T R Raghunandan, an expert on decentralisation and a former joint secretary in the Ministry of Panchayati Raj, speaks to Shreehari Paliath in an email interview on the outcomes of the 73rd Amendment to the Constitution, which formalised the decentralisation of governance through panchayat raj institutions (PRI) across the country. Edited excerpts:
States such as Kerala, Karnataka and Tamil Nadu are among the top five for transferring functions, institutions and finances to PRIs. Lately, the details related to the weightage given to 2011 population in the 15th Finance Commission (FC) has received a backlash from the southern states. Do you think their reservations are relevant? What effect can it have on rural and urban local governance and the process of decentralisation?
The backlash certainly has plenty of substance. They are protesting because the 15th FC will take into account their 2011 populations when suggesting formulae for horizontal and vertical transfers [of central funds] to states.
These states say they are being punished for more effective population control ever since the family planning programme was announced in 1971. That is bound to have a bearing on the actual proportion of allocations these states receive from the central government’s revenues divisible pool, both for their own use and to supplement local governments’ finances.
The 14th FC was of the view that the use of dated population data is unfair and concluded that a weight to the 2011 population would capture the demographic changes since 1971, both in terms of migration and age structure.
However, this is not directly relevant to the issue of whether south Indian states are doing better than northern ones in the devolution of powers and responsibilities to local governments. Arguably, even if they were not, the use of 2011 population data will harm them.
While there are variations across states, the economic survey 2017-18 noted that urban local governments in India generated 44 per cent (in 2015-16) of their total revenue from their own resources compared to panchayats which overwhelmingly (about 95 per cent in 2014-15) depend on devolution of funds from the Centre. What are the challenges and solutions for resolving the challenges to cooperative fiscal federalism?
While the urban local governments earn a higher proportion of their revenues on their own as compared to panchayats, both rural and urban local governments are significantly underfunded to perform the tasks that are devolved to them under the law.
This does not mean that there is no scope to raise more revenues at the panchayat and municipality levels. In this regard, it is true that the panchayats have generally failed to utilise the revenue handles that have been given to them by the state governments under the law. While some states, such as the southern states and Maharashtra, have had a generally better track record, and Chattisgarh and West Bengal have been able to undertake effective reforms in this regard, there is tremendous scope for panchayats to increase their own revenues.
Unfortunately, it is quite often the lack of capacity of states that has come in the way of panchayats raising their own revenues. Tax administration needs human resources and funds, but where states have not posted panchayat secretaries, or have one-person panchayat offices, panchayats cannot be blamed for not collecting taxes.
Most of the solutions for strengthening fiscal federalism have been repeated ad nauseum over the past two decades. They comprise of (a) a clear assignment of functions, powers and responsibilities to the local governments through activity mapping, (b) a clear budget window in state budgets assigning funds to the panchayats to match the devolved functions, (c) adequate staffing at the panchayat level, either through the state assigning staff on deputation or enabling the panchayats to recruit their own staff, and (d) the state being willing to provide capacity on tap to panchayats to enable them to perform their functions, instead of running low-quality, discontinuous, and haphazard one-off training programmes that deliver homilies to elected representatives instead of squarely addressing the administrative weaknesses of panchayats.
The biggest challenge is that higher-level politicians and bureaucrats don’t want to devolve powers and responsibilities to local governments, because they fear competition and being outclassed by the latter in the delivery of essential goods and services. They have a vested interest in mystifying governance simply to protect their monopoly.
In a 2015 article, you mention, “Over the last decade, the amount of money that goes to one [panchayat] has increased tenfolds but the staff has remained nearly the same.” There seems to be very little in terms of building the organisational capacity of PRIs and strengthening the skills of functionaries. What sort of investments are needed to improve this?
To put matters bluntly, states do not know the meaning of the word ‘devolution’. It means that exclusive powers and authority are transferred to local governments, along with adequate fiscal allocations, capacities (in terms of people and systems to perform, not in terms of training alone) and accountability systems to ensure that people can hold their local governments accountable.
What we run in India through the panchayats is an extension office of the rural development department in villages. Panchayats are basically run as agencies of the state government, implementing rigid schemes through officers nominally posted at that level who owe allegiance to higher official channels than to the elected representatives.
The elected representatives are scoffed at, ignored, or treated with hostility, particularly if they are outspoken. They are universally condemned as being transactional and corrupt. They are not at the table when crucial policy decisions are taken on how panchayati raj should be reformed. This is hardly devolution.
One of the big weaknesses of Indian administration is that it is under-capacitated in many ways. While many departments are top-heavy and centralise their administration through multiple levels of scrutiny in order to give something to do to redundant higher-levels officers, at the field level they typically suffer from grievous shortages of staff. This shortage pans itself across both local governments and departments that are not decentralised.
In such circumstances, the finance, planning and personnel departments of states need to take a serious look at how much investment needs to be put into the hiring and placement of well-qualified staff, regardless of whether they wish to run a decentralised or centralised system. Sadly, not one state thinks of these matters in the long term. Interim solutions include hiring people on contract, and even running departments through consultants hired through external funding. There cannot be a greater abdication of responsibility by states.
New Zealand has a remuneration authority for setting remuneration for elected members of local authorities. Would a similar body in India help uniformly establish honorarium/salary and benefits from panchayats to state legislatures and members of parliament? What has been the effect of the non-uniformity in salaries at different governance levels?
New Zealand is a unitary country. India is a federal country with huge variations in culture, democratic practice, habitation patterns, climatic conditions, service-delivery requirements and cost of service delivery. In such circumstances, having a single remuneration authority will not make sense.
Having said that, there is indeed a need to establish a set of norms for how much legislators and other elected representatives ought to be compensated. Politics is no longer to be wholly regarded as selfless public service. There is an opportunity cost to be considered if politics is to attract quality professionals. Otherwise, even the best are likely to become corrupt, first, in order to catch up on the lucrative incomes that they may have foregone to join politics, and then, to rake in the moolah while the good times last.
I have been involved in research studies of panchayat members, which show that while they are under pressure from their voters to perform, they do not have the staff to competently deliver services. In such circumstances, panchayat members themselves take on quasi-executive duties and incur expenditure to undertake legitimate governance activities. As the sitting fees paid to them are not adequate to cover such expenses, even the best of them are drawn to indulge in need-based corruption, by which they skim off just enough money from government contracts and procurements to compensate for the expenditure they incur.
Such practices also open them to blackmail by corrupt officials who are often on the lookout for chinks in the armour of honest elected representatives. Having state-wise remuneration authorities would be a good way to bring these issues out in the open and take pragmatic decisions based on the fundamental principle that everybody involved in governance, whether as elected representative or staff, ought to be compensated adequately. Only then will we be able to take a hard line on curbing corruption.
We’ll have panchayats in future because they represent our identities, not because they can deliver water or education or sanitation services better. That may be an additional benefit, but it might not be the glue that holds us together in our local governments.