Arpookar: PI Ettunanur Kottayam

Ayyampuzha P 2 Ang;rmaly Ernakulam

1 3 Balal 1 P 3 I Kanhangad / Kasargod / Hilly / Agriculture /

Hilly Agriculture

Alappuzha Coastal Agriculture

Kannur Midland Agriculture

Kasaragod Hilly Agriculture Karnithalam 1 9 1 K O ~ ~ ~ ~ O O P 9 Peravoor 1

10 Mogralputhur P I0 Kasgvagod Kasaragod

1 1 Paralam P I1 Cherpu

Hilly

Coastal

Midland

Agriculture

Agriculture

1 12 / Kuzhur I P 12 I Malt1 / Thrissur / Midland / Agriculture 1

Nedumkandam ldukki

Thrissur

Alappuzha

High Tea, coffee, ranges 1 spices 1

16 Senapathy I P 16 Idukki I I

Midland

Midland

ldukki

Agriculture

Agriculture

High Tea, coffee, ranges / spices I

Thiruvaniyoor

Thondernad

Thripprangatoor

Vadavukode

Mar anthavadi

Kocthuparambu t

Ernakulam

Waynad

Kannur

Midland

High ranges

Hilly

Agriculture

Tea, coffee, spices

Agriculture

1 20 1 Vengad 1 P20 lrini ( Kannur Midland Agriculture I

Table 4.2

Profile of 10 special grade panchayats

Rl,)ck 1 District Land 1 Main features activities

P 2 1 Edapp;~lly Ernakulam Midland Agriculture

P 22 Thalasiiery Kannur Midland Agriculture. -

P 23 Vypin Ernakulam Coastal Agriculture. fishing

P 24 Chalakudy Thrissur Hilly Agriculture.

P 25 Mallappally Pathanamthitta Hilly Agriculture.

7 1 2 7 "vikulam Idu!&i i ~ i ~ h p:c;lture. ranges Tea, coffee,

Sources of Funds

Table 4.3 gives the details of source of funds for own tax revenue for

20 lower grade panchayats. As we know source of funds include Property

Tax, Profession Tax, Entertainment Tax, Advertisement Tax etc. From the

table it is seen that the most significant taxes are property tax and profession

Table 4.3 Source of Funds: Tax Revenues : Own Taxes of 20 lower grade panchayats and 10 special grade panchayats (Rs. in Lakhs)

1. I

2.

3

4.

5.

6.

Propertp Tax Per Panchayat Percent to total Profession Tax Per Panchayat Percent to total Entertainment Tax & Show tax " "~ . ~,.~.~.. re* L a ~ ~ r r o y a r

Percent to total Advertisement Tax Per Panchayat Percent to total Service Tax & Surcharge Per Panchayat Percent to total Others Per Panchayat Percent to total Total own tax revenue Per Panchayat Percent

I

1998-99 49.81 2.49 46.54 43.30 2.16 40.45 5.26

n i c Y.LV

4.91 0.017 0.008 0.02 1.96

0.098 1.83 6.70 0.33 6.26

107.04 5.35 100

1998-99 53.64 5.36

55.13 27.06 2.71 27.81 6.04

kc2 6.2

0.038 0.0038 0.04 2.23 0.22 2.29 8.30 0.83 8.53

97.30 9.73 100

panchayat 2000-0 1

63.83 3.19

44.58 57.35 2.87 40.06 4.79

"24 3.35

2.82 0.14 1.97

14.38 0.72 10.05

143.17 7.16 100

Lower grade 1999-00 57.83 2.89

43.42 57.65 2.89 43.3 5.04

2.25 3.78

2.06 0.10 1.55 10.60 0.53 7.96

133.17 6.65 100

Spl. grade 1999-00 66.72 6.67 52.05 45.49 4.55 35.48 5.71

0.57 4.45 0.027

0.0027 0.02 2.70 0.27 2.12 7.55 0.76 5.89

128.20 12.82 I00

panchayats. 2000-01

54.61 5.46

48.45 40.77 4.08 36.16 4.90

O.*P 4.34

0.02964 0.003 0.03 2.68 0.27 2.38 9.74 0.97 8.64

112.73 11.27 100

200 1-02 73.89 3.69

43.95 70.56 3.53

4 1.97 3.46

1 9,!7 2.06

3.22 0.16 1.92 17.00 0.85 10.1 1

168.13 8.4 1 100

200 1-02 78.46 7.85 54.77 56.71 5.67

39.59 3.20

1 n.32 2.24

N LL

2.28 0.23 1.59 2.60 0.26 1.82

143.26 14.33 100

Diagram 4.1 - --

Property tax

oc 1998-99 1099-00 2000-01 2001-02

Year

L-~ower grade Panchayats t Spl Grade ~ a n c h a y d --- -- - - -- - - - - - -

Diagram 4.2

Profession tax

04- I

1998-99 19E9-00 2000-01 2001 -02

Year ' I t Lower graae Panchayats t S p Grade Pancnayats

Diagram 4.3 - - - -- - -

Total Own Tax Revenue

1998-99 1!199-00 2000-01 2001-02 I Year I

t Lower grad,? Panchayats t Spl. Grade ~anchayatsl ~

-~ -

tax which together constituted 86.99 per cent of the total own tax revenue in

1998-99. This share remained tht: same in subsequent years. At the same time

in absolute terms these taxes recorded substantial progress. For instance, per

panchayat property tax which stood at Rs.2.49 lakhs in 1998-99 increased to

Rs.3.69 lakhs. the percentage increase being 48.19. It may be specially noted

that Pookode panchayat of Thrissur district collected Rs.6.82 lakh as property

tax in 1998-99 which increased to Rs.8.00 lakhs in 2001-02 which is much

greater than the per panchayat value of property tax. Vengad and

Mogralputhur also showed high amounts of property tax collection. Similarly,

profession tax increased from Rs.2.16 lakhs to Rs.3.53 lakhs the rate of

increase being 63.43. These trends are due to the increase in the number of

buildings assessed for property tax and steady increase in the number of

payers of profession tax. Entertinment tax showed a steady decrease. It is

also interesting to observe that advertisement tax was recorded only in 1998-

99, that too a very small amount In toto, it is also to be seen that the own tax

revenue of the panchayat increaiied from Rs. 10.70 crores to Rs. 16.8 1 crores,

the percentage of increase being 57.10. Consequently, per panchayat taxes

also increased from Rs.5.35 lakhs to Rs.8.41 lakhs. In short, we may conclude

that own tax revenue recorded a reasonable increase over a period of four

years. Property tax and Profession tax showed an increasing trend. In the

sample of 20 lower grade panchayats only 9 had cinemas and collected

entertainment tax. Only two pa~ichayats collected advertisement tax. This is

due to laxity on the part of the panchayats.

From table 4.3 it is a150 seen that in the case of special grade

panchayats the most important taxes are property tax and profession tax which

together constituted 82.94 per cc:nt of the total own tax revenue in 1998-99.

This share remained almost the same in subsequent years except in the

terminal year which showed a peak of 94.36 per cent. In absolute terms these

taxes recorded a substantial increase except for a slight dip in 2000-01. For

example, per panchayat property tax which was Rs.5.36 lakhs in 1998-99

increased to Rs.7.85 lakhs in 20C 1-02, the percentage increase being 46.46. In

the same way, profession tax increased from, Rs.2.71 lakhs to Rs.5.67 lakhs,

the rate of increase being 109.22:. These trends are due to the increase in the

number of buildings assessed and steady increase in the number of payers of

profession tax. However, it was observed that for majority of the panchayats

both the numbers fluctuated during 2000-01. Considering the property tax

among the special grade panchayats, Munnar collected Rs.16.52 lakhs in

1998-99 which increased to Rs 24.88 lakhs in 2001-02. it showed a dip in

2000-01 and this is due to the bifurcation of the panchayat as Munnar and

Mankulam in 2000 and subsequent fall in the number of buildings assessed

and delay in collection of tax. Profession tax also reveals a similar trend

which increased from Rs.9.79 lskh in 1998-99 to Rs.23.64 lakhs in 2001-02.

These amounts of property tax and profession tax are found to be much

greater than the corresponding, per panchayat figures. Entertainment tax

showed a decreasing trend for the period. This is because number of people

who go for cinemas are declining. It is peculiar to see that the panchayats are

least bothered to collect advertisement tax. Panchayats are flushed with plan

funds and therefore their interest in exploiting new avenues of taxes have

declined. In sum, per panchayat taxes increased from Rs.9.73 lakhs to

Rs.14.33 lakhs. From this obsercation we may conclude that non tax revenue

showed a reasonable progress during the period of study.

Out of 10 special grade panchayats, 8 had cinemas. It is seen that, only

two panchayats collected advertisement tax, that too only for two years.

Both property tax and profession tax are buoyant and would have

fetched more amounts had the method of assessment been scientific. The

present system of annual rent based valuation of buildings causes great

leakages of taxes. The assessment must be based on 1) type of construction of

building 2) location 3) type of use and 4) plinth area of the building. For

multi-storeyed buildings area ol' each floor has to be calculated separately.

Self assessment of the property owner may be taken as a base. Depreciation

for wear and tear has to be considered. The method should be of minimum

discretion, transparent and simple. It may be noted that a large number of

buildings like buildings of air.ports, tourist resorts, theme parks, lodging

houses, hospitals, etc. are to be tsrought in to the tax net. It is interesting to see

that unnecessary and untimc:ly interventions from state government

occasionally cause problems for the panchayats. To give an example, the

quinquennial revision of building tax has been stopped as per a government

circular, presumably, to switch over to plinth area based taxation, rules

pertaining to which have not yet been framed. This has caused a loss of 20 to

25 per cent of increase in builcing tax which amounted to crores of rupees.

Tax has to be revised during alterations and additions to the existing

buildings. This is possible onl:~ in those few panchayats where the Kerala

Building Rules are applicable. Penal provisions may be incorporated in to the

rules so as to make it statutory to report the modifications of buildings to the

panchayats.

Coming to Profession tax, many omissions are to be noticed. Many

professionals like doctors, advoi;ates, consultants and businessmen who are

mainly private practitioners are not assessed for taxation. Similar is the case

with business concerns and i~stitutions which are run without proper

panchayat license.

It is pertinent to notice that nowadays there is no actual demand

maintained for profession tax in many of the panchayats. Demand has to be

prepared by 3oth April every year. Now the practice followed is to treat actual

collection as on 3 1'' March as dzmand for the year. Constitutional ceiling of

profession tax to be levied is Rs.1250 half-yearly and Rs.2500 yearly. A

minimum half yearly turn over of Rs.2 lakhs is required for institutions for

assessing profession tax of Rs.120 half yearly. Big business houses have

crores as turn over, but they also have to remit only Rs.2500 yearly.

Institutions in the economic zones are exempted from paying profession tax.

This, in turn, causes great loss of tax to the fund starved panchayats.

For entertainment tax, its buoyancy is being lost. As the other

entertainment media are well developed, the relevance of Cinema halls have

declined. To compensate, a tax may be imposed on cable television, internet

cafes etc.

The only thing a panchayat has to do to collect advertisement tax is to

have an approved bye-law. It is observed that only four panchayats out of a

sample of 30 have shown some interest in collecting advertisement tax. This

tax may conveniently be collecteti by giving on auction.

Assigned Taxes

Table 4.4 gives the composition of funds for Assigned taxes revenue

which include duty on transfer of property, Basic tax and Vehicle tax

compensation. From the table it is observed that the most important taxes are

duty on transfer of property and vehicle tax compensation which together

constituted 86.81 per cent of the total assigned taxes revenue in 1998-99. The

same pattern continued throughout the period. However, in absolute terms the

receipts from these taxes showc:d fluctuations. For example, per panchayat

duty on transfer of property which was Rs.3.34 lakhs in 1998-99 increased to

Rs.4.5 lakhs in 2000-01 which again decreased to Rs.2.63 lakhs in 2001-02.

Similarly, the receipts on vehicle tax compensation which stood at Rs.3.55

lakhs steadily decreased to Rs.C.15 lakhs, the rate of decrease being 95.77.

This shows the irregular and urpredictable pattern of release of funds from

the state govt. Some arrears of duty on transfer of property was released in

2000-01 and the due share was n3t released in 2001-02.

In sum, it is also to be noted that the assigned taxes revenue of the

panchayats decreased from Rs.158.70 lakhs in 1998-99 to Rs.67.30 lakhs in

2001-02 the percentage of decrease being 57.15. As a result, per panchayat

taxes also decreased from Rs.7.93 lakhs to Rs.3.36 lakhs. In short, we may

conclude that revenue from assigned taxes recorded a reasonable decrease

over a period of four years. From this it is clear that the state govt. with holds

Table 4.4

Source of Funds: Assigned Taxes of selected 20 lower grade and 10 special grade panchayats (Rs. in Lakhs)

1.

2.

3

4.

Note: Upper fig. gives total for 20 lower grade panchayats (part I) and total for 10 special grade panchayats (Part 11)

Middle fig. gives value per panchayat

Lower fig gives percentage contribution to total assigned taxes

Duty on transfer of property Per Panchayat Percent Basic Tax Per Panchayat Percent Vehicle tax compensation Per Panchayat Percent Total Assigned Taxes Per Panchayat Percent

Lower grade panchayats

I

1998-99 66.76 3.34

42.06 20.93 i n 4 13.19 7 1 .O1 3.55 44.75 158.70 7.93 100

Spl. grade panchayats. 2000-01

90.05 4.5

79.56 8.02 0 an 7.08 15.12 0.75 13.36 113.19 5.66 100

1999-00 72.32 3.62

47.28 6.68

1 n ? ? 4.37 73.97 3.70

48.35 152.97 7.65 100

1998-99 53.81 5.38

36.85 14.75 1 47

10.10 77.48 7.75 53.1

146.04 14.6 100

2001-02 52.56 2.63 78.09 11.78 n 5 9

17.51 2.96 0.15 4.4

67.30 3.36 100

1999-00 45.43 4.54 45.51 16.86 ! 6? 16.89 28.73 2.87 28.78 91.00

9.1 100

2000-01 47.80 4.78 86.4 6.65 n.66 12.03 0.87 0.09 1.57

55.32 5.53 100

2001-02 34.51 3.45 8 1.75 4.63 9.46 10.96 3.07 0.3 1 7.28 42.22 4.22 100

Diagram 4.4

Duty or1 Transfer of Property

1939-00 2000-01

Year

!+~wer grade F'anchayats t Spl Grade Panchayats 1 - - . . - -

Diagram 4.5

--- --

Basic Tax

1998-99 ' 999-00 2000-01 2001-02

Year

-t Lower grade Pancnayats t Spl Grade Pancnayals -

Diagram 4.6 -

Vehicle Tax Compensation

1998-99 1993-00 2000-01 2001-02

Year I ~~ -

[ x s o r grade Ptlnchayats t Spl. Grade ~anchayats i ~~ .. -- - - 1 -

the amounts due to the panchayats and releases the same at unpredictable

intervals.

Coming to the case of special grade panchayats it is seen that the same

pattern followed. It is observed from the table I1 that per panchayat receipts of

taxes which stood at Rs.14.6 lakhs in 1998-99 decreased to Rs.4.22 lakhs the

percentage of' decrease being 71 10. Out of 30 panchayats 2 did not have any

receipts under duty on transfer of property in the last two years. 10 panchayats

did not have any receipts under basic tax in the last 2 years and 24 panchayats

did not have any receipts under vehicle tax compensation in the last two

years. There are fluctuations ~ I I the amounts disbursed also. This kind of

unsteady flow of funds creates ~roblems for panchayats in preparing budget

estimates properly.

Table 4.5 presents the details regarding the sources of funds for non tax

revenue for panchayats. The soupces comprise gate fees, license fees & permit

fees, income from property (buildings & others), river sand, usufructs from

trees, beneficiary contribution, user charges and toll etc. From the table it is

observed that the most significailt items are income from property, river sand

and beneficiary contribution. Tz~gether the three items constitute 72.87 per

cent of the total non-tax revenul: in 1998-99. This share remained almost the

same in the following three years. At the same time, in absolute terms both

income from property and riker sand recorded substantial progress. For

instance, per panchayat income 'rom property which stood at Rs. 1.05 lakhs in

1998-99 increased to Rs. 1.53 l;~khs, the percentage increase being 45.7 1. It

may be noted that Poomangal;lm panchayat of Thrissur district collected

Table 4.5

1.

2.

3

4.

5.

6.

7.

8.

grade and 2001-02

1.23 0.06 0.76 6.60

0.33 4.04 30.54

1.53 18.71 77.34 3.87 47.39 1.56 0.08 0.96 11.21 0.56 6.87 0.08 0.004 0.05 34.64 1.73

21.22 163.21 8.16 100

Source of Funds:

Gate fees Per Panchayat Pzrcznt License fees & Permit fees Per Panchayat Percent Income from property (Buildings and others) Per Panchayat Percent River sand Per Panchayat Percent Usufructs from trees Per Panchayat Percent Contribution (Beneficiary) Per Panchayat Percent User charges & toll

pp

Others Per Panchayat Percent Total Per Panchayat Percent

10

-

Non Tax 1998-99

0.42 0.02 0.39 6.07

0.30 5.6

21.02

1.05 19.39 3.86 0.19 3.56 0.81 0.04 0.75 54.14 2.71 49.92 0.13 0.01 0.12

22.00 1.10

20.28 108.46 5.42 100

special grade 1998-99

2.29 0.23 3.12 4.87

0.49 6.61 7.40

0.74 10.05

2.15 29.21 0.14 0.014 0.19

24.60 2.46 33.44 1.33 0.13 1.81 11.46 1.15

15.57 73.59 7.36 100

Revenue of 1999-00

0.34 0.02 0.28 5.95

0.30 4.87 29.55

1.48

-p-.pppp- 24.21 7.26 0.36 5.95 0.89 0.04 0.73

60.57 3.03

49.59 0.08 0.004 0.07 17.48 0.87 14.32 122.13 6.11 100

selected 20 lower 2000-01

0.92 0.05 0.62 7.09

0.35 4.77 40.93

2.05 27.54 9.68 0.48 6.51 0.27 0.01 0.18 45.93 2.30 30.91 0.08 0.004 0.05

43.72 2.19 29.42 148.62 7.43 100

panchayatsRs. 1999-00

1.93 0.19 2.62 6.19

0.62 8.32

1 3.36

0.34 4.55 18.20 1.82

24.68 0.086 0.01 0.12 2.68 0.27 36.28 2.68 0.26 3.63 14.54 1.45 19.72 73.74 7.37 100

in Lakhs 2000-01

3.08 0.31 4 69 9.86

0.99 15.03 11.1 1

1.11 16.94 17.59 I. Ib

26.82 0.83 0.08 1.27 7.39 0.74 11.27 1.10 0.11 1.61 -

14.66 1.47

22.36 65.58 6.56 100

2001-02 2.96 0.30 4.63 7.01

0.70 10.96 10.68

1.07 16.7 16.81 -

1.66

26.28 0.24 0.02 0.38 3.25 0.33 5.09 0.64 0.06 1.07

22.37 2.24 34.96 63.98 6.40 100

Diagram 4.7

Contribution

19 39-00 2000-01

Year

--- ~ - , t Lower grade F'anchayats +Spl. Grade Panchayats ~~ ~ ~ L I -. - - ~ ~~~

Diagram 4.8 ~ ~ ~

~ ~~

River Sand

19!39-00 2000-01

Year

~ ~~~- -

[ ? p i e r !grade F,anchayats -m-Spl. Grade ~ a n c h a y a d . - - -- -- - ~ , ~ i

----.---p-.. ~p~ -p-- ~~ I

Diagram 4.9 . -

Others

' - - , ! 0

1998-99 1399-00 2000-01 2001-02

Year I ---~~ ! --t Lower grade Panchayats t Spl. Grade L~~ ~~

p~ ~, -- ~

~

Rs.2.87 lakh in 1998-99 and Rs.3.25 lakh in 2001-02 as income from

property. This is found to be much higher than the per panchayat values. This

highlights the capacity of certain individual panchayats in creating income

generating assets. Similar is the case of Cheruthazham with a collection of

Rs.4.95 lakhs in 2001-02 and Arppookara with a collection of Rs.16.10 lakhs

in 2001-02. The highest value recorded was Rs.2.05 lakhs in 2000-01.

Similarly, income from river sand increased from Rs.0.19 lakhs to Rs.3.87

lakhs, the rate of increase being 409. 16 out of 20 lower grade panchayats of

the sample recorded collection of income from property. More and more

panchayats have showed interest in construction of buildings like shopping

complexes and community halls by making use of plan funds. This caused to

generate more income under this item. But, the panchayats can invest still

more in this regard. Here it is pertinent to note that only 5 out of 20

panchayats have collection on account of income from river sand. It is

interesting to notice that one panchayat has shown a high income especially in

2001-02 showing a peak increase. Changaroth panchayath of Kozhikode

district collected Rs.1.98 lakhs n 1998-99 which increased to Rs.75.43 lakh

in 2001-02 fkom river sand. It is also important that the government has

imposed a lot of restrictions on the mining of sand from the rivers, as it causes

a lot of environmental problen~s. Moreover, lifting of ban of sand mining

results in a sudden rise in incomt: from this item.

Coming to the item of beneficiary contribution panchayats recorded a

steady decrease except for the year 1999-00 when it showed a rise. For

instance, per panchayat beneficiary contribution which stood at Rs.2.71 lakhs

in 1998-99 decreased to Rs.0.5f1 lakhs in 2001-02, percentage decrease being

79.34. However it constituted 49.92 per cent in 1998-99 and decreased to

30.91 and dipped to 6.87 per cc:nt in 2001-02. These trends are due to the

inability and lack of interest of the panchayats in resource mobilization.

Moreover, people's interest in contribution also declined because of the

feeling that panchayats have enough funds to spend. Panchayats, in turn, were

finding it difficult to spend the l'unds allotted to them in time. Only 9 out of

20 panchayats of the sample wt:re able to mobilize beneficiary contribution

during the period of study that too the amount recorded a decreasing trend. 7

out of 20 panchayats mobilized partly, that is, for one or two years. There is

no consistency seen in the rrobilization of beneficiary contribution. In

general, panchayats were struggling to incur expenditure of their plan funds

allotted in time thereby causing lapse of funds. Instalments of plan funds have

been cut by govt. In such a situation the capacity of panchayats in the

mobilization of beneficiary contribution declined. At the same time, the

beneficiaries have the general feeling that panchayats have enough funds and

consequently, there were few takers for individual based projects where the

beneficiary contribution is a must.

Collection with regard tc' the conventional sources of funds like gate

fees, license Fees & permit fees, user charges and toll etc together constituted

around 5 per cent of the total ncntax revenue and recorded a stagnant picture.

Panchayats do not mobilize thme sources of revenues due to a variety of

reasons among them were lack of interest, scarcity of staff and their

unwillingness for field duty and the virtual absence of division of duties,

monitoring and supervision by competent senior officers of the department. It

is to be noticed that the compt:tency of the senior officers are doubtful (as

most them are promotees from lower division clerks and some of them are

even from part-time sweepers1 for efficient and effective control and

supervision of administration ol' the officers under the new panchayati raj

system. Panchayats should be able to collect the conventional items not only

as a source of revenue but also to exert control over the various activities

going on in the area of jurisdict on of panchayats. In toto, it is seen that the

non tax revenue of the panchayat increased from Rs.108.46 lakhs to

Rs.163.21 lakhs the percentage of increase being 50.48. Consequently, per

panchayat tax also increased from Rs.5.42 lakhs to Rs.8.16 lakhs.

In short, we my conclude: that non tax revenue recorded a reasonable

increase over a period of four years. However considering its potential this

increase is not adequate.

Coming to the case of spzcial grade panchayats the three items of non

tax revenue together constitute '72.7 per cent in 1998-99. However, the share

sharply declined to 48.07 pel cent in 2001-02. In absolute terms, per

panchayat revenue from property increased from Rs.0.74 lakhs to Rs.1.07

lakhs, showing a percentage increase of 44.59. Mallappally panchayat of

Pathanamthitta district collected Rs.2.84 lakhs in 1998-99 and Rs.2.61 lakhs

in 2001-02 as income from property. This is much greater than the

corresponding per panchayat values. However, revenue from river sand

decreased from Rs.2.15 lakhs to Rs. 1.68 lakhs the percentage decrease being

21.86. Beneficiary contribution also decreased from Rs.2.46 lakhs to Rs.0.33

lakhs, percentage decrease being 86.58. 9 of the 10 spl. grade panchayats have

recorded income from property. It is interesting to observe that per panchayat

revenue recorded is much lower than that recorded for lower grade

panchayats. This should have been the other way round. This is because in

the case of special grade panchayats, the shopping complex buildings and

community halls are comparativc:ly older and the rents were fixed earlier and

hence less when compared to t ~ a t of lower grade panchayats. 6 of the 10

sample special grade panchayats have recorded income from river sand. But

during certain periods they did not show any income at all. It may be noted

that Ranniangali panchayat collected Rs.1.76 lakhs in 1998-99 which

increased to Rs.8.76 lakhs in 20(11-02 on account of river sand. This is due to

the ban imposed by the state goternment on sand collection from the rivers.

Also, it is seen that the laxity on the part of panchayats to prevent

unauthorized sand mining resulting in heavy loss of income and

environmental degradation. Panchayats need to show more attention to

prevent leakage of income from liver sand.

Another observation is thlt collection from gate fees, license fees and

permit fees is much better for rpecial grade panchayats than that for lower

grade panchayats. This is because special grade panchayats have markets and

some have implemented Kerala Building Rules which fetch them fees for

building plan approval based on the plinth area of the building.

On the whole, it is to be seen that for special grade panchayats non tax

revenue per panchayat slightly 'ecreased from Rs.7.36 lakhs to Rs.6.4 lakhs

the percentage of decrease being 13.04. In short, we may conclude that non

tax revenue recorded a marginal decrease over a period of four years. This is

mainly because the special grade panchayats could not mobilize beneficiary

contribution to any reasonably good level. Ranniangadi panchayat mobilized

beneficiary contribution to the time of Rs.9.17 lakhs in 1998-99 which

sharply declined to Rs.0.85 lakhs in 2001-02. During the initial years people's

participation was higher and hence their interest to contribute to the

development projects was also greater. Over the years, the participation rate

as well as contribution declined t~ a very low level.

From the items gate fees, usufructs, user charges & tolls the

contributions were only insignifcant which together contributed about 5 per

cent of the total revenue. Revenue from beneficiary contribution and river

sand together comprises about 50 per cent under the non tax revenue both for

lower grade and special grade panchayats. However, it may be noticed that

these are not regular and dependable sources of income. But the revenue from

other permanent sources like gate fees, license fees, permit fees etc. are very

small. These sources have to bc: augumented. Income from own property of

the panchayats like buildings, shopping complexes and community halls may

also be increased by starting new markets; parking places, cart stands etc, and

constructing new buildings for shopping complexes, community halls etc. At

the same time the income structure of these items have to be thoroughly

revised.

Grants-in-aid

Table 4.6 gives the composition of grants-in-aid which comprises plan

devolution (people's planning). state plans schemes (sponsored), funds for

management of transferred institutions (non plan), other grants (rural pool

Table 4.6

Source of Funds: Grants-in-aid of selected 20 lower grade and 10 special grade panchayats (Rs. in Lakhs)

1 1 Per ~anchavat ' 5.35 6.04 1 10.04 1 8.08 1 6.00 1 5.72 9.03 1 8.58 1

2001-02 352.53 35.25 60.91 40.40

4.04 6.98

66.68

6.67 11.52 9.06

0.91 1.57

110.08 1

6 .

1998-99 765.93 76.59 73.15 61.19

6.12 5.84

71.34

schemes '

Per Panchayat Percent Pensions(SocialWe1fare) - ~- ~ ~~~~~~~~

Percent Total Grants-in-aid Per Panchayat Percent

2000-01 687.20 34.36 61.64 33.31

1.67 2.99

105.57

I.

2.

3

1999-00 481.87 48.19 66.19 34.19

3.42 4.74

62.79

2001-02 576.41 28.82 60.97 13.60

0.68 1.44

106.17

1998-99 848.27 42.41 69.65 44.24

2.21 3.62

124.33

Plan (People's Planning) Per Panchayat Percent State Plan Schemes (Sponsored) Per Panchayat Percent Management of transferred institutions

4.02 6.59

107.05

8.76 1221.42 61.07

100

2000-01 421.64 42.16 30.50 68.68

6.87 49.68 61.45

6.28 8.7

32.52

3.25 4.5

52.88

1999-00 774.57 38.73 65.52 22.17

1.1 1 1.87

88.73

6.15 4.44 3.42

0.34 0.25

118.74

4.

5.

5.2 8.80

120.70

10.21 1182.25 59.1 1

100

7.13 6.81

29.28

2.93 2.79 59.31

6.22 10.18 17.02

0.85 1.39

80.50

(Non Plan) Per Panchayat Percent Other grants (mral pool, VRM etc) Per Panchayat Percent Centrally Sponsored

I

5.28 1 5.31 9.47 1 1.23

4.44 7.50 72.08

3.6 6.10

104.00

3.25

0.16 0.29 84.63

4.23 7.59

200.89

18.02 11 14.85 55.74

100

3.07

0.15 0.33 84.58

4.23 8.95

161.63

17.10 945.47 47.27

100

5.93 5.66

60.06

5.74 1047.10 104.70

100

5.28 7.33

57.15

7.92 721.41 72.14

100

11.87 8.59

90.33

6.53 1382.42 138.24

100

11.00 19.02 85.76

14.82 578.75 57.87

100

Iliagram 4.10 - -

Plan

1!399-00 2000-01

Year

State Plan Schemes

15199-00 2000-01

Year

-- -. - ~-

S p i Grade ~ a n c h a y a r s 1 ~~~ - ,

Iliagram 4.12 --

Centrally Sponsored Schemes

4 I

2 i 0

1998-99 1999-00 2000-01 2001-02 ~ Year

--

t Spl. . Grade ~ Panchayaq J

~- . ~~ ~~~ ~~ ~

Pensions (Social Welfare)

12 .. .. -- - - .. . . -. . --- . - - ~.

Year

[*Cower grade Panchayats t Spl. Grade Panchayats 1 ~- - - -- ~- ~~ . . ~

Diagram 4.14

(Grants-in-aid

1 20- - 1998-99 1!l99-00 2000-01 2001-02

Year

Grade Panchayats / 1 .- -- ~

~~~.

,- ~ ~ ~~ . -

1 Establishment Cost

0 --

1998-99 1599-00 2000-01 2001-02

Year ~- ~

/ t & w e r grade Panchayats ~ t S p l . .- Grade ~ a n c d ~ .~~ -~ --

grant, village road maintenance grant etc.). Table 4.6 presents the picture of

receipts under various grants-in-aid from state and central governments.

From table 4.6 it is seen that the most significant grants-in-aid is the

plan fund devolved under peoplz's plan which constituted 69.65 per cent of

the total grants in 1998-99 and 61.97 per cent at the end of 2001-02 recording

a small but steady decrease over the years. In absolute terms also plan funds

recorded a steady decline. For example, per panchayat plan funds which stood

at Rs.42.41 lakhs in 1998-99 decreased to Rs.28.82 lakhs in 2001-02, the

percentage decrease being 32.04.

These decreasing trends itre due to the inability of the panchayats in

utilizing plan funds in time and the corresponding cut in actual allocation

from the state government over the period. Panchayats find it very difficult to

obey the detailed guide lines issued by the government for sectional

allocation, plan formulation, beneficiary selection, projects approval,

implementation and monitoring .within prescribed time frame. In some cases,

by the time the projects are approved by the District Planning Committee the

season might be over, especially in the case of agricultural and related

projects. Considering the capacity of elected representatives and staff at the

local government level the cumbersome procedure to be followed for projects

approval and implementation is too much for them. This is partly the result of

the 'big-bang' blunder of devolution of huge quantum of funds at one go,

without waiting for capacity building of local government functionaries. With

a view to improve the quality o ' execution by participation and to avoid the

leakage due to the presence of contractors in the system beneficiary

committees were entrusted pith civil construction works. In reality,

beneficiary committees were a lcose association of beneficiaries which do not

have any technical and practical competency in undertaking civil construction

works. Naturally, this led to the coming of contractors as benamis into the

scene. The pity is that presently these binamis had a good time as they had no

responsibility for the execution of the work. Again, they did not have to make

any advance investment as they got advance from panchayats through

beneficiary committees. This re:;ulted in deplorably poor quality of projects

executed and an enormous waste of funds and corruption at the local level.

Now it is well known that what the beneficiaries could do at the most

was to monitor the quality of mplementation of projects. In the name of

people's participation many voluntary expert groups with too much criticism

of the activities of the panchayat and less positive help entered the liable local

government structure which in turn disturbed the apple cart of administration

at the local level. These issues greatly affected the good performance of local

governments. All these and other factors contributed to the poor performance

of panchayats and the consequc:nt decrease in allotment and utilization of

funds. Grants from state plan schemes and management of transferred

institutions together constituted J 3.8 per cent in 1998-99. This share remained

almost the same in subsequent years. At the same time, in absolute terms

these grants showed substantial decrease. For instance, per panchayat state

plan schemes which stood at R: .2.21 lakhs in 1998-99 decreased to Rs.0.68

lakhs, the percentage decrease being 69.23. Similarly, grants pertaining to

management of transferred inztitutions decreased from Rs.6.22 lakhs to

Rs.5.31 lakhs, the rate of decrease being 14.63. The trends show that there is

no clear cut policy of devolutioi~ of grants to panchayats. It is interesting to

notice that the grants from ruriil pool & village road maintenance are not

significant which vary from 1.39 per cent to 0.33 per cent and the devolution

is found to be irregular.

Coming to the centrally sponsored schemes, per panchayat contribution

was Rs.4.02 lakhs in 1998-99 which slightly increased to Rs.4.23 lakhs. It

shows a stagnant picture. Regarding welfare pensions, per panchayat

contribution stood at Rs.5.35 lekhs increased to Rs.8.08 lakhs, the rate of

increase being 51. Formerly, welfare pensions have been disbursed from

various government departments. Presently, they have been transferred to

panchayats for convenience of distribution. The pity is that funds have been

transferred, but not the functionaries in the corresponding proportion. The

procedure regarding the beneficiary selection for pensions is rather time

consuming as it required personal verification by visiting the place of

residence of the beneficiary. It is significant to note that panchayats are

understaffed with the pattern fixed two decades ago when the panchayats had

a different face altogether. In toto, it is also to be seen that the receipts of

grants per panchayat decreased from Rs.61.07 lakhs to Rs.47.27 lakhs the

percentage of decrease being 22.50. We may conclude that the grants received

during the four year period showt:d a decline.

In the case of special grade panchayats also, the same pattern is seen.

Coming to item wise contribution, revenue from plan funds recorded the

highest percentage contribution for having shown 73.15 per cent in 1998-99

which steadily decreased to 60.9 1 per cent in the terminal year. For instance,

per panchayat receipt of plan funds which stood at Rs.76.59 lakhs decreased

to Rs.35.25 lakhs the percentage of decrease being 53.98. In toto, the receipts

under grants showed high fluctuations. For example, per panchayat receipt

was Rs.104.70 is 1998-99 which sharply decreased to Rs.72.14 lakhs in the

next year. Again it, showed a mdden peak to Rs.138.24 lakhs in 2000-01

which sharply fell to Rs.57.87 in the last year. This trend is attributed to the

irregular flow of funds from slate government to panchayats. However, a

microscopic view of the grants-in-aid structure reveals a declining trend both

in the case of lower grade panc.hayats and special grade panchayats over a

period of four years. llence the hypothesis that the flow funds for state

government to panchayats by .Nay of grants-in-aid and assigned taxes is

decreasing over the years is reaswed.

Debt Heads

Receipts under the deb heads (Table 4.7) are collected by the

panchayat and deposited to its account and remitted later on to various

departments. That is, the amount collected shall not be used for the

developmental activities of the 1)anchayats. Here, the panchayats act only as

an agent for collection under dc:bt head account. Therefore, normally there

will not be any great impact on the panchayat revenue by this account. For

lower grade panchayats, it is ob:;erved from the table that, in absolute terms,

per panchayat debt head which stood at Rs.3.91 lakhs showed fluctuations

and decreased to Rs.2.54 lakh in 2001-2002.

The main components of debt head are library less, sales tax, income

tax, Kerala Work man's Welfare compensation fund earnest money deposit

Table 4.7

Debt Heads of selected 20 lowx grade and 10 special grade panchayats ( i s . in Lakhs)

etc. In certain panchayats provident fund, repayment of loans and other govt.

78.37

49.20

60.40

50.84

24.44

16.74

27.43

12.27

dues remained as back log to be remitted. It is seen that majority of the lower

Per panchayat

3.91

2.46

3.02

2.54

2.4

1.67

2.74

1.23

grade panchayats divert the fund under this item for meeting establishment

expenditure which are expected to be met from own fund of the panchayat.

There are arrears for remittance. There are also cases in which provident fund

deducted from salaries are not remitted in time. Similarly, loans from Rural

Development Board, arrears of water charges etc. are not paid in regular

instalments.

In the case of special srade panchayats, per panchayat debt head

fluctuated between Rs.2.4 lakhs and Rs.1.23 lakhs in 2001-02. It is obsewed

that special grade panchayats have better own funds position so as to meet

establishment expenditure and hence there is less diversion of funds from debt

head.

Loans

From table 4.8 it is seen that only one panchayat out of the total sample

has availed of loans from financial institutions (Rural Development Board)

All the other panchayats have not shown any effort to avail loans. This

actually makes a potential loss tcl the panchayats. They can avail of loans for

the creation of income-yielding assets. Most of the panchayats own vacant

plots of lands with them which c m be utilized for this purpose. On the whole,

we may conclude that this is a fully unavailed source of fund.

Table 4.8 Loans of selected 20 lower grade and 10 special grade panchayats

(Rs. in Lakhs)

I Year I Loans I I

1999-00

2000-01

2001-02 -- Nil

Source of Funds

Table 4.9 presents the colnposition of source of funds. It is composed

of own taxes, assigned taxes, non tax revenue, grants-in-aid, debt heads and

loans. From table 4.9 it is seen that the most significant sources are grants-in-

aid and assigned taxes which together constituted 82.13 per cent in 1998-99

which decreased to 72.76 per cent. At the same time, in absolute terms these

sources recorded substantial decrease. For instance, per panchayat assigned

taxes which stood at Rs.7.93 lakhs decreased to Rs.3.37 lakhs in 2001-02, the

percentage decrease being 57.50. Similarly, grants-in-aid decreased from

Table 4.9

Total Source of Funds: of selected 20 lower grade and 10 special grade panchayats (Rs. in Lakhs)

/ 1998-99 1 1999-00 1 2000-01 1 2001-02 1 ( 1998-99 1 1999-00 / 2000-01 1 2001-02 1. i Own taxes i 107.04 i 133.17 i 143.17 i 168.13 i i 97.30 i 128.20 i 112.73 i 143.26 I

Per Panchayat Percent 6.37

Per Panchavat Percent 1 9.44 1 9.33 / 7.16 1 4.83 1 Non-tax revenue 1 108.46 / 122.13 i 148.62 1 163.20 1

I

Percent / 6.45 1 7.45 1 9.40 1 11.70 1 Grants-in-aid 1 1221.42 1 1182.25 1 1114.85 1 945.47 i Per Panchayat 61.07 59.1 1 55.74 47.27 Percent 72.69 72.1 70.55 67.78

5. Debt heads 78.37 49.20 60.40 50.84 Per Panchayat 3.92 2.46 3.02 2.54

I Percent 1 4.66 1 3 1 3.82 / 3.64 1 1 1.76 / 1.62 1 1.67 / 1.46 6. 1 Loans 1 6.30 1

Per Panchayat Percent Total

1 I 1 0.3 1 0.37

1680.28 84.01 100

-

1639.71 81.99 100

-

1580.23 79.01 100

1394.95 69.75 100

1388.47 138.85

100

-

103 1 .I0 103.1 1

100

1643.49 164.35

100

840.48 84.05 100

Total source of funds 1998-99 (Lower Grade Panchayats)

-- -- -p - -- - - --

own taxes El Assigned taxes Non-tax revenue1

OGrants-~n-a~d R l Debt heads Loans I L . - - - : -~ ~ ---- -~ - -

Diagram 4.17

'Total soilrce of funds 200 1-02 (Lower Grade Panchayats)

-~ - -- -. - p~ ~- - I HAssigned taxes ONon-tax revenue)

Loans i

H Debt heads - - -~ -- - - - -~ - -- ~ -- - ~ I

Iliagram 4.18 Total soirce of funds 1998-99

(Special Grade Panchayats)

I ll ~ssigned taxes on-tax revGn4

grants-in-aid I 1 Debt heads Loans I - -- - - -- -

p- ~ - - -

Diagram 4.19 Total source of funds 2001-02

(Special Grade Panchayats)

I - - . --

Own taxes ll Assigned taxes Non-tax revenue ( L n t s - i n - a i d 11 Debt heads !

O Loans --

~p~ ~~~ ~ ~- ~

--- - 1

Rs.61.07 lakhs to Rs.47.27 lakhs, the rate of decrease being 22.60. These

trends are due to the decrease in the devolution of assigned taxes to the

panchayats by the state government. In the case of grants-in-aid the allotments

to panchayats decreased becausc: of the non utilization of plan funds. Plan

funds have been devolved in four instants depending on the utilization of the

previously allotted installments. -i[owever, most of the panchayats did not get

the fourth instalment. This was ihe main reason for the declining trend. It is

seen that own taxes and non tax revenues show almost equal importance.

Both together constituted 12.82 per cent in 1998-99 and increased to 23.75

per cent in 2001-02. At the same time, in absolute terms, both these taxes

showed a substantial progress. For example, per panchayat own taxes which

stood at Rs.5.35 lakhs in 1998-90 increased to Rs.8.4 lakhs, the percentage of

increase being 57.00. Similarly, non tax revenue increased from Rs.5.42 lakhs

to Rs.8.16 lakhs the percentage of increase being 50.55. 'These trends are due

to the increase in the number of lax payers for property tax and increase in the

number of payers of profession lax over the years. It is interesting to observe

that only one panchayat has ava led of loans from Rural Development Board

which was used for the construc ion of a shopping complex during the period

of study.

Rural Development Boartl or similar types of Financial Institutions are

a good source of funds to be utilized by the panchayats, especially, for

constructing income-generating assets which will be a long term asset for the

panchayat. Panchayats have the powers of raising loans and deposits which

have been exercised with the purpose of building income-yielding assets.

Large sums of rental incomes ought to have been earned by this way.

In toto, it is to be seen that the source of funds decreased from

Rs.1680.28 lakhs to Rs.1394.95 lakhs the percentage of decrease being 16.98.

Consequently, per panchayat sollrce of funds also decreased from Rs.84.01

lakhs to Rs.69.75 lakhs. In short, we may conclude that source of funds

recorded a decrease over a period of four years. The highest contribution to

the source of funds was from grants-in-aid. In sum, the analysis of sources of

funds reveals a declining trend, which has its adverse impact on the problems

of resource mobilization and ~tltimately the development scenario of the

panchayats. From table 4.9 it is observed that grants-in- aid showed a steadily

declining trend from a per panthayat value of Rs.61.07 lakhs in 1998-99 to

Rs.47.27 lakhs 2001-02. It is se,:n that the panchayats find it very difficult to

prepare projects and get the approval of the district planning committee with

in the prescribed time limit after the cumbersome procedure of grama sabhas

development seminars. Once the approval is given and the project is ready the

season for implementation would have passed most of the time especially in

the case of projects in the a;<riculture sector. Many projects under the

infrastructure sector are held up because of delay in getting land. In certain

cases the individual beneficiaries would not turn up to take the projects. There

used to be frequent treasury ban:; also. Due to all these factors panchayats will

not be able to avail of all the instalments of plan funds allotted. This is the

major reason for the decline in the source of funds over the years.

Coming to special grade panchayats, it is also seen that the most

important sources are assignc,d taxes and grants-in-aid which together

constituted 85.93 per cent of thc total sources of funds in 1998-99. This share

remained almost the same with marginal fluctuations in subsequent years.

However, in absolute terms these sources recorded tremendous

decrease over the four years. For instance, per panchayat assigned taxes which

stood at Rs.14.6 la!& in 1998-99 decreased to Rs.4.22 lakhs, the rate of

decrease being 71.10. These trelds are due to the non availability of funds

from the state government to panchayats. Assigned taxes are collected by

state governments but given to panchayats. Finances of the state government

during the period was very weak and they held back the amounts to tide over

the fiscal problems of the state government. To make matters worse, there

were treasury bans also. Similarly, per panchayat grants-in-aid which was

Rs.104.71 lakhs in 1998-99 decreased to Rs.57.87 lakhs, the percentage of

decrease being 44.73.

These trends are also due to delayed flow of funds to local bodies. It is

interesting to notice that there were budgetary allocation, but in actual

practice, the panchayats did nct get the amounts due to them, either the

panchayats were not able to uti ize the prescribed minimum to get the next

allotment or the government had no money to disburse to panchayats. It is

pertinent to notice that the state ;:overnment published a white paper showing

its financial position. Treasury bans were every day occurrences during these

days. In the case of both the assigned taxes and grants, the government have

the direct control.

Considering the cases of own tax and non tax revenues, it is significant

to notice that both these source:, show almost the same quantum and rate of

growth. Taken together these two sources constituted 12.31 per cent of the

total sources in 1998-99. This slare showed great fluctuations in subsequent

years having values of 19.58 per cent in 1999-00 and 10.85 per cent in 2000-

01.

In absolute terms own tax revenue sources showed substantial

progress where as non tax revenues showed a slight decrease. For example,

own taxes revenue which stootl at Rs.9.73 lakhs in 1998-99 increased to

Rs.14.33 lakhs, the percentage increase being 47.28. The non tax revenue

showed a decrease. For example, per panchayat non tax revenue which stood

at Rs.7.36 lakhs in 1998-99 decreased to Rs.6.40 lakhs in 2001-02, the

percentage of decrease being 13.04. In the case of own taxes, the upward

trend is due to the fact that there is gradual increase in number of buildings

assessed for tax and increase in the number of payers of profession tax. There

have been good realization of these taxes also. On the other hand, the

panchayats have shown little i~terest in collecting various items of fees.

Hence, it showed a declining trend.

On the whole, the sources of funds of the panchayats decreased from

Rs.13.88 crores to Rs.8.40 crores, the percentage of decrease being 39.48.

Consequently, per panchayat soivces of funds also decreased from Rs. 138.85

l a b s to Rs.84.05 lakhs. In shc~rt, we may conclude that sources of funds

recorded a decrease over a period of four years. Both the lower and special

grade panchayats showed a similu declining pattern.

Sources of funds (People's Planning)

Table 4.10 gives the deta~ls of sources of funds earmarked exclusively

for peoples' planning. As it involved 35 to 40 per cent of the state plan funds,

for expenditure of plan assistanc:e, specific guide lines are issued by the state

government for sectoral allocation, projects preparation, beneficiary selection,

implementation and monitoring. Therefore, these funds are treated separately

for our study. As we know sourc1:s of funds include plan assistance from state

government, own fund of the panchayat transferred, beneficiary contribution,

loans from financial institutions, voluntary contribution and share from other

local bodies. From the table it it; seen that the most significant source is the

plan assistance from state goverrment which constituted 76.69 per cent of the

total funds. This share showed a gradual increase over the years. At the same

time, in absolute terms this source recorded a substantial decrease, For

example per panchayat plan assistance which stood at Rs.42.41 lakhs in 1998-

99 decreased to Rs.28.82 lakhs in 2001-02, the percentage decrease being

32.04. This trend is due to the dccrease in allotment of plan assistance. Due to

a variety of reasons the pancllayats found it very difficult to make the

expenditure in time by stipulati~ig to the guidelines for spending plan funds.

Most of the projects of the panchayats were imitations of the model projects

prepared at the state level rc:sulting in problems at the stage of real

implementation at the local 1evc:l. The true reflection of needs and wants of

the grama sabha in the projecls of the panchayats are very limited which

caused the declining interest in participation and beneficiary contribution for

the projects in later years. Frvquent treasury bans for long periods every

month also prevented the smootl~ expenditure of funds. It is interesting to note

that every year there is increase: in the allocation of funds as per the budget

document of the state government. But in actual practice panchayats could get

only less and less amounts during the period.

Table 4.10

Source of Funds: People's Planning of selected 20 lower grade and 10 special grade panchayats (Rs. in Lakhs)

.. I .

2.

3

4.

5.

6.

55.31 100

~ ~ ~ ~

Plan assistance from state government Per Panchayat Percent Own fund transferred Per Panchayat Percent Beneficiary Contribution Per Panchayat Percent Loans from Banks & Other institutions

Voluntary Contribution Per Panchayat Percent Share from other local bodies Per Panchayat Percent

1999-00 774.57 38.73 79.07 69.22 3.46 7.07

91.33 4.57 9.32 4.86

0.24 0.50

35.41 1.77 3.61 4.21

0.21 0.43

979.60 48.98

100

1998-99 848.27 42.41 76.69 99.22 4.96 8.97

87.82 4.39 7.94

70.71 3.54 6.39 0.13

0.006 0.0 1

1106.15

2000-01 687.19 34.36 79.67 100.87 5.04 11.69 37.59 1.88 4.36 2.04

0.10 0.24 9.23 0.46 1.07

25.67

1.28 2.98

pppp

862.59 43.13

100

2001-02 576.41 28.82 86.65 36.77 1.84 5.53

20.78 1.04 3.12

4.73 0.23 0.71

26.54

1.33 3.99

665.23 33.26

100

1998-99 765.91 76.59 89.16 45.00

4.5 5.24

33.18 3.32 3.86

10.00 1 .OO 1.16 4.94

1 0.49 0.58

859.04 85.9 100

1999-00 473.07 47.31 81.64 52.06

5.2 8.98

35.59 3.56 6.14

17.13 1.71 2.96 1.62

0.16 0.28

ppp

579.47 57.95 100

2000-01 421.54 42.15 83.37 59.24 5.92 11.72 16.40 1.64 3.24

3.80 0.38 0.75 4.65

0.47 0.92

505.63 50.56

100

2001-02 352.43 35.24 78.2

78.15 7.8

17.34 10.46 1.05 2.32

3.60 0.36 0.80 6.02

0.60 1.34

450.65 45.07

100

Iliagram 4.20

Source of funds: People's Planning 1998-99

(Lower Grade Panchayats)

( 1 0 Beneficiary contribution Loans from banks & other institutions(/ ~ 1. Vo1untary~;ontribution Share from other local bod~es --- -

- - - - - . - -~ ~ ~ - - -

Source of funds People's Planning 2001 -02

(Lower Grade Panchayats)

- - - - - -- -- 1 Plan assistance from State G O ~ 0 i n fund transferred

Beneficiary contribution Loans from banks & other institutions . Voluntary contribution Share from other local bodies ~ - ~ ~ -

-~ - -~ - - -

Diagram 4.22

Source of funds: People's Planning 1998-99

(Special Grade Panchayats)

- - ~ . ~ ~ --

Govt. M o w n fund transferred OLoans from banks & other institutions

Share from other local bodies . ~

- - --

Iliagram 4.23

Source of funds People's Planning 2001-02

(Special Grade Panchayats)

~- - ~~ ~

I Plan assistance from State God. Own fund transferred

Beneficiary contribution Loans from banks & other institutions

.Voluntary contribution Share from other local bodies - -. -

~ - - ~ -- - . - - I \ --

Coming to beneficiary contribution, per panchayat the amount stood at

Rs.4.39 lakhs in 1998-99 which decreased to Rs.1.04 lakhs, the percentage

decrease being 76.30. During tht: initial years of the people's plan campaign

the beneficiaries showed good interest to contribute their share. But over the

years people's interest declined and the panchayats were forced to reduce the

number of projects with beneficiary contribution.

Similarly, per panchayat loluntary contribution which stood at Rs.3.54

lakhs decreased sharply to Rs.0.33 lakhs, the percentage of decrease being

93.50. The reason for this downward trend is that people's interest to

contribute has become less as they feel that panchayats are flooded with funds

and they get lapsed due to laxi@ on the part of the panchayat administration.

It is to be noticed that the share from other tiers of panchayats is negligibly

small and this indicates that ccmmon integrated projects with contribution

from all tiers are few. The main reason for this is that though the guide lines

stipulates that recommendations for common projects may be given to higher

tiers, in actual practice, this is nct considered at that level. There used to be no

time for integration of projects ;it the district and state levels by the time the

projects reach at the District Planning Committee. It is interesting to notice

that every year there used to be ast hour rush. In many cases, projects are not

assessed properly for its feasil)ility which causes hurdles at the stage of

execution.

The fate of the dream projects were also the same. Delays in

availability of land and hurdles in land acquisition were some of the other

impediments. Coming to loans from banks and other institutions the picture

was very poor. Majority of the panchayats were not able to mobilise funds

from this source. The main reason was non feasibility of the project.

Exactly the same pattern is followed by special grade panchayats also.

For special grade panchayats per panchayat plan assistance which was at

Rs.76.59 lakhs in 1998-99 dec:reased to Rs.35.24 lakhs in 2001-02, the

percentage decrease being 54. It may be noted that Munnar panchayat

received an amount of Rs.301.1.4 lakhs in 1998-99 as plan assistance which

declined to Rs.60.96 lakhs in 2001-02. These amounts are much greater than

the per panchayat values.

In this chapter we dis;ussed the sources of funds for sample

panchayats classified into lower grade and special grade. This classification

was based on the guidelines is:;ued in 1983. It is felt that the division of

panchayats into various categori,:~ based on different criteria is not scientific

and relevant because irrespectite of the status of the panchayats pattern of

sources of funds is almost similar. To ascertain this and also assure

correlations and t-test (two sample means) were estimated and the results are

available from table 4.1 1.

From table 4.1 1 it is seen that in the case of basic tax, contribution,

others, people's planning, centr;illy sponsored schemes and grants-in-aid the

correlations are not siginificant. This may be due to the attitude of the

government towards various category of panchayats. In the case of river sand,

people's planning and centrallj sponsored schemes even the correlation is

negative. The t-test (two sample mean) values are found to be statistically

insignificant in all cases.

Table 4.1 1

Computed correlation and t-values of sample panchayats

Incoma

Property Tax

Profession Tax

Total own tax revenue

Duty on transfer of property

Basic Tax

Vehicle tax compensation

Contribution

River sand

Others

Plan (People's Planning)

fate Plan Schemes

Centrally Sponsoreil Sche

Pensions (Social Welfare)

Grants-in-aid

These trends indicate that the gr'mping of panchayats into different categories

is not relevant. All panchayats are of almost equal status in terms of financial

performance with respect to source of funds. Hence the hypothesis that there

is no significant difference in tke pattern of income and expenditure for both

lower grade and special grade psnchayats is validated.

To sum up, based on th; sample panchayat analysis it is established

that the decentralization and panchayati raj have not made any substantial

changes in the structure of sources of funds. The gains of new Panchayat Raj

Act is not directly associated to the own resources of the panchayats. The pre

panchayati rirj sources of funds and post panchayati raj sources of funds are

not significantly different. The relative advantage was with respect to the flow

of funds for activities listed under people's planning. Eventhough there were

attempts to link panchayati raj astivities directly with people's planning, and

similar activities moved in an isoloated way limiting to planning exercise.

These discussions, arguments and logic validate the hypothesis that resource

mobilisation efforts of panchayats are declining over the years.