Context:

• The novel coronavirus pandemic has brought home the critical role of local governments and decentralised responses.

 

Core issues

• COVID-19 has raised home four major challenges:
• Economic
• Health
• Welfare/livelihood and
• Resource mobilisation
• These challenges have to be jointly addressed by all tiers of government in the federal polity while several lacunae that continue to trouble local governance have to be simultaneously addressed.

 

Lacunae in local governance:

 

• Ambiguous functional mapping

 

• • There is yet no clarity in the assignment of functions, functionaries and financial responsibilities to local governments. Functional mapping and responsibilities continue to be ambiguous in many States.

 

•  Lack of recognition

 

• • The critical role of local governments will have to be recognised by all.

 

Suggestions for resource mobilisation for local bodies

 

• Local finance

 

               Rationalise property tax regime

Key facts The Economic Survey 2017-18 points out that urban local governments, or ULGs, generate about 44% of their revenue from their own sources as against only 5% by rural local governments, or RLGs. There is a big gap between tax potential and actual collection, resulting in underperformance. A recent study shows that the share of property tax in GDP has been declining since 2002-03. The share of property tax in India in 2017-18 is only 0.14% of GDP as against 2.1% in the Organisation for Economic Co-operation and Development (OECD) countries.

 

• • As Property tax forms the major source of local revenue, all States should take steps to enhance and rationalise the property tax regime. 
  • Property tax collection with appropriate exemptions should be a compulsory levy and preferably must cover land. 
  • If property tax covers land, that will hugely enhance the yield from this source even without any increase in rates.

 

          Land monetisation:

• • Land monetisation for revenue generation purpose and betterment levy may be tried in the context of COVID-19 in India.
  • Betterment levies are a form of tax or a fee levied on land that has gained in value because of public infrastructure investments.

 

 

 

        Corona containment bond

• • Corona containment bonds for a period of say 10 years can be issued by municipalities and even suburban panchayats, on a coupon rate below market rate but significantly above the reverse repo rate to attract banks.

 

 

     Members of Parliament Local Area Development Scheme, or MPLADs

 

• • The suspension of MPLADS by the Union government for two years for which the annual budget was around Rs 4,000 crore is a welcome measure. 
  • MPLADs, which was earmarked for local area development, must be assigned to local governments, preferably to panchayats on the basis of well-defined criteria.

 

About the MPLAD scheme The Members of Parliament Local Area Development Scheme (MPLADS) is a programme first launched 1993, aimed towards providing funds for developmental works recommended by individual MPs. The objective of the scheme is to enable MPs to recommend works of developmental nature with emphasis on the creation of durable community assets based on the locally felt needs to be taken up in their Constituencies. Under the MPLADS scheme, each MP has the choice of suggesting to the District Collector works to the tune of Rs 5 crore per annum to be taken up in his or her constituency. The Ministry of Statistics and Programme Implementation has been responsible for the policy formulation, release of funds and prescribing monitoring mechanism for implementation of the Scheme. Jurisdiction Lok Sabha Members can recommend works within their Constituencies and Elected Members of Rajya Sabha can recommend works within the State of Election (with select exceptions). Nominated Members of both the Rajya Sabha and Lok Sabha can recommend works anywhere in the country. Under MPLADS, the role of the MPs is limited only upto recommendation of works. Thereafter, it is the responsibility of the District Authority to sanction, execute and complete the works recommended by Members of Parliament within the stipulated time. The guidelines recommend MPs to suggest works costing at least 15 per cent of their MPLADS entitlement for the year for areas inhabited by Scheduled Caste population and 7.5 per cent for areas inhabited by ST population. In case there is insufficient tribal population in the area of Lok Sabha Member, they may recommend this amount for the creation of community assets in tribal areas outside of their constituency but within their State of election. What kind of projects are executed? The guidelines lay down a number of development works, including construction of railway halt stations, providing financial assistance to recognised educational bodies, cooperative societies, bar associations, installing CCTV cameras, and rainwater harvesting systems, The MPLADS funds can be merged with other schemes such as MGNREGA and Khelo India.

 

 

    Fifteenth finance commission

 

• • A special COVID-19 containment grant to the Local Governments by the Fifteenth Finance Commission to be distributed on the basis of State Finance Commission laid criteria is the need of the hour.
  • Further the 13th Finance Commission’s recommendation to tie local grants to the union divisible pool of taxes to ensure a predictable source of revenue to Local Governments (accepted by the then Union government) must be restored by the commission.

 

Key Facts The local government grant of ₹90,000 crore for 2020-2021 by the Fifteenth Finance Commission is only 3% higher than that recommended by the Fourteenth Finance Commission. For panchayats there is only an increase of ₹63 crore.

 

Way forward:

• The new pandemic is a public health challenge of an unprecedented nature along with livelihood and welfare challenges.

• In terms of information, monitoring and immediate action, local governments are at an advantage, and eminent to meet any disaster such as COVID-19.
• COVID-19 has woken us up to the reality that local governments must be equipped and empowered for which relevant action is the critical need.

 

Reference:

1. https://www.thehindu.com/opinion/op-ed/the-critical-role-of-decentralised-responses/article31782116.ece