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Revenue of Panchayats UPSC NOTE

 Challenges and opportunities for generating revenue by panchayats in India

  • Three decades have passed since the 73rd and 74th Constitutional Amendments Acts came into effect.

  • 73rd and 74th CAA envisages that local bodies in India would function as institutions of local self government. 

  • The Ministry of Panchayati Raj was constituted in 2004 to strengthen rural local governments.

  • The commitment of State governments towards decentralisation has been vital in making panchayati raj institutions an effective local governance mechanism at the grass-roots level.

  • The constitutional amendment has set forth specific details on fiscal devolution which includes the generation of own revenues.

  • Panchayats earn only 1% of the revenue through taxes.

  •  The rest being raised as grants from the State and Centre.

  • It specifically points out that 80% of the revenue is from the Centre and 15 % from the States.

  • The report of the expert committee constituted by the Ministry of Panchayati Raj on own source of revenue (OSR) of rural local bodies elaborates on the details of State Acts that have incorporated tax and non-tax revenue that can

be collected and utilised by panchayats.

  • Property tax, cess on land revenue, surcharge on additional stamp duty, tolls, tax on profession, advertisement, user charges for water and sanitation and lighting are the major OSRs where panchayats can earn maximum income.

  • Panchayats are expected to establish a conducive environment for taxation by implementing appropriate financial regulations.

  • This includes making decisions regarding the tax and non-tax bases, determining their rates, establishing provisions for periodic revisions, defining exemption areas.

  • The huge potential for non-tax revenue includes fees, rent, and income from investment sales and hires charges and receipts

  • OSR covers income from rural business hubs, innovative commercial ventures, renewable energy projects, carbon credits

  • Corporate Social Responsibility (CSR) funds and donations.

  • Despite every enabling factor to raise revenue, panchayats confront several impediments in resource mobilization.

  • The ‘freebie culture’ rampant in society is the cause for the antipathy in paying taxes. 

  • Elected representatives feel that imposing taxes would alter their popularity adversely

  • There is a need to educate elected representatives and the public on the significance of raising revenue to develop panchayats as self-governing institutions.

  • The dependency syndrome for grants has to be minimised and in due course, panchayats will be able to survive on their own resources.

  • Panchayats can only achieve such a state of affairs when there are dedicated efforts in all tiers of governance, which includes even the State and central level.



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Learnerz IAS | Concept oriented UPSC Classes in Malayalam: Revenue of Panchayats UPSC NOTE
Revenue of Panchayats UPSC NOTE
Learnerz IAS | Concept oriented UPSC Classes in Malayalam
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