NEWS Recently the 15th Finance commission has given its recommendation to the government. In that, there are measures to empower local government financially. However it is felt by many that goal of fiscally empowering local governments to deliver territorial equity is still far away. 

FINANCE COMMISSION MANDATES 

• The primary task of the Union Finance Commission is to rectify the vertical and horizontal imbalances in resources and expenditure responsibilities between Union and States, which after the 73rd and 74th Constitutional Amendments also includes the third tier of local governments. 
• The present finance commission is fifth after the 73rd and 74th amendment act (incorporation of Part IX and Part IX­A to the Constitution).
• Unlike the previous Commissions, the present Commission was in the background of the COVID­19 pandemic which reinforced the significance of local governments, gram sabha and other participatory institutions in containing the crisis and delivering social protection in India.

POSITIVE ASPECTS OF THE RECOMMENDATIONS 

• Vertical devolution recommended to local governments is raised remarkably high. From a measly share of 0.78% of the divisible pool with an absolute sum of ₹10,000 crore by the Eleventh Commission, the Fifteenth Finance Commission raised it to 4.23% with a reasonably estimated amount of ₹4,36,361 crore. Compared with the Fourteenth Finance Commission there is a 52% increase in the vertical share
• All the Commissions since the Eleventh Commission have tied specific items of expenditure to local grants and the Fifteenth Finance Commission has raised this share to 60% and linked them to drinking water, rainwater harvesting, sanitation and other national priorities in the spirit of cooperative federalism.

LACUNAE IN RECOMMENDATIONS

• The present commission have reduced the performance ­based grant to just ₹8,000

crore and that too for building new cities, leaving out the Panchayati Raj Institutions (PRIs) altogether which were thoughtfully introduced by Thirteenth Finance Commission earmarked 35% of local grants specifying six conditions for panchayats and nine for urban local governments and covered a wide range of reforms

• Many conditionalities have been introduced in the Fifteenth Finance commission while giving performance grants like improvement in own source revenue by Panchayati Raj, publication of service level benchmarks for basic services by municipalities. There are also entry ­level criteria to avail the union local grant like for example Panchayats the condition is online submission of annual accounts for the previous year and audited accounts. 
• For urban local governments, two more conditions are specified i.e.  fixation of minimum floor for property tax rates by the relevant State followed by consistent improvement in the collection of property taxes in tandem with the State’s own Gross State Domestic Product. These conditionalities are timely however there are apprehensions of bringing substantive changes on the ground because of quality of data not published and quality of data produced.
• The transformative potential in designing performance linked conditionalities for improving the quality of decentralised governance in the context of indifferent states has been missed.
• The Fifteenth Finance Commission has failed to carry policy choices forward systematically. Articles 243G, 243W and 243ZD read along with the functional decentralisation of basic services like drinking water, public health care, etc., mandated in the Eleventh and Twelfth schedules demand better public services and delivery of ‘economic development and social justice’ at the local level. 
• While the grants to the primary health centres must be acknowledged as a great gesture, a good opportunity to ensure comparable minimum public services to every citizen irrespective of her choice of residential location has not been taken forward in an integrated manner.

WAY FORWARD There is a need to stick to Alma­ Ata declaration of the World Health Organization (1978) which focuses on local government approach with focus on water, sanitation and shelter. 

In the Finance commission stated objective of balancing the union and the states there is a need to include local government too. It is equally important to note that in the criteria used by the Fifteenth Finance Commission for determining the distribution of grants to States for local governments, there is need to include not only continuity, equity and efficiency.  

In sum, if decentralisation is meant to empower local people, the primary task is to fiscally empower local governments to deliver territorial equity.

Reference:

1. https://www.thehindu.com/opinion/lead/still-no-recognition-of-the-third-tier/article34209337.ece