Local self-government institutions (LSGIs) are likely to lose their fiscal and administrative autonomy and be reduced to the status of government departments.
State Finance Commission cell sources told The Hindu that the present system of devolving funds to local governments would be abolished on April 1 and substituted with a bill system under which funds would be released only against fully vouched contingent bills furnished by the drawing officers in the treasury. No further allocation would be made to LSGIs after the funds they hold at present get exhausted.
A note issued by Finance Secretary K.M. Abraham described the change as a measure to tackle the mounting revenue deficit.
The fund devolution mode in vogue is not a welcome trend in the present Ways and Means situation of the government and should be urgently modified to address the financial crisis, the note says.
The proposed reform is likely to reduce local governments to an appendage of the government. This would render the State Finance Commission and its recommendations in apportioning funds too redundant. Local bodies would also be deprived of the leeway to carry over unspent funds to the next financial year.
The note has laid out a clear road map for the changeover.
Expenditure
Treasury officers would be authorised to debit the expenditure incurred by each local body from a consolidated fund. Treasuries would be informed about the budgetary provision that can be drawn by each civic body in every quarter. Fixing of expenditure for development funds would come to an end.
This would deplete the financial and administrative powers of local governments and would run contrary to the concept of devolving powers to the grassroots level.
The efforts put in for preparing a shelf of projects to be completed during the five-year Plan period have become futile. Henceforth, local governments would have to work out only annual projects and need not have to plan beyond a year.
If the government imposed curbs on treasury payments, it would definitely have a bearing on the bill clearing process and civic bodies would have to endlessly wait for payments, the sources said.
