The critical role of decentralised responses

POLITY/ GOVERNANCE

Topic: General Studies 2:

• Devolution of powers and finances up to local levels and challenges therein. 
• Government policies and interventions for development in various sectors
• Important aspects of governance, transparency and accountability

The critical role of decentralised responses

Context: The novel coronavirus pandemic has brought home the critical role of local governments and decentralised responses

What are the issues that plague local bodies that needs to be addressed?

• Health Delivery: The new normal demands a paradigm shifts in the delivery of health care at the local body level. 
• Prevalence of Parastatal bodies: The parallel bodies (Ex. District Water and Sanitation Committees) that have come up after the 73rd/74th Constitutional Amendments have considerably undermined authority of local bodies.
• Multiple oversight bodies have distorted the functions-fund flow matrix at the lower level of governance. 
• Administrative Challenges: There is yet no clarity in the assignment of functions, functionaries and financial responsibilities to local governments. Functional mapping and responsibilities continue to be ambiguous in many States. 
• Lack of Politico-administrative Will: The critical role of local governments will have to be recognised by all

How resources can be mobilized for Local bodies in the wake of COVID pandemic?

1. Local Finance

• The Economic Survey 2017-18 points out that urban local governments generate about 44% of their revenue from own sources as against only 5% by rural local governments.
• Property tax collection with appropriate exemptions should be a compulsory levy and preferably must cover land.
• Land monetisation and betterment levy may be tried in the context of COVID-19 
• When they are not taxed, people remain indifferent. All States should take steps to enhance and rationalise property tax regime
• The share of property tax in GDP has been declining since 2002-03, In India in 2017-18 it is only 0.14% of GDP as against 2.1% in the OECD countries.
• Municipalities and even suburban panchayats can issue a corona containment bond for a period of say 10 years, on a coupon rate below market rate to increase its funds

2. MP fund scheme

• MPLADS suspended now and appropriated by Centre must be assigned to local governments, preferably to panchayats on the basis of well-defined criteria.

3. Fifteenth Finance Commission (FFC)

• The local government grant of ₹90,000 crore for 2020-2021 by the FFC is only 3% higher than that recommended by the 14th FC. For panchayats there is only an increase of ₹63 crore
• Untied Grants: The ratio of basic to tied grant is fixed at 50:50 by FFC. In the context of the crisis under way, all grants must be untied for freely evolving proper COVID-19 containment strategies locally. 
• A special COVID-19 containment grant to the local government by the 15th-FC to be distributed on the basis of State Finance Commission-laid criteria is needed now.
• Further the 13th Finance Commission’s recommendation to tie local grants to the union divisible pool of taxes to ensure a good and predictable source of revenue to LGs (accepted by the then Union government) must be restored by the commission.

Conclusion

COVID-19 has woken us up to the reality that local governments must be equipped and empowered. Relevant action is the critical need.

Connecting the dots:

• 15th Finance Commission
• 73rd and 74th Constitutional Amendment Act – Critical Analysis