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`More control leaves local bodies with limited discretion'

By Our Special Correspondent

BANGALORE, NOV. 12. The limited devolution of meaningful authority and discretion to local bodies is one of the weaknesses in the decentralisation policy of the State Government, according to a World Bank report.

The report, "Fiscal decentralisation to rural governments in India", which was released here on Wednesday by the Deputy Chief Minister, Siddaramaiah, says local governments have been vested with only a few resources, but relatively little discretion to make a significant impact on the delivery of services. As a result, local communities have not been engaged fully in the process of planning and accountability as desired by the policymakers.

The assignment of expenditure responsibilities is not clear. The Government has retained the responsibility for a large number of key decisions on various services and has left the local governments with limited discretion. Because of this, there is unclear assignment of expenditures between three tiers that is leading to duplication of efforts, problems in coordination and uncertainty on the part of the local population on where there is accountability.

`Demarcation must'

The bank, which has studied the functioning of local bodies in Bagalkot, Bidar, Mandya and Udupi districts, says it is necessary to demarcate the detailed assignment of functions, the fiscal transfer system and the administrative arrangement for supporting decentralisation, and capacity-building at the State and local levels.

In Karnataka, there is no discretion in the utilisation of plan funds.

Almost 50 per cent is earmarked for salary, 20 per cent for transfers to individuals and most of the remainder for input purchases where there is little local discretion. The situation is similar for non-plan funds (89 per cent for salary and transfers).

The revenue generating power of the local bodies is negligible - less than one per cent of the Gross Domestic Product from their own resources.

The main reasons for poor revenue generation are unwillingness of officials at the local level to enforce tax laws; limited capacity of local government officials to effectively administer a revenue system; weak administrative procedures; property tax base not amenable to take advantage of the increase in property values for the purpose of taxation and taxpayers see little benefit from paying taxes to local governments.

Tax collection rates low

The report says the property tax collection rates are low. On an average, the per capita collection was only Rs. 8 in 2001, showing a decline from the previous year.

"Almost 80 per cent of the gram panchayats in the four districts have property tax collection of less than Rs. 10," it adds.

Under the present arrangement, panchayats make no contribution to the formulation of schemes and are given little discretion in their implementation.


The bank has recommended to the State to redesign the transfer system by making it transparent through a formula-driven allocation.

It has recommended for conversion of the transfer system from scheme-based transfers into broad programmes. The local bodies should have flexibility and autonomy to make allocations according to priorities.

Fiscal information

The fiscal information system in the State does not provide an adequate base for designing, implementing and evaluating the decentralisation policy. The development of a proper fiscal information system is an important recommendation of the study.

The study focused on Karnataka and Kerala where decentralisation appears to be better compared to other States.

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