‘More freedom needed for local bodies to implement development projects’

KOCHI, June 10, 2016 | K.A. MARTIN

Local self-government institutions in the State do not generate enough money on their own to implement plans and projects as agents of change in the true spirit of decentralisation of administration, according to an analysis of the finances of five panchayats in Ernakulam district over the last five years.

The study was done at Aarakuzha, Edathala, Ezhikkara, Kalady, and Thiruvaniyoor panchayats. The panchayats form a microcosm of the State, as they represent the poor, middle-income and comparatively rich local bodies, said the study done by city-based Centre for Public Policy Research.

Potential not tapped

Tax and non-tax revenue generated by these local bodies average around 16 per cent of the total revenue, and the proportion of tax revenue to the total revenue comes to around 10 per cent. The study said only 60 to 70 per cent of the potential for generation of funds by local bodies was being tapped. The scope for tapping profession tax is high, but it is not utilised fully.


The local bodies were found so short of their own money that they were forced to use even a part of the funds transferred by the State government for their day-to-day requirements. Areas like contributions from beneficiaries of projects and voluntary donations remain largely untapped.

“Panchayats have not been able to mobilise funds on their own, and they act as “agencies” transferring funds. Strictures from MPs and MLAs, who make funds available, or from State government agencies, curtail the freedom of local bodies to utilise funds,” said Martin Patrick, who led the CPPR study.

He also called for innovation on the part of local bodies and less expediency on the part of political parties when it came to raising revenue for local bodies.

Property tax

The study highlighted the recent instance in which the government decided to raise property tax but retracted its decision, as election approached.

The local bodies that were studied stood to lose between Rs.4 lakh to Rs.14 lakh a year on account of the retraction of property tax hike.

“Discrimination exercised by officials of local bodies while fixing taxes is another cause for revenue loss and a lopsided situation in which the poor ended up paying more tax than the rich,” Mr. Patrick added.

The study also sought more freedom for local bodies to implement development projects and cooperation among local bodies to help in cost-cutting and raise revenue and bring about innovations.

This article was first published in The Hindu LSGs lag in revenue generation: study

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