Local taxes, fees contribute 1.1% to Panchayats' total revenue: RBI report

Local taxes and fees contributed only 1.1 per cent to Panchayats’ total revenue, according to a report by the Reserve Bank of India (RBI).

Non-tax revenue, primarily from Panchayati Raj programmes and interest earnings, constituted 3.3 per cent of the total revenue receipts.

States like Tamil Nadu, Himachal Pradesh, Maharashtra, and Telangana reported higher non-tax revenue than others, according to the RBI report on the Finances of Panchayati Raj Institutions.

“The own revenues of the Panchayats --- generated by imposing local taxes, fees, and charges on various activities, including land revenue, professional and trade taxes, and miscellaneous fees --- were only 1.1 per cent of their total revenue during the study period,” the report said.

According to the report, the average revenue per Panchayat, encompassing taxes, non-taxes, and grants, was at 21.2 lakh in 2020-21, 23.2 lakh in 2021-22, and experienced a slight dip to 21.23 lakh in 2022-23.

This decline is attributed to a reduced devolution of grants during that fiscal period.

“Panchayats’ sources of revenue are limited, mainly property taxes, fees, and fines --- around 95 per cent of their revenues take the form of grants from higher levels of government, restricting their spending ability that is already hampered by delays in the constitution of State Finance Commissions,” the report said.

The aggregate revenue receipts exhibit a broad correlation with the populations of the respective states, the report said. The ratio of Panchayats' revenue receipts to the states' revenues ranges from 0.1 per cent in Andhra Pradesh to 2.5 per cent in Uttar Pradesh, suggesting that Panchayat revenues, relative to those of the states, are moderate.

The average revenue per Panchayat ranged from 2.7 lakh in Andhra Pradesh to a substantial 64 lakh in West Bengal.

The average expenditure per Panchayat witnessed a decline from 17.3 lakh in 2020-21 to 12.5 lakh in 2022-23, attributed to elevated spending during the pandemic year.

States like Goa, Karnataka, Odisha, Sikkim, Kerala, and Tamil Nadu recorded the highest average expenditure at the Panchayat level.

Despite fluctuations, the ratio of revenue expenditure of Panchayats to nominal Gross State Domestic Product (GSDP) remained below 0.6 per cent for all states.

The composition of expenditure indicated a consistent rise in spending on water and sanitation, reflecting an increased emphasis on cleanliness and access to clean water supply.

Investment in capital projects accounted for 29.6 per cent of the total expenditure of Panchayats in 2022-23, with a significant share allocated to Panchayati Raj programmes, transportation, water supply and sanitation, rural electrification, and rural housing.

Over 2.5 lakh Panchayati Raj Institutions (PRIs) utilised the eGramSwaraj platform for accounting purposes as of September 2023.

Additionally, more than 2.4 lakh PRIs have seamlessly integrated the eGramSwaraj-PFMS Interface for online transactions, facilitating online payments totaling Rs 25,694 crore during the first half of the financial year 2023-24, the report said.

eGramSwaraj, introduced in 2020, serves as a simplified, work-based accounting application for PRIs.

It addresses diverse aspects of Panchayat operations, including planning, accounting, budgeting, and online payments through the eGramSwaraj-PFMS interface.

The platform facilitates efficient financial management and provides a platform for higher authorities to monitor Panchayat activities effectively. The introduction of the Audit Online application by the Ministry of Panchayati Raj (MoPR) further strengthens financial management and transparency by enabling online audits of Panchayat accounts.