Centre State Local Relations

Centre State Local Relations

Devolution of Powers and Finances up to Local Levels and Challenges therein

Financial Autonomy of ULBs/ RLBs

                The lower levels of government suffer from lack of devolution of funds and of self-generating revenue. Municipal bodies in urban areas face multiple challenges that necessitate capital: water supply, sanitation, power supply, solid waste management.

Why a problem of Finance?

1. Lack of devolution of funds: Devolution of adequate funds is the prerogative of the state government and is included among the voluntary provisions to be implemented by states in setting up local government institutions
2. Lack of taxation powers: Most states have not provided avenues for municipalities to acquire revenue on their own through levying taxes and they continue to be dependent on state governments for grants
   1. Economic Survey: 4% of revenue of panchayats are raised from direct tax avenues
3. Corruption and Mismanagement: Most municipalities are crippled by corruption and financial mismanagement that hinders productive spending on infrastructure and resources
4. Taxation Powers not used: The Economic Survey points to a ‘low equilibrium trap’ wherein local bodies have been reluctant to use taxation powers vested in them to maintain the low level of accountability on local body institution.
   1. Inadequate delivery of serviceà Low Direct TaxesàWeak accountabilityàInadequate delivery
5. Tied Funds—> No Functional Autonomy

Way Forward

1. Ensure Financial Accountability: Municipalities expenditure needs to be placed under professional scrutiny and debt management should be made a priority to plug leaking funds
2. Sustainable Revenue Sources: Collection from property tax, sustained regular income from provision of services like water supply would usher in self-reliance when it comes to finances. GIS mapping and installation of ultra sound water meters can help in achieving both of these targets
3. Municipal Bonds: They can be vital instruments to attract corporates and entrepreneurs to invest in urban planning and infrastructure development. It also reduces the burden on state governments and relieves ULBs of their financial dependence on state governments

Local Self-Governments

            Local self-governments were provided with constitutional status through the 73^rd and 74^th amendment with the objective of deepening democratic decentralization in the country. LSGs transform citizens being passive participants in election process to active decision makers at ground level thus heralding participative democracy.

Why LSG?

Citizen participation: LSGs enable citizens to be direct participants in decision making at the grass-root level. This inculcates political consciousness within citizens making them an active part of democracy

Eg: The institution of Gram Sabha that is inclusive of all voters in a village is an embodiment of direct democracy where voices are directly heard and heeded to

Decentralization: LSGs are the lowest rung in the governance ladder that enables decentralized demand-driven service delivery to citizens. The citizens at the grass-root level are more aware of the needs of the society as compared to higher ladder governance institutions 

Eg: A village panchayat that needs healthcare service delivery will channelize its funds and functionaries in accordance with that priority in mind.

Women Empowerment: By reservation of one-third of LSG seats, women are politically empowered being active decision-makers at the grass-root level. This can drive them towards better social status and economic empowerment. Similarly, SCs, STs and other backward classes are emancipated due to reservation of seats in panchayats

Functions of a LSG

Planning and Implementation: The LSGs are vested with the authority for planning and implementation for socio-economic development and welfare of its population. The state government and LSGs cooperate to achieve the laid out objectives.

Beneficiary Identification: The LSGs are identifiers of deserving beneficiaries for state entitlements and assistance. They are better aware of grass root level demography and hence better placed to make decisions with regard to beneficiary identification

Eg: LSGs decide the beneficiaries of MGNREGA

Service Delivery: LSGs are responsible for service delivery of basic amenities to households- drinking water, electricity etc. In some states like Chhattisgarh, they are even managing the PDS to ensure fair and equal access to all beneficiaries.

Safeguards for Tribal Population: The LSG institutions in Schedule V and VI areas are responsible for expending natural resources – minerals, land, forests, minor water bodies. The Gram Sabha has to be consulted in matters of land acquisition, rehabilitation of displaced population and mineral mining.

Eg: Dongria Kond tribe of Niyamagiri hills rejected Vedanta’s request for Bauxite mining

Infrastructure: LSGs play a pivotal role in infrastructural development in coordination with the state government on matters of road connectivity, telecom and electrification.

Issues at the Local Body Level

• Lack of 3Fs: The state governments have not devolved enough funds, functions and functionaries hindering democratic decentralization to the third tier of the government. Many states have not included voluntary provisions of the amendment that included devolution of resources and functions.
• Lack of Financial Autonomy:
  • Limited Taxation Powersà No self-reliance
  • Limited use of existing taxation powersà Low revenue generation
  • Low devolution of funds from state and centre-à Infrastructural backwardness
  • Tied Fundsà Affects functional autonomy and priority based works of PRIs

The Economic Survey of 2017-18 states that the direct tax collection of panchayats is at a meagre 4% of its revenue base illustrative of the heavy dependence on state and central devolution

• Recentralization: The decentralization of governance has been partly negated by para-statal authorities and recentralization schemes that abridge the authority and status devolved to lower levels of government
  • MPLADS and GCDA
• Patriarchal Challenge: The provision for reservation of seats for women have been greatly compromised by the ‘Sarpanch pati’ system that puts husbands as active decision-makers in place of their passive spouse representative.
• Casteism: Panchayats have been formed along the lines of caste that have perpetuated caste divisions in villages and has assumed quasi-judicial functions that impose harsh punishments on lower caste sections on the basis of customary laws and practices.
  • Khap Panchayats in parts of U.P and Bihar
• Corruption or Maladministration: Panchayats as political institutions have not been free of corruption and other antithetical activities that hinder development, progress and welfare for all
• Bureaucratic Culture: The introduction of the 3^rd tier of governance has changed the role of a district collectorà The bureaucracy in practice is yet to be fully adapted to the change
• Ignorance of peri-Urban Areas: Regions at the periphery of cities that are transition zones for rural-urban areas suffer from lack of administrationà water and sanitation problems as per the 2^nd ARC report
• Lack of Human Resource Development: The panchayats suffer from the presence of a lack of adequate knowledge and expertise for governance at the local level.

Way Forward

• Greater Devolution of 3Fs: Panchayats and ULBs need to be adequately equipped with funds, functions and functionaries from state governments. Performance grants can be provided as per the 14^th finance commission’s recommendations to incentivize planning and implementation of socio-economic developmental projects
• Financial Autonomy:
  • Provide LSGs with more taxation powers
  • Devolve adequate finances to local bodies
  • Flexibility of Funds: The ARC recommends untied resources to be devolved so that sufficient fiscal space exists for the local governments to spend on priorities of the panchayat
  • ULBs can mobilize private capital through various debt instruments like Green and Blue bonds
• Functional Autonomy: The Principle of Subsidiarity as recommended by the ARC shall be followed with regard to matters of devolution of powers and functions. All functions that can be performed at the lowest level need to be vested with the local bodies.
• Avoiding Recentralization: ARCs recommend that recentralization schemes and para-statal authorities can be limited and their jurisdictions reversed so that they do not absolve the authority given to grass root level political institutions
• Monitoring to tackle Socio-cultural challenges: Caste and patriarchal challenges have to be overcome through better monitoring at grass root levels to ensure that they function as institutions of democratic governance alone and not on tradition or socio-cultural lines
• Anti-corruption body: ARC has recommended that a local body ombudsman can be constituted to limit malafide transgressions of panchayat members. Lokayutas can be made mandatory to supervise the prosecution of corruption related cases.
• Reforming Bureaucratic Culture: The rigidity of the bureaucratic system can only be overcome when proper awareness of the system is created among civil servants. They need to adapt to the 3^rd tier of governance and ensure coordination and cooperation to effectuate grass-root level development and welfare
• Education as Qualification: Bringing in education as qualification for panchayat membership can enhance the quality of human resource.
  • Recently, the Haryana assembly passed a legislation bringing in educational qualifications for candidates

Requirement of Education

            Few states like Haryana had instituted a law whereby individuals contesting elections to panchayat samite, zila parishad or for sarpanch were mandated educational qualifications

Issue at Hand

• Antithetical to Spirit of Constitution: The requirement of education is an impediment to a full realisation of grass-root democracy and people participation that is the hallmark of the 73^rd and 74^th amendment of the constitution
• Political Inequality: Even referenced in the preamble, political equality is an ideal that is at odds with prescribing education as a qualification for electoral posts calling into question the practice of Right to Equality guaranteed under Article 14 of the Indian Constitution
• Doubtful Correlation: There are several examples of uneducated individuals as good administrators and vice versa. Thus, the correlation between education and governance is not clearly visible

Why is it Required?

• Better Governance: Supreme Court has opined that education is indispensable for an office holder in determining what is right, wrong, good or bad. Thus, education can help in decision making at grass root level governance on planning and implementation of developmental projects
• Empowered Officials: Supreme Court also opined that educated and literate individuals are less susceptible to manipulation and misinformation giving the state an empowered workforce

Issues Pertaining to Federal Structure

The Curious Case of Delhi: Institution of the Governor

69^th Amendment of the Constitution

An elected Government + Legislature: It gave the UT of Delhi its own democratically elected government and legislature. Sub-section 4 of Article 239AA mandates that the council of ministers shall aid and advise the LG (Lieutenant Governor) in the exercise of his functions except in matters of his discretion

Power Sharing: As per Article 239AA, the elected legislature can legislate on all matters in the State and Concurrent list except public order, police, services and land. These three items are reserved for the centre through the institution of Lieutenant Governor.

The SC in the recent Government of NCT of Delhi vs Union of India case stated that the LG is bound by the aid and advice of the council of ministers in all other matters. He cannot act as an independent administrator in all matters except those reserved.

Conflict Resolution: A proviso to Article 239AA subsection 4 mandates that in case of a difference of opinion between the LG and Council of Ministers, the former shall refer the matter to the president. It stated that any matter cannot be every matter that is put for the president. Only matters involving extraordinary importance may be done so.

Provision for Dismissal of Elected Government: Article 239AB provides President with the opportunity to dismiss the council of ministers in case governance is not carried on in accordance with provisions under Article239AA

Issues of 239AA

No authority for Elected Government: The sweeping powers provided to the LG under Article 239AA is averse to the federal nature of administration curtailing authority provided to the elected representatives. It opens the door for arbitrary use of the vested power and conflicts between the Union government and the elected government of Delhi.

No control over Bureaucracy: The elected government in Delhi cannot even control the postings, promotion and transfer of bureaucrats of the Delhi government. This symbolises the lack of coordination in the governance machinery

Lack of Accountability: The exceptions of public order, police and land create dual power centres in the Delhi Polity hindering accountability of the elected government of the UT. It hinders the meaningful realisation of the mandate of the people

Poor Dispute Resolution Mechanism: Any dispute between the LG and the Delhi Government is resolved with the president as the mediator. This provision is biased in favour of the Union government as the President acts on the aid and advice of the council of ministers.

Court Verdicts

The 2016 Delhi High Court verdict granted autonomy to the LG opining he is not bound by the aid and advice of council of ministers and is free to take a unilateral decision regarding matters in the National Capital

The Supreme Court in November 2017 has observed that the Article gives primacy to the LG. However, the LG cannot cause inordinate delay to schemes and proposals put forward by the council of ministers. Any conflict in opinion shall be referred to the president and resolved immediately.

The court once again in the Government of NCT vs Union of India case stated that the LG is bound by the aid and advice of the elected state government in all matters except the reserved ones. This can enable the elected UT government to take back services and management of the bureaucracy which were earlier subsumed by the LG.

Way Forward

Limit Authority of LG: The subjects under the control of assembly and council of ministers shall be left exclusively to them with LG not attaining his discretionary power regarding these subjects. LG may exercise his discretionary power only in those subjects reserved for him under Article 239AA.

Harmonious administration: The court reaffirms the need for harmony and mutual respect in the functioning of the UT government and the LG to uphold constitutional values. The offices need to be used productively to realise the will of the people and bring welfare leaving aside political ambitions.

More Autonomy to Delhi Government: A democratically elected government needs to be vested with more freedom and autonomy to realise the mandate the people has given them.

Reform Dispute Resolution Process: The current dispute resolution process whereby matter is referred to by the president lacks credibility and invariably favours the centre. The dispute resolution process needs to be institutionalized as done in several capitals around the world            

Conclusion

                The offices of LG and state government must uphold constitutionalism and embrace the collaborative federal structure that is laid down in the finding document. The large metropolis that Delhi has evolved into needs its own elected government with clear authority and jurisdiction to function.