Kochi: Gram panchayats are performing better when compared to their performance three decades earlier but they are still not meeting expected standards in generating own funds with which they can plan their own special projects, says a study by Kochi think tank Centre for public policy research (CPPR).
The five panchayats, Arakuzha, Edathala, Ezhikkara, Kalady, and Thiruvaniyoor in Ernakulam district which were selected were the same that was selected by the Fourth State Finance Commission as they represented high-land, mid-land and low-land. The district was chosen based on its moderate value in the deprivation index (16.8).
“The panchayats were using the grants from various agencies and hence their projects were based on the grants. There was a need for dramatic improvement in generating own income with which they can plan projects of their own interest. Steps need to be taken to generate own assets by collecting more non-tax revenue, particularly collecting potential building and professional tax,” said chief economist Dr Martin Patrick who did the study.
Generating own revenue consists of tax and non-tax revenues. There are three types of tax revenue—own taxes, assigned taxes and shared taxes. Own taxes are assigned to local bodies and are levied by them. Property tax is an important item of local finance and a tool for empowering local governments. House tax, professional tax, vehicle tax, agricultural land tax, entertainment tax, pilgrim tax and tax on animals are the other important sources of tax revenue. Non-tax revenues include income from properties, fees and receipts, he said.
The highest increase increase is in Thiruvaniyoor panchayat, followed by Arakuzha. The lowest is reported in Ezhikkara panchayat with 0.93 per cent increase for the five year period considered. The average of own fund (tax revenue, non-tax revenue and general purpose fund) for all panchayats for the period considered was calculated Rs 122.45 lakhs. This comes to the extent of 26 per cent of total revenue of the sample panchayats. The proportion of own fund to total revenue for various years is ranging from 24 per cent to 29 per cent approximately. The highest proportion is noticed for Kalady with 32.54 per cent, followed by Edathala with 27.74 per cent. The lowest proportion of own fund is in Ezhikkara with 16.82 per cent.
Property and building tax is the main component of tax revenue for the five panchayats. Its proportion in the tax revenue has increased from 46 per cent in 2010-11 to almost 59 per cent in 2014-15 for Kalady, whereas it is 68 to 73 per cent for the period mentioned for Ezhikkara GP. Arakuzha presents a similar picture with 60 to 65 per cent for the respective period mentioned. The average proportion of property tax to tax revenue was 51.11 per cent in 2010-11 and this increased to 58.12 per cent in 2014-15.
Dr Patrick said that point worth noting is that the average budget realization for all GPs in respect of professional tax was 79.82 per cent in 2010-11, which further decreased to 73.41 per cent in 2013-14. Edathala and Kalady have more potential to collect professional tax as there are industrial establishments but inadequate collection efforts are being made by the officials.