GOVERNMENT OF INDIA

SECOND ADMINISTRATIVE REFORMS COMMISSION

SIXTH REPORT

LOCAL GOVERNANCE
An inspiring journey into the future

OCTOBER 2007

PREFACE
In this structure composed of innumerable villages, there will be ever widening, never ascending, circles. Life will not be a pyramid with the apex sustained by the bottom. But, it will be an oceanic circle, whose centre will be the individual, always ready to perish for the village, the latter ready to perish for the circle of the villages, till at last the whole becomes one life composed of individuals, never aggressive in their arrogance, but ever humble, sharing the majesty of the oceanic circle of which they are integrated units. Therefore, the outermost circumference will not wield power to crush the inner circle, but will give strength to all within and will derive its own strength from it. Mahatma Gandhi In this report on Local Governance, the Administrative Reforms Commission has examined in detail the issues relating to rural and urban local governance in India with a special focus on the need for real democratic decentralisation in the country in order to usher in genuine grass roots democracy as envisaged by the founding fathers of our republic and as now specifically mandated by our Constitution. The Report examines these issues in three parts - the first part deals with common issues of local governance that are relevant for both rural and urban areas as well as the rural-urban continuum; the second deals with rural governance issues; and the third with urban governance. What are the characteristics of good governance? An institutional set-up that ensures good governance usually has the following features: 1. Participation All men and women should have a voice in decision-making, either directly or through legitimate intermediate institutions that represent their interests. Such broad participation is built on freedom of association and speech, as well as capacities to participate constructively. 2. Rule of Law Legal frameworks should be fair and enforced impartially, particularly laws on human rights.

3. Transparency Transparency is built on the free flow of information. Processes, institutions and information are directly accessible to those concerned with them, and enough information is provided to understand and monitor them. 4. Responsiveness Institutions and processes try to serve all stakeholders. 5. Consensus Orientation Good governance mediates differing interests to reach a broad consensus on what is in the best interests of the group and where possible, on policies and procedures. 6. Equity All men and women have opportunities to improve or maintain their well-being. 7. Effectiveness and Efficiency Processes and institutions produce results that make the best use of resources. 8. Accountability Decision-makers in government, the private sector and civil society organisations are accountable to the public, as well as to the institutional stakeholders. This accountability differs depending on the organisation and whether the decision is internal or external to an organisation. 9. Strategic Vision Leaders and the public have a broad and long-term perspective on good governance and human development, along with a sense of what is needed for such development. There is also an understanding of the historical, cultural and social complexities in which that perspective is grounded. Our Constitution provides a clear mandate for democratic decentralisation not only through the Directive Principles of State Policy which exhorts the State to promote Panchayati Raj Institutions but more specifically now through the 73rd and 74th Amendments of the Constitution which seek to create an institutional framework for ushering in grass roots democracy through the medium of genuinely self-governing local bodies in both urban and rural areas of the country. However, despite the constitutional mandate, the growth of self-governing local bodies as the third tier of governance in the country has been uneven, halting and slow.

ii

I was recently told about the observation of a visiting European who wondered how India is able to function without any local government worthy of the name. His bafflement is understandable. We have allowed local bodies to atrophy and starved them of funds to such an extent that while local government revenues accounted for 15% of the total government revenues in the USA in the year 2001, the corresponding figure in India was just 3%. Even after the passing of the 73rd and 74th Constitutional Amendments, the transfer of funds, functions and functionaries has been nominal in most States with notable exceptions such as Kerala. Throughout the seventies and eighties, a process of centralisation of even basic municipal functions such as water supply and sanitation into the hands of parastatals such as water boards and authorities has led to a massive decline in the role and status of local bodies which is only now sought to be reversed. Such reversal faces inevitable hurdles from the established institutional structures at the State Government and district levels. Local democracy is sometimes treated as synonymous with decentralisation, but the two are in fact quite distinct. In particular, decentralisation is not necessarily conducive to local democracy. In fact, in situations of sharp local inequalities, decentralisation sometimes heightens the concentration of power, and discourages rather than fosters participation among the underprivileged. To illustrate, in some tribal areas where upper caste landlords and traders dominate village affairs, the devolution of power associated with the Panchayati Raj amendments has consolidated their hold and reinforced existing biases in the local power structure. It is now well established that the constitutional division of subjects between the Union and the States has been overdrawn and that what matters is not the subjects but the functions under each subject. These should ideally be performed according to the principle that the central authority should have a subsidiary function performing only those tasks which cannot be performed effectively at the more immediate or local level. That is the decentralisation envisaged in the 73rd and 74th Constitutional Amendments which now needs to be implemented in full. The world today is poised to leave its rural past behind. With cities being the main beneficiaries of globalisation, millions of people chasing jobs are migrating to cities, both large and small. For the first time in history, more than half the worlds population of 3.3 billion is living in these urban complexes. Within the next two decades, five billion people, i.e. 80 per cent of the worlds population will be living in cities. By contrast, the worlds rural population is expected to decrease by 28 million during this same period. Since most of this demographic growth will be in Asia and Africa, the crucial question is how Nation States will cope with this demographic transition, especially since most of this urban growth iii

is going to be propelled by the poor. Are our policymakers and civil society with their ill-equipped managerial capacities equipped to deal with this mounting population growth? Satellite pictures show that together the urban sites now cover more than 2.8 per cent of the earths landmass, an area slightly smaller than Japan. But because our cities are pulsating with a concentrated mass of people, we tend to see them as being larger than what they actually are. A recent UNFPA report on the status of world population has said that India does not even recognise peri-urban areas within its urban population and so understates the percentage of people who need to be funded in plans for urban areas. Peri-urbanisation refers to rapid unplanned settlement over large tracts of land in the precincts of manufacturing facilities on a citys periphery. Such areas lack clear administration, suffer from sanitation and water problems and are transitional zones between towns and the countryside. The key question of course is just how sustainable our urban conglomerates are. The answer to this complex question lies in the kind of consumption patterns our city dwellers are going to adopt. If we continue to foolishly dip into our natural resources to give a few glaring examples, Brazilian Amazon forests are being torn down to export wood to the United States and Europe, or closer home, lakhs of farmers and villagers are being displaced to build dams in order to provide electricity and water to our metropolis we will have to pay a heavy price. The interaction between urban and rural growth and sustainability is particularly critical for our future. Preventing environmental degradation and reducing vulnerability of the poor are key interventions that will determine the quality of life in our cities. In India, we are having the worst of urban development in the form of unsustainable slum improvement. We are also having the worst of rural development in the form of ill-designed SEZs. We have made a mess in both because we have not asked what the people want; only what we want for ourselves. To treat rural and urban poverty as somehow separate is to adopt a rather short-sighted view of the problem. Rural development supports urban development and vice versa. Another blinkered approach is to regard the urban poor as being a drain on the urban economy. Experts insist that the urban poor are essential to the economy and well-being of our cities. The majority may be working in the informal sector, but this sector is not a messy mix of marginalised activities as it tends to be viewed. Rather, it is a competitive and highly dynamic sector, which is well integrated into the urban and even the global economy. Over half the urban population in most developing nations is being forced to live in slums, with China and India together having 37 per cent of the worlds slums. The 2001 census estimated the number of slum dwellers in India at 40.3 million that is about 14.2 per cent of the population. iv

Yet, India need not have slums. It is less densely populated than England, Japan, Holland and several other countries. If those nations have avoided slums, we should be able to do the same. The majority of those living in these slums are young people below the age of 18. Interpersonal rivalry and insecurity are rising amongst these young people who have been found to be the largest perpetrators of violence. (They are also its principal victims). As high prices of urban land affect the poor and the lower middle classes (whose population exceeds 50 per cent of the total) the most, it is incumbent upon government to stop all speculative increases in urban land prices. Towards this end, the Union/State and Local Self Governments need to undertake legal and administrative reforms. The world sees India as potentially the biggest growth story, after China, in the coming decades. Some of the cities like Singapore, Kuala Lumpur and a few cities in China are now taking quantum leaps to become the greatest urban landscapes. Indian cities need to compete with them in a big way. If India is to meet the growing expectations of the global investors, one key test will be how it manages its rapid urbanisation. Everything else will flow from how well this is done. We need to create world class cities big and small which attract people from within and outside to participate in the economic social and cultural activity. In fact, many reckon this to be the most important condition for turning Mumbai into a world financial centre that will act as an aggregator and executor of complex financial transactions from across the world. In this Report, the Commission has tried to chalk out an agenda for reform of local governance in both urban and rural areas. At the outset, the core principles that underpin this agenda have been outlined. These principles include, inter-alia, democratic decentralisation as the centre-piece of governance reforms in the country; the principle of subsidiarity which means that what can best be done at the lower levels of government should not be centralised at higher levels; a clear delineation of functions entrusted to the local bodies; effective devolution in financial terms and convergence of services for the citizens as well as citizens centric governance structures. Based on these principles, the Report first looks at the present constitutional scheme relating to local bodies and what has already been achieved as well as what remains to be done. On the basis of this analysis, it is proposed that a framework law at the national level may be prescribed for local bodies with the consent of the States in order that devolution of functions as well as funds and functionaries becomes mandatory and not optional. This section also deals with the issues relating to capacity building for self-governance, the need for assigning the functions of decentralised planning to a single agency at the local and regional levels, the mechanisms required for ensuring transparency and accountability such as well defined audit mechanisms as well as the need for v

constitution of an Ombudsman to take care of complaints against local bodies. The question of creating a third tier of representative government at the district level without doing away with the historical institutional strengths represented by the office of the District Collector is also extensively examined and our recommendation on this issue represents the golden mean between the strident positions that are often taken on this issue. Thereafter, in the section on rural governance, issues relating to the role of Ward Sabhas, giving Panchayati Raj Institutions greater autonomy in personnel management and in the management of local resources are discussed in detail. The question of activity mapping to ensure clear cut transfer of functions to the Panchayati Raj Institutions (PRIs) as well as the critical issue of fiscal decentralisation are also analysed in detail in this section. Finally, the need to give the PRIs the central role in the implementation of centrally sponsored schemes while, at the same time, increasing the proportion of untied funds made available to them for carrying out their statutory functions are also highlighted. In the area of urban governance, the trends in urbanisation in India, the need for clear cut demarcation of the functional domain of Urban Local Governments (ULBs) and the need to make the Mayor a directly elected CEO of the ULBs are examined along with examples of international best practices. How municipal finances can be revitalised is also covered in detail in this section. In the area of infrastructure and service provision, the need to clearly make all infrastructure service providers accountable to the concerned ULBs is clearly prescribed. The importance of the emerging mega cities in the country and need for special institutional mechanisms to tackle their specific problems are also emphasised. The opportunity of creating 25 to 30 world class mega cities in India by using the JNNURM Scheme is also highlighted. Finally, the need for creating a symbiotic relationship between the ULBs and State Governments and how this can be achieved is examined and recommendations made. In conclusion, I would like to extend our gratitude to Sri Mani Shankar Aiyar, Minister for Panchayati Raj, Government of India; Shri V.N. Kaul, Comptroller and Auditor General of India and Shri N. Gopalaswamy, Chief Election Commissioner of India for their valuable inputs and suggestions which were of immense help to the ARC in formulating its recommendations on various issues relating to Local Governance in India.

New Delhi October 22, 2007 vi

(M. Veerappa Moily) Chairman

Government of India Ministry of Personnel, Public Grievances & Pensions Department of Administrative Reforms and Public Grievances Resolution New Delhi, the 31st August, 2005 No. K-11022/9/2004-RC. The President is pleased to set up a Commission of Inquiry to be called the second Administrative Reforms Commission (ARC) to prepare a detailed blueprint for revamping the public administration system. 2. 3. The Commission will consist of the following : (i) (ii) (iii) (iv) (v) (vi) Shri Veerappa Moily - Chairperson Shri V. Ramachandran - Member Dr. A.P. Mukherjee - Member Dr. A.H. Kalro - Member Dr. Jayaprakash Narayan - Member Smt. Vineeta Rai - Member-Secretary

The Commission will suggest measures to achieve a proactive, responsive, accountable, sustainable and efficient administration for the country at all levels of the government. The Commission will, inter alia, consider the following : (i) Organisational structure of the Government of India (ii) Ethics in governance (iii) Refurbishing of Personnel Administration (iv) Strengthening of Financial Management Systems (v) Steps to ensure effective administration at the State level (vi) Steps to ensure effective District Administration (vii) Local Self-Government/Panchayati Raj Institutions (viii) Social Capital, Trust and Participative public service delivery (ix) Citizen-centric administration (x) Promoting e-governance (xi) Issues of Federal Polity (xii) Crisis Management (xiii) Public Order vii

Some of the issues to be examined under each head are given in the Terms of Reference attached as a Schedule to this Resolution. 4. The Commission may exclude from its purview the detailed examination of administration of Defence, Railways, External Affairs, Security and Intelligence, as also subjects such as Centre-State relations, judicial reforms etc. which are already being examined by other bodies. The Commission will, however, be free to take the problems of these sectors into account in recommending re-organisation of the machinery of the Government or of any of its service agencies. The Commission will give due consideration to the need for consultation with the State Governments. The Commission will devise its own procedures (including for consultations with the State Government as may be considered appropriate by the Commission), and may appoint committees, consultants/advisers to assist it. The Commission may take into account the existing material and reports available on the subject and consider building upon the same rather than attempting to address all the issues ab initio. The Ministries and Departments of the Government of India will furnish such information and documents and provide other assistance as may be required by the Commission. The Government of India trusts that the State Governments and all others concerned will extend their fullest cooperation and assistance to the Commission. The Commission will furnish its report(s) to the Ministry of Personnel, Public Grievances & Pensions, Government of India, within one year of its constitution. Sd/- (P.I. Suvrathan) Additional Secretary to Government of India

5. 6.

7.

8.

viii

Government of India Ministry of Personnel, Public Grievances & Pensions Department of Administrative Reforms and Public Grievances RESOLUTION New Delhi, the 24th July, 2006 No. K-11022/9/2004-RC (Vol.II) The President is pleased to extend the term of the second Administrative Reforms Commission by one year upto 31.8.2007 for submission of its Reports to the Government. Sd/- (Rahul Sarin) Additional Secretary to the Government of India

Government of India Ministry of Personnel, Public Grievances and Pensions Department of Administrative Reforms & Public Grievances RESOLUTION New Delhi, the 17 July, 2007 No.K-11022/26/2007-AR The President is pleased to extend the term of the second Administrative Reforms Commission (ARC) by seven months upto 31.3.2008 for submission of its Reports to the Government. Sd/- (Shashi Kant Sharma) Additional Secretary to the Government of India

ix

CONTENTS Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5. x Introduction: Local Self Government Evolution and Growth The Core Principles 2.1 Introduction 2.2 Subsidarity 2.3 Democractic Decentralisation 2.4 Delineation of Functions 2.5 Devolution in Real Terms 2.6 Convergence 2.7 Citizen Centricity Common Issues 3.1 The Constitutional Scheme 3.2 Elections 3.3 Functions of Local Governments 3.4 Framework Law for Local Bodies 3.5 Devolution of Funds 3.6 Capacity Building for Self Governance 3.7 Decentralised Planning 3.8 Accountability and Transparency 3.9 Accounting and Audit 3.10 Technology and Local Governance Rural Governance 4.1. Institutional Reforms 4.2. Functional Devolution 4.3. Panchayat Finance 4.4. Rural Development 4.5. Role of Panchayats in Delivery of Services 4.6. Local Government in the Fifth and Sixth Schedule Areas Urban Governance 5.1 Urbanisation and Growth 5.2 Structure of Urban Governance 5.3 Urban Finances 5.4 Infrastructure and Service Provision 5.5 Mega Cities Metropolitan Corporations 5.6 Urban Poverty 5.7 Urban Planning 5.8 Urban Local Bodies and the State Government Conclusion Summary of Recommendations 1 13 13 14 15 16 17 18 20 21 21 33 44 48 59 68 74 96 108 119 124 124 137 151 165 182 191 198 198 204 221 240 276 284 296 308 310 312

list of Annexures Annexure-I(1) Speech of Chairman, ARC at the National Colloquium on Decentralisation in Rural Governance held at ISS, New Delhi Annexure-I(2) Annexure-I(3) Annexure-I(4) Annexure-I(5) Annexure-I(6) Annexure-I(7) Annexure-I(8) List of Participants at the National Colloquium on Decentralisation in Rural Governance Recommendations at the National Colloquium on Decentralisation in Rural Governance Questionnaire on Decentralisation in Rural Governance Speech of Chairman, ARC at the National Colloquium on Urban Governance held at IIM, Bangalore List of Participants at the National Colloquium on Urban Governance Recommendations at the National Colloquium on Urban Governance Questionnaire on Urban Governance

349 358 360 367 380 388 390 399 409 414 416 417 11 42 46 47 63 82 83 102 110 111 121 154 156 158 xi

Annexure-IV(1) Powers of State Government under Some Panchayati Raj Acts Annexure-IV(2) Recommendations of the Expert Group on Planning at the Grass Roots Level on Centrally Sponsored Schemes Annexure-V(1) Annexure-V(2) Appointment of Executive Heads of City Governments: International Practice Powers of the State Government under Some Municipal Acts

List of Boxes 1.1 Service Decline under Status Quo 3.1 The Delimitation Act, 2002 3.2 Eleventh Schedule (Article 243 G) 3.3 Twelfth Schedule (Article 243 W) 3.4 Experience of the State Finance Commissions in India 3.5 Guidelines Issued by the Planning Commission 3.6 DPCs Support Framework - Recommendations of Expert Group 3.7 Citizen-centric Accountability: Case of Hubli-Dharwad Municipal Corporation 3.8 Overview of Audit of PRIs by C&AG in Maharashtra (2004-05) 3.9 Case for Prudent Accounting and Reporting Norms 3.10 A Nationwide GIS to Improve Planning 4.1 Income-wise Classification of Village Panchayats in Tamil Nadu 4.2 Royalty Accruals on Minerals in States with Significant Mining Activities 4.3 Taxation Powers of Zila Parishads in Maharashtra

4.4 4.5 4.6 4.7 4.8 4.9 4.10 4.11 5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9 5.10 5.11 5.12 5.13 5.14 5.15 5.16 5.17 5.18 5.19 5.20 5.21 5.22 5.23

Bharat Nirman : Tasks National Rural Health Mission (NRHM) The Vision Role of Panchayati Raj Insititutions in NRHM Rural Radio Broadcasts by Ministry of Rural Development Community Radio in Jharkhand Approach of the Planning Commission in Promoting Access to Health and Education in the Eleventh Five Year Plan Drinking Water Coverage Norms Emphasis on Water Supply in Rural Areas in the Tenth Plan Urban Growth Trajectories Urban Agglomeration Netaji as Chief Executive Officer International Comparison of Fiscal Role of ULBs Financial Position of Urban Local Bodies Expenditure on Establishment Tax Domain for Municipalities Tax Collection Efficiency (1999-2000) Impact Fees A Regulatory Framework for Borrowing New Fiscal Tools Innovated in Haryana FSI as a Resource Pollution in Yamuna River Benefits of Delhi Metro Bus Based Public Transport System Mass Transit Options The Planned Development of a Mega City Rural Development and Self Employment Training Institute Health and Sanitation In-situ Rehabilitation of Slum Dwellers The Tehkhand Project The Mumbai Floods Reasons Land Encroachment in Bengaluru Inclusive Growth in a Small Corner

167 172 173 179 181 183 184 185 201 203 216 222 223 223 226 229 234 235 238 239 248 263 264 266 278 286 290 291 300 300 302

List of Tables 3.1 Comparison of Powers of State Election Commissions 34 3.2 Composition of State Election Commissions 38 3.3 Revenue and Expenditure of Local Bodies (Rural and Urban) 60 3.4 Constitution of DPCs Variations Across some States 79 3.5 Status of Constitution of District Planning Committee in States (2006) 84 3.6 Status of MPC Constitution 92 3.7 Allocation of Funds to Flagship Schemes 108 4.1 Demographic Details of the Panchayats in States 125 and Union Territories xii

4.2 4.3 4.4 4.5 4.6 5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 5.9 5.10 5.11 5.12 5.13 5.14 5.15 5.16 5.17

Size of the Gram Panchayat Size of the Intermediate Panchayat Status of Devolution of Functions as of November 2006 Budget Estimates of Annual Plan 2006-07 for Centre, States & UTs Progress against Key Input Targets of SSA Distribution of the Total, Urban and Rural Populations of the World by Development Group: 1950-2030 India: Number and Population (in Million) of Urban Agglomerations (UAs) and Towns (1901-2001) The Largest Metropolises Growth of Urban Population in Million-plus Cities/ Agglomerations in India 1901-2001 Urban Agglomerations/Towns by Class/Category: Census of India 2001 Recommended Categorisation of Urban Local Governments Political Representation Ratios, 2000 Mode of Election of Municipal Chairperson and their Terms Trend in Municipal Resources All India Revenue and Expenditure of Urban Local Bodies (All Levels) Access to Water and Sanitation Facilities for Urban Households Living in Slums (per cent) (2002) Health Sector: India in Comparison with Other Countries Number of Urban Hospitals, Beds and Dispensaries per 100,000 Population Technical Features and Capacity of Urban Transport Modes Funding Pattern in JNNURM Sector Wise Demand in JNNURM Per Capita Investment Demand in JNNURM

126 126 138 166 187 199 200 201 202 205 206 207 214 224 225 250 258 258 267 271 272 273 9 11 136 152 153 180 211 224 224 256 xiii

List of Figures 1.1 Average Daily Water Availability (hours/day) 1.2 Millennium Development Goals 4.1 Comparative Position of Devolution in States 4.2 All India Revenue of Panchayati Raj Institutions 1998-99 4.3 All India Revenue of Panchayati Raj Institutions 2002-03 4.4 Rural Female Literacy Rate in Select States 5.1 Pictorial Representation of the Proposed System 5.2 Sources of Revenue for Bengaluru (2007-08) 5.3 Classification of Annual Expenditure of a Municipal City Corporation (Bengaluru 2007-08) 5.4 Primary and Secondary/Senior Secondary Schools by Management during 2004-05

List of Abbreviations Abbreviation ACA AR ARC ARV ARWSP ASHA AUWSP AYUSH BDO BEO BEST BRGF BIS BSUP BWH CAA CAG CBO CD/NES CDP CHC CPHEEO CSS DAs DDA DHM DHS DLFA DM DMS DPAP DPCs DPEP DPRs DRDA DWCUA DWSC EFC xiv Full Form Additional Central Assistance Accommodation Reservation Administrative Reforms Commission Annual Rental Value Accelerated Rural Water Supply Programme Accredited Social Health Activist Accelerated Urban Water Supply Programme Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homoeopathy Block Development Officer Block Education Officer Brihanmumbai Electric Supply & Transport Backward Regions Grant Fund Bureau of Indian Standards Basic Services to Urban Poor Bore Wells with Hand Pumps Constitutional Amendment Act Comptroller & Auditor General Community Based Organisation Community Development/National Extension Service Comprehensive Development Plan Community Health Centre Central Public Health & Environmental Engineering Organisation Centrally Sponsored Scheme Development Authorities Delhi Development Authority District Health Mission District Health Society Director of Local Fund Audit District Magistrate Disaster Management Support Drought Prone Areas Programme District Planning Committees District Primary Education Programme Detailed Project Reports District Rural Development Agency Development of Women and Children in Urban Areas District Water and Sanitation Committee Eleventh Finance Commission

EO EWS FFDA FSI GIS GPs HCBS HUDCO IAY ICAI ICDS IDSMT IEC IHSDP ILCSS IMR/MMR IMRB Indo-USAID FIRE-D IPHS ISRO JDCP JNNURM JUSCO KMDA KVIC LRT MLA MLA LADS MML MMRDA MP MP LADS MPCs MWS NBC NCAER NCERT NCRWC NCU NDWM

Earth Observation Economically Weaker Sections Fish Farmers Development Agency Floor Space Index Geographical Information System Gram Panchayats Housing Cooperative Building Societies Housing and Urban Development Corporation Indira Awas Yojna Institute of Chartered Accountants of India Integrated Child Development Scheme Integrated Development of Small and Medium Towns Information Education and Communication Integrated Housing and Slum Development Programme Integrated Low Cost Sanitation Scheme Infant Mortality Rate/Maternal Mortality Rate Indo-USAID Financial Institutions Reforms and ExpansionDebt Indian Public Health Standards Indian Space Research Organisation Jhabua Development Communications Project Jawaharlal Nehru National Urban Renewal Mission Jamshedpur Utilities and Services Company Kolkata Metropolitan Development Authority Khadi & Village Industries Commission Light Rail Transit Member of Legislative Assembly MLA Local Area Development Scheme Model Municipal Law Mumbai Metropolitan Region Development Authority Member of Parliament MP Local Area Development Scheme Metropolitan Planning Committees Mini Water Supply Scheme National Building Code National Council of Applied Economic Research National Council of Educational Research and Training National Commission to Review the Working of the Constitution National Commission on Urbanisation National Drinking Water Mission xv

NGO NIPFP NIUA NLCPR NMAM NMMP NNRMS NREGA NRHM NSDP NSLRS NSSO O&M OBCs PAC PDS PEAF PESA PHC PHED PPP PRIs PSs PURA REGS RGNDWM ROW RTI Act RUDSETIs SC SDMCs SEBI SEC SEZs SFC SFDA SGRY SHASU SHG SJSRY SJSY SPV xvi

Non Governmental Organisation National Institute of Public Finance and Policy National Institute of Urban Affairs Non Lapsable Central Pool of Resources National Municipal Accounts Manual National Mission Mode Project National Natural Resources Management System National Rural Employment Guarantee Act National Rural Health Mission National Slum Development Programme National Scheme of Liberation and Rehabilitation National Sample Survey Organisation Operation and Maintenance Other Backward Classes Public Accounts Committee Public Distribution System Panchayats Empowerment and Accountability Fund Panchayati Raj (Extension to Scheduled Areas) Act Primary Health Centre Public Health and Engineering Department Public Private Partnership Panchayati Raj Institutions Panchayat Samitis Provision of Urban Amenities in Rural Areas Rural Employment Guarantee Scheme Rajiv Gandhi National Drinking Water Mission Right of Way Right to Information Act, 2005 Rural Development and Self Employment Training Institutes Scheduled Caste School Development and Management Committees Securities & Exchange Board of India State Election Commission Special Economic Zones State Finance Commission Small Farmers Development Agency Sampoorna Grameen Rozgar Yojana Scheme of Housing and Shelter Upgradation Self Help Group Swarna Jayanti Shahari Rozgar Yojana Swaran Jayanti Swarojgar Yojna Special Purpose Vehicle

SSA ST SUME SUWE SWSM TCPO TDCC TDR TFC TGS TISCO TSC TSP UIDSSMT UIG ULBs ULGs UMTAs UNEP UNFPA URIF URP UTAs UTs VAMBAY VAT VEC VPN VRCs VWSC ZPs

Sarva Siksha Abhiyan Scheduled Tribe Scheme of Urban Micro Enterprises Scheme of Urban Wage Employment State Water and Sanitation Mission Town and Country Planning Organisation Training and Development Communication Channel Transfer of Development Rights Twelfth Finance Commission Technical Guidance and Supervision Tata Iron and Steel Co. Total Sanitation Campaign Tribal Sub Plan Urban Infrastructure Development Scheme for Small and Medium Towns Urban Infrastructure and Governance Urban Local Bodies Urban Local Governments Unified Metropolitan Transport Authorities United Nations Environment Programme United Nations Fund for Population Activities Urban Reforms Initiative Fund Uniform Recall Period Unified Transport Authorities Union Territories Valmiki Ambedkar Awas Yojana Value Added Tax Vidyalaya Education Committee Virtual Private Network Village Resource Centres Village Water and Sanitation Committee Zila Parishads

xvii

Local Self Government - Evolution and Growth

Introduction

1.1. Integrating institutional reforms in local governance with economic reforms was Gandhijis far-sighted vision of Poorna Swaraj. Economic reforms and local government empowerment are the two great initiatives launched in the 1990s. Economic reforms have taken roots over the years and have yielded significant dividends in the form of enhanced growth rate, bulging foreign exchange reserves and availability of a variety of goods and services. The freedom and choice resulting from the reforms have built a broad national consensus across the political spectrum ensuring their continuity. Local government empowerment too is broadly accepted as a vital principle and all parties are committed to it. But, in practice, real empowernment as envisaged has not taken place. 1.2. Viewed in this context, the Terms of Reference of the Second Administrative Reforms Commission (ARC) pertaining to Local Self Government assume special significance since they cover key areas of reforms in Local Governance. These Terms of Reference are: (i) Improving delivery mechanism of public utilities and civic services with greater citizens and stakeholders involvement in such processes. Utilities like water, power, health and sanitation, education, etc. (ii) Empowerment of local self government institutions for encouraging participative governance and networking. (iii) To encourage capacity building and training interventions for better performance of local bodies. 1.3. The Commission has examined the issues of Rural and Urban Local Governance in three parts which are as follows: (A) Common Issues: This part deals with issues which are common to both rural and urban governance. (B) Rural Governance: This part deals with issues related to rural governance. (C) Urban Governance: This part deals with issues concerned with urban governance.

Local Governance

1.4. The concept of local self government is not new to our country and there is mention of community assemblies in the Vedic texts. Around 600 B.C., the territory north of the river Ganga comprising modern day north Bihar and eastern U.P. was under the suzerainty of small republics called Janapadas among which Lichhavis were the most powerful. In these Janapadas, the affairs of the State were conducted by an assembly consisting of local chieftains. In the post Mauryan times as well, there existed republics of Malavas and the Kshudrakas where decisions were taken by sabhas. The Greek Ambassador, Megasthenes, who visited the court of Chandragupta Maurya in 303 B.C. described the City Council which governed Pataliputra comprising six committees with 30 members. Similar participatory structures also existed in South India. In the Chola Kingdoms, the village council, together with its sub-committees and wards, played an important part in administration, arbitrated disputes and managed social affairs. They were also responsible for revenue collection, assessing individual contribution and negotiating the collective assessment with the Kings representative. They had virtual ownership of village waste land, with right of sale, and they were active in irrigation, road building and related work. Their transactions, recorded on the walls of village temples, show a vigorous community life and are a permanent memorial to the best practices in early Indian polity. The present structure of Local Self Government institutions took shape in 1688 when the British established a Municipal Corporation at Madras which was followed by creation of similar bodies at Bombay and Calcutta (1726). Comprising a Mayor and a majority of British-born Councillors, these Corporations were basically units of administration enjoying considerable judicial powers. During the next 150 years, municipal bodies were created in several mufasil1 towns although their functions remained confined to conservancy, road repairs, lighting and a few other sundry items. 1.5. In 1872, Lord Mayo introduced elected representatives for these municipalities and this was further developed by his successor, Lord Ripon, in 1882. By the 1880s, these urban municipal bodies had a pre-dominance of elected representatives in a number of cities and towns, including Calcutta and Bombay. A corresponding effective structure for rural areas came up with the enactment of the Bengal Local Self Government Act, 1885 which led to the establishment of district local boards across the entire territory of the then Bengal province. These boards comprised nominated as well as elected members with the District Magistrate as Chairman who was responsible for maintenance of rural roads, rest houses, roadside lands and properties, maintenance and superintendence of public schools, charitable dispensaries and veterinary hospitals. Within a span of five years, a large number of district boards came into existence in other parts of the country, notably Bihar, Orissa, Assam and North West Province. The Minto-Morley Reforms, 1909 and the Montague Chelmsford Reforms, 1919, when Local Self Government became a transferred subject, widened the participation of people in the governing process and, by 1924-25, district boards had a 2
1

Mufasil means small towns

Introduction

preponderance of elected representatives and a non-official Chairman. This arrangement continued till the countrys Independence in 1947 and thereafter till the late 1950s. 1.6. The debates in the Constituent Assembly indicate that the leaders at that time were hesitant to introduce a wholesale change in the then prevailing administrative system and as a compromise, it was agreed that Panchayati Raj Institutions would find place in the Directive Principles of State Policy (Part IV, Article 40) which, inter alia, provides that the State shall take steps to organise village panchayats and endow them with such powers and authority as may be necessary to enable them to function as units of self-government. But there was a general view that local government institutions would be creatures of the State Legislature and hence there was no whittling down of the powers of the State Government. 1.7. In compliance with the provisions of the Directive Principles of State Policy pertaining to establishment of village panchayats as units of self government, an ambitious rural sector initiative, the Community Development Programme, was launched in 1952. Its main thrust was on securing socio-economic transformation of village life through peoples own democratic and cooperative organisations with the government providing technical services, supply and credit. Under this programme 100 to 150 villages formed a Community Development Block and participation of the whole community was the key element of this experiment which strengthened the foundation of grassroots democracy. In 1953, the National Extension Service was introduced which was an amplified version of the Community Development Programme and aimed at transferring scientific and technical knowledge to agricultural, animal husbandry and rural craft sectors. The underlying theme was extension of innovative pilot projects and while the programme did not have any content of elected democratic institutions since they were run by government functionaries with the help of ad hoc semi-popular bodies like Vikas Mandal and Prakhand Samiti, yet in the midst of the euphoria prevailing immediately after Independence in the country, they, to a great extent, caught the attention of the rural masses. 1.8. In 1956, when the Second Five Year Plan was launched, it recommended that the Village Panchayats should be organically linked with popular organisations at higher levels and in stages the democratic body should take over the entire general administration and development of the district or the sub division excluding functions such as law and order, administration of justice and selected functions pertaining to revenue administration. To operationalise this initiative, Government appointed a committee under the chairmanship of Shri Balwantrai Mehta in 1957. The Balwantrai Mehta Committee offered two broad directional thrusts; first that there should be administrative decentralisation for effective implementation of the development programmes and the decentralised administrative system should be placed under the control of local bodies. Second, it recommended that the 3

Local Governance

CD/NES blocks throughout the country should be designed as administrative democratic units with an elected Panchayat Samiti at this level to operate as a fulcrum of developmental activity in the area. This Samiti would need guidance of technical personnel in many matters; hence it should have line department officers of suitable competence under its control. The Panchayat Samiti was also to be equipped with sources of income. Certain powers of control were retained by the government; like supersession of Panachayat Samiti in public interest, suspension of a resolution of a Panchayat Samiti by the Collector on grounds of breach of peace, being contrary to the law of the land or being ultra vires the Constitution. The recommendations also suggested reservation for SC/ST and women through co-option. In order to ensure coordination, the Committee recommended formation of a Zila Parishad at the district level consisting of all the Presidents of the Panchayat Samitis, Members of Legislative Assemblies and Members of Parliament with district level officers of the public health, agriculture, veterinary and education departments as members and the Collector as the chairman. But the Committee made it clear that the district tier was being conceived just as an advisory body; a support structure for Panchayat Samitis. 1.9. The recommendations of the Committee were generally welcomed and Panchayati Raj legislations were enacted in a number of States to give effect to these recommendations. By the 1960s, Gram Panchayats covered 90% of the rural population in the country. Out of 4974 Blocks, Prakhand2 Samities were formed in 4033 blocks. Out of 399 districts in existence, 262 Zila Parishads were also constituted with varying degrees of actual power. Although a number of Panchayat structures were set up in different States at all the three tiers, they had limited powers and resources and the essential idea that all developmental activity should flow only through the Block Panchayat Samitis lost ground. Moreover, important schemes like the SFDA, DPAP and ITDP were not brought within the purview of the elected Zila Parishad even in States like Maharashtra and Gujarat where effective financial decentralisation had taken place. Unfortunately, after the intensive stage of the Community Development programme, there was a visible trend towards centralisation. Panchayati Raj elections were postponed indefinitely and flow of funds for Block Development were reduced to a trickle. The net result was that, by the 1970s, these bodies remained in existence without adequate functions and authority. The position of these institutions was further weakened due to the creation of a large number of parastatals, which were assigned many of the functions legitimately envisaged in the domain of PRIs, for example water supply, slum improvement boards, etc. on the perception that these functions were too complex and resource dependent to be handled by local governments. 1.10. Beginning with Rajasthan and Andhra Pradesh in 1959, the Panchayati Raj system was at work in some form in all the States of the Indian Union, although the higher tier had not been set up in Kerala and Jammu & Kashmir. By end 1980s, except Meghalaya, 4
2

Prakhand means a development Block.

Introduction

Nagaland, Mizoram and the Union Territory of Lakshadweep, all other States and UTs had enacted legislation for the creation of PRIs. In 14 States/ UTs, there was a three-tier system, in 4 States/UTs it was a two-tier structure and in 9 States/ UTs only one tier functioned. 1.11. In 1969, the first Administrative Reforms Commission in its report on State Administration recommended that the main executive organ of the Panchayati Raj system should be located at the district level in the form of Zila Parishad and not at the Block level as Panchayat Samiti. It was of the view that the Zila Parishad would be in a better position to take a composite view of the resources and needs of the entire district and thus will be able to formulate a plan for the area. The Commission also believed that due to paucity of resources, it was difficult to sustain a well equipped administrative and development machinery at the level of a Block. 1.12. In 1977, Government formed a committee under the chairmanship of Shri Asoka Mehta to go into the working of Panchayati Raj Institutions and to suggest measures to strengthen them into effective local apparatus for decentralised planning and development of the rural areas. This was considered necessary in view of the Governments high priority to rural development which included the need to increase agricultural production, create employment and eradicate poverty. The Asoka Mehta Committee was of the view that the democratic process could not stop at the state level. The series of elections held for Parliament and State Legislature had attuned the people to the democratic political processes and made them conscious of their power and rights as political sovereigns in the country. The concept of Panchayati Raj, like democracy at national and state levels, is both an end as well as a means. It was an inevitable extension of democracy to the grass roots which in turn makes it the base of the democratic pyramid of the country. In the end, Panchayati Raj should emerge as a system of democratic local government discharging developmental, municipal and ultimately regulatory functions. Based on the Maharashtra-Gujarat model which was commended by the first Administrative Reforms Commission and a number of other committees, the Committee chose the district as the first point of decentralisation below the State level. 1.13. The next level of self-governing institutions recommended by this Committee was the Mandal Panchayat which was to cover a population of around 10,000 to 15,000. It was thought that the cluster of villages falling in the jurisdiction of the Mandal panchayat would turn into a growth centre. As an ad hoc arrangement, the Committee recommended continuation of the Panchayat Samiti at the Block level, not as a unit of self government but as a nominated middle level support body working as an executing arm of the Zila Parishad. Similarly, at the village level it thought of a nominated village level committee consisting of (a) local member elected to Mandal Panchayat, (b) local member elected to the Zila Parishad, and (c) a representative of small and marginal farmers.

Local Governance

1.14. In the total view of the set-up, the Zila Parishad was recommended to take up planning for the district as a whole, to coordinate the programmes and to guide the lower PRI tiers. The recommendations also called for creation of a machinery for taking up the district level planning exercise and for this it recommended stationing professionally qualified teams of experts at the district headquarters. The annual plan thus prepared had to be placed before the Zila Parishad for their comments/views. The Committees other recommendation was on transfer of all development functions and related government staff to the control of the Zila Parishad. To assist the Zila Parishad, it recommended creating a senior post known as the Chief Executive Officer who could provide support to the body in formulation and implementation of policies. In order to ensure effective coordination among officers posted at the district, this officer could be senior in rank to the District Collector. 1.15. With minor variations introduced by subsequent committees in the 1980s, the recommendations of the Asoka Mehta Committee were generally well received and led many of the States to introduce appropriate amendments in their Panchayati Raj Acts. Karnataka, Maharashtra, Andhra Pradesh, West Bengal and Gujarat adopted the new arrangement, but U.P., Bihar, Orissa, Punjab and Haryana held back. Some of them did not hold elections even to the existing bodies. 1.16. The Committee which submitted its report in 1978 was also of the view that despite the rhetoric, Panchayat empowerment was not of much use unless it received Constitutional standing. Hence, there was need for introducing a Constitutional amendment on this subject. With some variations, these recommendations form the basis of the PRI format in existence in the country today. 1.17. Although a number of committees were formed between 1978 and 1986 to look into various aspects of strengthening the local self government institutions such as the committees under Shri C.H. Hanumantha Rao, Shri G.V.K. Rao and Shri L.M. Singhvi, only minor suggestions were made for any change in the ideas/structures proposed by the Asoka Mehta Committee. The next landmark in decentralised governance occurred with the 64th and 65th Constitutional Amendment Bills introduced in July 1989 by the Government of Shri Rajiv Gandhi. The basic provisions of the Bills were: (a) it should be mandatory for all States to set up PRIs/ULBs, (b) the elections to be conducted by the Election Commission, (c) tenure of Panchayats/ULBs to be five years and, if dissolved before time, fresh elections should be held within six months, (d) all seats (except those meant for the representatives of other institutions) to be filled through direct elections, (e) reservation of seats to be made for SC/ST/Women, (f ) Local Bodies to be entrusted with more functions e.g. minor irrigation, soil conservation, bio-gas, health, benefits to 6

Introduction

SC/ST etc. (g) planning and budgeting systems be introduced at the panchayat level, (h) the State Legislature to authorise Panchayats/ULBs to levy taxes/tolls and fees, (i) a separate commission to review the Local Body finances, and (j) PRI/ULB accounts to be audited by the CAG. The Bill could however not be passed in the Rajya Sabha. 1.18. In 1990, a combined Constitution Amendment Bill, covering both PRIs & ULBs was tabled in Parliament. It was a skeleton legislation which left the details to be crafted by the State Governments in their State enactments; even matters concerning elections were left completely to the discretion of the State Government. With the dissolution of the Government, this Bill too lapsed. 1.19. Finally in 1992, after synthesising important features of the earlier exercises on this subject, Government drafted and introduced the 73rd and 74th Amendments Bill in Parliament which were passed in 1993. These introduced new Parts IX and IXA in the Indian Constitution containing Articles 243 to 243ZG. 1.20. The 73rd and 74th Amendments to the Constitution constitute a new chapter in the process of democratic decentralisation in the country. In terms of these Amendments, the responsibility for taking decisions regarding activities at the grass roots level which affect peoples lives directly would rest upon the elected members of the people themselves. By making regular elections to Panchayati Raj/Municipal bodies mandatory, these institutions have been given permanency as entities of self government with a specific role in planning for economic development and social justice for the local area. In totality, the intention of these Amendments is to assign a position of command to them in the democratic framework of the country. But there seems to be an area of weakness in the constitutional scheme. Local government being a State subject under Schedule VII, the implementability of these provisions is, to a large extent, dependent on the intention and strength of the State Panchayati Raj enactment. The challenge is to ensure an architecture for the State law which is in total harmony with the spirit of the 73rd and 74th Amendment. 1.21. Article 243 B of the Constitution envisages that all the States/UTs, except those with populations not exceeding 20 lakhs, will have to constitute a three-tier system of Panchayats i.e. at the village, intermediate and district levels. While the district has been defined as a normal district in a State, the jurisdiction of village and intermediate levels have not been specifically defined in the Act. A village as per the provisions of the Constitution is to be specified by the Governor by a public notification for the purpose of this part and includes a group of villages so specified. That means the territorial area of a Village Panchayat can be specified by a public notification by the Governor of the State, and may consist of more than one village. Similarly, the intermediate level which can be a Taluk, Block or a Mandal, 7

Local Governance

is also to be specified by the Governor through a public notification in this regard. This provides a certain amount of flexibility to the States in constituting Panchayats at the lower and middle levels. 1.22. Panchayati Raj Institutions (PRIs) in India have, over the years, developed certain critical strengths, although they are characterised by several systemic weaknesses and constraints as well. Post the 73rd Constitutional Amendment, Panchayats have been established at three levels, the district, block and cluster of villages (Village Panchayat). The number of Village Panchayats in the country as on 1st December, 2006 was 2,32,913; of the Intermediate Panchayats 6,094 and of the District Panchayats 537. The total number of representatives elected to these bodies is 28,28,779 out of which 10,38,989 (36.7%) are women. 1.23. Consequent to the 73rd Constitutional Amendment as well as the Supreme Courts rulings which effectively mandate that local authorities are also to be treated as Government or State; the PRIs have acquired substantial legitimacy, are recognised as an instrument of the Government, and have created participatory structures of grass roots democracy for the rural people. Creation of Constitutional bodies like the State Election Commissions and the State Finance Commissions have also given permanency and stability to these institutions. However, most Panchayats continue to be treated as agencies of the State for implementation of prescribed schemes, even though essential services such as provision of drinking water, rural sanitation, preventive health and primary education are accepted as their legitimate core functions. Moreover, the PRIs have a varied menu of potential taxes such as on professions, entertainment, tolls, users charges etc., but remain crippled by lack of elastic revenue sources. Internal Revenue mobilisation remained at only 4.17% of the total revenue of panchayats at all levels in 23 States during 1990-91 to 1997-98. In a few States like Bihar, Rajasthan, Manipur and Sikkim, it was nil during this period. Although the 11th and 12th Finance Commissions have provided untied grants to these institutions, their financial capacity remains suspect. As a result, PRIs exist as over-structured but under-empowered organisations, boasting of Constitutional status but suffering from lack of effective devolution of powers and functions from the State Governments. 1.24. At the same time, the structure of district administration under the control of the Collector/District Magistrate, characterised by a command structure and lack of horizontal coordination at the grass roots level, has become somewhat anachronistic in the modern democratic framework of our polity. In order to make local administration more responsive, transparent and accountable to citizens, there is need to have a representative government not only in the Union and States but also at the district and village levels with an equitable division of functions among them. However, any such reform agenda is constrained by the 8

Introduction

lack of cooperation between the legislature and the representatives of local bodies as well as the lack of capacity of the Panchayati Raj Institutions to take on enhanced responsibilities because of absence of trained personnel as well as their financial incapacity. The fact that most States have, during the 1970s and 80s, created state-wide autonomous organisations and parastatals to carry out even local level functions such as water supply also means that the issue of division of functions between such organisations and the local authorities comes in the way of greater decentralisation. 1.25. As regards urban local self-government, although municipalities played a key role in local self-government during British Rule, the actual task of managing civic functions by the ULBs themselves tended to remain constrained by their poor finances. After Independence, the focus tended to be on rural India and the concept of Gram Swaraj and urban local bodies were not given much attention. Thus, the Directive Principles of the Constitution refer to Village Panchayat and the only reference to urban local bodies is in the State List of the Constitution. 1.26. There were no major changes in the structure and functioning of the ULBs till the 74th Constitutional Amendment despite rapid urbanisation and consequential increase in the complexities of problems. The powers and functions of these bodies varied from State to State as the subject Local government, that is to say, the constitution and powers of municipal corporations was included in the State List, empowering the States to define the role of the ULBs through statutes. Infrequent elections, rigid governmental control, inadequate autonomy and lack of capacity have been some of the problems faced by ULBs. The 74th Constitutional Amendment brought in some basic changes in ULBs. Mandatory holding of periodic elections, introduction of the Twelfth Schedule, reservation of seats for women and restrictions on the powers of State Governments to interfere in the functioning of ULBs are some of the important features of the 74th Constitutional Amendment Act. Although the States have 9

Local Governance

amended their laws relating to the ULBs, the devolution of functions and finances has been slow and hesitant. 1.27 The State Governments have created a large number of functional bodies in the form of development authorities, housing boards, slum development agencies and water and sanitation boards. The growth of these specialised agencies has weakened the authority of municipal bodies and contributed to their atrophy. This has also led to a fragmented approach, with a large number of bodies working in isolation. Consequently, ULBs remain ill-equipped in terms of technical manpower and organisational ability and are unable to deal with the spread of urbanisation to the rural areas. In addition, our mega cities are characterised by specific problems of mounting infrastructural constraints, large scale inmigration and governance structures that remain unprofessional, unresponsive and lacking in transparency. 1.28 Improving the quality of life of citizens by providing them civic amenities has been the basic function of local governments ever since their inception and it continues to be so even today. Local governments are ideally suited to provide services like water supply, solid waste management, sanitation etc, as they are closer to the people and in a better position to appreciate their concerns and even economic principles state that such services are best provided at the level of government closest to the people. However, the performance of a large number of local bodies on this front has generally been unsatisfactory. 1.29 Providing safe drinking water and sanitation have been important elements in our development efforts, ever since the First Five Year Plan. Though there have been improvements on this front, both in urban and rural areas, the situation cannot be termed satisfactory. As per the Census (2001), only 36.4 per cent of total population has latrines within/attached to their houses. Whereas in rural areas, only 21.9 per cent of population has latrines within/attached to their houses. Out of this, only 7.1 per cent households have latrines with water closets. In urban areas, though water availability, measured as litres per capita per day is quite high for almost all Indian cities but delivery, computed as water supply in hours per day in the cities is rather poor (Fig. 1.1)3. 1.30 The Millennium Development Goals highlight the importance of safe drinking water supply and sanitation. The Bharat Nirman Programme includes drinking water as one of its six thrust areas. The Total Sanitation Campaign seeks to provide Sanitation for all by 2012. However, in all these initiatives the role of the local bodies is going to be crucial. There are financial, technological and institutional issues which need to be addressed.

10
Source: Urban Water Sector in South Asia: Benchmarking Performance, Water and Sanitation Program, May, 2006; http://www.wsp.org/filez/pubs/ urbanwater.pdf
3

Introduction

On institutional issues, P r i m e M i n i s t e r D r. Manmohan Singh stated4: One problem we have with the management of the Drinking Water Sector is that this is one activity within the portfolio of rural development programmes which is still handled at the State level, at the level of State capital and not at the district level. Other programmes with which it seeks integration have moved to being managed at the district level. I sincerely believe the time has come to do the same thing with regard to other supply schemes as well. I therefore request State Governments to consider empowering district level institutional structures to handle the issue of water supply. This is also a constitutional obligation as water supply is one of the basic functions to be carried out by rural and urban local bodies as per the 11th Schedule of our Constitution. 1.31 The Commission feels that substantive reform of local self-government institutions is not possible without creating an autonomous space for them, built upon the premise that the local government institutions, being governments at their own level, are an integral part of the countrys governance system and therefore, must replace the existing administrative structure in respect of the functions or activities devolved to them. While there may be rationale for retention of some establishments of the State Government including that of the district administration at the local level, their functions and responsibilities should be confined to areas which are outside the jurisdiction of the local bodies. In respect of 11
4

PMs address at the Annual Conference of Ministers in charge of Drinking Water and Sanitation July 4, 2007, New Delhi

Local Governance

devolved functions, local government institutions should have autonomy and must be free of the State Governments bureaucratic control. 1.32 In order to ascertain views from various stakeholders, the Commission organised two National Colloquiums separately for Rural and Urban Governance. The National Colloquium on Rural Governance was organised at the Institute of Social Studies (ISS), New Delhi and the National Workshop on Urban Governance was organised in association with Janaagraha, a well known NGO in Bengaluru, associated with reforms in urban governance. The details of these two workshops are at Annexure-I. The Commission has greatly benefited by the inputs provided by the Ministry of Panchayati Raj, the Ministry of Urban Development and the Ministry of Housing and Urban Poverty Alleviation in their respective fields. During the process of consultations, the Commission also held discussions with the Election Commission of India, the Comptroller & Auditor General of India, some State Election Commissioners and State Finance Commissions, whose views and suggestions have been of immense help to the Commission in formulating its recommendations. The Commission is grateful to Smt. Meenakshi Datta Ghosh, Secretary, Ministry of Panchayati Raj, Government of India; Shri M Ramachandran, Secretary, Ministry of Urban Development, Government of India; Shri Bhurelal, Member, Union Public Service Commission; Shri N.P. Singh, former Secretary, Government of India; Shri Naved Masood; Shri T.R. Raghunandan, Joint Secretary, Ministry of Panchayati Raj; Shri M. Rajamani, Joint Secretary, Ministry of Urban Developlment, Government of India; Dr. P.K. Mohanty, Joint Secretary, Ministry of Housing and Urban Poverty Allevation, Government of India; Shri Vivek Kulkarni,Visiting Professor, Department of Management Studies, Indian Institute of Science, Bengaluru; Shri R Sundaram, Chairman & Managing Director, Sundaram Architects Private Limited; and Dr. V.S. Hedge and his team, ISRO for their valuable inputs. The Commission would like to place on record its gratitude to the eminent scholars, activists, representatives of citizens groups, officers of Government of India and the State Governments for their active participation in the workshops, and in meetings during the Commissions visits to States. The Commission also visited Singapore and Thailand and held discussions with authorities on urban governance issues. The Commission highly appreciates the reports furnished by Janaagraha, Bengaluru and Institute for Social Sciences, New Delhi which contain inputs which are utilised in the preparation of this Report. In this connection the Commission would like to acknowledge the contributions of Shri Ramesh Ramanathan, Janaagraha and Shri George Mathew, Institute of Social Sciences, New Delhi.

12

THE CORE PRINCIPLES

2.1 Introduction

2.1.1 India is a Union of States. States can be created or amalgamated by a law of Parliament; residuary powers are vested in the Union (Entry 97 of List I); local governments were creatures entirely of State laws until the 73rd and 74th Constitutional Amendments and presently Constitutional devolution is the norm, not upward or outward delegation. 2.1.2 The evolution of the Constitution, over the years, has tended to favour greater empowerment of States. The rise of regional parties and coalition governments at the State and Union levels, greater economic liberalisation reducing State control and diminishing the importance of State investment in commercial undertakings, a very healthy tradition of fair non-discriminatory fiscal devolution through various mechanisms and compulsions of economic growth engendering a healthy competition for investment all these factors are responsible for a more harmonious balance in Union-State relations. The empowerment of States has not weakened the Union; in fact the Unions role is better defined and more respected in recent decades as authority is tempered by leadership, cooperation and coordination. This rediscovery of the legitimate and effective role of the Union even as more powers are devolved on States is one of the happy features of our Constitutional evolution. Though the situation varies from State to State, overall, such a development is still in its infancy in the relationship between States and local governments. It has to be strengthened in the coming years by empowering local governments, while the State Government continues to have an important and significant role, appropriate to that level. In order to achieve this, the Commission has carefully considered the principles to be applied in the reform of local governance. It considers the core principles to be: application of the principle of subsidiarity in the context of decentralisation; clear delineation of functions of local governments vis--vis State Governments and among different tiers of local governments; effective devolution of these functions and resources accompanied by capacity-building and accountability; integrated view of local services and development through convergence of programmes and agencies and above all, citizen-centricity.

13

Local Governance

2.2 Subsidiarity 2.2.1 The central idea of subsidiarity is that citizens as sovereigns and stake-holders in a democracy are the final decision-makers. Citizens are also the consumers of all services provided by the State. The citizen-sovereign-consumer must exercise as much authority as practicable, and delegate upward the rest of the functions which require economies of scale, technological and managerial capacity or collective amenities. 2.2.2 The Oxford dictionary defines subsidiarity as, a principle that a central authority should have a subsidiary function, performing only those tasks which cannot be performed at a more local level. 2.2.3 The principle of subsidiarity stipulates: functions shall be carried out closest to citizens at the smallest unit of governance possible and delegated upwards only when the local unit cannot perform the task. The citizen delegates those functions he cannot perform, to the community, functions that the community cannot discharge are passed on to local governments in the smallest tiers, and so on, from smaller tiers to larger tiers, from local government to the State Governments, and from the States to the Union. In this scheme, the citizen and the community are the centre of governance. In place of traditional hierarchies, there will be ever-enlarging concentric circles of government and delegation is outward depending on necessity. 2.2.4 Application of the subsidiarity principle has three great advantages in practical terms. First, local decision-making improves efficiency, promotes self reliance at the local level, encourages competition and nurtures innovation. The demonstration effects of successful best practices will ensure rapid spread of good innovations and there will also be greater ownership of programmes and practices by the local communities. Second, democracy is based on three fundamental assumptions: all citizens are equal irrespective of station and birth; the citizen is the ultimate sovereign; and the citizen has the capacity to decide what is in his best interest. Only when these principles are put in practice can a democratic system derive its full legitimacy. Subsidiarity is the concrete expression of these foundations of a democratic society. Third, once decision-making and its consequences are integrally linked at the local level, people can better appreciate that hard choices need to be made. Such awareness promotes greater responsibility, enlightened citizenship and maturing of democracy. 2.2.5 The Commission is of the considered view that a local government reform package must be informed by the principle of subsidiarity. Only then can citizen-sovereignty be real and meaningful and democracy will acquire content beyond structures and institutions.

14

The Core Principles

2.3 Democratic Decentralisation 2.3.1 While subsidiarity should be the overarching principle in restructuring governance, in practical constitutional terms it can be applied only through effective decentralisation. It is in recognition of this, that the 73rd and 74th Constitutional Amendments were enacted in 1992. Most of the constitutional provisions relating to local governments are very similar to those pertaining to the States (SFC, SEC) with the significant exception that the Seventh Schedule of the Constitution remains unaltered. As a result, while the local government structure and attendant institutions are created by a constitutional mandate, the actual functions to be devolved on local governments are the responsibility of the States. Therefore, effective democratic decentralisation from States to Local Governments should be the cardinal principle of administrative reforms. Such a decentralisation should be influenced by four guiding norms. 2.3.2 First, there should be a clear link in citizens minds between their votes and the consequences in terms of the public good it promotes. We have a robust democracy with regular elections, constitutional freedoms and peaceful transfer of power. 2.3.3 Second, decentralisation tends to promote fiscal responsibility, provided there is a clear link between resource generation and outcomes in the form of better services. People will be encouraged to raise more resources only when there is a greater link between the taxes and user fees levied and the services that are delivered. This is possible only when service delivery is locally managed to the extent feasible and the citizens as stakeholders are directly empowered to raise resources and manage the functions. However, for this link to be established effectively between resources and the outcomes, local government must be perceived to be fully responsible for the services so that they have no alibis for non-performance. Only then can fiscal prudence, resource mobilisation and greater value of the public money spent be integral to democratic governance. 2.3.4 Third, there is considerable asymmetry of power in our society. Only about 8 per cent of our work force is employed in the organised sector with a secure monthly wage and attendant privileges and over 70 per cent of these workers are employed in government at various levels and in public sector undertakings. This asymmetry of power is further accentuated by our hierarchical traditions combined with our colonial legacy. Any serious effort to make our governance apparatus an instrument of service to the people and a powerful tool to achieve national objectives needs to take into account these two cardinal factors plaguing our system the asymmetry in power and the imbalance in its exercise. 2.3.5 Fourth, in centralised structures, citizen participation and ownership are illusory despite national citizen sovereignty. The closer the government process is to the citizen, the 15

Local Governance

greater the participation, stakes and understanding of the issues. Therefore, if democracy is to be real and meaningful, the locus of power should shift as close to the citizen as possible in order to facilitate direct participation, constant vigil and timely intervention. 2.3.6 In the ultimate analysis, all governance processes are about fulfilling the citizens aspirations and needs. Whatever be the structure of governance, we have to face two great challenges in the coming decades. The first is the fulfillment of human potential, prevention of avoidable suffering and ensuring human dignity, access to speedy justice and opportunity to all Indians so that every citizen is a fulfilled and productive human being. The second is the rapid economic growth realising the nations potential and allowing India to play her rightful role in the global arena in order to protect the vital interests of present and future generations and become an important actor in promoting global peace, stability and prosperity. We need to sharply focus the States role and fashion instruments of governance as effective tools in our quest for these national goals. Decentralisation is a potent tool to counter the phenomenal asymmetry in the locus of power and the imbalance in the exercise of power. 2.3.7 Only in an effective and empowered local government can the positive power to promote public good be reinforced and the negative impulses to abuse authority curbed. Equally, ordinary citizens can hold public servants accountable in the face of the asymmetry of power exercised by the bureaucracy, only when such citizens who are directly affected by their actions are empowered to exercise oversight functions. 2.4 Delineation of Functions 2.4.1 In a federal democracy, the roles and responsibilities of various tiers of government have to be clearly defined. In all federations, this is usually done through a constitutionally mandated scheme. It is no accident that every federal democracy has a written Constitution, clearly listing the subjects under the jurisdiction of each tier of government and the specific role assigned to it. Indias Constitution too enumerates the subjects under State control under List II of the Seventh Schedule. Where a subject requires a federal and State jurisdiction it is included in List III and clear principles are enunciated defining the extent of authority of the Union and the States. However, in respect of local governments there are two complications. 2.4.2 First, since all local government subjects by definition are also State subjects, there should be clear delineation of roles of the State and the local government, in respect of each of the subjects/functions, otherwise needless confusion and undue interference by the State will be the inevitable consequences. It must be recognised that in several of these functions, States have a vital and legitimate role to play. For instance, while school education should be a subject of devolution, the framing of the curriculum, setting of standards and conduct 16

The Core Principles

of common examinations should fall within the States purview. Similarly, in healthcare, development of protocol, accreditation of hospitals and enforcing professional standards should necessarily fall within the States purview and outside the competence of the local governments. Much of the confusion about devolution of functions to local governments has arisen for want of this role-clarity between the State and the local bodies. 2.4.3 Second, within local governments there is a need for clear functional delineation amongst the various tiers. For example, while school management can be entrusted to a Village Panchayat/parents committee, most staffing and academic matters would fall within the purview of the higher tiers of local government. Similarly, while a health sub-centre may be looked after by the Village Panchayat, the Primary Health Centre (PHC) should be managed by the Intermediate Panchayat, and the Community Health Centres and hospitals by the District Panchayat. By the same token, there is need to delineate the functions between a city/urban government and the smaller tier of a Ward Committee. The Ward Committee can be entrusted with sub-local functions like street lighting, local sanitation, management of local schools, management of local health centres etc. The Commissions approach is informed by this recognition that there is no omnibus approach to devolution of powers to local governments and that the details need to be evolved keeping in view the local circumstances and balancing of details of decentralisation with the basic principle of subsidiarity. 2.5 Devolution in Real Terms 2.5.1 The principles of subsidiarity and democratic decentralisation cannot be operationalised by mere creation of elaborate structures and periodic elections. Devolution, to be real and meaningful, demands that local governments should be effectively empowered to frame regulations, take decisions and enforce their will within their legitimate sphere of action. Such empowerment should be clearly and unambiguously defined by the Constitution and State legislatures. Even legislated empowerment remains illusory unless public servants entrusted with the discharge of responsibilities under the local governments sphere are fully and permanently under local government control, subject to protection of their service conditions. Only then is the responsibility of the local government commensurate with the authority. Finally, fiscal devolution to the local governments must meet two standards: the local government must be able to effectively fulfill its obligation; there must be sufficient room for flexibility through untied resources, to establish priorities, devise new schemes and allocate funds. Equally important, there must be both opportunity and incentive to mobilise local resources through local taxes, cess and user fees, subject to norms of financial propriety and accountability. While devolving funds to local governments, it needs to be ensured that issues of regional equity inter-state as well intra-state and minimum entitlement of citizens across the country, the rights guaranteed to citizens under the Constitution and 17

Local Governance

the legitimate expectations of a better life and reasonable opportunity for vertical mobility to all children are similar across the country. Therefore, the devolution package to local governments must go beyond the per capita norms and should take into account certain benchmarks regarding quality of life and services. 2.5.2 However, real empowerment should go well beyond what the State gives in terms of power and resources. Giving effective voice to local governments to enable them to negotiate with the State on a continuing basis is equally important. For instance, the Upper House in many federal countries is created as the voice of constituent States and gives them negotiating power. Corresponding provisions relating to legislative councils in the State needs to be strengthened suitably to give a voice to local bodies. 2.5.3 Equally important is the building of capacity of local governments to discharge their functions effectively. Strengthening organisational and management capacity, constant training and human resource development activities, conversion of state agencies into expert manpower pools providing guidance and support on demand, strong federations, pooling of resources, talent and management practices, ability to attract expertise available outside government to meet the growing need for high quality human resources in public management are some of the crucial challenges in enhancing the capabilities of local governments. 2.5.4 Finally, real empowerment not only demands devolution and capacity building but strategies also need to be evolved to overcome the resistance of the state executives and governments as the compulsions of real politics often preclude the possibility of any serious measures to enable local governments to function as institutions of self governance. 2.5.5 In its Report on Ethics in Governance, the Commission had observed If the legislators are beholden to the executive, the legislature can no longer retain its independence and loses the ability to control the Council of Ministers and the army of officials and public servants. An effective mechanism like empowered legislative committees is therefore needed to enhance the legislators role to give them an opportunity of exercising positive power for public good. Appropriate mechanisms will also need to be devised to enhance the role of a legislator in keeping with democratic values and promotion of public good. 2.6 Convergence 2.6.1 In large, complex governance structures compartmentalisation is inevitable. But as governance is brought closer to the citizens, this fragmentation should yield place to convergence based on the recognition that the citizens needs and concerns are indivisible. Even in an otherwise efficient and honest administration, isolated functioning of disparate government agencies and departments complicates the citizens life immeasurably. Therefore, 18

The Core Principles

convergence must be a key principle in the organisation of local governments. There are following four broad areas of convergence which need to be addressed. 2.6.2 First, the rural urban divide in the intermediate and district tiers of local governments is a colonial legacy. At the primary level the needs of the rural population and the approaches required to address them are somewhat different from those of urban people. Also the occupational profile of the population lends itself to rural-urban categorisation. However, in the larger federated tier of exclusively rural local governments, as a result of this incongruity, new mechanisms like the District Planning Committee had to be created, and they never took roots. With rapid urbanisation and increasing need for peri-urban areas to be taken into account in city planning and development, there must be greater institutional convergence between rural and urban local governments. 2.6.3 Second, as earlier stated (para 1.27), the parastatal bodies function totally independent from the local governments and are directly accountable to the State Government. Thus, the local governments are often divested of their important functions. Such proliferation of parastatals runs counter to the principle of subsidiarity and precludes effective citizens participation in the management of these services. The citizen is compelled to deal with a multiplicity of authorities to access even the basic amenities and services. The local functions of all these authorities therefore need to devolve on local governments, even as institutional mechanisms need to be devised to benefit from expert guidance. 2.6.4 Third, the citizen must be enabled to interact with all service providers through a single window as far as practicable. Increasingly, all over the world, several disparate services provided by different agencies of government, are available to citizens under one roof. For instance, the post office is a nodal agency for voter registration and many other services in some countries. In Germany, a local government office is the point of contact in obtaining a passport, though the actual service is provided by the federal government. Similarly, collection of tariffs, fees and taxes by various service providers can be at a common kiosk and all complaints and suggestions can be received at a common call centre. 2.6.5 Finally, as pointed out in para 2.2 (subsidiarity), empowerment of stakeholders and local governments should be seen as a continuum. Wherever a group of stake-holders can be clearly identified, for instance, the parents of children of a school, they should be directly empowered to the extent possible, so that stake-holding and power-wielding are integrally linked. However, stake-holder empowerment should not be seen as antithetical to local government empowerment. Both are part of the same quest for local governance based on subsidarity. At the same time, the representative local government and the empowered group of stake-holders cannot function in isolation. Just as the tiers of local government have to function in close coordination, local government and empowered stake-holders groups 19

Local Governance

should work in concert. The larger functions of support, coordination and policy will be with the local governments, and the actual day-to-day management and service delivery will be the responsibility of stake-holders. This convergence between the empowered stakeholders groups and local governments should be a key feature of decentralisation. 2.7 Citizen Centricity 2.7.1 The citizen is the heart of a democratic system. Therefore all governance institutions, particularly local governments should be judged by the satisfaction of citizens and the direct empowerment of people. 2.7.2 Since propensity to abuse authority is intrinsic to all authorities; and local governments are no exceptions, for local governments to be effective in fulfilling their desired objectives, a series of mechanisms need to be constituted giving voice to the citizens. Measurement of citizens satisfaction as the consumer of public services is an important mechanism. Report cards, citizens feedback at delivery and service counters, call centres and such fora for the citizens voice to be heard and feedback to be counted, needs to be institutionalised in decentralised governance. In addition, social audit through credible community based organisations, civil society groups and prominent citizens would ensure citizen centricity. 2.7.3 Representative democracy is a necessary mode of organisation in government. While citizen sovereignty is acknowledged, it is impractical for citizens to participate in decision making in large structures. However, at the local community level, the citizen as stakeholder can directly participate in decision making, relatively easily. A Gram Sabha comprising all the adult residents of a village is a far more legitimate guardian of public interest. Similarly, in urban governance too, we need to create smaller structures for decentralised decision making with peoples participation. 2.7.4 The most important form of citizens participation is a community of clearly identifiable stakeholders in the delivery of a specific public service. For instance, parents sending their children to a public school, farmers receiving irrigation from a common source, producers selling their produce in a market and members of a cooperative are groups of clearly identifiable stakeholders who also need empowerment in consonance with the principle of subsidiarity. 2.7.5 The Commission has taken note of the debate on local governments versus citizens groups. The Commission is of the considered view that empowerment of stakeholders and local governments must be seen as a continuum and that there should be no cause for conflict between stakeholders groups and representative local governments. Effective empowerment of stakeholders accompanied by mechanisms for coordination with local governments is, therefore, a key principle to be followed. 20

COMMON ISSUES

The principles governing democratic decentralisation are the same for both rural and urban areas. A large number of issues are common to both urban and rural areas and such issues have been comprehensively examined in this Chapter. In addition, the issues that are specific to rural or urban governance are detailed in two separate chapters Rural Governance and Urban Governance. 3.1 The Constitutional Scheme 3.1.1 The Principle of Subsidiarity 3.1.1.1 The 73rd and 74th Amendments of the Constitution, which aimed at a fundamental shift in the nature of governance, were passed in 1992 and came into effect in 1993 with great hope and anticipation. However, the past experience of over a decade shows that creating structures of elected local governments and ensuring regular elections do not necessarily guarantee effective local empowerment. While Panchayats, Nagarpalikas and Municipalities have come into existence and elections are being held, this has not always translated into real decentralisation of power. The Constitution left the issue of degree of empowerment and devolution to the State Legislature. Centralisation is not a guarantor of citizens liberty or good governance, it in fact delegitimises democracy, alienates the citizen, perpetuates hierarchies, and often breeds corruption and inefficiency. A large-sized district in India is larger than about 80 Nation States in the world in terms of population. Most of our larger States would be among the large countries of the world. Uttar Pradesh, Maharashtra, West Bengal and Bihar each would be the largest nation in Europe. Uttar Pradesh would be larger than the worlds sixth largest country. Centralisation in the face of such vast numbers, not to speak of the enormous diversity, can often lead to poor functioning of public services and marginalisation of citizens. In this backdrop, the 73rd and 74th Constitutional Amendments were intended to be a breath of fresh air, empowering the citizens through local governments, redefining the State, invigorating our democracy, and injecting efficiency and accountability in our public services. As stated earlier, democratic institutions need patience, nurturing and long evolution, and cannot be expected to yield instant results. However, for democracy to work, there should be consistency, predictability, 21

Local Governance

and effective empowerment of institutions combined with accountability. An analysis of the empowerment and functioning of local governments in various States leads to the following broad conclusions: Despite the mandatory constitutional injunctions, it took years, and in some cases a decade, to even constitute local governments and hold elections. Even when local governments are constituted and elections are held, States often postponed the subsequent elections on some pretext or other. Each time it is an uphill task to ensure compliance in some States, even with the mandatory provisions of the Constitution. There has been no linear development or evolution in respect of democratic decentralisation. State Governments, legislators and civil servants are in general reluctant to effectively empower local governments. Only the bare minimum required to implement the strict letter of the Constitution prevails in many States. What is implied by the spirit of the Constitution and principles of democracy is often ignored. Even mandatory provisions like the constitution of District Planning Committees and Metropolitan Planning Committees have been ignored in many States. Where the Panchayats have been constituted and elections held regularly, they are still left at the mercy of State Legislatures and State Executive. Although local governments have a long tradition of autonomy, the fact that Union and State Governments have an established tradition of centralisation for nearly four decades, means that strong vested interests have developed over time disallowing devolution of power. Some legislators at times tend to act as executives, intervening in transfers and postings, sanctioning of local bodies contracts and tenders, crime investigation and prosecution all of which are therefore often at the mercy of the local legislator. Given the compulsions of survival, the State Government which depends on the goodwill and support of legislators, does not usually intervene except where the Constitution specifically and unambiguously directs it.

3.1.1.2 There is a strong case to revisit the basic constitutional scheme relating to local government.These are being outlined in the paras that follow. 3.1.1.3 The provisions of Articles 243 G and 243 W of the Constitution relating to the powers, authority and responsibilities of local governments have been interpreted by most States as being merely advisory in nature. The Statement of Objects and Reasons of the Constitution (Seventy-third Amendment) Act, 1992 points out: 22

Common Issues

Though the Panchayati Raj Institutions have been in existence for a long time, it has been observed that these institutions have not been able to acquire the status and dignity of viable and responsive peoples bodies due to a number of reasons including absence of regular elections, prolonged supersessions, insufficient representation of weaker sections like Scheduled Castes, Scheduled Tribes and women, inadequate devolution of powers and lack of financial resources. 2. Article 40 of the Constitution which enshrines one of the Directive Principles of State Policy lays down that the State shall take steps to organise village panchayats and endow them with such powers and authority as may be necessary to enable them to function as units of self-government. In the light of the experience in the last forty years and in view of the short-comings which have been observed, it is considered that there is an imperative need to enshrine in the Constitution certain basic and essential features of Panchayati Raj Institutions to impart certainty, continuity and strengthen them. 3.1.1.4 The Statement of Objects and Reasons of the Constitution (Seventy-fourth Amendment) Act had this to say: In many States, local bodies have become weak and ineffective on account of a variety of reasons, including the failure to hold regular elections, prolonged supersessions and inadequate devolution of powers and functions. As a result, urban local bodies are not able to perform effectively as vibrant democratic units of self-government. The common desire was to ensure self government by the local bodies, that is, the third tier. 3.1.1.5 However, while the constitutional provisions relating to the structure of local governments are very strong and mandatory in nature, Articles 243 G and 243 W are less categorical. The intent of the Constitution is clear from the Objects and Reasons as well as the definition of local governments vide Articles 243 D and 243 P where local government, whether Panchayats or Municipalities, are defined as institutions of self government. Similarly, Articles 243 G and 243 W are clear about endowing local governments with such power and authority as may be necessary to enable them to function as institutions of Self Government. 3.1.1.6 The issue of whether a firm constitutional directive compelling State Legislatures to empower local governments effectively is desirable has been a matter of much public debate over the last decade. Clearly, there is need to empower local governments. Happily, an impressive political consensus on this issue among political parties across the spectrum 23

Local Governance

exists. However, when it comes to action, many States seem to feel that the balance of convenience lies in favour of minimum local empowerment. Given this backdrop a strong constitutional provision mandating effective empowerment of local governments seems both desirable and necessary. However, there are difficulties in such an approach. First, the autonomy of States must be respected in bringing about major constitutional amendments. Second, the situation varies from State to State and the uniform approach [one shoe fits all] could be detrimental to the objective of local government. Third, the matters listed in the Eleventh and Twelfth Schedules could not be fully handled by the local governments even in the best of circumstances. As pointed out in para 2.4, there are several functions which can be identified under each matter/subject and they in turn should vest in the appropriate level of local government or State Government based broadly on the principle of subsidarity. Such detailed prescription is not possible in the Constitution and the States must have the operational freedom in devolving specific functions to local governments. 3.1.1.7 A close examination of the Eleventh and Twelfth Schedules of the Constitution shows that they are only illustrative and not exhaustive. Also, there appear to be certain incongruities in the Twelfth Schedule and several matters listed in the Eleventh Schedule that ought to have been included, have been omitted inadvertently. 3.1.1.8 Agriculture, rural housing, watershed development, farm forestry, minor forest produce, rural electrification all are functions which by their very nature belong to rural local bodies. But non-conventional energy (sources), poverty alleviation programmes, education including primary and secondary education, adult education, technical training and vocational education, women and child welfare, family welfare, the public distribution system, even animal management and welfare (slightly different from husbandary in the traditional sense), libraries, cultural activities (which figure in the Eleventh Schedule but not in the Twelfth) can surely be functions for municipalities too. The Twelfth Schedule does cover a vast range of subjects urban planning, land and building regulation, fire services, roads and bridges, urban poverty alleviation, slum improvement and upgradation, provision of amenities, water supply, sanitation, public health, environment and so on. However, somewhat unexpectedly, economic and social development of urban citizens is restricted to only planning for them, and education covered only as promotion of .educational.aspects (sic). On the other hand, as mentioned above, various aspects of education figure prominently in three functions listed in the Eleventh Schedule and are intended to be devolved on rural local bodies. 3.1.1.9 The Commission examined the desirability of reviewing the two Schedules. However, these lists are merely illustrative and in any case, there is need for further functional 24

Common Issues

delineation between the State Government and local government in respect of most of these matters. Therefore, the Commission is of the considered view that the two Schedules need not be revised, but that the fact that they are not exhaustive and are only illustrative should be recognised. 3.1.1.10 The National Commission to Review the Working of the Constitution (NCRWC), which also went into this question, was concerned about the poor devolution of functions to local bodies and made the following recommendation: Article 243G along with the Eleventh Schedule indicates the kind of functions to be discharged by the Panchayats. It does not guarantee assignments of a set of exclusive functions to the Panchayats. Hence the kind of role they would be expected to play in governance depends on the regime that controls the government of a State. The Commission, therefore, recommends that Panchayats should be categorically declared to be institutions of self-government and exclusive functions should be assigned to them. For this purpose, Article 243G should be amended to read as follows: Substitution of Article 243G.- For Article 243 G, the following Article shall be substituted, namely: Powers, authority and responsibility of Panchayats. Subject to the provisions of this Constitution, the Legislature of a State shall, by law, vest the Panchayats with such powers and authority as are necessary to enable them to function as institutions of self-government and such law shall contain provisions for the devolution of powers and responsibilities upon Panchayats at the appropriate level, subject to such conditions as shall be specified therein, with respect to (a) (b) preparation of plans for economic development and social justice; the implementation of schemes for economic development and social justice as shall be entrusted to them including those in relation to the matters listed in the Eleventh Schedule.

Similar amendments should be made in Article 243W relating to the powers, authority and responsibilities of Municipalities, etc. The NCRWC recommended the use of the phrase shall by law vest as against the existing may by law endow in Articles 243 G and 243 W. Perhaps States have taken may in the 25

Local Governance

present provisions as discretionary and not mandatory. The expectation is that, with an express mandatory provision the process of devolution would take centre-stage. 3.1.1.11 The Commission has examined these reports, arguments and presentations with great care. It is of the considered view that while Articles 243 G and 243 W need to be strengthened, it is desirable to lay down general principles of empowerment without unduly restricting the States freedom of action. In particular, two principles need to be stated in the Constitution so that the State Legislatures can make laws based on these governing principles. First, devolution should be based on the broad principle of subsidiarity, and local governments at the appropriate level should be vested with adequate powers and authority to enable them to function as institutions of self government in respect of functions that can be performed by the local level. Second, as matters listed in Eleventh Schedule are not intended to be wholly transferred to local governments, the empowerment of local governments should be limited to specific functions, which can be performed at the local level. The Commission therefore recommends amendment to Article 243 G (and 243 W) on the following lines: 3.1.1.12 Recommendations: a. Article 243 G should be amended as follows: Subject to the provisions of this Constitution, the Legislature of a State shall, by law, vest a Panchayat at the appropriate level with such powers and authority as are necessary to enable them to function as institutions of self government in respect of all functions which can be performed at the local level including the functions in respect of the matters listed in the Eleventh Schedule. Article 243 W should be similarly amended to empower urban local bodies.

b.

3.1.2 Strengthening the Voice of Local Bodies 3.1.2.1 Article 171(2) stipulates Until Parliament by law otherwise provides, the composition of the Legislative Council shall be as provided in clause (3). (3) Of the total number of members of the Legislative Council of a State

26

Common Issues

(a)

as nearly as may be, one-third shall be elected by electorates consisting of members of municipalities, district boards and such other local authorities in the State as Parliament may by law specify; (b) as nearly as may be, one-twelfth shall be elected by electorates consisting of persons residing in the State who have been for at least three years graduates of any university in the territory of India or have been for at least three years in possession of qualifications prescribed by or under any law made by Parliament as equivalent to that of a graduate of any such university; (c) as nearly as may be, one-twelfth shall be elected by electorates consisting of persons who have been for at least three years engaged in teaching in such educational institutions within the State, not lower in standard than that of a secondary school, as may be prescribed by or under any law made by Parliament; (d) as nearly as may be, one-third shall be elected by the members of the Legislative Assembly of the State from amongst persons who are not members of the Assembly; and (e) the remainder shall be nominated by the Governor in accordance with the provisions of clause (5).

3.1.2.2 Presently, most of the States do not have Legislative Councils. After the enactment of the 73rd and 74th Constitutional Amendments, a third tier of Government has been created in the form of the local bodies. The Commission feels that this third tier of Government should also have a stake in making laws in the State Legislatures. Apart from constituting Legislative Councils (where they do not exist), the existing Legislative Councils may be recast as a council for local governments. 3.1.2.3 Article 171 provides for election of one-third of the Members of the Legislative Council, to be elected by local bodies. However, given the importance of democratic decentralisation, this proportion of representation for them is not enough. The constitutional provisions have a historical background because the number of educated peoples, especially in rural areas, was not large at the time of framing of the Constitution. The situation has changed over the years. With strides in education, the number of educated electorate has increased manifold and a graduation degree is nothing exceptional today. Therefore, there is no raison detre now for having a graduate constituency. Moreover, with modernisation of the economy, a large number of professions have emerged and in such a scenario it may not be proper to give representation to only one profession that is, teaching. Article 171 provides an opportunity for restructuring the Legislative Councils as a Council of local governments. Thus, the Legislative Council should have members elected solely from the 27

Local Governance

elected representatives of the local bodies. This would not require any amendment of the Constitution a law of Parliament would suffice. 3.1.2.4 Recommendation: a. Parliament may by law provide for constitution of a Legislative Council in each State, consisting of members elected by the local governments.

3.1.3 Structure 3.1.3.1 In the current constitutional scheme, detailed and inflexible mandatory provisions exist in respect of the constitution and composition of local governments including the manner of election. There have been strong voices across the country seeking a more flexible scheme, granting greater freedoms to States to design the Panchayat structure, suitable to their requirements. In particular, there are three issues to be examined carefully: 1. 2. 3. Number of tiers Composition of local bodies and mode of elections Urban rural divide at the district level.

Number of Tiers 3.1.3.2 Article 243 B makes it mandatory for every State with a population exceeding 20 lakhs to have three tiers of Panchayats at the Village, Intermediate and District levels. In a vast and complex country with traditional diversity, it is not feasible to prescribe nationally any specific pattern of local governments. Also, the States should have freedom to experiment and improve the design from time to time. In Kerala, there are only about 999 Village Panchayats in 14 districts. Clearly a mandatory intermediate tier Panchayat would be redundant in Kerala. Even larger States, with generally smaller habitats mostly want to treat a group of villages as the polling unit of local government on the pattern of the countries in the West. In such a case again, Intermediate Panchayats may be redundant. At the same time, if the States wish to have three tiers, they should be free to adopt them. The Commission is of the considered view that while the States should constitute the Panchayats, the tiers of local government should be left for the State Legislature to decide. Article 243 B should be correspondingly amended to constitute in every State, Panchayats at the appropriate levels instead of specifying mandatory creation of Village, Intermediary and District Panchayats. Composition of Local Bodies and Mode of Elections 3.1.3.3 Until 1993, States had their own models of Panchayats. Typically in most States, the Village Panchayat head was the ex-officio head of the Intermediate Panchayat (IP), 28

Common Issues

and the head of Intermediate Panchayat was the member of District Panchayat. Several States believed that such an arrangement ensured an organic link between the three tiers and facilitated their harmonious functioning. Article 243 C of the Constitution makes it mandatory for all the seats in a Panchayat (at every level) to be filled by persons chosen by direct election from territorial constituencies in the Panchayat area. In other words, the member of every tier of Panchayat Village, Intermediate & District - should be elected directly by the people and the States have no flexibility of establishing any organic link between the three tiers. However, there is a strong argument in favour of each Panchayat being directly elected by the people, instead of a series of indirect elections, once the members of Village Panchayats are elected. Such a system of indirect representation will be increasingly remote from the people and might defeat the very purpose of local government. In some States, this problem was evaded in the pre-1993 era by a direct popular election of the Chairperson of the Panchayat. For instance, in Andhra Pradesh, under the 1987 law, the Chairperson of the Village, Intermediate and District Panchayats were chosen by direct popular elections, through universal adult franchise. Under the current constitutional provision {Article 243 C (5)}, the State Legislation has no choice in altering the manner of election of the Chairperson of the Intermediate Panchayat and District Panchayat. Some States may prefer direct election of a Chairperson in order to ensure greater stability of local governments and higher accountability and legitimacy that comes from a direct popular mandate. Indirect election of the Chairperson has led to certain complications on occasions on account of a complex system of reservations. There are several instances in which a party with majority support did not have any electoral member in the category for which the office of Chairperson was reserved. 3.1.3.4 Article 243 C (3)(c) and (d) stipulates that the State Legislature may by law provide for the representation of the Members of Parliament and State Legislature of the State at levels other than the village level. The Commission is of the view that the imposing presence of Members of Parliament and the State Legislature in the Panchayats would subdue the emergence of local leadership which is a sine qua non for development of vibrant local governments. Therefore, the Commission is of the view that Members of Parliament and State Legislatures should not become members of local bodies. This would endow the local bodies with decision-making capabilities. 3.1.3.5 On balance, the Commission feels that States should be free to decide the composition of Panchayats and the manner of election to suit their local conditions best. However, the Commission is of the view that in the States which opt for indirect membership of Intermediate Panchayat & District Panchayat, whereby the Chairpersons of the lower tiers became members of higher tiers, and there are no directly elected members, it is desirable to have the Chairperson directly elected. In other words, in each tier, either 29

Local Governance

the members or the Chairperson should be directly elected so that the population will get proper representation. 3.1.3.6 One important feature of the constitutional scheme of local government is the empowerment of the SC, ST, women and where the States choose so, OBCs through a system of reservations. Already evidence shows that women and weaker sections elected to Panchayats and Municipalities have performed very creditably. The resultant empowerment of these sections has been one of the most noteworthy features of local government. District Council 3.1.3.7 The sheer accident of elected urban local governments coming into being first during the colonial era led to parallel and disjointed development of panchayats and municipalities. Consequently, the statutory framework has also been separate and no efforts were made to ensure their convergence. The isolation of rural local governments from urban local governments has resulted in several unhappy consequences. First, there is an artificial divide between the rural and urban populations even in matters relating to common needs and aspirations. For instance, health care and education are the basic public services that should be available to all categories everywhere. Segmentation of these services is neither desirable nor feasible because there is a hierarchy of institutions, each feeding into the other and the geographical location of an institution, say district hospital, does not mean it caters to only the urban population in the district town. 3.1.3.8 Second, in a rapidly urbanising society, the boundaries between rural and urban territories keep shifting. In time, the population served by rural local governments will shrink quite significantly. In fact, the peri-urban areas around fast growing cities have hybrid characteristics of both village and town, and their special needs must to be addressed in an integrated manner. Further, the obvious need for coordination between rural and urban local governments at the district level gave rise to artificial institutions like District Planning Boards and District Development Review Committees in the pre-1993 era. This is now sanctified in the Constitution by the creation of DPCs under Article 243 Z D. Finally, in the public eye there is no single, undivided local government, representing all sections at the district level. The districts are over two centuries old and have come into their own as vibrant political, cultural, economic and administrative entities, with each having its own distinctive characteristics. Despite this, the artificial rural and urban separation meant that the people continue to view the Zila Parishad or the municipality as just another body and not the embodiment of the district in political terms. Not surprisingly, in most States, the District Collector continues to remain the real symbol of authority in the district. 3.1.3.9 The 73rd Amendment of the Constitution built upon the Balwantrai Mehta model 30

Common Issues

and the Asoka Mehta Committee recommendations, as a result there is no effective integration at district level of all local governments urban or rural. The DPCs prescribed in Article 243Z D are too weak and non-starters in many States. Therefore, the Commission is of the considered view, that there must be a single elected District Council with representatives from all rural and urban areas, that will function as a true local government for the entire district. In such a scheme, the District Council will be responsible for all the local functions, including those listed for them in the Eleventh and Twelfth Schedules. The DPC in its present form will be redundant, once a District Council comes into existence as envisaged by the Commission. Planning for the whole district urban and rural will become an integral part of the District Councils responsibility. The role of the District Collector/DM also needs to be reviewed in the context of the District Council and the District Government. There are two broad views that have emerged over the years on this issue. Strong advocates of local governments empowerment argue that the District Collectors institution is redundant in a democratic milieu with empowered and effective local governments and should, therefore, be dispensed with. Pragmatists argue that the Collectors institution served the country well for some two centuries and has been the pillar of stability and order in a diverse and turbulent society. Therefore, the institution of District Collector must remain in the current form for some more time. Eventually, the District Council should have its own Chief Officer. Meanwhile, as an interim mechanism, there is merit in utilising the strength of the Collectors institution to empower local governments. The Commission is of the considered view that a golden mean between these two positions is desirable and the District government must be empowered while fully utilising the institutional strength of the District Collector. 3.1.3.10 The Commission believes that these two objectives can be realised, by making the District Collector function as the Chief Officer of the District Council. In such a case, the Collectors appointment should be in consultation with the District Council. The District Collector-cum-the Chief Officer would have dual responsibility and would be fully accountable to the elected District Government on all local matters, and to the State Government on all regulatory matters not delegated to the District Government. This issue will be further dealt with in detail in the Report on District Administration (TOR: 6). 3.1.3.11 Recommendations: a. Article 243B(1) should be amended to read as follows: There shall be constituted in every State, as the State Legislature may by law provide, Panchayats at appropriate levels in accordance with the provisions of this part. 31

Local Governance

b.

The Constitutional provisions relating to reservation of seats (Article 243 D) must be retained in the current form to ensure adequate representation to the under-privileged sections and women. Members of Parliament and State Legislatures should not become members of local bodies. Article 243 C(1) should be retained. Article 243 C (2 & 3) should be repealed and supplanted by Article 243 C(2) as follows: 243 C(2) Subject to the provisions of this part, the Legislature of a State may, by law, make provisions with respect to composition of Panchayats and the manner of elections provided that in any tier there shall be direct election of at least one of the two offices of Chairperson or members. Provided that in case of direct elections of members in any tier, the ratio between the population of the territorial area of a Panchayat at any level and the number of seats in such Panchayat to be filled by election shall, so far as practicable, be the same throughout the State. Also, each Panchayat area shall be divided into territorial constituencies in such manner that the ratio between the population of each constituency and the number of seats allotted to it shall, so far as practicable, be the same throughout the Panchayat area.

c. d. e.

f. g.

There shall be a District Council in every district with representation from both urban and rural areas. 243 B (2) should be substituted by: There shall be constituted in every District, a District Council representing all rural and urban areas in the District and exercising powers and functions in accordance with the provisions of Articles 243 G and 243 W of the Constitution.

32

Common Issues

3.2 Elections 3.2.1 The Electoral Process 3.2.1.1 After the initial hiccups, elections to local bodies are now being conducted fairly regularly in almost all States and independent Election Commissions have been constituted everywhere as constitutional authorities. At present, Jharkhand is the only State not to have held Panchayat elections. In respect of municipalities, the conduct of elections has been a little more irregular, partly because of periodic change of boundaries of local governments with urbanisation. However, there are several issues which need to be addressed in the conduct of elections to local governments. 3.2.1.2 Although the Constitution entrusts the conduct of elections to the SECs (State Election Commissions), the Commission (SEC) is often helpless when the delimitation exercise is not completed in time. Article 243 C of the Constitution provides that the ratio between the population of the territorial area of a Panchayat at any level and the number of seats in such Panchayat to be filled by election shall, as far as practicable, be the same throughout the State. While such an explicit provision has not been made in respect of municipalities, basic principles of equity and democratic participation demand that a similar practice should be followed in urban local governments. Clause (4) of Article 243 K states as follows: the Legislature of State may, by law, make provisions with respect to all matters relating to, or in connection with, elections to the Panchayats. 3.2.1.3 As can be seen from the Table 3.1, in many States, the powers of delimitation of local government constituencies have been retained by the Governments. As a result, in many cases, particularly in urban areas, the SECs have to wait until a delimitation exercise is completed by the State Governments. Though the constitutional provisions relating to elections to Lok Sabha/State Assemblies are identical, Parliament has made laws right from the inception of the Republic creating independent Delimitation Commissions with the participation of the Election Commission of India. The office of the Election Commissioner in fact acts as the Secretariat for the delimitation exercise. This salutary institutional mechanism has ensured that elections in independent India were never delayed on grounds of incomplete delimitation. The Commission is of the view that a separate Delimitation Commission for local governments is unnecessary. Independent SECs, especially when appointed as Constitutional authorities, can easily undertake this exercise and the government can provide the broad guidelines for delimitation either by law or by Rules. Once delimitation is carried out by SECs, State Governments cannot delay the conduct of elections on the plea of incomplete delimitation exercise. 33

Local Governance

Table 3.1 Comparison of Powers of State Election Commissions Activity related to elections Reservation and Rotation of Reserved Constituencies Delimitation and Preparation of electoral rolls Where the responsibility lies State Government SEC Madhya Pradesh Maharashtra Rajasthan Gujarat Andhra Pradesh Uttar Pradesh Kerala Tamil Nadu Haryana West Bengal Punjab Karnataka (for DPs & IPs) Karnataka (for GPs) Andhra Pradesh West Bengal Haryana Himachal Pradesh Karnataka Punjab Maharashtra Rajasthan Tamil Nadu Uttar Pradesh

Source: Report of the Working Group on Democratic Decentralisation and PRIs, Planning Commission/Ministry of Panchayati Raj, November, 2006.

3.2.1.4 The Constitution provides for political empowerment of disadvantaged sections and therefore the reservation of elective offices in local governments. However, once again, in most States, the power of reservations is retained by State Governments. Given the complexity of reservations in local government and the high proportion of seats reserved (70% and more in certain states), periodic rotation of seats becomes necessary. Many States undertake the exercise of enumeration of Other Backward Classes (for whom census figures are not available) in the eleventh hour, delaying reservation and therefore the conduct of elections. The Commission is of the view that reservation of constituencies should also be entrusted to SECs. In respect of the Lok Sabha and the Legislative Assemblies, both delimitation and reservations are decided simultaneously by the Election Commission. 3.2.1.5 Article 243 K vests preparation of electoral rolls for local elections in SECs. The eligibility criteria for voting rights are identical for the Lok Sabha, State Assemblies and local governments, therefore, constitute the third tier of governance and the national, 34

Common Issues

state and local governments should be seen as a seamless continuum. In such a situation preparation of separate electoral rolls for local governments is redundant and can only lead to confusion. Many States recognise this problem and some of the State laws have adopted the Assembly Electoral rolls prepared by the Election Commission of India for elections to local governments also. However, the laws vary from State to State and often the Assembly rolls are taken as the starting point and fresh registration is taken up by the SEC for local elections. In cases where fresh rolls are prepared, the two rolls (one for the local bodies and another for the Legislative Assembly) may differ. This is likely to lead to confusion among voters and could also pose legal complications. In order to obviate any such difficulty it would be better if the rolls for the Legislative Assembly are used as the basis for local bodies elections also. It however needs to be emphasised that the electoral rolls for the Legislative Assembly cannot be used straightaway for local bodies elections because of two reasons: (i) a local body area may not be exactly the same as the area covered by the electoral roll of a Legislative Assembly; (ii) the voters list in case of local bodies elections have to be prepared ward-wise whereas the voters list of the Legislative Assembly is part-wise and as a unit a ward is completely different from a Part. 3.2.1.6 At present, a Part in an electoral roll for the Legislative Assembly is defined as follows5: 5. Preparation of roll in parts.(1) The roll shall be divided into convenient parts which shall be numbered consecutively. ... (4) The number of names included in any part of the roll shall not ordinarily exceed two thousand.

3.2.1.7 It has been experienced that such Parts are not always compact geographical units because of which it becomes difficult to use them as the basic unit for the purposes of delimitation of municipal and village wards (constituencies). The Commission is, therefore, of the view that a Part should be defined to be a compact geographical unit. Then a Building Blocks approach can be used so that a ward comprises one or more integral Parts (In smaller towns and villages, a ward may be smaller than a Part and in such cases the ward should be so constituted such that one or more wards constitute a Part). A further step towards convergence would be to define Enumeration Blocks during a census as coterminus with Parts of electoral rolls of the Legislative Assembly. 3.2.1.8 The Commission is of the view that local government laws in all States should provide for adoption of the Assembly electoral rolls for local governments without any revision of names by SECs. For such a process to be effective, it is also necessary to ensure 35
The Registration of Electors Rules, 1960; http://lawmin.nic.in/legislative/election/volume%202/registration%20of%20electors%20rules,%201960.pdf
5

Local Governance

that the voter registration and preparation of electoral rolls by the Election Commission of India is based on geographic contiguity. Similarly, the electoral divisions for elections to local bodies should follow the Building Blocks approach. 3.2.1.9 As stated earlier, rotation of reservations becomes necessary given the complexity and high percentage of reservation of seats. However, frequent rotation denies to the elected representatives, an opportunity to gain experience and grow in stature. This is particularly damaging for disadvantaged sections of voters who have hitherto been denied leadership opportunities. As a result, while reservations lead to numerical representation, empowerment is sometimes illusory because very often, entrenched local elites tend to nominate proxy candidates in reserved seats in anticipation of its rotation after a term. Considering these facts, the Commission is of the view that reservation of seats should be in a manner that leads to effective empowerment and not numerical and notional representation. This can be accomplished through the following three broad approaches: First, the rotation can be after at least two terms of five years so that there is possibility of longevity of leadership and nurturing of constituencies. In Tamil Nadu, this approach has been adopted. However, with multiple reservations this may lead to large sections being denied the opportunity of reservation for a generation or more. Second, instead of single-member constituencies, elections can be held to multi-member constituencies. Several seats can be combined in a territorial constituency in a manner that the number of seats allocation for each disadvantaged section remains the same in each election in that constituency. Elections can then be held by the List System so that parties get representation in proportion to votes obtained. Alternatively, members may be elected on the basis of votes obtained individually. In either case, the law should clearly specify the required number of members to be elected from each reserved category. The 1952-57 Lok Sabha/State Assembly elections were conducted in 2 or 3-member constituencies. Maharashtra has adopted multi-member constituencies for elections in Panchayats. Third, if the office of the Chairperson/Chief Executive is elected directly by popular vote there is greater pool of talent available from the disadvantaged sections and leadership can be nurtured and developed. The Commissions recommendations vide para 3.1.3.11 to give the States the flexibility in the composition of Panchayats and the manner of elections would address this problem. 3.2.1.10 In most States, DPCs/MPCs have not been constituted. As per Article 243 ZD, at least 80% of members of DPC shall be elected by and from amongst the elected members of the Panchayat at the district level and of the Municipalities in the district in proportion to 36

Common Issues

the ratio between the population of the rural areas and of the urban areas in the district. In case of MPCs, at least two-third of the members shall be elected by and from amongst the elected members of the Municipalities and Chairpersons of Panchayats in the Metropolitan area in proportion to the ratio between the population of the municipalities and of the Panchayats in that area (Article 243ZE). This process involves giving weightage to the votes proportional to the population and timely conduct of elections. The Commission, therefore, feels that the conduct of elections for the elected members of these bodies should also be entrusted to the SECs. 3.2.1.11 The Government of India has also circulated a Model Panchayat Elections Bill, 2007. As per the provisions of this Bill, the powers of delimitation, notification of an election, reservation of seats as well as reservation in the offices of Chairpersons have been proposed to be given to the State Election Commission. 3.2.1.12 Recommendations: a. b. The task of delimitation and reservation of constituencies should be entrusted to the State Election Commissions (SECs); Local government laws in all States should provide for adoption of the Assembly electoral rolls for local governments without any revision of names by SECs. For such a process to be effective it is necessary to ensure that the voter registration and preparation of electoral rolls by Election Commission of India is based on geographic contiguity. Similarly, the electoral divisions for elections to local bodies should follow the Building Blocks approach. The Registration of Electors Rules, 1960, should be amended to define a Part as a compact geographical unit. In order to achieve convergence between census data and electoral rolls, the boundaries of a Part and an Enumeration Block should coincide. Reservation of seats should follow any one of the two principles mentioned below: i. In case of single-member constituencies, the rotation can be after at least 2 terms of 5 years each so that there is possibility of longevity of leadership and nurturing of constituencies. 37

c. d. e.

Local Governance

ii.

Instead of single-member constituencies, elections can be held to multi-member constituencies by the List System, ensuring the reservation of seats. This will obviate the need for rotation thus guaranteeing allocation of seats for the reserved categories.

f.

The conduct of elections for the elected members of District and Metropolitan Planning Committees should be entrusted to the State Election Commission.

3.2.2 Constitution of the State Election Commission 3.2.2.1 Given the common functions of the State Election Commissions with regard to local bodies elections, it is necessary to examine how the system has functioned and what improvements to that system, if any, are required. The State Election Commission performs functions similar to that of the Election Commission of India. The number of elected representatives of the people has enormously increased over the years and the conduct of elections to the local bodies is indeed a gigantic task. This institution is not yet two decades old, but holds the key to a highly representative system of democratic governance in the country. It is, therefore, essential that the machinery for organising local elections is adequately supported. 3.2.2.2 The tenure and conditions, qualifications and conditions of service of State Election Commissions vary greatly across States as indicated in the Table 3.2. Table 3.2: Composition of State Election Commissions
State Tenure Age limit Qualifications Status Status: Equal to that of the Chairman, Public Service Commission. Pay Scale: Last pay drawn in the government minus pension Salary: Same as in the government service minus pension. Salary: Same as in the government service minus pension

Assam 4 years 62 years A minimum 25 years of service in administrative, judicial or legal service of State or Union Government. Bihar 3 years 62 years Haryana 5 years Between 55 & 65 years Not below the rank of GOI Additional Secretary or equivalent post A Judge of High Court or a person who has served government in the rank of a Commissioner for 5 years.

38

Common Issues

Table 3.2 Contd.

State Tenure Age limit Himachal 5 years 65 years Pradesh Qualifications Not below the rank of Additional Chief Secretary or equivalent position. Status Salary: Equal to that of a Judge of a High Court minus pension. Salary: Same as in the Government at time of appointment as SEC or Rs.6500/- per month whichever is higher minus pension. Status: Equal to that of the State Chief Secretary. Salary: Rs. 8000/- per month (old scale) minus pension. Salary: Rs. 8000/- per month (old scale) minus pension. Salary: Rs. 7600/- per month (old scale) (also a provision of pay protection) Salary: Rs, 20,450/- per month minus pension or last salary drawn, which ever is higher. Facilities as available to Chairman, State PSC. Salary: equal to that of a High Court Judge.

Karnataka 5 years 62 years No qualifications prescribed. Kerala 4 years 62 years No qualifications prescribed. Madhya 6 years 62 years Pradesh Not below the rank of GOI Additional Secretary or equivalent post in the State Government.

Maharashtra 5 years Not below rank of Principal Secretary to the State Government. Orissa 5 years 62 years Retired High Court Judge, or retired District Judge or a serving civil servant. Punjab 5 years 64years Tamil Nadu Serving or a retired High Court judge, or service of at least 2 years as Financial Commissioner or Principal Secretary to State Government.

2 years 62 years Not below the rank of (may be Secretary to Government. reappo-

Salary: As admissible to a Serving Judge of a High Court.

39

Local Governance

Table 3.2 Contd.

State Tenure inted for two successive terms). Not below rank of Joint Secretary in GOI or must have held the post of District Magistrate or Divisional Commissioner and a senior Secretariat administrative post. Sufficient experience in the affairs of Union or any State Government in an administrative post. Salary: As admissible to him in his parent department. Age limit Qualifications Status

Uttar 5 years 65 years Pradesh West 5 years 65 years Bengal

Salary: Rs. 8000/- per month (old scale) minus pension.

Source: Report of the Working Group on Democratic Decentralisation and PRIs, Planning Commission/Ministry of Panchayati Raj, November, 2006.

3.2.2.3 The National Commission to Review the Working of the Constitution (NCRWC) had recommended in 2002 that State Election Commissioners should be accorded the status of a Judge of a High Court in the same manner as Election Commissioners in the Election Commission of India are accorded the status of Judge of the Supreme Court. 3.2.2.4 There is no doubt that State Election Commissions must discharge their functions in a totally neutral manner. Moreover, the Commissioner should be a person with impeccable credentials. The Election Commission should have enough autonomy and powers to resist all extraneous pressures. In its Report onEthics in Governance, this Commission recommended that the CEC and other Election Commissioners should be selected through a collegial process. On the same analogy, the Commission is of the view that the SEC should also be appointed on the recommendations of a collegium comprising the Chief Minister, the Speaker and the Leader of Opposition in the Legislative Assembly. 3.2.2.5 It has been urged before the Commission that the State Election Commission should be brought under the control of the Election Commission of India. Such a measure would give the State Election Commission the required independence from State Governments and they would be able to discharge their duties in an objective manner. This would also ensure a commonality of approach in the electoral process. However, one independent constitutional authority cannot function under another constitutional authority. The only alternative would

40

Common Issues

be to repeal Article 243K and amend Article 324 entrusting local elections to the Election Commission of India. Article 324 provides for appointment of Regional Commissioners. A Regional Commissioner could then be appointed for each State under this provision and it could function as the State Election Commission for local elections. Against this it has also been argued that, as the number of local bodies is so large, the Election Commission of India would hardly have the time to attend to election related matters in respect of local governments and therefore it is better to have a decentralised mechanism with each State having its own State Election Commission. Now that every State has constituted its SEC, repealing Article 243K and abolishing these offices would be impractical. The Commission feels that the balance of convenience lies in strengthening the independence of the State Election Commission. This can be accomplished by the State legislation providing (as suggested above) for appointment of the SEC by a collegium comprising the Chief Minister, the Chief Justice of the High Court and the Leader of Opposition in the Legislative Assembly. Certain aberrations like appointment of serving officers with lien on service should be eschewed. Uniform criteria need to be evolved and institutionalised regarding the qualifications of appointment, tenure of office and age of retirement. The Commission is of the view that a uniform tenure of 5 years subject to a age limit of 62 years as is applicable to the judges of High Courts would be appropriate. However, the Commission strongly believes that an effective institutional mechanism should be evolved and strengthened to bring the Election Commission of India and the SECs on one platform. This will facilitate regular interaction, logistical coordination, infrastructure sharing and technical support to the SECs. It will also help SECs draw upon the institutional strength and credibility the Election Commission of India has established over the decades. In addition, the Commission is of the view that the impressive infrastructure of Electronics Voting Machines (EVMs) available with Election Commission of India should be deployed for local elections, given their success in the Parliament and Legislative Assembly elections. For this, the State law should specifically provide for use of EVMs. 3.2.2.6 Recommendations: a. The State Election Commissioner should be appointed by the Governor on the recommendation of a collegium, comprising the Chief Minister, the Speaker of the State Legislative Assembly and the Leader of Opposition in the Legislative Assembly. An institutional mechanism should be created to bring the Election Commission of India and the SECs on a common platform for coordination, learning from each others experiences and sharing of resources. 41

b.

Local Governance

3.2.3 Correcting the Urban Rural Imbalance in Representation in Legislative Bodies 3.2.3.1 Article 82 of the Constitution provides that the allocation of seats in the House of the People and the division of States into territorial constituencies shall be readjusted after each census. Similar provisions exist under Article 170 for State Legislative Assemblies. However, the Forty-second Amendment froze any such reallocation of seats till 2001. This freeze was further extended by the Eighty-fourth Amendment. The Statement of Objects and Reasons of the Eighty-fourth Amendment Act are as follows: Provisos to Articles 82 and 170 (3) of the Constitution provide that no fresh readjustment of constituencies can be undertaken until the figures of the first census taken after the year 2000 are published. These provisos were inserted by the Constitution (Fortysecond Amendment) Act, 1976 as a measure to boost family planning norms. Since the first census to be taken after the year 2000 has already begun, the constitutional embargo on undertaking fresh delimitation will lapse as soon as the figures of this census are published. There have been consistent demands, both for and against undertaking the exercise of fresh delimitation. Keeping in view the progress of family planning programmes in different parts of the country, the Government, as part of the National Population Policy strategy, recently decided to extend the current freeze on undertaking fresh delimitation up to the year 2026 as a motivational measure to enable the State Government to pursue the agenda for population stabilisation. Government has also decided to undertake readjustment and rationalisation of territorial constituencies in the States, without altering the number of seats allotted to each State in

42

Common Issues

the House of the People and Legislative Assemblies of the States, including the Scheduled Caste and the Scheduled Tribe constituencies, on the basis of the population ascertained at the census for the year 1991, so as to remove the imbalance caused due to uneven growth of population/electorate in different constituencies. It is also proposed to refix the number of seats reserved for the Scheduled Castes and the Scheduled Tribes in the House of the People and the Legislative Assemblies of the States on the basis of the population ascertained at the census for the year 1991.

3.2.3.2 The Constitution had laid down provisions for delimitation of constituencies after every census so that the population-seat ratio is maintained. The increase in population has not been uniform throughout the country. Moreover the high rate of rural to urban migration has increased the population of urban constituencies much faster than their rural counterparts. As a result, on an average the number of electorates in an urban constituency is much higher than in rural constituencies. The freeze imposed by the Forty-second Amendment and further extended by the Eighty-fourth Amendment, on the total number of seats in the House of the People and the Legislative Assemblies is quite understandable, as it seeks to help the objectives of family planning. But within the number of seats allotted to a State, it would be desirable to carry out the adjustment of such seats. The Delimitation Act, 2002, primarily seeks to achieve this objective. The Delimitation Commission has been asked to carry out the delimitation, as per Section 8 of the Act, which says: 8. Readjustment of number of seats.The Commission shall, having regard to the provisions of Articles 81, 170, 330 and 332, and also, in relation to the Union Territories, except National Capital Territory of Delhi, sections 3 and 39 of the Government of Union Territories Act, 1963 (20 of 1963) and in relation to the National Capital Territory of Delhi sub-clause (b) of clause (2) of article 239AA, by order, determine, (a) on the basis of the census figures as ascertained at the census held in the year 1971 and subject to the provisions of section 4, the number of seats in the House of the People to be allocated to each State and determine on the basis of the census figures as ascertained at the census held in the year [2001] the number of seats, if any, to be reserved for the Scheduled Castes and for the Scheduled Tribes of the State; and (b) on the basis of the census figures as ascertained at the census held in the year 1971 and subject to the provisions of section 4, the total number of seats to be assigned to the Legislative Assembly of each State and determine on the basis of the census figures as ascertained at the census held in the year [2001] the number of seats, if any, to be reserved for the Scheduled Castes and for the Scheduled Tribes of the State. 43

Local Governance

3.2.3.3 Such an exercise would set right the imbalance between the urban and rural electorate in terms of the number of voters per seat within the State. However, as the population of urban areas would further increase rapidly as compared to rural areas, it would be desirable if such an exercise is carried out after each census as was originally envisaged in the Constitution. The number of seats in the Lok Sabha and the Legislative Assembly in a State would not change but the allocation of seats within the State would change. This would help in getting the focus of legislators on urban issues along with the rural issues. 3.2.3.4 Recommendation: a. In order to set right the electoral imbalance between the urban and rural population in view of rapid urbanisation, an adjustment of the territorial constituencies both for the Lok Sabha and the Legislative Assembly within a State should be carried out after each census. Articles 81, 82, 170, 330 and 332 of the Constitution would need to be amended.

3.3

Functions of Local Governments

3.3.1 Devolution of Powers and Responsibilities 3.3.1.1 Under Article 243 G (as regards Panchayats) and Article 243 W (as regards Municipalities), the 73rd and 74th Constitutional Amendments empowered State Legislatures to endow by law: Such powers and authority as may be necessary to enable them to function as institutions of self government; Such law may contain provisions for devolution of powers and responsibilities, subject to conditions specified therein, with respect to (a) the preparation of plans for economic development and social justice; and (b) implementation of schemes for economic development and social justice as may be entrusted to them (Article 243 G)/performance of functions and implementation of schemes as may be entrusted to them (Article 243 W) including those in relation to the matters listed in the Eleventh Schedule (Panchayats) and the Twelfth Schedule (Municipalities) respectively. 3.3.1.2 The overriding intention of these two Articles is that powers and authority may be so devolved as to enable Panchayats and Municipalities to function as institutions of self government. For this, they may also be empowered to prepare local plans for economic development and social justice and to implement schemes/perform functions including those listed in the relevant Schedules. 44

Common Issues

3.3.1.3 Though 15 years have gone by, the progress of devolution of powers and responsibilities to local governments at various levels is poor and uneven. A survey of the present status of devolution reveals the following position: a. Devolution has been sought to be done in most of the States by omnibus legislations regarding Panchayats/Municipalities and Municipal Corporations, in which the matters listed in the Eleventh and Twelfth Schedules are just repeated. The number of subjects said to have been transferred varies from a few in number in some States to the entire list as given in the Schedules in some others. However, in all cases the progress in delineation of functions of the different tiers of local governments in a given subject matter has been very slow. Due to the persistent efforts of the Ministry of Panchayati Raj in the last three years, detailed activity mapping of different tiers of local governments have been undertaken in all the States. However, the exercise continues to be partial and prolonged. The draft activity mapping lists have not been approved by the State Governments in some cases. Even where activity mapping has been approved, parallel action to enable local governments to exercise the functions has not been taken. The existing Government Departments with their executive orders and instructions, parallel government bodies like DRDAs and the continuance of statutory bodies (as regards water, electricity, etc.) without any change, prevent the local governments from exercising the so called transferred functions. In some cases even those activities that can be undertaken by local governments within the existing arrangements are got done by encouraging and financing the formation of a number of parallel community organisations of stakeholders and entrusting the activities exclusively to them, instead of working out a synergic relationship between them and the local governments.

b.

c. d. e.

f.

3.3.1.4 The implementation space at local levels is thus occupied by a multiplicity of governmental agencies Union, State and local even in the case of a single sector. Confusion, unnecessary duplication, inefficiency, wastage of funds, poor outputs and outcomes are the result of this organisational jungle. The local organisations which should be the most directly and fully concerned are at best treated as a small part of the implementation, occasionally consulted but, in most cases, bye-passed and ignored. 3.3.1.5 The Standing Committee on Urban and Rural Development, 2004 (Thirteenth Lok Sabha) had noted the failure of the Union and State Governments in implementing the provisions of the Constitution. 45

Local Governance

The overall aim of Part IX is to endow the Panchayats with such powers and responsibilities as may be necessary to enable them to function successfully as institutions of selfgovernment, as per Article 243G of the Constitution. State L e g i s l a t u re s h a v e been empowered to endow Panchayats by law with such powers and authority as may be necessary to enable them to prepare plans for economic development and social justice and implement schemes for economic development and social justice, including those in relation to the matters contained in the Eleventh Schedule. The Committee are, however, constrained to note that although more than nine years have passed since the Constitution (Seventy-third Amendment) Act was enacted, very few States seem to be serious about the implementation of said provision of Part IX. They further find that endowing Panchayats with certain functions is fruitful only if the Panchayats are equipped with the trained functionaries and adequate finances are also made available to them. Thus they note that Panchayats can fulfill their responsibility as institutions of self-government only if devolution is patterned on a nexus between the three Fs, i.e. functions, functionaries and finances. The Committee are unhappy to note that very few States have linked the very important devolution of functions to the means of actualising such devolution 46

Common Issues

through the devolution of functionaries and funds for all the 29 subjects enlisted in the Eleventh Schedule.6 In this respect, there is need to identify practical steps for effective empowerment of local governments, in addition to strengthening the constitutional provisions of Article 243. There are two areas which need special attention. First, Articles 243 N and 243 Z F mandate that all laws which are inconsistent with the provisions of Parts IX and X of the Constitution shall continue to be in force until such laws are suitably amended to bring them in conformity with the Constitutions or repealed, or until the expiration of one year from the dates of the 73rd and 74th Constitutional Amendments coming into effect. The 73rd and 74th Constitutional Amendments came into effect on 24th April, 1993 and 1st June, 1993 respectively, and as mentioned earlier, despite the passage of 15 years since then, most States have not even identified all the statutes which are inconsistent with the Parts IX and X of the Constitution. Kerala is one significant exception where dozens of laws have been identified and amended. Clearly, when the architecture of governance is fundamentally altered, several existing laws need to be suitably amended and alternative statutory arrangements made to transfer powers now exercised by State Government and officials to the local governments. Mere constitution of local governments would not serve the purpose without such a detailed and thorough exercise. 3.3.1.6 For the reasons stated in Para 3.1.1.8, the Commission is of the view that a fresh, more comprehensive, set of functions should be laid down for urban bodies, to include all the activities that need to be performed at the local level. In addition to the functions already listed in the Twelfth Schedule, functions like school education; public health including community health centres/Area hospitals; traffic management and civic policing activities; land management, including registration etc. may also be included. 47
6

Standing Committee on Urban And Rural Development (2004) (Thirteenth Lok Sabha)

Local Governance

3.3.1.7 Recommendations: a. There should be clear delineation of functions for each level of local government in the case of each subject matter law. This is not a one-time exercise and has to be done continuously while working out locally relevant socio-economic programmes, restructuring organisations and framing subject-matter laws. Each subject-matter law, which has functional elements that are best attended to at local levels, should have provision for appropriate devolution to such levels either in the law or in subordinate legislation. All the relevant Union and State laws have to be reviewed urgently and suitably amended. In the case of new laws, it will be advisable to add a local government memorandum (on the analogy of financial memorandum and memorandum of subordinate legislation) indicating whether any functions to be attended to by local governments are involved and if so, whether this has been provided for in the law. In case of urban local bodies, in addition to the functions listed in the Twelfth Schedule, the following should be devolved to urban local bodies: School education; Public health, including community health centres/area hospitals; Traffic management and civic policing activities; Urban environment management and heritage; and Land management, including registration.

b.

c.

d.

These, however, are only illustrative additional functions and more such functions could be devolved to urban local bodies by the respective States. 3.4 Framework Law for Local Bodies 3.4.1 The Statement of Objects and Reasons of the Constitution (Seventy-fourth Amendment) Act referred to in paragraph 3.1.1.4 had highlighed the weaknesses of the local bodies in many States.

48

Common Issues

3.4.2 Article 243(d) of the Constitution defines a Panchayat as an institution of selfgovernment for the rural areas. Article 243G expresses the intention that while framing laws on Panchayats, State Legislatures should endow these institutions with such power and authority as may be necessary to enable them to function as institutions of self-government. Thus, Panchayats are governments at their own level and they must be allowed to function as governments. This means that they should have an autonomous jurisdiction of their own. However, if there are governments at multiple levels, then government at each level will enjoy only partial autonomy. How much autonomous jurisdiction can be carved out for Panchayats is a matter of judgment. But it cannot be too small to make the concept of selfgoverning institutions at the local level meaningless. Creating an autonomous jurisdiction for the Panchayats is based on the constitutional mandate for effective decentralisation of governmental power as opposed to mere administrative deconcentration. This would necessitate withdrawal of certain activities or functions from the State Government and transferring them to local bodies. Such conceptualisation of Panchayats marks a break from the way local government institutions were treated in the past as bodies wholly subservient to State Governments. 3.4.3 The Eleventh Schedule of the Constitution, which gives a list of 29 activities, or functions, intended to be transferred to the local bodies, covers a broad spectrum of development activities ranging from activities in the social and economic sectors (education, health, women and child development, social security, farm and non-farm economic activities etc) to the development of infrastructure and institutions necessary for social and economic development. The thrust is, obviously, on development. However, the difference between a subject and a function remains as a major hiatus between local level activity and local governance. 3.4.4 In the urban sector, a similar situation prevails. Article 243P (e) defines a Municipality as an institution of self government. Article 243W, which corresponds to Article 243G regarding Panchayats, proposes that the Legislature of a State may, by law, endow the Municipalities with such powers and authority as may be necessary to enable them to function as institutions of self-government and such law may contain provisions for the devolution of powers and responsibilities upon Municipalities. 3.4.5 The first roundtable of Panchayati Raj Ministers, held in Kolkata on July 24-25, 2004, agreed to make to their respective Governments, inter alia, the following recommendations for joint acceptance by the Union and the States: I) The Constitution (Article 243G) provides for devolution, that is, the empowerment of Panchayati Raj Institutions (PRIs) to function as institutions of self-government 49

Local Governance

for the twin purposes of i) making plans for economic development and social justice for their respective areas, and ii) implementing programmes of economic development and social justice in their respective areas, for subjects devolved to the PRIs, including those listed in the Eleventh Schedule, and subject to such conditions as the State may, by law, specify. Therefore, the key objective is to ensure that Panchayati Raj Institutions function as institutions of self-government rather than as mere implementing agencies for other authorities in respect of such functions as may be devolved on them; II) While devolution must eventually comprise the entire range of subjects provided for the State legislation in a time-bound manner, States/UTs may prioritise their devolution programme to ensure that for such functions as are prioritised, there is full and effective devolution in empowering PRIs as institutions of self-government in respect of these functions; III) To this end, the essential step is the identification of activities related to the devolved functions with a view to attributing each of these activities to the appropriate tier of the 3-tier system. To the extent possible, there should be no overlapping between tiers in respect of any given activity; IV) In determining the tier of the Panchayati Raj System, to which any given activity is to be attributed, the principle of subsidiarity must, to the extent possible, be followed. The principle of subsidiarity states that any activity which can be undertaken at a lower level must be undertaken at that level in preference to being undertaken at any higher level; . VIII) With a view to promoting a measure of irrevocability of devolved functions, devolution may be routed through legislative measures or, alternatively, by providing a strong legislative framework for devolution through executive orders. 3.4.6 The National Commission to Review the Working of the Constitution (NCRWC) has, in its Report, recommended certain changes in the Constitution, especially with regard to the powers of the local bodies, both urban and rural. It has observed: The Commission, therefore, recommends that the Eleventh and the Twelfth Schedules should be restructured in a manner that creates a separate fiscal domain for Panchayats and Municipalities. Accordingly, Articles 243H and 243X should be amended making it mandatory for the Legislature of the States to make laws devolving powers to the Panchayats and Municipalities.

50

Common Issues

3.4.7 In spite of the Constitutional provisions, and observations made by several expert groups and even by Parliamentary Committees, empowerment of local governments in the real sense has not taken place. Under such circumstances, it becomes the responsibility of the Union to ensure that the 73rd and the 74th Constitutional Amendments are implemented both in letter and spirit. This becomes all the more necessary as major development schemes, funded largely by the Union Government, are being implemented by the local governments. However, the issue that arises is the manner in which the Union intervenes to ensure that the local governments are duly empowered by the States. 3.4.8 Our Constitution was framed at a time when the first and foremost requirement of the country was to consolidate itself as a nation. Over 400 princely states had been replaced by a more homogeneous federation of larger States. The next few years were spent in reorganising and strengthening the States. The Constitution did not give prominence to the local bodies at that point of time and legislative powers remained within two tiers of Government, and as separate subjects. In the intervening decades there was also debate about the role and suitability of local bodies as institutions of governance and it was recognised that (a) the third tier of government may require some legislative powers, (b) all three levels may need to legislate in the same sphere, and (c) new areas of governance have emerged. 3.4.9 The Commission notes that the position of Item 5 in List II of the Seventh Schedule of the Constitution has placed all responsibility for local bodies with the States. It reads as follows: Local government, that is to say, the constitution and powers of municipal corporations, improvement trusts, district boards, mining settlement authorities and other local authorities for the purpose of local self-government or village administration. 3.4.10 In 1950, when the Constitution was adopted, this allocation was appropriate, and indeed continues, by and large, to be so even today. The governance of local bodies cannot be controlled by the Union overlooking the States. Nevertheless, the multifarious activities of a large municipal body today are such that they impact the nation as a whole, such as commercial development, and may even have international ramifications, such as with international airports in some cities. In the districts, the funding for district development comes very largely from the Centre, because the States lack of resources to provide adequately for local governments makes them approach the Government of India for funds. The indirect stamp of the Centre in urban affairs through programmes such as the Jawaharlal Nehru National Urban Renewal Mission has become necessary. In rural development, there are conditionalities set by the Centre in its programmes for rural areas. 51

Local Governance

3.4.11 To make the flow of local level activity smooth through the various levels of government, one approach could be that Item 5 of List II (Local governments), or certain functions which are only with the Union, or only with the States, but which are directly relevant to all three tiers of government be placed in the Concurrent List to enable appropriate, hierarchical and framework legislation by the Union or the State. This would shift functions to subjects with regard to local bodies. This would enable Parliament to legislate on the subject local governments and thus the Union could mandate the devolution of powers, functions and responsibilities to the local governments. 3.4.12 Another approach to activate the changes that were intended to be made in our economic and political system through the 74th Amendment, would be that, along with the devolution of functions, certain legislative powers could also be devolved on the third tier of governance; there could be a List IV to the Seventh Schedule which would give limited legislative powers to the local bodies. If there are to be two sets of functions, one for rural and another for urban areas, then such a list can have two parts. 3.4.13 A third approach may be a more integrated one, introducing a single, legally binding legislative framework under which the States and the local bodies would function, somewhat on the lines of the South African model for municipal systems. Framework laws exist in some other countries; the EU Directives are in the nature of framework legislation. But it is the South African model that may bear emphasis here. 3.4.14 The South African Model: The South African Constitution lays down a cooperative model of Government under a hierarchical framework. Articles 40 and 41 of that Constitution read as follows: 40. Government of the Republic 1. In the Republic, government is constituted as national, provincial and local spheres of government which are distinctive, interdependent and interrelated. All spheres of government must observe and adhere to the principles in this Chapter and must conduct their activities within the parameters that the Chapter provides.

2.

41. Principles of co-operative government and inter-governmental relations 1. 52 All spheres of government and all organs of state within each sphere must

Common Issues

e. f. g.

h.

respect the constitutional status, institutions, powers and functions of government in the other spheres; not assume any power or function except those conferred on them in terms of the Constitution; exercise their powers and perform their functions in a manner that does not encroach on the geographical, functional or institutional integrity of government in another sphere; and co-operate with one another in mutual trust and good faith by i. fostering friendly relations; ii. assisting and supporting one another; iii. informing one another of, and consulting one another on, matters of common interest; iv. co-ordinating their actions and legislation with one another; v. adhering to agreed procedures; and vi. avoiding legal proceedings against one another.

2.

An Act of Parliament must a. establish or provide for structures and institutions to promote and facilitate inter-governmental relations; and b. provide for appropriate mechanisms and procedures to facilitate settlement of inter-governmental disputes.

The provincial legislatures can legislate in their own sphere under Article 104: 1. The legislative authority of a province is vested in its provincial legislature, and confers on the provincial legislature the power a. to pass a constitution for its province or to amend any constitution passed by it in terms of sections 142 and 143; b. to pass legislation for its province with regard to i. any matter within a functional area listed in Schedule 4; ii. any matter within a functional area listed in Schedule 5; iii. any matter outside those functional areas, and that is expressly assigned to the province by national legislation; and iv. any matter for which a provision of the Constitution envisages the enactment of provincial legislation; and 53

Local Governance

c.

to assign any of its legislative powers to a Municipal Council in that province.

3.4.15 There is also a part on local government, the equivalent of which are Parts IX and IXA of the Indian Constitution.7 And there are Schedules - Schedule 4 to provide for functional areas for concurrent national and provincial legislative competence and another, Schedule 5, for exclusive provincial jurisdiction. 3.4.16 The major difference between the two Constitutions (Indian and South African), in regard to the present issue, appear to be that: i. ii. In South Africa, functions listed for concurrent legislation, in Schedule 4 of that Constitution, include a vast part of municipal governance matters, whereas in the Indian Constitution, this is specifically a State subject. The South African Parliament can pass a framework law in any matter to provide for structures and institutions to promote and facilitate inter-governmental relations.

3.4.17 The Municipal Systems Act of South Africa, 2000, was enacted as a framework for urban governance in the country. The objective of the Act is detailed below: To provide for the core principles, mechanisms and processes that are necessary to enable municipalities to move progressively towards the social and economic upliftment of local communities, and ensure universal access to essential services that are affordable to all; to define the legal nature of a municipality as including the local community within the municipal area, working in partnership with the municipalitys political and administrative structures; to provide for the manner in which municipal powers and functions are exercised and performed; to provide for community participation; to establish a simple and enabling framework for the core processes of planning, performance management, resource mobilisation and organisational change which underpin the notion of developmental local government; to provide a framework for local public administration and human resource development; to empower the poor and ensure that municipalities put in place service tariffs and credit control policies that take their needs into account by providing a framework for the provision of services, service delivery agreements and municipal service districts; to provide for credit control and debt collection; to establish a framework for support,, monitoring and standard setting by other spheres of government in order to progressively build local government into an efficient, frontline development agency capable of integrating the activities of all spheres of government for the overall social and economic upliftment of communities in harmony with their local natural environment; to provide for 54
7

Local Government in the South African Constitution does not segregate and differentiate rural and urban governments as in India

Common Issues

legal matters pertaining to local government; and to provide for matters incidental thereto. 3.4.18 An issue that is beginning to emerge in the matter of local self governance is the degree to which the rights and duties of the citizen can be enunciated. In the South African Act, the rights and duties of members of the local community are clearly enunciated. It is useful to quote the early sections of the Act in toto: Legal Nature and Rights and Duties of Municipalities Legal nature 2. A municipality (a) is an organ of state within the local sphere of government exercising legislative and executive authority within an area determined in terms of the local government: Municipal Demarcation Act, 1998; (b) consists of (i) the political structures and administration of the municipality; and (ii) the community of the municipality; (c) functions in its area in accordance with the political, statutory and other relationships between its political structures, political office bearers and administration and its community; and (d) has a separate legal personality which excludes liability on the part of its community for the actions of the municipality. Co-operative government 3.(1) Municipalities must exercise their executive and legislative authority within the constitutional system of co-operative government envisaged in section 41 of the Constitution. (2) The national and provincial spheres of government must, within the constitutional system of co-operative government envisaged in section 41 of the Constitution, exercise their executive and legislative authority in a manner that does not compromise or impede a municipalitys ability or right to exercise its executive and legislative authority. (3) For the purpose of effective co-operative government, organised local government must seek to

55

Local Governance

(a) develop common approaches for local government as a distinct sphere of government; (b) enhance co-operation, mutual assistance and sharing of resources among municipalities; (c) find solutions for problems relating to local government generally: and (d) facilitate compliance with the principles of co-operative government and inter-governmental relations. Rights and duties of municipal councils 4.(1) The council of a municipality has the right to (a) govern on its own initiative the local government affairs of the local community; (b) exercise the municipalitys executive and legislative authority, and to do so without improper interference; and (c) finance the affairs of the municipality by (i) charging fees for services; and (ii) imposing surcharges on fees, rates on property and, to the extent authorised by national legislation. other taxes, levies and duties. (2) The council of a municipality, within the municipalitys financial and administrative capacity and having regard to practical considerations, has the duty to (a) exercise the municipalitys executive and legislative authority and use the resources of the municipality in the best interests of the local community; (b) provide, without favour or prejudice, democratic and accountable government; (c) encourage the involvement of the local community; (d) strive to ensure that municipal services are provided to the local community in a financially and environmentally sustainable manner; (e) consult the local community about (i) the level, quality, range and impact of municipal services provided by the municipality, (ii) the available option for service delivery: (f ) give members of the local community equitable access to the municipal services to which they are entitled; (g) promote and undertake development in the municipality; (h) promote gender equity in the exercise of the municipalitys executive and legislative authority; 56

Common Issues

(i) (j)

promote a safe and healthy environment in the municipality; and contribute, together with other organs of state, to the progressive realisation of the fundamental rights contained in sections 24, 25, 26, 27 and 29 of the Constitution.

(3) A municipality must in the exercise of its executive and legislative authority respect the rights of citizens and those of other persons protected by the Bill of Rights. Rights and duties of members of local community 5.(1) Members of the local community have the right (a) through mechanisms and in accordance with processes and procedures provided for in terms of this Act or other applicable legislation to (i) contribute to the decision-making processes of the municipality; and (ii) submit written or oral recommendations, representations and complaints to the municipal council or to another political structure or a political office bearer or the administration of the municipality; (b) to prompt responses to their written or oral communications, including complaints, to the municipal council or to another political structure or a political office bearer or the administration of the municipality; (c) to be informed of decisions of the municipal council, or another political structure or any political office bearer of the municipality, affecting their rights, property and reasonable expectations; (d) to regular disclosure of the state of affairs of the municipality, including its finances; (e) to demand that the proceedings of the municipal council and those of its committees must be (i) open to the public, subject to section 20; (ii) conducted impartially and without prejudice; and iii) untainted by personal self-interest; (f ) to the use and enjoyment of public facilities; and (g) to have access to municipal services which the municipality provides, provided the duties set out in subsection (2)(b) are complied with. (2) Members of the local community have the duty (a) when exercising their rights, to observe the mechanisms, processes and procedures of the municipality; 57

Local Governance

(b) where applicable, and subject to section 97(1)(c), to pay promptly service fees, surcharges on fees, rates on property and other taxes, levies and duties imposed by the municipality; (c) to respect the municipal rights of other members of the local community; (d) to allow municipal officials reasonable access to their property for the performance of municipal functions; and (e) to comply with by-laws of the municipality applicable to them. Duties of municipal administrations 6.(1) A municipalitys administration is governed by the democratic values and principles embodied in section 195(1) of the Constitution. (2) The administration of a municipality must (a) be responsive to the needs of the local community; (b) facilitate a culture of public service and accountability amongst staff; (c) take measures to prevent corruption; (d) establish clear relationships, and facilitate co-operation and communication between it and the local community; (e) give members of the local community full and accurate information about the level and standard of municipal services they are entitled to receive; and (f ) inform the local community how the municipality is managed, of the costs involved and the persons in charge. Exercise of rights and performance of duties 7. The rights and duties of municipal councils and of the members of the local community, and the duties of the administrations of municipalities, as set out in sections 4, 5 and 6, are subject to the Constitution, the other provisions of this Act and other applicable legislation. 3.4.19 The Commission is of the considered view that local governments fall under the rightful domain of the States. It would not be desirable to bring this subject in the Concurrent List in order to empower the Union to enact a framework law for the local governments. The Commission is, therefore, of the view that a Framework Law may be passed by Parliament under Article 252 (power of Parliament to legislate for two or more States by consent and adoption of such legislation by other States). The remaining States may then be persuaded to adopt this law. This law should spell out the rights and duties of the

58

Common Issues

citizen in relation to the local authority and also those of the local body vis-a-vis the citizen. It would also provide broad principles for detailing of activities at the third tier. Equally importantly, the model law must lay down guidelines for devolution of responsibilities, powers and functions, by the States. 3.4.20 Recommendation: a. Government of India should draft and place before Parliament, a Framework Law for local governments. The Framework Law could be enacted under Article 252 of the Constitution on the lines of the South African Act, for the States to adopt. This Law should lay down the broad principles of devolution of powers, responsibilities and functions to the local governments and communities, based on the following: Principle of Subsidiarity Democratic Decentralisation Delineation of Functions Devolution in Real Terms Convergence Citizen Centricity

3.5 Devolution of Funds 3.5.1 Finances of Local Governments 3.5.1.1 Despite the important role that local bodies play in the democratic process and in meeting the basic requirements of the people, the financial resources generated by these bodies fall far short of their requirements. Table 3.3 shows the percentage share of own resources in total revenues of the local bodies. The figures indicate that more than 93 per cent of the total revenues of rural bodies were derived from external sources. On the other hand, urban local bodies raised 59.69 per cent of total revenues from their own resources in 1998-99 but this percentage declined to 58.44 in 2002-03. Also the per centage of revenue expenditure covered by their own resources for rural and urban local bodies is 9.26 per cent and 68.97 percent, respectively, in 2002-03. The percentage of revenue derived from own taxes for rural and urban local bodies are 3.87 per cent and 39.23 per cent respectively in 2002-2003.

59

Local Governance

Table 3.3: Revenue and Expenditure of Local Bodies (Rural and Urban) (Rs. in Crores) 1998-99 1999-00 2000-01 2001-02 2002-03

Revenue Own Tax Own Non-Tax Own Revenue Assignment + Devolution Grants-in-Aid Others Total Revenue Total Revenue Expenditure Revenue Expenditure Capital Expenditure Total Expenditure 5385.41 2648.98 8034.39 7431.03 11552.05 1792.84 20775.93 28810.32 22090.94 8250.88 30341.84 5828.5 2885.86 8714.37 9155.13 15369.85 2197.75 26722.72 35437.09 26579.45 9565.33 36144.79 6371.27 3307.49 9678.76 9513.01 15665.44 2968.2 28146.64 37825.4 29797.49 10005.7 39803.19 6696.62 3496.3 10192.93 8914.06 15895.72 2616.57 27426.35 37619.27 30381.95 9473.53 39855.48 5869.89 3133.91 9003.79 8877.13 16230.45 2495.64 27603.23 36607.02 28411.6 9871.72 38283.31

Source: Data provided by State Governments to the Twelfth Finance Commission

3.5.1.2 The local bodies are heavily dependant on State Governments for financial inflows, even for routine functions because the proceeds of various buoyant taxes like State Excise, VAT and Motor Vehicles Tax are not available to them as they form part of the Consolidated Fund of the State. The major sources of income for local governments like property tax etc. are woefully inadequate to meet their obligations both due to their inherent nature and inefficiency in collecting them. This asymmetry between the taxation power and the responsibility to provide civic amenities necessitates transfer of funds from the State to the local governments either through untied grants or through a share in other State Taxes or as part of various development schemes. 3.5.1.3 The overall finances of the local bodies such as resource generation, efficiency of collection, investment, taxation etc. will be dealt in the respective chapters pertaining to Urban and Panchayat Finances. However, it is appropriate to deal with the issue of devolution of funds and functioning of the State Finance Commissions as a common issue between the State Government and urban and rural local governments.

60

Common Issues

3.5.2 The State Finance Commission (SFC) 3.5.2.1 Articles 243H and 243X make it obligatory for the State Government to authorise the local bodies, by law, to impose taxes, duties etc. and assign to the local bodies such taxes/duties levied and collected by the State Government. These Articles also make provision for grants-in-aid to the local bodies from the Consolidated Fund of the State. The devolution of financial resources to these bodies has been ensured through constitution of the State Finance Commissions that are required to make recommendations on the sharing and assignment of various taxes, duties etc. Under these provisions, the Governor of a State is required to constitute the State Finance Commission within one year from the commencement of the 73rd Amendment (Articles 243 I and 243 Y), and thereafter, at the expiration of every fifth year, to review the financial position of the Panchayats and Municipalities. The composition of the Commission, the qualifications required for appointment as its members and the manner in which they are selected is decided by the State Legislature by way of a Law. It is also stipulated in the Constitution that the Governor of a State shall cause every recommendation made by the Commission under these Articles together-with an explanatory memorandum as to the action taken thereon to be laid before the Legislature of the State. 3.5.2.2 The SFCs so constituted (Articles 243 I and 242 Y) have to make recommendations to the Governor as to (a) the principles which should govern (i) the distribution between the State and the local bodies of the net proceeds of the taxes, duties, tolls and fees leviable by the State, which may be divided between them under this Part and the allocation between these bodies all levels of their respective shares of such proceeds; (ii) the determination of the taxes, duties, tolls and fees which may be assigned to, or appropriated by, the local bodies; (iii) the grants-in-aid to the local bodies from the Consolidated Fund of the State; (b) the measures needed to improve the financial position of the local bodies; and (c) any other matter referred to the Finance Commission by the Governor in the interest of sound finance of the these local bodies. 3.5.2.3 The provisions of Articles 243 I and 243 Y are essentially modeled on Article 280 which deals with constitution of a Finance Commission at the Union level to make recommendations on (a) the distribution between the Union and the State of the net proceeds of taxes which are to be, or may be, divided between them under this Chapter and the 61

Local Governance

allocation between the States of the respective shares of such proceeds; (b) the principles which should govern the grants-in-aid of the revenues of the States out of the Consolidated Fund of India; (bb) the measures needed to augment the Consolidated Fund of a State to supplement the resources of the Panchayats in the State on the basis of the recommendations made by the Finance Commission of the State8; (c) the measures needed to augment the Consolidated Fund of a State to supplement the resources of the Municipalities in the State on the basis of the recommendations made by the Finance Commission of the State;9 (d) any other matter referred to the Commission by the President in the interest of sound finance. 3.5.2.4 The Tenth Finance Commission, for the first time, made a separate provision of Rs.1,000 crores for urban local bodies in the country (for a five-year period). They also made a provision of Rs.100 per capita for the Panchayats. The Eleventh Finance Commission made a detailed study of the local finances and also the recommendations made by various State Commissions. They recommended several measures to augment the Consolidated Fund of the States including a total grant of Rs. 1,600 crores and Rs. 400 crores for the Municipalities for each of the five years starting from the Financial Year 2000-01. Besides, the Eleventh Finance Commission analysed the process of implementation of the 73rd and 74th Amendments and suggested certain changes as follows: a) Transfer of functions and schemes to the local bodies should be specifically provided by legislation. b) There is need for making legislative arrangements to clearly indicate the role that the different levels of Panchayat Bodies have to play in the system of governance. c) Special agencies like the District Rural Development Agency and the District Urban Development Agency should be integrated with the local government set-up. d) For extending the provisions of the 74th Amendment to the Fifth Schedule Areas, an enabling legislation has to be enacted. e) DPCs and MPCs should be constituted in all States. 3.5.2.5 Similar to the role of the Finance Commission in recommending devolution of funds from the Union to the States, the State Finance Commissions also make recommendations regarding the principles that should govern the distribution of taxes between the State on the one hand and the local bodies on the other. Thus, the SFC arbitrates the claims to resources of a State by the State Government and the local bodies. The terms of reference of the constitution of the State Finance Commissions generally include the provision that 62
8 9

Inserted by 73rd Amendment. Inserted by 74th Amendment.

Common Issues

while making its recommendations, the Commission should take into consideration the resources of the State Government, and the requirements of the local bodies for meeting revenue expenditure. The State Finance Commissions have generally followed the approach of estimating the finances of the State Governments as well as the local bodies. Based on this, the SFC recommends the devolution package. Apart from devolving funds to the urban and local bodies as a whole, the State Finance Commission also recommends principles for inter-se distribution of funds between the urban local bodies and different Pancahayats. An analysis of the recommendations of various State Finance Commissions indicates that there is a wide variation in the approach and contents of the Reports of the different State Finance Commissions. While some States have followed the concept of pooling of all revenues and then sharing, others follow different percentages of devolution for different taxes. Such differences are quite understandable, as the laws governing these local bodies vary in different States as do the functions and duties assigned to them. 3.5.2.6 The Eleventh Finance Commission mentioned certain constraints because of which it was unable to adopt the SFC reports as the basis for its recommendations. These are as follows: a) non-synchronisation of the period of the recommendations of the SFCs and the Central Finance Commission; b) lack of clarity in respect of the assignment of powers, authority and responsibilities of the local bodies; c) absence of a time frame within which the state governments are 63

Local Governance

d)

required to take action on the recommendations of the SFCs; and non-availability of the reports of the SFCs.

3.5.2.7 The Twelfth Finance Commission examined the functioning of the State Finance Commissions in great detail and made some very important recommendations which, if implemented, would go a long way in streamlining the scheme of fiscal decentralisation and achieving the ultimate goal of developing the local bodies as institutions of self-government. One of the important recommendations of the Twelfth Finance Commission (TFC) pertains to the time span for setting up of the SFCs, the time allowed for submission of its report, time limits for action taken report and synchronisation of its award period with that of the Central Finance Commission. The TFC recommended that: It is desirable that SFCs are constituted at least two years before the required date of submission of their recommendations, and the deadline should be so decided as to allow the State Government at least three months time for tabling the ATR, preferably along with the budget for the ensuing financial year. Synchronisation of the award periods of the SFC with the central finance commission does not mean that they should be coterminus. What is necessary is that the SFC reports should be readily available to the central finance commission, when the latter is constituted so that an assessment of the States need could be made by the Central Finance Commission on the basis of uniform principles. This requires that these reports should not be too dated. As the periodicity of constitution of the Central Finance Commission is predictable, the States should time the constitution of their SFCs suitably. In order to fulfill the overall objective, the procedure and the time limits would need to be built into the relevant legislation. 3.5.2.8 The Twelfth Finance Commission made several recommendations regarding the working of the SFCs. These are summarised as follows: a. b. c. d. The principal recommendations made by the SFCs should be accepted by the Government as is the case with the recommendations made by the Central Finance Commission. The SFCs follow the procedure adopted by the Central Finance Commission for transfer of resources from the Centre to the States. While estimating the resource gap, the SFCs should follow a normative approach in the assessment of revenues and expenditure rather than make forecasts based on historical trends. It is necessary that the States constitute SFCs with people of eminence and competence, instead of viewing the formation of SFCs as a mere constitutional formality.

64

Common Issues

e.

f.

In the matter of composition of the SFCs, States may be well advised to follow the Central legislation and rules which prescribe the qualifications for the chairperson and members and frame similar rules. It is important that experts are drawn from specific disciplines such as economics, public finance, public administration and law. There should be a permanent SFC cell in the finance department of each State. This cell may be headed by a secretary level officer, who will also function as secretary of the SFC.

3.5.2.9 The recommendations of the Central Finance Commissions are not mandatory but from the beginning, successive Union Governments have established a healthy tradition of accepting the devolution package suggested by the Finance Commission without any deviation. In effect, therefore, these recommendations have become mandatory. However, this tradition has not been established in the States, as a result even if recommended by the SFCs, State Governments often do not commit adequate resources for the local governments. The healthy precedent established by the Union Government in generally accepting the devolution proposals made by the Union Finance Commission should also be followed by the State Government with regard to the recommendations of the State Finance Commissions. This will ensure effective and progressive devolution of functions and powers to the local bodies and lead to their empowerment. 3.5.2.10 With the Thirteenth Finance Commission likely to be constituted in 2007/2008, it would be appropriate to advise that all States appoint their State Finance Commissions in advance so that the reports of the State Finance Commissions are available for the consideration of the Central Finance Commission. This Commission, therefore, is of the view that State Finance Commissions should be set up with the periodicity of five years as required by the Constitution, but equally importantly, that they should be set up in time across the country, so that, as recommended by the Twelfth Finance Commission, their recommendations can be taken into consideration by the Central Finance Commission. 3.5.2.11 Incidentally, the Constitution provides for the setting up of the Central Finance Commission every five years or earlier. Article 280 states: The President shall, within two years from the commencement of this Constitution and thereafter at the expiration of every fifth year or at such earlier time as the President considers necessary, by order constitute a Finance Commission which shall consist of a Chairman and four other members to be appointed by the President.

65

Local Governance

3.5.2.12 However, Article 243 I, which relates to the setting up of SFCs, does not provide for such a course to the States. Perhaps this is to prevent arbitrariness and adhocism in the setting up of SFCs. But since the need for the Central Finance Commission to take into account the recommendations of the SFCs arises out of Article 280 (3) (bb) and (c), Government may examine the need to modify Article 243 I suitably. 3.5.2.13 The Commission also agrees with the recommendations of the Twelfth Finance Commission that each State should prescribe through an Act the qualifications of persons eligible to be appointed as Members of the State Finance Commission, on the lines of the Central Act. This would ensure that persons with requisite qualifications, experience and public standing are appointed. 3.5.2.14 The task of the State Finance Commissions is undoubtedly complex. They have to assess the resource gap in case of all the urban and rural local bodies. Even within a State, there are wide variations in the financial position of these local bodies and also in the level of services provided by them. Lack of data on various aspects of local governance makes the task of the SFCs even more difficult. Generally, the SFCs have attempted to estimate the resource gap and recommended devolution of funds accordingly. The resource gap for any local body can never be measured in absolute terms as the resource gap is a function of variety of factors such as the level and quality of civic amenities provided, the efficiency of the local body in raising resources, the quantum of service charges levied by the local body etc. The Commission is of the view that the State Finance Commissions should link the devolution of funds to the level/quality of civic amenities that the citizens could expect. This approach would also help to bring about some uniformity in the quality of services provided by different local bodies. Basically, this would shift the focus from outputs to outcomes. 3.5.2.15 Although SFCs, while making their recommendations about devolution of funds also give their recommendations on other matters affecting the resources of the local bodies, there has not been adequate emphasis on the outcomes of such devolutions. Local bodies focus their attention on getting the maximum possible funds from the State, and in the process, other recommendations which seek to enhance the resources of the local bodies such as improvement in their own tax base, higher efficiency in tax collection, economy in expenditures, reduction of surplus staff etc do not get due attention. In short, the local bodies implement only the soft portions of the recommendations and the hard recommendations are often not acted upon. As a result, the recommendations of the SFCs do not get implemented in totality and the outcomes are therefore sub-optimal. The Commission is of the view that the SFCs should carry out a more thorough analysis of the finances of local bodies and make concrete recommendations for improvements in their 66

Common Issues

working. In case of smaller local bodies, such recommendations could be broad based, but in case of larger local governments such recommendations would need to be more specific. With historical data being available with the SFC, and with the improvement in efficiency of data collection, the SFC would be in a position to carry out detailed analysis. 3.5.2.16 A substantial portion of the revenues of the local bodies goes towards meeting the establishment expenditure. Generally, the local bodies are overstaffed in some respects and yet the requisite capability is not available within the organisation. The SFCs should evolve norms for expenditure on establishment for different local bodies. 3.5.2.17 Monitoring the implementation of the recommendations of the SFCs has generally been weak. This has also been observed by various Finance Commissions. It is necessary that a mechanism is put in place which reviews the implementation of all the recommendations of the SFCs. An Action Taken Report must be tabled in the State Legislature within six months, and this should be followed up with an annual statement on the devolution made and grants given to individual urban bodies, through an appendix to the State budget documents. If considered necessary, the devolution of funds could be made conditional to local bodies agreeing to implement the recommendations of the SFCs. 3.5.2.18 Recommendations: a. This Commission endorses and reiterates the views of the Twelfth Finance Commission regarding the working of the SFCs as listed in paragraph 3.5.2.8. Article 243 I (1)of the Constitution should be amended to include the phrase at such earlier time after the words every fifth year. Each State should prescribe through an Act, the qualifications of persons eligible to be appointed as Members of the State Finance Commission. SFCs should evolve objective and transparent norms for devolution and distribution of funds. The norms should include area-wise indices for backwardness. State Finance Commissions should link the devolution of funds to the level/quality of civic amenities that the citizens could expect. This could then form the basis of an impact evaluation. The Action Taken Report on the recommendations of the SFC must compulsorily be placed in the concerned State Legislature within six months 67

b. c. d.

e.

Local Governance

of submission and followed with an annual statement on the devolution made and grants given to individual local bodies and the implementation of other recommendations through an appendix to the State budget documents. f. Incentives can be built into devolution from the Union to the States to take care of the need to improve devolution from the States to the third tier of governments. Common formats, as recommended by the Twelfth Finance Commission (TFC) must be adopted, and annual accounts and other data must be compiled and updated for use by the SFCs. SFCs should carry out a more thorough analysis of the finances of local bodies and make concrete recommendations for improvements in their working. In case of smaller local bodies such recommendations could be broad in nature, but in case of larger local bodies, recommendations should be more specific. With historical data being available with the SFC, and with the improvement in efficiency of data collection, the SFC would be in a position to carry out the required detailed analysis. The special needs of large urban agglomerations particularly the Metropolitan cities should be specially addressed by the SFC. SFCs should evolve norms for staffing of local bodies. It is necessary that a mechanism be put in place which reviews the implementation of all the recommendations of the SFCs. If considered necessary, devolution of funds could be made conditional to local bodies agreeing to implement the recommendations of the SFCs.

g.

h.

i. j.

3.6 Capacity Building for Self Governance 3.6.1 The crucial issue of capacity building in urban and rural local bodies remains a largely neglected area in decentralised self governance. Beyond short term training of personnel and elected elements of these bodies, little has so far been contemplated, and even in this sphere there has been limited initiative and fitful progress. As a result, there is capacity deficit within the Panchayat and Municipal Institutions. With the enactment of the National Rural Employment Guarantee Act (with an annual outlay of Rs 60000 crores when universalised) and other flagship schemes like the Jawaharlal National Urban 68

Common Issues

Renewal Mission-JNNURM- (Rs 50,000 crores for five years for 63 cities) being primarily implemented through such institutions, it is clear that sustained, well planned enabling exercises need to be undertaken to ensure that the implementing agencies have the capacity and the capability to deal with the challenges in undertaking and implementing these major national programmes apart from being able to fulfil their statutory functions. 3.6.2 An erroneous notion that capacity building relates only to training and imparting new skills to employees and improving their existing skills needs to be clarified. Capacity building is much more than training, and has two major components, namely: Individual development Organisational development. 3.6.3 Individual development involves the development of human resources including enhancement of an individuals knowledge, skills and access to information which enables them to improve their performance and that of their organisation. Organisational development on the other hand is about enabling an organisation to respond to two major challenges that it has to confront: External adaptation and survival Internal integration. 3.6.4 External adaptation and survival has to do with how the organisation copes with its constantly changing external environment. This involves addressing the issues of mission, strategies and goals means to achieve the goals which includes selection of appropriate management structures, processes, procedures, incentives and rewards system. measurement which involves establishing appropriate key result areas or criteria to determine how well individuals and teams are accomplishing their goals. 3.6.5 Internal integration is about establishing harmonious and effective working relationships in the organisation, which involves identifying means of communication to develop shared values, power and status of groups and individuals, and rewards and punishment for encouraging desirable behaviour and discouraging undesirable behaviour. 3.6.6 There is also another related aspect of capacity building, which deals with the development of institutional and legal framework to enable organisations to enhance their capacity to pursue their objective and goals by making the necessary legal and regulatory changes. These guiding principles need to be kept in view while undertaking exercises to enhance capacities, individual and organisational, in local bodies. 69

Local Governance

3.6.7 The task of building organisational capacities is more complex and demanding than the requirement of skills upgradation of an individual, partly on account of the hitherto complete neglect of this aspect and partly due to more complex initiatives required to achieve this goal. Organisational capacity building is, to a large extent, dependent on formulation of the appropriate recruitment and personnel policies and finding the right mix of in-house provision of services and out-sourcing of functions. Organisational capacity building would include designing appropriate structures within the organisation, re-engineering internal processes, delegation of authority and responsibility, creation of an enabling legal framework, developing management information systems, institutionalising reward and punishment systems and adopting sound human resource management practices. 3.6.8 Organisational capacity building should not be taken to mean that the organisation acquires all the skills and knowledge required to perform its tasks. In recent years, a large number of agencies have developed certain specialised skills. Prudence demands that any organisation should have the capability of tapping such skills rather than spending a large amount of resources in acquiring such skills themselves. Evolving partnerships, developing networks and outsourcing functions are all methods of enhancing the capability of an organisation. 3.6.9 The Commission also believes that adequate staffing of local bodies is a matter that requires considerable attention of the State Finance Commissions in active association with the State Governments in order to endow these bodies with greater capacities. The Commission agrees with, the observations of the Standing Committee on Urban and Rural Development of the Thirteenth Lok Sabha in its Fifty-sixth Report where it summarises the crux of local bodies growth as development of functions, functionaries and finances. This approach encompasses the mutually complementary but somewhat neglected goals of organisational and individual growth and development. It also underscores the responsibility of State Governments to take the initiative for standardisation and norm fixation in areas like the strength of the establishment, monitoring of outsourced activities, optimum internal resource mobilisation potential and unit costs of providing services etc. 3.6.10 The State Finance Commissions, therefore, need to be vested with the responsibility of suggesting staffing norms for various levels and categories of local bodies to determine the optimum or desirable degree of outsourcing of functions. While outsourcing results in reduction of operational personnel, its successful outcome, as already noted, depends on an appropriate complement of monitoring mechanism. Failure to take a holistic view of this approach is often responsible for outsourced functions (particularly in the sphere of public health and sanitation) becoming a source of public dissatisfaction. Similarly, a 70

Common Issues

number of flagship schemes e.g. NREGS, JNNURM, cast implementing responsibilities on the various tiers of panchayati institutions and the municipal bodies. Besides, there are a number of other schemes particularly in the rural sector with considerable involvement of PRIs. Some such schemes do carry a staffing component mainly for supervision. The state of preparedness of the local bodies in such cases is, however, not uniform and is often not properly assessed. This observation is primarily in the context of Centrally Sponsored Schemes. There is also a trend in certain States to involve such institutions in executing some of the State sector programmes; observations in the context of Centrally Sponsored Schemes also apply to such cases. There are clear indications that failure to upgrade organisational capacity to meet rising demands is a badly neglected aspect of local self-governance. 3.6.11 This brings us to the conventional facet of capacity building through Training. While State Institutes of Rural Development and other institutions involved in training Panchayat functionaries have been imparting training to the target beneficiaries, these are generally limited to areas like Panchayat and Municipal laws, rudiments of book keeping, account codes and office procedures. Clearly, much more is required for capacity building and skills-inculcation beyond such routine measures. For example, issues like principles of good local governance, gender concerns and sensitivity, disaster management and Right to Information are aspects needing much more salience in training and individual capacity building initiatives. Training initiatives for elected local government representatives have been even more sporadic and inadequate. Apart from certain initiatives of distance training of Gram Panchayat chiefs by the Indira Gandhi National Open University, some programmes financed by All India Council of Mayors and the occasional trainings in the State Administrative Training Institutes, there are hardly any other initiatives for meaningful capacity enhancement of the elected representatives. The tendency to respond to filling up training gaps by establishing more institutions is obviously not the answer. 3.6.12 The 73rd Constitutional Amendment provides for minimum of 33% reservation of women in elective posts, thus putting over one million women in positions of leadership and mainstreaming them in the process of development. In fact, women in Panchayat seats today have enlarged their representation beyond the minimum 33% prescribed by the Constitution. They have also brought to their office, enthusiasm and courage and their contribution has enriched the quality of life in their communities. However, because of entrenched gender bias, there are still many instances of women Panchayat members encountering obstruction and exclusion and lacking self-confidence as also adequate knowledge of their duties and responsibilities. While the situation has improved due to special training and capacity building programmes, there is still need to give special attention to capacity building of women panchayat leaders and members so that they are truly equipped to carry out their envisaged role in the third tier of government. 71

Local Governance

3.6.13 With the responsibilities of rural and urban local government institutions expanding and with their role and reach poised for further enlargement in the foreseeable future, there is a clear need to bring about a networking of the existing training institutions in various subjects like financial management, rural development, disaster management and general management to formulate compendia of training methodology and training modules to build institutional and individual capacities. There is a strong case for the Union Ministries of Panchayati Raj and Urban Development to initiate funding of specific key training programmes. The training needs, assessment and content details of the training programmes should be best left to the local training institutions so that they are relevant to the local needs. It is equally important that training should be mainstreamed in the activity mapping of organisations so as to be a continuing activity. 3.6.14 While it may be argued that there is no need for standalone training institutions for Panchayat and Municipal institutions, there is little doubt that activities like applied and action research, case studies, documentation of major initiatives and evaluation of important interventions need special focus. Further, some of the larger, better endowed local bodies may be in a position to commission and finance academic initiatives and they should be encouraged to take action in this field. The primary responsibility in this behalf must rest with the State and Union Governments through funding under suitable state/ national schemes. The research and higher education funding establishment must also play a role to provide encouragement to purely academic research on topics with implications for the functions performed by local bodies and those providing theoretical underpinnings and analytical framework for matters connected with decentralised governance, subsidiarity and allied issues. 3.6.15 As a result of decentralisation, local bodies have become responsible for a number of services. One of the difficulties they face is the lack of specialised and technical skills required for these services pertaining to engineering design, project management, maintenance of high-tech equipment, accounting etc. In the pre-decentralised period, such services were made available by the State Governments, at least to some extent. It would, therefore, be appropriate if a common pool of such expertise is maintained either by a federation of local bodies or by professional agencies which can be accessed by local bodies on demand and payment. 3.6.16 Recommendations: a. Capacity building efforts in rural and urban local self governing institutions must attend to both the organisation building requirements as also the professional and skills upgradation of individuals associated with these

72

Common Issues

bodies, whether elected or appointed. Relevant Panchayat and Municipal legislations and manuals framed thereunder must contain clear enabling provisions in this respect. There should be special capacity building programmes for women members. b. State Governments should encourage local bodies to outsource specific functions to public or private agencies, as may be appropriate, through enabling guidelines and support. Outsourcing of activities should be backed by development of in-house capacity for monitoring and oversight of outsourced activities. Likewise, transparent and fair procurement procedures need to be put in place by the State Government to improve fiscal discipline and probity in the local bodies. Comprehensive and holistic training requires expertise and resources from various subject matter specific training institutes. This can be best achieved by networking of institutions concerned with various subjects such as financial management, rural development, disaster management and general management. This should be ensured by the nodal agencies in State Governments. As an aid to capacity building, suitable schemes need to be drawn up under State Plans for Rural and Urban Development for documentations of case studies, best practices and evaluation with reference to the performance of the prescribed duties and responsibilities of such bodies. Training of elected representatives and personnel should be regarded as a continuing activity. Expenditure requirement on training may be taken into account by the State Finance Commissions while making recommendations. Academic research has a definite role to play in building long-term strategic institutional capacity for greater public good. Organisations like the Indian Council of Social Science Research must be encouraged to fund theoretical, applied and action research on various aspects of the functioning of local bodies. A pool of experts and specialists (e.g. engineers, planners etc.) could be maintained by a federation/consortium of local bodies. This common pool 73

c.

d.

e.

f.

g.

Local Governance

could be then accessed by the local bodies whenever required for specific tasks. 3.7 Decentralised Planning 3.7.1 Constitutional Provisions 3.7.1.1 The concept of planning at the local level has been given an institutional framework under Articles 243 G, 243 W, 243 ZD and 243 ZE of the Constitution. 243 G. Powers, authority and responsibilities of Panchayat: Subject to the provisions of this Constitution, the Legislature of a State may, by law, endow the Panchayats with such powers and authority as may be necessary to enable them to function as institutions of self-government and such law may contain provisions for the devolution of powers and responsibilities upon Panchayats, at the appropriate level, subject to such conditions as may be specified therein, with respect to(a) the preparation of plans for economic development and social justice; (b) the implementation of schemes for economic development and social justice as may be entrusted to them including those in relation to the matters listed in the Eleventh Schedule. 243 W. Powers, authority and responsibilities of Municipalities, etc.: Subject to the provisions of this Constitution, the Legislature of a State may, by law, endow(a) the Municipalities with such powers and authority as may be necessary to enable them to function as institutions of self-government and such law may contain provisions for the devolution of powers and responsibilities upon Municipalities, subject to such conditions as may be specified therein, with respect to(i) the preparation of plans for economic development and social justice; (ii) the performance of functions and the implementation of schemes as may be entrusted to them including those in relation to the matters listed in the Twelfth Schedule; (b) the Committees with such powers and authority as may be necessary to enable them to carry out the responsibilities conferred upon them including those in relation to the matters listed in the Twelfth Schedule. 243 ZD. Committee for district planning : (l) There shall be constituted in every State at the district level a District Planning Committee to consolidate the 74

Common Issues

plans prepared by the Panchayats and the Municipalities in the district and to prepare a draft development plan for the district as a whole. (2) The Legislature of a State may, by law, make provision with respect to (a) the composition of the District Planning Committees; (b) the manner in which the seats in such Committees shall be filled: Provided that not less than four-fifths of the total number of members of such Committee shall be elected by, and from amongst, the elected members of the Panchayat at the district level and of the Municipalities in the district in proportion to the ratio between the population of the rural areas and of the urban areas in the district; (c) the functions relating to district planning which may be assigned to such Committees; (d) the manner in which the Chairpersons of such Committees be chosen. (3) Every District Planning Committee shall, in preparing the draft development plan,(a) have regard to(i) matters of common interest between the Panchayats and the Municipalities including spatial planning, sharing of water and other physical and natural resources, the integrated development of infrastructure and environmental conservation; (ii) the extent and type of available resources whether financial or otherwise; (b) consult such institutions and organisations as the Governor may, by order, specify. (4) The Chairperson of every District Planning Committee shall forward the development plan, as recommended by such Committee, to the Government of the State. 243 ZE. Committee for Metropolitan planning-(l) There shall be constituted in every Metropolitan area, a Metropolitan Planning Committee to prepare a draft development plan for the Metropolitan area as a whole. (2) The Legislature of a State may, by law, make provision with respect to75

Local Governance

the composition of the Metropolitan Planning Committees; the manner in which the seats in such Committees shall be filled: Provided that not less than two-thirds of the members of such Committee shall be elected by, and from amongst, the elected members of the Municipalities and Chairpersons of the Panchayats in the Metropolitan area in proportion to the ratio between the population of the Municipalities and of the Panchayats in that area; (c) the representations, in such Committees of the Government of India and the Government of the State and of such organisations and institutions as may be deemed necessary for carrying out the functions assigned to such Committees; (d) the functions relating to planning and co-ordination for the Metropolitan area which may be assigned to such Committees; (e) the manner in which the Chairpersons of such Committees shall be chosen. (3) Every Metropolitan Planning Committee shall, in preparing the draft development plan,(a) have regard to(i) the plans prepared by the Municipalities and the Panchayats in the Metropolitan area; (ii) matters of common interest between the Municipalities and the Panchayats, including co-ordinated spatial planning of the area, sharing of water and other physical and natural resources, the integrated development of infrastructure and environmental conservation; (iii) the overall objectives and priorities set by the Government of India and the Government of the State; (iv) the extent and nature of investments likely to be made in the Metropolitan area by agencies of the Government of India and of the Government of the State and other available resources whether financial or otherwise; (b) consult such institutions and organisations as the Governor may, by order, specify.

(a) (b)

76

Common Issues

(4) The Chairperson of every Metropolitan Planning Committee shall forward the development plan, as recommended by such Committee, to the Government of the State. 3.7.1.2 In addition, the Twelfth Schedule, which lays down the functions of urban local bodies, lists urban planning including town planning, regulation of land use and planning for economic and social development as key functions of the ULBs. 3.7.2 Planning Roles of the Panchayats, ULBs, DPCs and MPCs 3.7.2.1 There is need to draw a distinction between the planning role of the largely rural Panchayats, which is focused on plans for economic development and social justice, which may be described as development planning; as compared to the planning functions of the urban local bodies (or rural areas in transition) which includes town planning, regulation of land use as well as planning for economic and social development. It is also essential to clarify the wider role of the DPCs and the MPCs which emphasises coordinated spatial planning of a much larger area, sharing of water and other physical and natural resources and the integrated development of infrastructure and environmental conservation as well as integration of the development plans of the various local bodies that fall in their jurisdictions. 3.7.3 Legal Provisions in the States 3.7.3.1 In the light of the Constitutional provisions, various States have passed new legislations or amendments to existing Panchayat and Municipal Acts to outline the structure and functions of the planning bodies at different levels. 3.7.3.2 In Kerala, for example, the role of the Panchayat in planning has been defined in the Kerala Panchayat Act,1994 as under: The Panchayat at every level shall prepare every year a development plan for the next year in respect of the functions vested in it, for the respective Panchayat area in the form and manner prescribed and it shall be submitted to the District Planning Committee before the date prescribed. (2) The Village Panchayat shall prepare the development plan having regard to the plan proposals submitted to it by the Gram Sabhas. (3) Where the District Planning Committee directs to make changes in the draft development plan on the ground that sector-wise priority and criteria for subsidy specified by the Government had not been followed or sufficient funds 77

Local Governance

for Scheduled Castes and Scheduled Tribes development schemes have not been provided in the draft development plan or that the scheme was prepared not in accordance with the provisions of the Act or rules; the Panchayat shall be bound to make such changes. (4) The Panchayat shall in addition to the annual and five year plans, prepare a perspective plan foreseeing a period of fifteen years, with special focus on spatial planning for infrastructure development and considering the resources and the need for further development and such plan shall be sent to the concerned District Planning Committee 3.7.3.3 In Tamil Nadu, the constitution of the DPCs has been defined in the Tamil Nadu Panchayat Act,1994 as under: The Government shall constitute in every district a District Planning Committee (hereinafter in this section referred to as the Committee) to consolidate the plans prepared by the district panchayats, panchayats union councils, village panchayats, [town panchayats]10, municipal councils and municipal corporations in the district and to prepare a draft development plan for the district as a whole.. Its composition has been outlined as follows: (i) the chairman of the district panchayat; (ii) the Mayor of the City Municipal Corporation in the district; (iii) the collector of the district; (iv) such number of persons, not less than four-fifth of the total number of members of the committee as may be specified by the Government, elected in the prescribed manner from amongst the members of the district panchayat, town panchayats and councillors of the municipal corporations and the municipal councils in the district in proportion to the ratio between the population of the rural areas and of the urban areas in the district. In addition, the MPs and MLAs are to be permanent special invitees to the DPC along with MLCs registered as electors in the district and Municipal chairpersons. It is also stipulated that the Chairman, District Panchayat will be the Chairman and the Collector, the Vice-Chairman of the DPC.The role of the DPC in planning has been defined in accordance with the provisions of Article 243 ZD of the Constitution and is common across States. 3.7.3.4 However, there are variations across States in the constitution of the DPCs and regarding the Chairperson which is shown in Table 3.4 below: 78
10

Inserted by Tamil Nadu Act 55 of 1997.

Common Issues

Table 3.4: Composition of DPCs Variations Across some States State Elected Members Nominated Chairperson Members
President of the Zila Parishad President of the Zila Parishad President of District Panchayat Minister nominated by State Government

Secretary
CEO of Zila Parishad CEO of Zila Parishad District Collector District Collector District Collector

Assam (Assam Panchayat Four-fifth One-fifth Act, 1994) Karnataka (Section 301 of Four-fifth One-fifth Karnataka Panchayat Raj Act) Kerala 12 3 Madhya Pradesh Four-fifth One-fifth

Maharashtra {Maharashtra Four-fifth One-fifth Minister nominated District Planing Committee by State Government (Constitution and Functions Act)} Rajasthan 20 5 Tamil Nadu (Tamil Nadu Four-fifth One-fifth Panchayat Act) Uttar Pradesh Four-fifth One-fifth West Bengal Four-fifth One-fifth
Source: Collected from different sources.

President of the Zila Parishad President of District Panchayat Minister nominated by State Government President of the Zila Parishad

Chief Planning Officer, Zila Parishad CEO of District Panchayat Chief Development Officer District Collector

3.7.3.5 Similarly, for MPCs there are variations across States primarily in their composition. In Kerala, the MPCs composition has been defined in the Kerala Panchayat Act, 1994, as under: The Metropolitan Planning Committee shall consist of fifteen members of whom a. ten shall be elected, in such manner as may be prescribed, by and from amongst, the elected members of the Municipalities and the Presidents of the Village Panchayats in the metropolitan area in proportion to the ratio between the population of the Municipalities and Village Panchayats in that area; b. five shall be nominated by the Government of whom (i) one shall be an officer of the rank of a Secretary to Government or an eminent person having experience in local administration or public administration; (ii) one shall be an officer not below the rank of Senior Town Planner of the Town Planning Department; 79

Local Governance

(iii) one shall be an officer not below the rank of Superintending Engineer of the Public Works Department; (iv) one shall be an officer of any Government Department not below the rank of a Deputy Secretary to Government; and (v) one shall be the Collector of the district in which the metropolitan area is comprised or where more than one district is comprised in the metropolitan area one of the Collectors of such districts, as the Government may determine. (3) The members mentioned under clause (a) to sub-section (2) shall be elected under the guidelines, supervision and control of the State Election Commission and one among them shall be elected as the Chairman. The nature of the plans to be prepared by the MPCs as defined in the Kerala Act broadly follows the provisions laid down in the Constitution i.e. The Metropolitan Planning Committee shall, in preparing the draft development plan (a) have regard to (i) the plans prepared by the Municipalities and the Panchayats in the metropolitan area; (ii) matters of common interest between the Municipalities and Panchayats including the co-ordinated spatial planning of the area, sharing of water and other physical and natural resources, the integrated development of infrastructure and environmental conservation; (iii) the overall objectives and priorities set out by the Central or the State Government; 3.7.3.6 In West Bengal, the Metropolitan Planning Committee Act was enacted in 1994 and the Metropolitan Planning Committee was constituted in 2001 with the Chief Minister as its Chairperson. The Kolkata Metropolitan Development Authority (KMDA) is the technical secretariat of the MPC and the Secretary KMDA is the Secretary of the MPC. West Bengal is the only State which has actually constituted the MPC so far. 3.7.3.7 In Maharashtra, the MPC Act was passed in 1999. It envisages a nominee of the State Government as the Chairperson, the MMRDA as the technical arm of the MPC and a mix of officials, MLAs/MPs and experts as nominated members. However, the MPCs are still to be constituted there. 80

Common Issues

3.7.4 Planning at the Panchayat Level 3.7.4.1 The Constitutional scheme of institutionalising decentralised planning at the level of the Panchayats has not been realised. One of the reasons for this is that many State Acts do not contain provisions relating to the actual task of preparing development plans at all the levels of Panchayats, as envisaged in Article 243 G of the Constitution. 3.7.4.2 Even in States where the respective Panchayat Acts have such provision, the task is not taken seriously. There are various reasons for this. First, real devolution of functions/ activities has not taken place in most States. In the absence of meaningful devolution of powers and responsibilities in respect of local level activities, the local bodies cannot be expected to be motivated to take up this function seriously for the simple reason that they would not have the authority to implement what they plan. Secondly, the lack of untied funds is another constraint for the local bodies to take up local planning. Local level planning reflecting concerns for addressing the urgent local needs cannot be a reality if the Panchayats have at their disposal only schematic funds to use. They require untied funds to finance projects that cannot be covered by the tied funds. Lastly, till recently the National Planning Commission had not taken much interest in local government level planning and in integrating the local plans with the State plans. The State Planning Boards also, by and large, failed to prepare viable frameworks for preparing local plans. 3.7.4.3 In the above context, carving out an autonomous jurisdiction for local bodies and ensuring flow of untied funds to these bodies are preconditions for institutionalisation of local level planning. Specific recommendations on these issues have been made elsewhere in this Report. 3.7.4.4 Panchayat Plan a holistic concept: The Panchayat plan should be in the nature of a holistic plan covering and integrating within it multiple sectors, so that it can achieve the objectives of economic development and social justice envisaged in the Constitution. Some centrally sponsored programmes, on the other hand, mandate preparation of standalone sectoral plans, such as health or education plans. It is necessary to dovetail sectoral plans into overall development planning at the local level. 3.7.5 Planning at the District Level 3.7.5.1 Role of the District Planning Committee 3.7.5.1.1 Under Article 243 ZD of the Constitution, the role of the District Planning Committees to be set up in every State at the district level except in Meghalaya, Mizoram, Nagaland, Jammu & Kashmir and NCT of Delhi, is to consolidate the plans prepared 81

Local Governance

by Panchayats and Municipalities in the district and to prepare a draft development plan for the district. It is for the State Legislatures to frame laws regarding the composition of District Planning Committees provided that not less than four-fifths of the total number of members of such Committee shall be elected by, and from amongst the elected members of the Panchayat at the district level and of the Municipalities in the district in proportion to the ratio between the population of the rural areas and urban areas in the district. For ensuring effective bottom up participative planning, there is a need to re-orient the district planning mechanism with a view to ensuring centrality of Panchayats in participative planning from the village level upwards. In order to ensure that the Eleventh Plan begins with and is founded on District Plans prepared in accordance with Part IX and IX-A of the Constitution, the Planning Commission has also requested all States in September and October 2005 to establish DPCs in accordance with Article 243 ZD of the Constitution. 3.7.5.2 Nature of the District Plan 3.7.5.2.1 There is also considerable confusion about the district plans. One type of confusion relates to its nature: is it a collection of the Panchayat and Municipal plans? What are the things that cannot be addressed at the microlevels of Gram Panchayats, Intermediate Panchayats and the Municipalities, but require a macro-view for proper appreciation of the problems and issues? Settled answers to these questions are not yet available. The other type of confusion relates to the domain of planning. Will the district plans consist of only those functions which have been devolved to the local bodies? Should such plans also accommodate the 82

Common Issues

activities of the State Government that are not devolved to the local bodies, because they may have an impact on the economy, society or the physical environment of the district? In other words, is there a need for congruence between the perception of the higher level government and that of the local governments in preparing a development plan for a district? In case of conflict, how should this be resolved? For districts with substantial urban areas, where Development Authorities now carry out town planning functions by statute, the issue of parallel planning bodies working in isolation also arises. It may be argued that satisfactory answers to these questions will emerge over time through practice. But that may not be an alibi for not recognising them or addressing them. In this context, it is necessary to introduce more clarity in the concept of the district plan. The real essence of the district plan has to be in ensuring integrated planning for the rural and urban areas in the district. 3.7.5.2.2 In a regime of multi-level planning, providing knowledge and skills to different levels is a problem that needs to be addressed. In this connection, the idea of establishing a

83

Local Governance

dedicated centre in each district for providing such inputs to the local bodies may be considered. Closely associated to this, is the need to ensure a two-way process of flow of information from the higher levels of government to the local governments and vice versa. In an era of advanced information technology, this should not be difficult. 3.7.5.2.3 The National Planning Commission has recently issued guidelines (see Box: 3.5) to ensure that the concept of planning from below, as envisaged in the Constitution, is realised in practice. The guidelines envisage preparation of a vision document for the district by the District Planning Committee in consultation with the local government institutions. Among other things, this document will analyse the progress of the district in different sectors, identify the reasons for backwardness and indicate interventions for addressing the problems. The document will thus provide a framework for preparation of plans by the local government institutions. 3.7.5.2.4 Decentralised planning should involve a process of decentralised consultations and stock taking exercise followed by a planning exercise at each local body level and then the consolidation and integration exercise. The vision should be articulated at every level of local governance. The Expert Group on Planning at Grassroots level headed by Shri V. Ramachandran has gone into great detail regarding the planning process at all levels viz. Gram Panchayat level, Intermediate level and the District level. Their recommendations have been accepted by the Ministry of Panchayati Raj and the Ministry is strictly monitoring its implementation. Specifically, with regard to the measures needed to strengthen the capacity of the DPCs, the Expert Group has made detailed recommendations. (See Box 3.6). 3.7.5.2.5 Constitution of District Planning Committee The current status across the States is given in Table 3.5. Table 3.5: Status of District Planning Committees (Article 243-ZD) S. No. 1. State/UTs Andhra Pradesh State of Constitution of DPCs Not yet Constituted. However, an ordinance has been issued by the Govt. of AP in December, 2003 for constitution of DPCs. 2. 3. 84 Arunachal Pradesh Assam Not Constituted Not Constituted

Common Issues

Table 3.5 Contd. S. No. 4. State/UTs Bihar State of Constitution Of DPCs 37 districts out of 38 Districts constituted on adhoc basis. Chairman ZP in the Chairperson of DPCs. 5. 6. Chattisgarh Goa Constituted. Minister is the Chairperson of DPC. Constituted. President of ZP Chairperson of DPC. 7. 8. 9. Gujrat Not Haryana Himachal Pradesh Constituted Only in 16 Districts out of 19 Districts. Constituted only in 6 Districts out of 12 Districts. Minister is the Chairperson of DPC. 10. Karnataka Constituted. President of ZP Chairperson of DPC. 11. 12. Jharkhand Kerala Panchayat Elections yet to be held. Yes, Chairman of District Panchayat(DP) is Chairman of DPC. 13. 14. 15. Madhya Pradesh Maharashtra Manipur Yes, District incharge Ministers are Chairperson. Not Constituted Yes, in 2 Districts out of 4 Districts. Adhyaksha, DP is the Chairperson. 16. Orissa Only in 26 Districts. Minister is the Chairperson of DPC. 85

Local Governance

Table 3.5 Contd. S. No. 17. 18. State/UTs Punjab Rajasthan State of Constitution Of DPCs Not Constituted Constituted. Chairperson of DP is Chairman of DPC. 19. 20 21. 22. 23. 24. 25. Sikkim Tamil Nadu Tripura Uttar Pradesh Uttarakhand West Bengal A & N Islands Yes Yes, Chairperson, DP is Chairperson. Not Constituted Not Constituted Constituted. Minister is Chairperson of DPC. Constituted. Chairperson ,DP is Chairperson. Constituted. Chairman of DP is Chairman of DPC. 26. 27. Chandigarh D& N Haveli Not Constituted Constituted. Chairman , DP is Chairman of DPC. 28. Daman & Diu Constituted. Chairman, DP is Chairman of DPC. 29. Lakshwadeep Constituted. Collector-cum-Development Commissioner is Chairperson of DPC. 30. Pondicherry Not Constituted. Panchayat Elections not held.

Source: Website of Ministry of Panchayati Raj

86

Common Issues

3.7.5.3 Structure of the DPCs in the States 3.7.5.3.1 Regarding the constitution of the DPCs, the National Institute of Urban Affairs, has observed as follows : These include Arunachal Pradesh, Assam, Bihar, Chhattisgarh, Haryana, Karnataka, Kerala, Madhya Pradesh, Orissa, Rajasthan, Tamil Nadu and West Bengal. The members of DPCs vary among the states. They generally comprise the Minister-incharge of the district, the Mayor of the Corporation, Chairperson of the Council, Chairperson of the Zila Parishad/Panchayat, elected members of local bodies (both rural and urban), special invitee members (i.e., MPs, MLAs, MLCs), nominated members, the Divisional Commissioner, Deputy Commissioner, Additional Deputy Commissioner, District Collector, District Planning Officer, District Statistical Officer, etc. Insofar as the functioning of DPCs is concerned, it is understood that in Karnataka, Kerala and Tamil Nadu, DPCs have been constituted and technically they are functioning. However, it is learnt that in Karnataka they have not been functioning as expected. In fact, Kerala is the only State in South India where DPCs are active and functional. In the case of Madhya Pradesh, it is learnt that the DPC has no executive powers. In Chhattisgarh, the DPCs are not functioning at all and no meetings of DPCs are being held11 . 3.7.5.3.2 As regards who chairs the DPCs, two broad patterns are visible; one of having a State minister as the Chairperson (e.g. in Maharashtra, Madhya Pradesh, Uttar Pradesh) and the other of the Zila Parishad Chairman/District Panchayat President as the Chairperson of the DPC (e.g. in Kerala, West Bengal, Karnataka etc). This issue in turn is also closely linked to the broader issue of decentralisation from the State to the district and local levels and whether the District Panchayat or Zila Parishad should take on the broader role of a district government at some future date; an issue which is dealt with in the following paragraph. 3.7.5.4 Rural-Urban Divide and Long-Term Role of DPC vis-a-vis District Council 3.7.5.4.1 The Commission is of the view that of all the institutions created by the 73rd/74th Constitutional Amendments, the District Planning Committee (DPC) is one, which in most States, has so far failed to emerge as an effective institution. Some States have not formed the DPC. Besides, there are some inherent problems with this institution. In a developmental State, planning is an essential function of government at any level. Creating a separate authority independent of the structures of governance for undertaking the exercise of development planning has no logic. The DPC is the only body in the decentralisation scheme of the Constitution where up to one-fifth of the total members can be nominated. 87
11

NIUA: Impact of the 74th CAA

Local Governance

A nominated member can also be the Chairperson of the DPC. Nomination could be used as a convenient tool available to the ruling party of a State to induct members on narrow political considerations. Some States have the system of nominating a minister as head of the Committee, thus converting the DPC into a power centre that is stronger than the elected local bodies. Also, the DPC is a stand-alone committee within the Panchayat-Municipal system and there is no organic linkage between the two. Being constituted partly through indirect election and partly by nomination, it is neither accountable to the people directly, nor to the PRI-Municipal system. With all these weaknesses, the DPC in its present form is hardly able to make any contribution to the process of democratic decentralisation. The situation is compounded by the fact that separate district plans are required to be prepared for each of the major Centrally Sponsored Schemes. 3.7.5.4.2 It may be pointed out, however, that under the guidelines in Kerala, the DPC plays an important role in coordinating the planning exercises at the levels of various local governments, providing technical guidelines to the local bodies, examining the local plans for, among other technical things, prevention of overlapping and duplication of schemes and for preparation of the district plan. When all the local bodies are required to prepare plans for their respective areas, it is necessary that the above activities are performed at the district level. 3.7.5.5 District Council Relevance vis a vis DPCs 3.7.5.5.1 It is urged in some quarters that in the strict sense of the term, only the Gram Panchayat and the Municipality qualify for being regarded as local governments. It is also significant that powers of taxation, which is an indicator of governmental authority, is enjoyed by these two bodies among all the local bodies. On the other hand, traditionally, the district has been an indispensable unit of our countrys administration. Hence, if democratisation of local administration is the goal, then there has to be a representative body at the district level. Therein lies the justification for having a District Panchayat or Zila Parishad, as it is called in most States. Even when the British introduced local self government in the country, District Boards had been set up. Thus the District Panchayat has a long tradition. Compared to this, the idea of Intermediate Panchayat is a new one the product of the Balwantrai Mehta Committee report. The Asoka Mehta Committee had recommended a two-tier structure. 3.7.5.5.2 The urban areas on the other hand have a separate local government system in the form of municipalities or corporations. There are institutional linkages between different tiers of Panchayats, the chairpersons of the lower tiers being members of the higher tiers. There is operational linkage also between them, since it becomes difficult for the higher 88

Common Issues

tier to function by remaining completely detached from the lower tiers and similarly the lower tiers quite often need the assistance and support of the higher tiers in discharging their own functions. Urban local bodies, on the other hand, function independently and remain detached not only from each other but also from the Panchayat system. 3.7.5.5.3 The institutional arrangement under which Panchayats cater to the rural areas and the Municipalities to the urban areas only, may work at the micro-level of villages and towns. When it comes to the level of the district, the distinction disappears. A development plan for the whole district, for example, has to take into consideration both rural and urban areas. A district plan is something more than the two sets of separate plans - one consisting of micro-plans for rural areas and the other comprising plans for individual towns. As one moves from the micro-levels to the meso-and macro-levels, perspectives and priorities of plans change. The Constitution recognises this and accordingly prescribes that the district plan, as distinguished from the individual Panchayat and Municipal plans, should have regard to matters of common interest between the Panchayats and the Municipalities. This, in other words, means that the development needs of the rural and urban areas should be dealt with in an integrated manner and, therefore, the district plan, which is a plan for a large area consisting of villages and towns, should take into account such factors as spatial planning, sharing of physical and natural resources, integrated development of infrastructure and environmental conservation [Article 243ZD(3)]. All these are important, because the relationship between villages and towns is complementary. One needs the other. Many functions that the towns perform as seats of industry, trade and business and as providers of various services, including higher education, specialised health care services, communications etc have an impact on the development and welfare of rural people. Similarly, the orderly growth of the urban centre is dependent on the kind of organic linkage it establishes with its rural hinterland. 3.7.5.5.4 In the decentralised regime, there is thus need for a body which can coordinate between the individual rural and urban local bodies and at the same time take the responsibility of such tasks of local administration as cannot be discharged by the individual local bodies. As explained earlier, the DPC is an inappropriate institution for this. In this context the concept of district government becomes relevant. It is felt that the District Panchayat or Zila Parishad can be perfectly fitted into the role of district government by expanding its jurisdiction to the whole district. Its members may be elected by the people of both rural and urban areas. Under such a scheme, the rural-urban distinction among local government institutions will remain for individual municipalities and the Panchayats up to the intermediate level. At the district level, the distinction will disappear and the local government institution at that level will represent rural as well as the urban people. The District Panchayat in that case will have a much more meaningful role to play than 89

Local Governance

it is playing now. In fact, as the Gram Panchayats and the Intermediate Panchayats start functioning as self-governing institutions, the necessity of the District Panchayat as a representative body of the rural areas only gets reduced. But with its expanded role as the government of the whole district, it can give a new dimension to the project of democratic decentralisation. As already recommended earlier, the present office of the District Collector may be converted into the Chief Officer of such a District Government fully accountable to the elected District Government in all local matters. This idea is not new. In the 1980s, the state of Karnataka made an experiment with the concept of district government. In 1991, District Councils were formed in Kerala based on a 1988 Report on Decentralisation and continued for about a year. The suggestion to expand the jurisdiction of the Zila Parishad to cover the entire district and the abolition of the DPC in its present form was also made by the Institute of Social Sciences in its consultation paper submitted to the National Commission to Review the Working of the Constitution (2001). Recently, the National Advisory Council has given similar suggestions which are as follows: The district tier of local government may represent both rural and urban population. Article 243(d) needs to be amended facilitating election of a single representative body at the district level for both rural and urban population. Article 243 ZD may be repealed, since with the district tier representing both rural and urban areas, the DPC in its present form will be redundant. 3.7.5.5.5 A committee dedicated to the task of planning will, however, be necessary for coordination of the planning exercises of various local bodies, providing technical guidelines to them, examining the local plans for ensuring technical and financial viability and for preventing overlapping and duplication of schemes and for preparation of the district plan. Such a committee may function under the district council. 3.7.5.5.6 For the metropolitan areas, which often encompass more than one district, an alternative institutional structure in the form of a Metropolitan Planning Committee has been mandated by the Constitution and its planning functions will have to be harmoniously dovetailed with the DPC/District council framework as discussed later in this chapter. 3.7.5.6 Recommendations: a. A District Council should be constituted in all districts with representation from rural and urban areas. It should be empowered to exercise the powers and functions in accordance with Articles 243 G and 243 W of the Constitution. In that event, the DPCs will either not exist or become,

90

Common Issues

at best, an advisory arm of the District Council. Article 243 (d) of the Constitution should be amended to facilitate this. b. In the interim and in accordance with the present constitutional scheme, DPCs should be constituted in all States within three months of completion of elections to local bodies and should become the sole planning body for the district. The DPC should be assisted by a planning office with a full time District Planning Officer. For urban districts where town planning functions are being done by Development Authorities, these authorities should become the technical/ planning arms of the DPCs and ultimately of the District Council. A dedicated centre in every district should be set up to provide inputs to the local bodies for preparations of plans. A two-way flow of information between different levels of government may also be ensured. The guidelines issued by the Planning Commission pertaining to the preparation of the plan for the district and the recommendations of the Expert Group regarding the planning process at the district level should be strictly implemented. Each State Government should develop the methodology of participatory local level planning and provide such support as is necessary to institutionalise a regime of decentralised planning. States may design a planning calendar prescribing the time limits within which each local body has to finalise its plan and send it to the next higher level, to facilitate the preparation of a comprehensive plan for the district. State Planning Boards should ensure that the district plans are integrated with the State plans that are prepared by them. It should be made mandatory for the States to prepare their development plans only after consolidating the plans of the local bodies. The National Planning Commission has to take the initiative in institutionalising this process.

c.

d.

e.

f.

g.

h.

91

Local Governance

3.7.6 Planning for Urban Areas 3.7.6.1 Current Status of implementation of constitutional provisions: 3.7.6.1.1 The status of MPC in various States is given in Table 3.6. Table 3.6: Status of MPC Constitution Sl. Name of State No. 1 2 3 4 5 6 7 8 9 Andhra Pradesh Assam Bihar Gujarat Haryana Jharkhand Karnataka Kerala Madhya Pradesh No. of Metropolitan Areas in States (Cities/ Urban agglomerations exceeding 1 million) 3 - 1 4 1 2 1 1 3 Status of MPC Composition at the end of 2006

Not yet constituted Not yet constituted Not yet constituted Not yet constituted Not yet constituted Not yet constituted Not yet constituted Not yet constituted Not yet constituted Act passed-MPC yet to be constituted Not yet constituted Not yet constituted Not yet constituted Not yet constituted Yes (for Kolkata) Not yet constituted Not yet constituted

10 Maharashtra 4 11 Punjab 12 Rajasthan 13 Tamil Nadu 14 Uttar Pradesh 15 West Bengal 16 GNCT of Delhi 17 UT of Chandigarh Total 2 1 3 6 2 1 1 36

3.7.6.1.2 While the DPCs have been set up in a number of States, an MPC has been constituted in West Bengal alone. The Kolkata Metropolitan Planning Committee (KMPC) 92

Common Issues

comprises 60 members, including the Chief Minister, Minister-in-charge of Municipal Affairs and Urban Development, elected members of local bodies and nominated members. Of the 60 members, two-third members are elected and one-third are nominated. The Chief Minister of the State is the Chairman of the KMPC and the Minister-in-charge of Municipal Affairs and Urban Development Department of the State is the Vice-Chairman. Kolkata Metropolitan Development Authority (KMDA) is the technical secretariat of the KMPC and Secretary, KMDA is the Secretary of the KPMC. 3.7.6.1.3 A proposal for constituting MPCs is also in an advanced stage in Maharashtra. The Maharashtra MPC Act specifies that the State Government shall nominate the chairperson of the MPC and it also envisages the MMRDA as its planning or technical arm to assist the MPC in preparing the development plan for the Mumbai metropolitan area. The Kerala Municipalities Act makes provision for election of a chairperson of the MPC from among the elected members. 3.7.6.2 Multiplicity of Planning Authorities 3.7.6.2.1 At present there is a multiplicity of planning agencies in cities. It has been observed: These two constitutionally authorised planning mechanisms, viz. DPCs and MPCs, as and when they are set up in all States, will have to contend with the existing multiple planning structures for major cities which are in the form of Development Authorities, Town and Country Planning Departments and Housing Boards and/or the Municipal Corporations. It has been pointed out that in many Indian cities, Development Authorities wear the hat of planner and developer simultaneously as a result of which physical development supersedes planning concerns12. At present, we are in a transitional phase where urban spatial planning in most cities involves a multiplicity of agencies whereas the constitutional provisions appear to broadly envisage local level planning by local bodies and regional planning by the DPCs and MPCs. Government of Indias conditionalities under the JNNURM scheme are, however, helping States to accelerate the transition to a regime where ULBs gain full jurisdiction over town planning functions. 3.7.6.2.2 For the metropolitan areas in particular, there is an additional issue of how the two committees i.e. the District Planning Committee and the Metropolitan Planning Committee (DPC and MPC) would interface with each other in different scenarios. For example, in Delhi the Metropolitan area comprises 7 revenue districts some of which still have rural areas but all of which are likely to be urbanised in the next decade or so. There can be other cases where the urbanisable area for particular metropolitan cities could extend to more than one district and the setting up of DPCs and MPCs without delineating their jurisdictions, may only lead to confusion. The difficulty with MPCs is also that they have a peripheral outreach that extends into rural areas. There are also issues of externalities. Some 93
12

Planning for urban infrastructure-Olivier Toutain and S Gopiprasad in India Infratsructure Report,2006

Local Governance

of the urban facilities have a larger clientele outside its area or a source which is outside its jurisdiction. The bus service often has routes which go into non-urban locations, bringing commuters or other travellers into the city; the source of water supply may be a hundred kilometres away and the landfills for solid waste are certainly in the countryside. Many of these services may cut across jurisdiction of several local bodies, such as with electricity transmission. It would be useful to dovetail the views and interests of the rural district, which is its immediate hinterland, into the Metropolitan Planning Committee. Another aspect is the future relationship between the two, and the ownership in Government of these two institutions. In the Government of India, for example, the Ministry of Urban Development is responsible for MPCs while district planning is with the Ministry of Panchayati Raj. In most States, there is a similar problem of coordination. Clearly this would be even more acutely a difficulty in the field. Presently, a Zila Parishad has jurisdiction in certain matters that extend into the cities. Should there be a difference of opinion between an MPC and a neighbouring DPC, who would be the decision-maker? 3.7.6.2.3 One possible option would be for the State Government to notify the jurisdiction of the MPCs in such a manner that all districts falling within its fully urbanised or urbanising (peri-urban) boundaries would come under one MPC and no DPC for such districts/ portions of districts need be constituted. The Tamil Nadu Government has attempted to do this by providing that the MPC for the Chennai metropolitan area will be deemed to be a DPC for those portions of the revenue districts that are included in the metropolitan area. This would ensure that there will be a single planning authority for the entire metropolitan area to be duly notified by the State Government, with no competing DPC. And to further ensure integration of the planning function, the planning resources in terms of technical and human resources of the existing Development Authorities for these metropolitan areas may be integrated with the secretariats of the concerned DPC/MPC. Taking into consideration the need for coordination, it may also be necessary to have Chairpersons of Panchayats and of the local bodies in the MPCs. For this purpose, the Presidents of the neighbouring Zila Panchayats concerned and the Chairmen of the adjacent District Planning Committees (or District Councils) should be ex-officio members of the Metropolitan Planning Committee. This principle, of a single planning authority, will apply even if the DPC is conceived not as an independent planning body, as is currently laid down in the Constitution; but as an adjunct planning office reporting to a representative District government (whether such district government is called the District Council or District Panchayat or Zila Parishad) as recommended by this Commission elsewhere in this Report. In that scenario also, for the Metropolitan areas whose urban footprint encompasses several districts, an MPC alone may be constituted with representation from the District Councils/Zila Parishads/District 94

Common Issues

Panchayats that fall within its urban-peri-urban boundaries. In any case, there would be no need for a DPC for these areas. 3.7.6.2.4 Recommendations: a. The function of planning for urban areas has to be clearly demarcated among the local bodies and planning committees. The local bodies should be responsible for plans at the layout level. The DPCs/District Councils when constituted and MPCs should be responsible for preparation of regional and zonal plans. The level of public consultation should be enhanced at each level. For metropolitan areas, the total area likely to be urbanised (the extended metropolitan region) should be assessed by the State Government and an MPC constituted for the same which may be deemed to be a DPC for such areas. As such an area will usually cover more than one district, DPCs for those districts should not be constituted (or their jurisdictions may be limited to the rural portion of the revenue district concerned).The MPCs should be asked to draw up a Master Plan/CDP for the entire metropolitan area including the peri-urban areas. The planning departments of the Development Authorities (DAs) should be merged with the DPCs and MPCs who will prepare the master plans and zonal plans. The task of enforcement and regulation of the master plans/CDPs drawn up by the MPCs should be the specific statutory responsibility of all the local bodies falling within the extended metropolitan region concerned. The monopoly role of Development Authorities (DAs) in development of land for urban uses, wherever it exists, should be done way with. However, public agencies should continue to play a major role in development of critical city level infrastructure as well as low cost housing for the poor. For this purpose, the engineering and land management departments of the DAs should be merged with the concerned Municipality/Corporation.

b.

c.

d.

e.

95

Local Governance

3.8 Accountability and Transparency 3.8.1 Need for Effective Accountability 3.8.1.1 While democracy, including local democracy, is by no means a perfect tool to improve governance, the only antidote to imperfections in democracy is more and better democracy. The improvement of conditions through local empowerment is necessarily an evolutionary process. Experience over the last decade shows that, in many cases, local governments are beset by the same problems of corruption, patronage, arbitrary exercise of power and inefficiency which have bedevilled governance. 3.8.1.2 This failure is part of a larger process of democratic evolution and needs to be addressed with patience, perseverance and innovation. In an environment where corruption is still a major problem, local governments cannot be expected to be islands of probity and competence, overnight. The exercise of power often becomes distorted, sometimes leading to a patronage-based, unaccountable governance structure. Not surprisingly, power at the local level is also, at times, sought to be exercised in a similar manner. The difference is that local corruption and arbitrariness are far more glaring and visible and touch peoples lives more directly as they affect basic amenities and services. In time, as people understand the link between their vote and quality of public goods and services better, things will no doubt improve. That is the logic of democracy and universal franchise. 3.8.1.3 However, since power is prone to corruption and abuse, there is need for effective instruments of accountability to be able to check abuse of power and give citizens a voice in improving the quality of services. 3.8.2 Elements of Accountability 3.8.2.1 Generally speaking, accountability of public institutions has focused almost wholly on two issues namely, (a) prevention of activities not specifically authorised by law or any subordinate legislation and (b) integrity of the public system or maintenance of financial propriety, which is often equated with adherence to financial rules. While these are important, there are other components also for which the local bodies are expected to be accountable. One of them is responsiveness. The activities of the local bodies must meet the felt needs of the people. At no level of government are the expectations about the congruence of government activities and the felt needs of the community more than at the level of the local government, as it is nearest to the people. The other component is 96

Common Issues

measurement of performance through which one can ascertain whether public resources have been utilised to derive maximum benefit. The basic parameters of measurement of performance are efficiency and effectiveness. Efficiency refers to the ratio of output (in terms of services provided or public goods produced) to cost. By comparing this ratio with certain technical standards or with other yardsticks one may determine how well a public institution is utilising resources or whether it is doing more with less resources. Effectiveness refers to the degree to which the service provided or the public good produced by a public agency corresponds to the expected outcome of a programme, the expected outcome being derived from the felt needs of people. Lastly, fair play is an essential attribute of government in a democracy. Hence, local bodies should be held accountable for discharging their regulatory and developmental responsibilities in a fair manner and strictly in accordance with the spirit of rule of law. Thus, in designing the components of accountability of local bodies it is necessary to focus on the following: a) Institutional mechanisms to ensure propriety: propriety that includes integrity in the use of resources, objective and effective implementation of laws and regulations, elimination of rent-seeking tendencies of public officials/ representatives and fair play in exercising administrative powers. Measures to improve responsiveness of the local bodies to the people. Evaluation of local bodies by results or measuring their performance in terms of efficiency, effectiveness and other indicators.

b) c)

3.8.3 Institutional Mechanisms to Ensure Propriety 3.8.3.1 Traditionally, local bodies have been subject to control by the State Government, which it exercises through financial regulations, administrative purview and legislation. The traditional system for ensuring financial propriety comprises (a) timely annual audit of accounts and other financial documents, (b) regular internal audit, (c) follow-up action on audit reports for correcting financial irregularities and (d) fixing responsibility for lapses and use of sanctions against those who are responsible for such lapses. The measures related to accounting and financial audit are discussed separately in this Report. The first requirement of ensuring accountability in local bodies is to provide for robust institutional mechanisms. Such mechanisms would basically relate to audit, State Government control and an independent grievance redressal body. 3.8.3.2 Audit: The most general definition of an audit is an evaluation of a person, organisation, system, process, project or product. Audits are performed to ascertain the validity and reliability of information and also provide an assessment of a systems internal control.* Traditionally, audits were mainly financial audits, associated with obtaining 97
* Wikipedia Encylopedia

Local Governance

information about a companys financial accounts and reporting systems. Indeed, the dictionary defines the term audit as an official examination of accounts. Audits today are diverse in scope, and are ultimately directed at improving governance. The three broad categories of audits, in this context, are Compliance Audits, Financial Audits and Performance Audits. 3.8.3.2.1 A large number of scandals in recent years have invited attention to strengthening audits and the role of audit committees in corporate governance in the corporate sector, in order to improve governance. The role of audit committees has been the subject matter of continuing debate in India and several committees were set up by Government as well as by SEBI, to examine the issues and make suitable recommendations, in order to improve transparency, accountability and ethical behaviour. 3.8.3.2.2 There is an elaborate audit mechanism in Government with the report of the Comptroller and Auditor General being scrutinised by the Public Accounts Committees. This mechanism has proved to be effective to a certain extent. However, holding public agencies accountable, based on the existing audit mechanism sometimes becomes difficult because of the large time lag between the decision making and its scrutiny by audit. Also a large number of audit objections/observations remain unattended due to lack of proper monitoring and follow up. 3.8.3.2.3 It may therefore be desirable to consider introducing some of the best practices of good governance prescribed for the corporate sector into the public sector. One such practice is the appointment of an audit committee by the State Government with independent members of proven integrity and professional competence and with appropriate oversight powers. It was certain events in the public sector and failures in the quality of government audits that prompted the U.S. Government Accountability Office (GAO) to recommend that public sector entities consider the benefit of using audit committees. In 2003, the GAO revised Government Auditing Standards to require that auditors communicate certain information to the audit committee or to individuals with whom they have contracted for the audit. Accordingly, each government entity is required to designate an audit committee or an equivalent body to fulfill the role. 3.8.3.2.4 Audit committees are expected to play a significant role in improving all aspects of governance, including transparency, accountability and ethical behaviour. In the case of local bodies, such audit committees may be constituted at the district level. For metropolitan bodies, separate audit committees may be constituted. Essentially, the audit committee must exercise oversight regarding the integrity of financial information, adequacy of internal controls, compliance with the applicable laws and ethical conduct of all persons 98

Common Issues

involved in the entity. To fulfil these roles effectively and to perform its duties diligently, the Commission is of the view that the audit committee must have independence, access to all information, ability to communicate with technical experts and accountability to the public. Once the District Councils are formed (as discussed earlier in this Report), a special committee of the District Council may examine the audit reports and other financial statements of the local bodies within the district. This committee may also be authorised to fix responsibility for financial lapses. In respect of the audit reports of the District Council itself, a special committee of the Legislative Council may discharge a similar function. The audit committee should report to the respective local body. 3.8.3.3 Legislative Oversight: Howsoever independent the third tier of governance may become, it should still be responsible to the State Legislature. The Commission is of the considered view that legislative supervision can be ensured by institutionalising a separate Committee on Local Bodies in the State Legislature. This Committee may also function in the manner of the Parliamentary Public Accounts Committee as recommended in this Report while dealing with Accounts and Audit. 3.8.3.4 Independent Grievance Redressal Mechanism (Local Body Ombudsman) 3.8.3.4.1 Apart from the above, there is need for institutionalising a grievance redressal mechanism which would address complaints regarding elected functionaries and officials of the local bodies. This would provide a platform to the citizens for voicing their complaints and also bring out the deficiencies in the system for suitable remedial action. With increased devolution to the local government institutions, a plethora of developmental schemes will be implemented at the grass roots level. On an average, a Panchayat could be handling a crore worth of programmes every year. Such a large size of public funds increases public expectations. It also gives rise to concerns that decentralisation without proper safeguards may increase corruption, particularly if the process is not simultaneously accompanied by the creation of suitable accountability mechanisms similar to those available at the Union and State Government levels. The Commission in its Fourth Report on Ethics in Governance considered this issue. It was of the view that a local body Ombudsman should be constituted for a group of districts to look into complaints of corruption and maladministration against functionaries of local bodies, both elected members and officials. For this, the term Public Servant should be defined appropriately in the respective State legislations. The Ombudsman should have the authority to investigate cases and submit report to competent authorities for taking action. Such competent authorities should normally take action as recommended. In case of disagreement, reasons must be recorded in writing and be placed in the public domain. These would require amendments in the respective State Panchayat Acts and the Urban Local Bodies Acts to include provisions pertaining to the local body Ombudsman. 99

Local Governance

3.8.3.4.2 The Commission has further deliberated on the matter and is of the considered view that the local body Ombudsman should be a single-member body. The Ombudsman may be appointed by a Committee consisting of the Chief Minister of the State, the Speaker of the State Legislative Assembly and the Leader of the Opposition in the Legislative Assembly. The Ombudsman should be selected from a panel of eminent persons of impeccable integrity who should not be serving government officials. The Commission is also of the view that in case a group of districts has a metropolitan city in its fold, then a separate Ombudsman may be constituted for the metropolitan local body, that is, in addition to the Ombudsman for that group of districts. 3.8.3.4.3 The Commission in its Report on Ethics in Governance had recommended that the local body Ombudsman should function under the overall guidance and superintendence of the Lokayukta. The Lokayukta should also have revisionary powers over the local body Ombudsman. The Commission is of the view that in case of complaints and grievances against a local body in general or its elected members with regard to corruption and maladministration, the local body Ombudsman should have powers to investigate into the matter and forward its report to the Lokayukta who shall further recommend it to the Governor of the State. In case of nonacceptance of the recommendations made by the Ombudsman, the reasons for doing so should be placed in the public domain by the State Government. Time limits may be described for the Ombudsman to complete its investigations into complaints. 3.8.3.4.4 The Commission is also of the view that as far as complaints related to infringements of law governing elections to these local bodies are concerned, the State Election Commissioner (SEC) would be the appropriate authority to investigate in the matter. The SEC should submit its report on such matters to the Governor of the State who shall act on his/her advice. 3.8.4 Measures to Improve Responsiveness of the Local Bodies to the People 3.8.4.1 In order to ensure efficient service delivery, accessibility and reach, there is need for improving the responsiveness of the local bodies to the citizens. Such responsiveness could be enhanced through: Delegation of functions In-house mechanism for redressal of grievances Social audit Transparency 100

Common Issues

3.8.4.2 Delegation of Functions: To make the lowest functionary accountable and to inculcate responsibility at the cutting edge level, there has to be delegation of functions to the lowest possible functionary in the local bodies. This would make the local bodies responsive in their interface with the common man. 3.8.4.3 In-house Mechanism for Redressal of Grievances: While audit and governmental control are necessary for making the local bodies accountable and an independent grievance redressal body would provide the citizens with the much needed instrument for enforcing accountability, the local bodies themselves should be in a position to learn from mistakes and mould themselves according to the needs of the people. This would require a robust in-house mechanism for redressal of grievances. 3.8.4.4 Social Audit 3.8.4.4.1 Institutionalising a system of social audit is essential for improving local service delivery and for ensuring compliance with laws and regulations. An effective system of social audit will have to be based on two precepts; first, that service standards are made public through citizens charters and second, that periodic suo motu disclosure is made on attainment of service delivery standards by the local bodies. Social audit processes are also important to ensure effectiveness. They should also evolve a suitable framework of social audit clarifying its objectives, scope and methods. Such framework may be evolved in each State through extensive consultations with the civil society organisations and others. The NGOs and the CBOs should be given support and encouragement to mobilise the local community in undertaking social audit. The formal audit should give due consideration to the findings of social audit and vice versa. 3.8.4.4.2 The Commission in its Fourth Report on Ethics in Governance recognised the importance of civil societies and social audit in enforcing accountability and in providing transparent administration. In chapter 5 on of that Report pertaining to Social Infrastructure, the following recommendations were made at para 5.1.12: a. Citizens Charters should be made effective by stipulating the service levels and also the remedy if these service levels are not met. b. Citizens may be involved in the assessment and maintenance of ethics in important government institutions and offices. c. Reward schemes should be introduced to incentivise citizens initiatives. d. School awareness programmes should be introduced, highlighting the importance of ethics and how corruption can be combated. 101

Local Governance

3.8.4.4.3 As regards social audit, the Commission in the said Report observed that: 5.4 Social Audit 5.4.1 Social audit through client or beneficiary groups or civil society groups is yet another way of eliciting information on and prevention of wrong doing in procurement of products and services for government, in the distribution of welfare payments, in the checking of attendance of teachers and students in schools and hostels, staff in the hospitals and a host of other similar citizen service-oriented activities of government. This will be a useful supplement to surprise inspections on the part of the departmental supervisors. The Commission, without entering into details of all these, would like to suggest that provisions for social audit should be made a part of the operational guidelines of all schemes. 5.4.2 Recommendation: a. Operational guidelines of all developmental schemes and citizen centric programmes should provide for a social audit mechanism.

3.8.4.4.4 The need for social audit was also emphasised by the Commission in its second Report on implementation of the National Rural Employment Guarantee Act entitled Unlocking Human Capital, Entitlement and Governance- a case study. The Commission observed that, 5.4.6.4 Community Control and Social Audit of All Works 5.4.6.4.1 The operational guidelines stipulate that there should be a local vigilance and monitoring committee composed of members of the locality or village where the work is undertaken, to monitor the progress and quality of work. The Gram Sabha has to elect the members of this committee and ensure adequate representation of SC/ST and women on the committee. 102

Common Issues

5.4.6.4.2 Section 17 of NREGA stipulates that Gram Sabhas shall conduct regular social audits of all projects under REGS. Social audit is a process in which, details of the resource, both financial and non-financial, used by public agencies for development initiatives are shared with the community, often through a public platform. Social audits allow people to enforce accountability and transparency, providing the ultimate users an opportunity to scrutinise development initiatives. Chapter 11 of the Operational Guidelines has emphasised the importance of social audit for the proper implementation of NREGA. It has prescribed a continuous audit and a mandatory social audit forum once in six months. The guidelines also prescribe the methodology for publicity, the documentation required and the mandatory agenda. Following these guidelines, in letter and spirit, would go a long way in enforcing social accountability. 5.4.6.4.3 For an effective social audit, the essential requirements would be a proper information recording and dissemination system, expertise to conduct audit and awareness among the Gram Sabha members about their rights. Thus proper record keeping, capability building and awareness generation would be required. All these aspects have been dealt with under respective paras. 3.8.4.4.5 Therefore, an effective system of social audit at all levels of local self government is critical to ensure accountability and transparency in these institutions. Some of the action points suggested in the Report of the Expert Group on Planning at the Grass roots Level, March, 2006 (para 5.9.5) in this regard are mentioned below: (a) Social audit should not be individually prescribed for each scheme implemented by the local bodies. A multiplicity of social audits separately prescribed for each scheme undermines the importance of the process. (b) Adequate publicity needs to be given for social audit. (c) Social audit action taken reports have to be time bound and placed in the public domain. It is advisable to precede a social audit with the action taken on the previous social audit. (d) Opportunity has to be given to people to inspect the records of the local bodies particularly their documentation on property lists, tax assessments and tax collected, measurement books and muster rolls. (e) In case of PRIs it may also be advisable to adopt a system where a higher level of Panchayat, such as the Intermediate Panchayat, provide details of the comparative performance of all Panchayats falling within its jurisdiction, so that people can get an idea of where their Panchayat stands in respect of each service delivered. 103

Local Governance

(f ) (g)

State Governments should encourage conduct of social audit of Gram Panchayats by the committees of Gram Sabha. Space has to be provided to Community Based Organisations to be involved in the social audit.

The Commission endorses these action points and recommends them for adoption by the State Governments. 3.8.4.5. Transparency 3.8.4.5.1 Suo motu disclosure of information, especially with regard to duties, functions, financial transactions and resolutions should become the norm for all the local bodies as provided under the RTI Act, 2005. Several local bodies have developed there own transparency mechanisms (see Box 3.7). Such practices may also be adopted by other local bodies. 3.8.5 Evaluation of Performance of Local Bodies 3.8.5.1 Local bodies have to be evaluated in terms of efficiency, effectiveness and resource mobilisation, apart from the efforts to promote participation and transparency as indicated above. One way of achieving this would be to benchmark the performance of local bodies. To ensure effective service delivery, the performance of local bodies has to be closely monitored. The best way of doing this is to fully involve these institutions at all levels in the monitoring process. This can be done by development of yardsticks for monitoring through discussions at the local level. The development of indicators can itself become a very good capacity building exercise. Another way of encouraging such self-assessment of performance is to consolidate data relevant to a particular indicator and compare it with the best possible status, as well as the minimum actual level of achievement within a particular area, say, within the district in the case of PRIs and within the State for ULBs. It may also be worthwhile for these bodies to lay down certain accepted quality standards concerning service delivery and give wide publicity to them by way of citizens charters, followed by periodic checks to ensure conformity. 3.8.5.2 In Tamil Nadu, a study to develop an approach towards comparative assessment of municipalities was carried out under the Indo-USAID FIRE-D (Financial Institutional Reforms and Expansion) project. The study adopted a total of forty one (41) indicators in assessing performance levels of municipalities, which included financial (15), service level and coverage (17) and service efficiency (9) indicators13. The financial indicators for debt management included outstanding loan per capita and overdue, service coverage indicators for sewerage and sanitation level included persons per unit of public conveniences and the 104
13

www.teri.res.in/teriin/users/case3.html

Common Issues

service efficiency indicators for sewerage and sanitation included staff per 10,000 population. On the basis of the performance of local bodies, benchmarking was done. 3.8.5.3 The Union Ministry of Panchayati Raj has also instituted an Awards Scheme for the Panchayats (in 2005). One important criterion for determining the best Gram Panchayat under this Scheme is efficient service delivery tested against specific identified benchmarks and identified range of activities14. 3.8.5.4 The Commission is of the view that State Governments should conduct such exercises for developing benchmarks. For this purpose, the State Governments may utilise the services of independent professional evaluators. Such benchmarking would bring in the desired accountability in respect of efficiency and outcomes. 3.8.5.5 Apart from the above, evaluation of the performance of local bodies may also be attempted from the viewpoint of the citizens. This essentially brings the concept of feedback mechanism to the fore. The feedback could be on legal and procedural conformity, services and amenities, public works and projects and planning and vision. It could be organised around polling booths, villages (if they are part of a larger Panchayat), wards and even communities. The feedback could consist of indicating a satisfaction score on the categories mentioned above. The collation of these feedbacks would provide a Citizens Report Card on the performance of the local bodies. In Chhattisgarh, a pilot project for performance rating based on Community Score Card has been tried and tested in 30 sample Gram Panchayats spread over seven districts in which a total of twelve (12) services were assessed. These were organising Gram Sabhas, health, education, drinking water, PDS distribution, other schemes, Mid-day Meal Scheme, sanitation, physical infrastructure, hand pump maintenance, Nawa Anjor (Chhattisgarh District Poverty Reduction Project) and taxation15. The Commission feels that such methods of a participatory nature which are now recognised the world over as a means of improving governance, service delivery and empowerment should be increasingly adopted as accountability tools. 3.8.6 Recommendations: a. Audit committees may be constituted by the State Governments at the district level to exercise oversight regarding the integrity of financial information, adequacy of internal controls, compliance with the applicable laws and ethical conduct of all persons involved in local bodies. These committees must have independence, access to all information, ability to communicate with technical experts, and accountability to the public. For Metropolitan Corporations, separate audit committees should be 105
14 15

http://panchayat.gov.in/awards_for_best_panchayats.htm http://www.sasanet.org/documents/LearningNote/Chattisgarh.pdf

Local Governance

constituted. Once the District Councils come into existence, a special committee of the District Council may examine the audit reports and other financial statements of the local bodies within the district. Such committee may also be authorised to fix responsibility for financial lapses. In respect of the audit reports of the District Council itself, a special committee of the Legislative Council may discharge a similar function. b. There should be a separate Standing Committee of the State Legislature for the local Bodies. This Committee may function in the manner of a Public Accounts Committee. A local body Ombudsman should be constituted on the lines suggested below. The respective State Panchayat Acts and the Urban local Bodies Acts should be amended to include provisions pertaining to the local body Ombudsman. i. Local body Ombudsman should be constituted for a group of districts to look into complaints of corruption and maladministration against functionaries of local bodies, both elected members and officials. For this, the term Public Servant should be defined appropriately in the respective State legislations. Local body Ombudsman should be a single member body appointed by a Committee consisting of the Chief Minister of the State, the Speaker of the State Legislative Assembly and the Leader of the Opposition in the Legislative Assembly. The Ombudsman should be selected from a panel of eminent persons of impeccable integrity and should not be a serving government official. The Ombudsman should have the authority to investigate cases and submit reports to competent authorities for taking action. In case of complaints and grievances regarding corruption and maladministration against local bodies in general and its elected functionaries, the local body Ombudsman should send its report to the Lokayukta who shall forward it to the Governor of the State with its recommendations. In case of disagreement with the recommendations of the Ombudsman, the reasons must be placed in the public domain.

c.

ii.

iii.

106

Common Issues

iv. v. d.

In case of a Metropolitan Corporations, a separate Ombudsman should be constituted. Time limits may be prescribed for the Ombudsman to complete its investigations into complaints.

In case of complaints and grievances related to infringement of the law governing elections to these local bodies, leading to suspension/ disqualification of membership, the authority to investigate should lie with the State Election Commission who shall send its recommendations to the Governor of the State. In the hierarchy of functionaries under the control of local bodies, functions should be delegated to the lowest appropriate functionary in order to facilitate access to citizens. Each local body should have an in-house mechanism for redressal of grievances with set norms for attending and responding to citizens grievances. For establishing robust social audit norms, every State Government must take immediate steps to implement the action points suggested in para 5.9.5 of the Report of the Expert Group on Planning at the Grass roots Level. It should be ensured that suo motu disclosures under the Right to Information Act, 2005 should not be confined to the seventeen items provided in Section 4(1) of that Act but other subjects where public interest exists should also be covered. A suitable mechanism to evolve a system of benchmarking on the basis of identified performance indicators may be adopted by each State. Assistance of independent professional evaluators may be availed in this regard. Evaluation tools for assessing the performance of local bodies should be devised wherein citizens should have a say in the evaluation. Tools such as Citizens Report Cards may be introduced to incorporate a feedback mechanism regarding performance of local bodies.

e.

f.

g.

h.

i.

j.

107

Local Governance

3.9 Accounting and Audit 3.9.1 Capability enhancement of the institutions of local self-government through constitutional empowerment, increased raising of resources and governmental transfers implies the existence of a strong accounting machinery which is willing to follow rigorous accounting standards. In the budget speech for 2006-07, the Union Finance Minister had indicated that a large chunk of resources would go to eight flagship programmes, namely, Sarva Shiksha Abhiyan, Mid-day Meal Scheme, Drinking Water Mission, Total Sanitation Campaign, National Rural Health Mission, Integrated Child Development Services, National Rural Employment Guarantee Programme and Jawaharlal Nehru National Urban Renewal Mission (JNNURM). These schemes, with the exception of JNNURM, fall within the core functions of Panchayats with substantial allocation of funds during 2006-07 and 2007-0816. The details of allocation of funds for these schemes are given in Table 3.7: Table 3.7: Allocation of Funds to Flagship Schemes Sl. Scheme Ministry /Department No. 1. Sarva Shiksha Abhiyan 2. Mid-day Meal Scheme 3. Drinking Water Mission 4. Total Sanitation Campaign 5. National Rural Health Mission 6. Integrated Child Development Services 7. National Rural Employment Guarantee Scheme (including SGRY) 108
16

Allocation in 2006-2007 (Rs in Crores) 10041 4813 4680 720 8207 4087

Allocation in 2007-2008 (Rs in Crores) 10671 7324 6500 1060 10890 4761

Department of Elementary Education Department of Elementary Education Department of Drinking Water Supply Department of Drinking Water Supply Ministry of Health and Family Welfare Ministry of HRD Department of Women and Child Welfare Ministry of Rural Development

14300

12000

Total

46848

53206

Source: Report of the Expert Group on Planning at the Grass roots Level, March 2006, and Union Budget for 2007-08

Common Issues

3.9.2 Even in the case of JNNURM, it is envisaged that funds from the Union and State Governments would flow directly to the nodal agency designated by the States and funds for identified projects across cities would be disbursed to the ULBs/Parastatal agencies through these nodal agencies.17 Thus, with the large flow of funds under various socio economic development programmes to the local bodies and the growing realisation of the importance of the third tier of government, accountability concerns assume critical importance. Owing to the large number of local bodies in the country, it is therefore necessary to address the concerns regarding maintenance of accounts and audit. 3.9.3 Article 243 J of the Constitution provides for the audit of accounts of Panchayats in the following way: The Legislature of a State may, by law, make provisions with respect to the maintenance of accounts by the Panchayats and the auditing of such accounts. 3.9.4 Article 243Z of the Constitution makes similar provisions with regard to audit of accounts of municipalities. Even though various States have incorporated general provisions regarding audit and maintenance of accounts in their Panchayati Raj and Municipal Acts, detailed guidelines have generally not been issued. The Eleventh Finance Commission (EFC) had occasion to comment on this: Article 243J and 243Z of the Constitution expect the States to make provisions by way of legislation for maintenance of accounts by the panchayats and the municipalities and for the audit of such accounts. Following this, most states legislation do make general provisions for these purposes, but detailed guidelines or rules have not been laid down, in several cases. In many States, the formats and procedures for maintenance of accounts by these bodies prescribed decades ago, are continued without making any improvements to take into account the manifold increase in their powers, resources and responsibilities. Most village level panchayats do not have any staff except for a full or a part-time Secretary, because of financial constraints. It would, therefore, be rather too much to expect a village panchayat to have a trained person dedicated exclusively to upkeep of accounts. With a passage of time, the flow of funds to the panchayats and the municipalities will increase considerably. Therefore, there is a need to evolve a system of maintenance of accounts by the local bodies that could be adopted by all the States. As regards audit, in many States, the legislation leaves it to the State Government to prescribe the authority. In some States, the Director, local Fund Audit or a similar authority has been given the responsibility for the audit of accounts of panchayats and municipalities. The C&AG has a role only in a few States and that too for the audit of district level panchayats and for very large urban bodies. In our view, this area of accounts and audit needs to be set right under the close supervision of the C&AG and supported by 109
17

Source: Overview document, JNNURM, retrieved from http://jnurm.nic.in/toolkit/Overview.pdf on 5.07.2007

Local Governance

specific earmarking of funds from the grants recommended by us in respect of local bodies18. 3.9.5 The observations of the Eleventh Finance Commission (EFC) called for an enhanced role for C&AG of India in the accounts and audit of local bodies. The main recommendations of the EFC in this regard were: a. The C&AG should be entrusted with the responsibility of exercising control and supervision over the proper maintenance of accounts and their audit for all the tiers/ levels of panchayats and urban local bodies. The Director, local Fund Audit or any other agency made responsible for the audit of accounts of the local bodies, should work under the technical and administrative supervision of the C&AG in the same manner as the Chief Electoral Officers of the States operate under the control and supervision of the Central Election Commission. The C&AG should prescribe the format for the preparation of budgets and for keeping of accounts for the local bodies. Such formats should be amenable to computerisation in a networked environment. Local bodies particularly the village level panchayats and in some cases the intermediate level panchayats, that do not have trained accounts staff, may contract out the upkeep of accounts to outside agencies/persons. Audit of accounts of the local bodies be entrusted to the C&AG who may get it done through his own staff or by engaging outside agencies on payment of remuneration fixed by him. The report of the C&AG relating to audit of accounts of the panchayats and the municipalities should be placed before a Committee of the State Legislature constituted on the same lines as the Public Accounts Committee19.

b.

c. d. e. f.

110
18 19

Para 8.19, Report of the Eleventh Finance Commission, June, 2000 ibid

Common Issues

3.9.6 The recommendations made by the EFC were studied by various State Finance Commissions and the ground realities compelled them to incorporate modifications to these recommendations. Thus, the Second State Finance Commission, Tamil Nadu (2002-07) recommended that the Director of Local Fund Audit (DLFA) should be made the statutory auditors for Municipal Corporations, Municipalities, Town Panchayats, District Panchayats and Panchayat Unions while audit of the Village Panchayats should continue to be done by the Deputy BDO subject to test audit by DLFA20. As Tamil Nadu was the pioneer State in introducing the accrual accounting system after running a pilot scheme for ten Municipalities and Municipal Corporations, the Second SFC recommended the progressive extension of the accrual accounting system to all Town Panchayats and Panchayat Unions from 2003-2004 after imparting training to the staff21. However, it also suggested that the Accountant General may go through the audit reports of Director of Local Fund Audit and indicate how they could be professionally improved by way of technical inputs and standards. There can be technical guidance by the Accountant General to Director of Local Fund Audit on a continuing basis. 3.9.7 The Second State Finance Commission, Ut t a r Pr a d e s h a l s o e x a m i n e d t h e recommendations made by the EFC for the streamlining of accounts and audit of PRIs. It noted that the UP Government agreed to get the audit of local bodies done under the supervision of C&AG. While the audit of Zila Panchayats would be done by AG, (A&E), UP, the audit of Kshetra and Gram Panchayats would be distributed among the parties of AG (A&E), UP and the Panchayati Raj audit staff of the State Government. However, owing to the very large number of PRIs and the very small size and low income levels of Gram Panchayats, it recommended that a separate organisation for the audit of PRIs in the State should be created and it should be delinked from the audit of cooperative societies as per prevailing arrangement. This should be an independent body under the control of Finance Department. This body must function under the over all supervision and guidance of the C&AG as agreed to by the State Government22. With regard to municipal accounting, the SFC noted that it was based on the age old system of revenue accounting which does not provide meaningful information about the financial performance of ULBs. It also rejected the
Para 3.6, Report of Second State Finance Commission, Tamil Nadu, May 2001, Volume I. 21 Para 3.7, ibid. 22 Para 11.19, Report of the Second State Finance Commission (Panchayati Raj and Urban Local Bodies), Government of Uttar Pradesh, June, 2002, Volume I.
20

111

Local Governance

argument that Muncipalities follow the cash-based accounting system in order to maintain better budgetary control over activities. It referred to the development of detailed formats for maintenance of accounts for local bodies by the C&AG and recommended that it should be mandatory to table a consolidated annual report on the audit and accounts of local bodies before the State Legislature every year and the report should be discussed in a specifically designated Committee of the Legislature which should function on the lines of the Public Accounts Committee23. 3.9.8 The Sixth Round Table of Ministers In-charge of Panchayati Raj held in November, 2004 at Guwahati agreed to recommend, inter alia, the following to their respective State Governments regarding audit of PRIs24: DLFAs and other similar bodies should work in concert with the C&AG to upgrade their work to the level required by constitutional imperatives. Audit and accounting standards should be established which are appropriate to the work of the Panchayats. The PRIs themselves should be associated with the preparation of standards. Audit and accounting standards for the PRIs should be elementary, simple and easily comprehensible to the elected representatives. They should focus on: o When to look into a transaction o What to monitor o How to document transactions, and o How to disclose transactions Arrangements should be made in the State Legislatures for establishment of Public Accounts Committees specifically for PRIs or for the accounts of PRIs to be submitted to Panchayati Raj Committees of the State Legislatures. Such institutional arrangements should be complemented by legislating an appropriate Fiscal Responsibility Act for elected local authorities. 3.9.9 The Ministry of Urban Development and Poverty Alleviation, Government of India (now Ministry of Urban Development) in association with the Indo-USAID FIRE Project has already formulated Policy Options for Framing New Municipal Laws in India. As a part of this effort, the Institute of Chartered Accountants of India (ICAI) has published a Technical Guide on Accounting and Financial Reporting by Urban Local Bodies. This guide also provides Guidelines on the Formats of Financial Statements of Municipalities.25 Some important guidelines are as follows: a) The financial statements of local bodies (viz. balance sheet and income and expenditure account) shall be prepared on accrual basis. 112

Para 17.17, ibid. Source: A Compendium of Resolutions of the Seven Round Tables of Ministers In-Charge of Panchayati Raj, http//panchayat.gov.in, retrieved on 3.07.2007 25 Source: http://urbanindia.nic.in/moud/legislations/li_by_min/Model_Municipal_Law/indexpop.html, retrieved on 3.07.2007
23 24

Common Issues

b)

c)

d) e)

Accounting policies shall be applied consistently from one financial year to the next. Any change in the accounting policies which has a material effect in the current period or which is reasonably expected to have a material effect in later periods shall be disclosed. In case of a change in accounting policies which has a material effect in the current period, the amount by which any item in the financial statements is affected by such change shall also be disclosed to the extent ascertainable. Where such amount is not ascertainable, wholly or in part, the fact shall be indicated. Provision shall be made for all known liabilities and losses even though the amount cannot be determined with certainty and represents only a best estimate in the light of available information. Revenue shall not be recognised unless the related performance has been achieved and no significant uncertainty exists regarding the amount of the consideration; and it is not unreasonable to expect ultimate collection. The accounting treatment and presentation in the balance sheet and the income and expenditure account of transactions and events shall be governed by their substance and not merely by the legal form. In determining the accounting treatment and manner of disclosure of an item in the balance sheet and/or the income and expenditure amount, due consideration shall be given to the materiality of the item.

3.9.10 It needs to be kept in mind that the accounts of the ULBs, in general, are kept on cash basis and there is no uniform practice of certification of accounts. Under the cash system of accounting, revenue and expenditure are recorded in books only if they are actually received or paid, whatever may be their period of accounting. On the other hand, under the accrual basis of accounting, revenue and expenses along with acquired assets are identified with specific periods of time. The recording in books takes place as they are incurred. Thus, financial transactions get recorded on occurrence of claims and obligations in respect of incomes or expenditures, assets or liabilities based on happening of any event, passage of time, rendering of services, full or partial fulfillment of contracts, diminution in values, etc. even though actual receipts or payments of money may not have taken place. Some of the benefits of such a system of accounting, particularly in the context of ULBs, are summarised below:26 Revenue is recognised as it is earned and thus income constitutes both revenue received and receivable. The accrual basis not only records the actual income but also highlights the level and efficacy of revenue collection, thereby assisting decision makers in taking financial decisions. Expenditure is recognised as and when the liability for payment arises and thus it constitutes both amount paid and payable. In the accrual basis 113
26

Source : National Municipal Accounts Manual, November 2004, Government of India, Ministry of Urban Development

Local Governance

of accounting, expenditure incurred on repairs and maintenance will be recognised as expense of the period in which they are incurred and, if not paid for during the year, shall be treated as a liability (payable) and be disclosed as such in the Balance Sheet. Expenses are matched with the income earned in that year. Thus, it provides a very effective basis to understand the true performance of the organisation for the operations that are conducted in that year. A distinct difference is maintained between items of revenue and capital nature. This helps in correct presentation of financial statements, viz., the Income and Expenditure Statement and the Balance Sheet. Costs which are not charged to the Income & Expenditure Accounts are carried forward and kept under continuous review. Any cost that appears to have lost its utility or its power to generate future revenue is written off. It helps in providing timely, right quality nature of information for planning, decision-making and control at each level of management. One of the distinct advantages of adopting the accrual accounting system is ease in financial appraisal by financial institutions. It also facilitates credit rating through approved Credit Rating Agencies, which is a pre-requisite for mobilising funds in the financial markets through debt instruments.

3.9.11 Accordingly, the Ministry of Urban Development, Government of India in association with the Office of the Comptroller and Auditor General of India, National Institute of Urban Affairs (NIUA) and Indo-USAID FIRE-D Project have brought out a National Municipal Accounts Manual (NMAM) for the ULBs. The accounts of the ULBs are now to be prepared on accrual basis as prescribed under NMAM. The new standards are those of the ICAI and the Ministry of Urban Development has prescribed the procedure for formalising these standards. The Commission is of the view that this Manual should be adopted by the State Governments for use by the urban local bodies. 3.9.12 The Model Municipal Law (MML) circulated by the Union Ministry of Urban Development, mentions that The municipal accounts as contained in the financial statement, including the accounts of special funds, if any and the balance sheet shall be examined and audited by an Auditor appointed by the State Government from the panel of professional Chartered Accountants prepared in that behalf by the State Government. [Clause 93(1)]27. This arrangement is similar to the arrangements for audit of Government Companies under the Companies Act, 1956. In order to ensure transparency, professional competence and accountability in the process of certification of accounts, the Commission is of the view that the C&AG should prescribe guidelines for empanelment of Chartered 114
27

Source: http://urbanindia.nic.in/moud/legislations/li_by_min/Model_Municipal_Law/indexmml.html, retrieved on 13.08.2007

Common Issues

Accountants like, qualification of members, length of existence and experience of firms, number of partners, etc. Further, it is also felt that for the proper conduct of audit, detailed guidelines would also be required to be prescribed by the C&AG as is the practice in the case of the Companies Act. It needs to be kept in mind that the audit to be done by the Local Fund Audit or the C&AG in discharge of their responsibilities would be different and in addition to this audit. 3.9.13 As mentioned above, the Eleventh Finance Commission had recommended that the Comptroller and Auditor General of India (C&AG) should be entrusted with the task of supervision over proper maintenance of accounts and audit of all three tiers of PRIs and ULBs. Presently, the C&AG of India has already developed the following framework with regard to maintenance of accounts and audit of PRIs and ULBs28: Auditing Standards for PRIs and ULBs Guidelines for Certification audit of accounts PRIs Manual of Audit for PRIs Audit training modules for ZPs, PSs and GPs List of Codes for functions, and activities of PRIs Budget and Accounts formats for PRIs New Accrual accounting system suggested for ULBs with detailed formats Training Module on PRI accounts and budget 2 parts theory and practical. 3.9.14 As of 31st March, 2007, out of 24 States where the 73rd and 74th Constitutional Amendments are applicable, full entrustment of the role of providing Technical Guidance and Supervision (TGS) over audit and accounts of PRIs and ULBs to C&AG has been made by 19 States29. Given the enormity of the task of maintenance of accounts and audit of all the PRIs and ULBs in the States and the concomitant technical requirements, the Commission is of the considered view that the entrustment of technical supervision over the maintenance of accounts and audit of PRIs and ULBs should be institutionalised through a provision in the respective laws governing the local bodies and the accounting formats and standards may be provided by way of Rules. 3.9.15 Similarly, the accounts and budget formats for PRIs prescribed by C&AG have been accepted and formal orders issued by 11 States, though 22 States have positively responded30. The format developed for PRIs is basically a simple receipt and payment account on cash basis accompanied by key statements that take care of the items of accrued income and expenditure. The format ensures that all the functions which have been devolved or are likely to be devolved by the States to the Panchayats are properly classified. It is also in synchronisation with the classification codes at the State and National level. The 115
28 29 30

Source: http://cag.nic.in/html/localbodies.htm, retrieved on 3.7.2007. ibid ibid

Local Governance

Commission would like to emphasise upon what has already been recommended in the Sixth Round Table of the Ministers in-charge of Panchayati Raj held in November 2004 at Guwahati the formats for the Panchayats should be simple and comprehensible to the elected representatives. 3.9.16 The Eleventh Finance Commission had also suggested that the Director, Local Fund Audit (DLFA) or any other agency responsible for audit of accounts of local bodies should work under the technical and administrative supervision of the C&AG in the same manner as the Chief Electoral Officers of the States do under the Central Election Commission. The Commission is of the view that the role of the C&AG should be limited to technical guidance and supervision and not extend to administrative control. In fact, there is a case for institutionalising the independence of the DLFA so that it could function as a specialised body devoted to the audit of the accounts of the local bodies. This would enhance the stature of the DLFAs with a positive impact on the quality of audit and on accountability. The Commission feels that to achieve this, the head of the body responsible for Local Fund Audit should be appointed by the State Government after selection from a panel vetted by the C&AG. This would imbibe this body with the required independence and facilitate coordination with the office of the C&AG. Further, to strengthen the arrangements for providing technical guidance and supervision by the C&AG, the Commission is also of the view that release of Finance Commission Grants to local bodies be made conditional on the acceptance by the States of such arrangements. 3.9.17 Apart from the statutory audit performed by the DLFA or such other designated authority of the State Government, audit of certain local bodies in a State would come under the purview of Section 14 of the C&AGs (Duties, Powers and Conditions of Service) Act, 1971. In terms of this Section, where any body or authority is substantially financed by grants or loans from the Consolidated Fund of India or of any State or of any Union Territory having a Legislative Assembly, the C&AG shall audit all receipts and expenditure of that body or authority. For the purposes of this Section, if the grant or loan is not less than rupees twenty five lakhs and is not less than 75% of the total expenditure of such body or authority, it would be deemed to be substantially financed. In case of bodies receiving grants or loans not less than Rupees one crore in a financial year, the Section provides that the C&AG may, with the previous approval of the President or the Governor of a State or the Administrator of a Union Territory having a Legislative Assembly, audit all receipts and expenditure. In fact, in exercise of this authority, C&AG is already conducting audit of PRIs and ULBs in various States under Section 14 of this Act, wherever applicable. Further, Section 20 of the said Act provides for audit of accounts of certain bodies by the C&AG on the basis of mutual agreement with the concerned government. Some of the 116

Common Issues

States have already entrusted audit of the local bodies to the C&AG under this provision. In fact, in the States of Bihar, West Bengal and Jharkhand, it is the C&AGs institution which acts as the Local Fund Examiner. Even in Karnataka, the first two tiers of Panchayats viz. Zila Panchayats and Taluk Panchayats are audited by the C&AG as the sole auditor. In Tripura also, the State Government has entrusted the statutory audit of PRIs to the C&AG. The Commission is of the view that the final decision on the matter should be left to the States. 3.9.18 It is equally important that prompt action is taken on the audit reports of C&AG. Accountability requires that corrective action is taken promptly on audit reports so as to increase the effectiveness of the local government. As recommended by the Eleventh Finance Commission, the reports of C&AG on local bodies should be placed before the State Legislature and public interest would be better served, if these reports are discussed by a separate committee of the State Legislature on the same line as the Public Accounts Committee (PAC). The Sixth Round Table of the Ministers in-charge of Panchayati Raj had also recommended on the same lines. The Commission endorses these views. The audit reports on local bodies should be placed before the State Legislature and these should be considered by a separate Committee of the State Legislature constituted on the lines of the Public Accounts Committee. The access to relevant information/records to DLFA/designated authority for conducting audit or the C&AG should also be ensured by incorporating suitable provisions in the State Laws governing local bodies. 3.9.19 In order to match the above standards with regard to accounts and audit, local bodies particularly the PRIs will need to be suitably strengthened by making skilled professionals available to them. The Commission is of the view that the States should take up appropriate capacity building measures so that the PRIs and ULBs are able to cope with the audit of these institutions. 3.9.20 With the progressive increase in capacity of the local bodies and reliability of the audit mechanism, a system of performance audit should also be gradually introduced. For this purpose, suitable parameters should be developed. This would strengthen the functioning of the local bodies and bring in elements of much desired accountability. 3.9.21 As significant funds are being ploughed through local bodies, the adoption of sound financial management principles along with accountability measures becomes a sine qua non. These should include, inter alia, the following: Effective and sustained fiscal monitoring systems Maintenance of local bodies debt at prudent levels 117

Local Governance

Prudent management of contingent liabilities and guarantees Productive use of borrowings The Karnataka Government has already taken an important initiative in this regard by enacting the Karnataka Local Fund Authorities Fiscal Responsibility Act, 2003. The Commission endorses the view taken at the Sixth Round Table of Ministers in-Charge of Panchayati Raj at Guwahati in November 2004 that an appropriate Fiscal Responsibility Act for local bodies should be legislated by all the States. 3.9.22 Recommendations: a. The accounting system for the urban local bodies (ULBs) as provided in the National Municipal Accounts Manual (NMAM) should be adopted by the State Governments. The financial statements and balance sheet of the urban local bodies should be audited by an Auditor in the manner prescribed for audit of Government Companies under the Companies Act, 1956 with the difference that in the case of audit of these local bodies, the C&AG should prescribe guidelines for empanelment of the Chartered Accountants and the selection can be made by the State Governments within these guidelines. The audit to be done by the Local Fund Audit or the C&AG in discharge of their responsibilities would be in addition to such an audit. The existing arrangement between the Comptroller & Auditor General of India and the State Governments with regard to providing Technical Guidance and Supervision (TGS) over maintenance of accounts and audit of PRIs and ULBs should be institutionalised by making provisions in the State Laws governing local bodies. It should be ensured that the audit and accounting standards and formats for Panchayats are prepared in a way which is simple and comprehensible to the elected representatives of the PRIs. The independence of the Director, Local Fund Audit (DLFA) or any other agency responsible for audit of accounts of local bodies should be institutionalised by making the office independent of the State administration. The head of this body should be appointed by the State Government from a panel vetted by the C&AG.

b.

c.

d.

e.

118

Common Issues

f.

Release of Finance Commission Grants to the local bodies may be made conditional on acceptance of arrangements regarding technical supervision of the C&AG over audit of accounts of local bodies. Audit reports on local bodies should be placed before the State Legislature and these reports should be discussed by a separate committee of the State Legislature on the same lines as the Public Accounts Committee (PAC). Access to relevant information/records to DLFA/designated authority for conducting audit or the C&AG should be ensured by incorporating suitable provisions in the State Laws governing local bodies. Each State may ensure that the local bodies have adequate capacity to match with the standards of accounting and auditing. The system of outcome auditing should be gradually introduced. For this purpose the key indicators of performance in respect of a government scheme will need to be decided and announced in advance. To complement institutional audit arrangements, adoption and monitoring of prudent financial management practices in the local bodies should be institutionalised by the State Governments by legislating an appropriate law on Fiscal Responsibility for local Bodies.

g.

h.

i. j.

k.

3.10 Technology and Local Governance 3.10.1 Information and Communication Technology 3.10.1.1 Information and Communication Technology provides tools which could be utilised by the local governments for simplifying cumbersome processes, reducing contact between the cutting edge functionaries and the citizens, enhancing accountability and transparency and providing single window service delivery for a variety of services. The Commission would discuss such issues in detail in its Report on eGovernance. 3.10.1.2 Recommendation: a. Information and Communication Technology should be utilised by the local governments in process simplification, enhancing transparency and accountability and providing delivery of services through single window. 119

Local Governance

3.10.2 Space Technology 3.10.2.1 Space technology, involving Satellite Communication (SatCom), and Earth Observations (EO), has made tremendous impact in recent years by way of effectively addressing certain key aspects related to rural and urban development. SatCom provides the conduit information exchange/transfer; and EO provides the content/information on terrain features that are of relevance to development. In fact, India is taking lead in putting the finest of space technology, both SatCom and EO conjunctively, into effective use for rural and urban development and addressing issues at the grass roots. 3.10.2.2 Satellite Communication (SatCom) has demonstrated its operational capabilities to provide the services relevant at the village/community level, such as, healthcare, development communication and education. On the other hand, the value-added, high-resolution Earth Observation (EO) images provide community-centric, geo-referenced spatial information useful in management of natural resources - land use/land cover, terrain morphology, surface water and groundwater, soil characteristics, environment and infrastructure, etc. The SatCom and EO segments, together, provide support to disaster management, also at community level. 3.10.2.3 Satellites are providing communication infrastructure for television and radio broadcasting and telecommunication including Very Small Aperture Terminals (VSATs). In fact, the Extended-C band channels of INSAT-3B and EDUSAT are being used for the Training and Developmental Communication Channel (TDCC), a service that has been operational since 1995. Several State Governments are using the TDCC system extensively for distance education, rural development, women and child development, Panchayat Raj and industrial training. In Madhya Pradesh, space technology harnessed under the Jhabua Development Communications Project (JDCP) is an important initiative in this direction. The JDCP network consists of 150 direct reception terminals in 150 villages and 12 interactive terminals in all the block headquarters in Jhabua district in Madhya Pradesh. The areas addressed under the overall umbrella of developmental communication included watershed development, agriculture, animal husbandry, forestry, women and child care, education and Panchayat Raj development. 3.10.2.4 Other areas where space technology is being harnessed to bring about a qualitative change in the rural areas are: i. Tele-education : The EDUSAT is specifically designed for providing audio-visual medium, employing digital interactive classroom and multimedia multi-centric system.

120

Common Issues

ii.

Tele-medicine : Today, the INSAT-based telemedicine network connects 235 hospitals - 195 District/remote/rural hospitals including those in Jammu and Kashmir, North East Region, and Andaman & Nicobar Islands; and 40 super speciality hospitals in major cities as well as a few hospitals of the Indian Air Force. Integrating Services through Village Resource Centre (VRCs): These are single window delivery mechanism for a variety of spaceenabled services and products, such as tele-education - with emphasis on awareness creation, vocational training, skill development for livelihood support and supplementary education; telemedicine - with focus on primary, curative and preventive healthcare; information on natural resources for planning and development at local level; interactive advisories on agriculture, fisheries, land and water resources management. These are implemented by ISRO through partnership with reputed NGOs and Governments. Weather and Climate: Space technology is providing round-the-clock surveillance of weather systems including severe weather conditions around the Indian region. Disaster Management: The Disaster Management Support (DMS) Programme of ISRO/DOS, embarked upon in association with the concerned Central and State agencies, employs both the space based communication and remote sensing capabilities, for strengthening the countrys resolve towards disaster management. ISRO/DOS are also networking the National Emergency Control Room and State Control Rooms through satellite based, secured, Virtual Private Network (VPN), with video-conferencing and information exchange capabilities. This VPN, during the period of natural disasters, facilitates video121

iii.

iv.

v.

Local Governance

conferencing and real-time information exchange among the different key institutions, disaster managers, and administrative offices at the highest level. Space technology is also utilised in flood mapping and damage assessment and drought assessment and monitoring. vi. Natural Resources Management: Satellite remote sensing through synoptic view and repetitive coverage, provides a scientific way of gathering information on natural resources for inventory and monitoring purposes. Several national missions in the key areas of socio-economic development have been carried out in the country under the aegis of the National Natural Resources Management System (NNRMS) with the active involvement of the user agencies. The areas of importance are rural land management, rural infrastructure, conservation of water bodies, groundwater mapping and providing drinking water, wasteland Mapping, participatory Watershed Development, geo-referencing of village maps etc.

3.10.2.5 Most of the utilities/services mentioned above could be utilised for the urban areas also by the local bodies. Remote sensing has provided an important source of data for urban landuse mapping and environmental monitoring. In fact, ISROs CARTOSAT-2 satellite has the capacity to provide panchromatic imagery with one metre spatial resolution. Such imagery could be used by the local bodies in urban infrastructure and transportation system planning, monitoring and implementation; mapping individual settlements and internal roads, urban complexes and urban utilities, etc.31 3.10.2.6 In recent years, there have been tremendous advancements in data collection and their updation through satellite and aerial remote sensing, and organisation of spatial databases using GIS packages and other database management systems. GIS based studies for the Bombay Metropolitan Region; the National Capital Region (NCR); Ahmedabad Urban Development Authority (AUDA); Hyderabad Urban Development Authority (HUDA); Bangalore Metropolitan Region (BMR); towns of Pimpri, Indore, Lucknow, Mysore, Jaipur, and many other cities have been taken up. These projects and programmes have demonstrated the utility of the multi-parameter database in arriving at useful guidelines for planning. Specifically, remote sensing data can be used for urban land use/sprawl/ suitability analysis for preparation of regional plans; preparation of existing and proposed land use; preparation of sustainable urban development plan; zonal planning; optimisation of transport routes; integrated analysis for locating sewage treatment plant sites; macro level urban information system; GIS approach to town planning information system etc. The Union Ministry of Urban Development (MUD) has taken initiative to establish a National Urban Information System (NUIS), with Town and Country Planning Organisation 122
31

Source: http://www.isro.org/pslv-c7/PSLV-C7_Background.pdf

Common Issues

(TCPO) as the nodal agency. The major objectives of NUIS are to: (a) develop attribute as well as spatial information base for various levels of urban planning; (b) use modern data sources: (c) develop standards with regard to databases, methodology, equipment software, data exchange format, etc; (d) develop urban indicies to determine and monitor the health of the towns and cities: (e) build capacity; and (f ) provide decision support system for planning. Some of the main sources of spatial data for base maps and land maps would be from sattllite remote sensing data and aerial photographs, which would be used for integration with conventional maps, as well as statistical data, for development of GIS database. In fact, an Urban Information System (UIS) for Jaipur city and environs covering Jaipur Development Area (JDA) of 2500 sq km has already been done. 3.10.2.7 The Commission is of the view that the local governments should utilise the facilities provided by space technology to prepare an information base and for delivery of services through resource centres. 3.10.2.8 Recommendations: a. b. Space technology should be harnessed by the local bodies to create an information base and for providing services. Local governments should become one point service centres for providing various web based and satellite based services. This would however require capacity building in the local governments.

123