The government decision to constitute 30 municipalities without gauging financial implications is likely to have a serious bearing on the functioning of urban local bodies.
Local Self-Government Department sources told The Hindu that functioning of more than 40 of the existing 60 municipalities was already in a quandary and they were striving hard to meet even the committed expenditure, including administrative expenses, salary, and pension.
The government had already decided to do away with the system of apportioning funds for local bodies annually and switch over to the bill system. As per the new system, local bodies would have to furnish bills for the works executed in each quarter against which funds would be released from the treasury. “Such decisions are likely to deplete the fiscal autonomy of local governments,” the sources said.
ADVERTISEMENT
Even after accepting recommendations of the Fourth State Finance Commission for institutionalising decentralisation of powers and funds to the local governments, the government had not opposed the Fifth Finance Commission stance that the local governments should reduce their reliance on the government and tap own income sources.
A proposal from the local governments to provide a special grant to compensate the shortfall in revenue on granting building tax concessions had not been considered so far.
The lingering financial crisis would be a major hurdle for the government to make the new municipalities functional. The Finance Department is understood to have stonewalled all proposals that would incur major additional liability to the government.
ADVERTISEMENT
Formation of a new panchayat or municipality would definitely cost the government dear. The approximate cost for setting up infrastructure such as office building, staff, vehicles and allied facilities in each new local body had been modestly pegged at Rs.40 lakh.
Recurring expenditure
Recurring expenditure such as salary and other benefits to staff too would vary in each municipality. Formation of new municipalities would invariably call for creation of new posts too.
The Finance Department is understood to have expressed its reservations against the decision anticipating such problems and had also clarified that it was not keen on an extensive delimitation process.
But the political leadership is understood to have overruled such objections and went ahead with the formation of the new municipalities, which may trigger a row, the sources said.
Most municipalities hard-pressed to meet committed expenditure
Finance Department against extensive delimitation process