COMMENTS

Page #5 of ARC's recommendations on Local Government has a lot of items that have been accepted by the union government, but not implemented yet at the state level.

e. The Action Taken Report on the recommendations of the SFC must compulsorily be placed in the concerned State Legislature within six months of submission and followed with an annual statement on the devolution made and grants given to individual local bodies and the implementation of other recommendations through an appendix to the State budget documents.(29)

Anything like above done yet in Karnataka?

Read more ...

h. SFCs should carry out a more thorough analysis of the finances of local bodies and make concrete recommendations for improvements in their working. In case of smaller local bodies such recommendations could be broad in nature, but in case of larger local bodies, recommendations should be more specific. With historical data being available with the SFC, and with the improvement in efficiency of data collection, the SFC would be in a position to carry out the required detailed analysis. The special needs of large urban agglomerations particularly the Metropolitan cities should be specially addressed by the SFC.(32)

How has Karnataka state finance Commission addressed special neds of a large Metropolitan area like Bengalurur? Nothing done here yet, right?

• thumb_up 34 Likes
• · login or register to post comments

A lot of above sounds like greek and latin, let me try in easier terms

• Direct tax: Money collected directly from citizens. Central govt collects Income tax, Local government collects property tax
• Indirect tax: Money collected indirectly from us by state or central governments. Like the VAT that you pay when buying anything. Or the entertainment tax you pay to the multiplex or IPL when buying tickets. Or the taxes, cess etc whe you pay for petrol.

How much of the tax you and me pay comes back to our local area, and how exactly does it travel down - that is the key thing to understand.

• Property tax goes directly to BBMP, very clearly (who did you write the check to?). But even there, as mentioned in Ramesh's article, collections need to be 5 times higher than they are.
• Extra money that we pay for Petrol in Bangalore, how exactly does that come back to Bangalore? Likewise for Entertainment tax (which goes to state), or various other cess (ex: education cess in phone bill, goes to Center) that we pay to state or center.
• How much of income tax paid by us comes back to support public works in Bangalore. JNNURM etc are adhoc measures, is there a clear way of sharing funds between central (Delhi), state (Karnataka), and City (Bengaluru)?

All of us need to demand a clear, transparent, and non adhoc way for center, state and local area to share funds (as in direct control of funds) for development work across the three tiers of governments. Without such clarity, changes to functional structure of government (Metropolitan Council, Board, directly elected mayor etc etc) wont do much. Creating new governing bodies would be like building new towns, but far far away from roads, rails or rivers :)

• thumb_up 52 Likes
• · login or register to post comments

Naveen, what you talk above is state vs center angle, and focus is more on collection. How you collect taxes is one thing, and then how you distribute it across the 3 tiers of governance (center, state, local area) is another.

As an example, even if center collects all income tax, do we know things like these on distribution side?

• What pecentage of it is shared with the state,
• and how is the distribution percentage derived?
• And then, how much of its share does state share with the local areas?
• Should state get all the percentage meant for itself and its local areas, and then decide how to distribute that further between local areas,
• or should the allocation be done by the center directly to local areas?

Both Collection as well as Distribution of Taxes needs some thinking to better enable local governments.

• thumb_up 45 Likes
• · login or register to post comments

What exactly is that document Ravi, and on USAID website? Anyway, here is what it says on Karnataka State Finance Commission

Karnataka. The first State Finance Commission of Karnataka took a strong position on functional devolution to the local level. It argued that the spirit of the 74th Amendment required that all functions listed in Schedule 12 be devolved exclusively to the local level:

 

"If the true spirit of 74th Amendment to the Constitution is accepted, all the functions enumerated in the 12th Schedule of the 74th Amendment are expected to be performed by the municipal bodies and no other agency is constitutionally entitled to perform them.… We consider that the state government will have to respect the spirit of the 74th Amendment. Therefore, we recommend that all functions of urban development boards constituted in the state, and all town planning units operating in the state, should be brought under the jurisdiction of the respective municipal bodies. Even the functions of the Bangalore Development Authority and the Town Planning organization have to be transferred to Bangalore City Corporation. They cannot function independently hereafter.… This is the ultimate objective of 74th Amendment and should be respected.

 

Our recommendations [are] intended to remove dual control and multiplicity of agencies which have proliferated over the years and reduced ULBs to insignificance. (p. 37)"

 

The state government ignored this part of the SFC’s recommendations. The second State Finance Commission of Karnataka backed away from sweeping recommendations about devolution of functional responsibilities. It implicitly assumed the continuation of existing institutions, while arguing for greater clarity in demarcation of the roles of different agencies and greater clarity and enforcement of the rules for interaction. However, it did not offer specific guidance as to how this could be accomplished at the operational level.

Now, where is Karnataka SFC based, and who heads the current SFC?

• thumb_up 42 Likes
• · login or register to post comments

@SB: Good start!

Look at this USAID (India) report for some insight. 

Here is the link to the PDF. 

Take your time to read to understand the intricacies involved. Covers, among many other things, how SFCs evolved and performed (generally poor), how devolution of powers and functions to ULBs are undermined by local unwillingness to pay for services, and ULB fiscal powers &  fund transfer criterion.

• thumb_up 45 Likes
• · login or register to post comments