Amid simmering debates on over-centralisation of power defining India’s response to the coronavirus pandemic, Kerala’s efforts have emerged as a model for emulation, partly for its reliance on resilient local governments and robust community participation.
This has reaffirmed the need for empowering the third tier, which has been pivotal in determining the effectiveness of India’s response to the coronavirus pandemic.
In a way, the Covid-19 outbreak has revived an issue which was never really dead – that local governments in India need constitutional, legislative and fiscal reforms.
Are there any stumbling blocks?
The 73rd and 74th Amendments (1992) to the Indian Constitution, while laudable in their attempt to create an institutional framework for local governance, let certain crucial aspects fall through the cracks. These amendments inserted Parts IX and IXA in the Constitution, which mandated the creation of panchayats and municipalities in every state, but left the the extent of devolution of functions and empowerment of these bodies to the discretion of the states.
Articles 243G (for panchayats) and 243W (for municipalities) nudge states to delegate their responsibilities with respect to matters listed in the Eleventh and Twelfth Schedules to panchayats and municipalities, respectively.
Most state-specific Panchayati Raj and municipalities’ laws do not clearly demarcate the functions, leading to an overlap in the domains of the state and local governments. For instance, the Uttar Pradesh Panchayati Raj Act, 1947 devolves an array of functions to gram panchayats, across matters ranging from agriculture to rural electrification. The matters listed under the Act are, by and large, a replication of entries under the Eleventh Schedule, without a clear delineation of the functions of gram panchayats. Such laws do not reflect the spirit of the Constitution, resulting in a third tier that is disempowered and depoliticised institutionally.
The scheme of fiscal devolution augments the disempowerment of the third tier. The power to determine the revenue-base for local bodies lies with states, which specify the taxes local bodies can levy and collect. As the revenues generated by local bodies fall short in meeting their expenditures, they rely heavily on devolution of funds from the central and state governments in the form of grants and transfers, rendering them unable to embark upon developmental activities of their own accord. Consequently, the third tier remains largely confined to performing traditional civic functions.
Where do we start?
While reform of local government encompasses extensive state-specific measures with respect to capacity building, the starting point for meaningful reform must necessarily involve a reassessment of the constitutional design. The Indian Constitution must be appropriately amended to ensure that state governments mandatorily devolve certain functions to local governments.
Simultaneously, local government being a state subject, it is imperative that state legislatures amend their respective laws for effective functional devolution, clearly delineating functions between the state and local governments.
The Kerala Panchayat Raj Act, 1994 can lead by example. It categorically confers gram panchayats with exclusive power to administer certain matters including, notably, running of dispensaries and primary health centres within their areas. Likewise, the Kerala Municipalities Act, 1994 creates representative ward committees, with detailed provisions for their functioning and facilitating community participation.
To complement functional devolution, local governments must have more avenues for revenue generation. Professional tax must become the prerogative of local governments with only local bodies being allowed to levy and collect it. Currently, in certain states (Kerala, Tamil Nadu), the proceeds of professional tax go to local bodies, whereas in others (West Bengal, Andhra Pradesh), the proceeds are channelled to the state governments.
Due regard must also be given to the recommendations of the Fifteenth Finance Commission for the year 2020-21. The report recommended, among other things, a total of Rs 90,000 crore in grants for local bodies in 28 states. Further, the Commission identified 50 per cent of the grants to both rural and urban local bodies as untied (with the remaining 50 per cent tied as grants for drinking water, sanitation, water supply). While most of these have been accepted by the Ministry of Finance, the implementation of the recommendations of the 15th Finance Commission should be tied to states taking due efforts at their end for empowering the third tier.
How do we start?
The constitutional design needs to be tweaked to make devolution of functions to panchayats and municipalities mandatory. To that end, Articles 243G and 243W must be amended to provide that state legislatures shall, by law, mandatorily vest panchayats and municipalities with such powers and authority as necessary to enable them to function as institutions of local self-government, including in respect to matters listed in the Eleventh and Twelfth Schedules, respectively. This will not be the first time such a recommendation is being mulled – the 2nd Administrative Reforms Commission (Sixth Report, October 2007) and the National Commission to Review the Working of the Constitution (2002) recommended similar amendments.
Article 276, which authorises the state government or a local authority to levy a tax on professions, trades, callings and employments, should also be amended. The amendment must provide that proceeds of professional tax go directly to local bodies (panchayats and municipalities) so as to widen their revenue base. Correspondingly, state-specific Acts should be amended to allow only local bodies to levy and collect professional tax, within the ceilings set by Parliament.
Quite naturally, empowerment of the third tier would remain ineffective unless states do what is required. To ensure adequacy of reforms at the states’ end, the release of central grants to states (as per the recommendations of the 15th Finance Commission) for local bodies must be tied to – first, states amending their laws to ensure effective devolution of functions and facilitating community participation at the local level; and second, apportioning untied funds to rural and urban local bodies to enable them to carry out wide-ranging developmental functions.
Towards a Post-Covid India is a briefing book with 25 legal reforms recommended by the Vidhi Centre for Legal Policy. Join a series of conversations — ‘Law with a Difference’ — on the book. ThePrint is the digital partner. Read all the articles here.
Vidhi's briefing book proposes strengthening the third tier by a constitutional amendment for greater functional devolution to local self-governments. Join panel discussion on July 27, 5:30 PM -part of the #LawWithADifference series with @ThePrintIndia as digital partner. THREAD. pic.twitter.com/wKdBICNkSd
— Vidhi Centre For Legal Policy (@Vidhi_India) July 25, 2020
Ritwika Sharma is Senior Resident Fellow and Team Lead, Charkha, Vidhi Centre for Legal Policy, Delhi. Sneha Visakha is Research Fellow, Vidhi Centre for Legal Policy, Karnataka. Views are personal.
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