About Panchayati Raj Institutions and their finances
- 73rd Constitutional Amendment Act 1992: institutionalized the PRIs at three levels i.e.,
- Mandate for setting up of Panchayats is provided by Article 243 in Part IX of the Constitution of India.
- Panchayats is a State subject.
- Constitutional Provisions for Financial Empowerment of Panchayats
- Article 243H: Provides for finance for the Panchayats by the state from the Consolidated Fund.
- It empowers panchayats to impose, collect, and allocate taxes, duties, tolls, and fees.
- Article 243-I: Setting up a Finance Commission (FC) every 5 years to review the financial position of Panchayats and make recommendations to improve their financial position.
- Article 280(3)(bb): Mandates FCs to recommend measures needed to augment the Consolidated fund of the state and supplement panchayat resources to the President.
Sources of Finance for PRIs Internal/Own sources of revenue
- Tax Revenue from Property tax on lands (other than Agriculture Land) or buildings or both; Taxes on Duties and Commodities; Service tax; Taxes on professional trades etc.
- Non-tax revenue from market fees on persons exporting goods for sale in Panchayat area; Fees on Registration of Cattle sold within the Panchayat area etc.
Transfer of Funds from Central Finance Commission (CFC) and State Finance Commission (SFC)
- Tied Grants: Earmarked for specific purposes or sectors, like sanitation, education etc.
- Untied Grants (General purpose grants): These are provided without specific conditions or restrictions and can be utilised for local needs and priorities.
- Performance-based Grants: Additional funds granted to PRIs based on recommendations of CFCs and specific performance criteria. •
- Special Category Grants: These grants are additional financial support designed to address unique challenges or particular needs of PRIs in specific regions or contexts.
- Other Sources
- Transfer from Central Government and State Government under different schemes like MGNREGA, PMAY (Rural), Sansad Adarsh Gram Yojana etc.
- Grants from internationals bodies like World Bank, etc. Challenges associated with the finance of PRIs
Importance of PRIs for Development:
- Creation of Social Infrastructure
- Accelerates Implementation of Government Schemes
- Localisation of Sustainable Development Goals (LSDGs)
- Enables Rural Development
- Beacon of Women Empowerment
- Primary and credible source of Information and Technologies developments
Initiatives taken to improve financial ecosystem of PRIs.
- e-Gram Swaraj: A user friendly web-based portal for decentralised planning, progress reporting and work-based accounting
- Gram Panchayat Development Plan (GPDP): GP development plans are prepared in a participatory manner under people’s Plan Campaign.
- Rashtriya Gram Swaraj Abhiyan (RGSA): It aims to strengthen capacities of institutions for rural local governance to become more responsive towards local development needs.