By Sumarbin Umdor
A meeting of 10 Autonomous District Councils (ADCs) called the Forum of Councils Under the Sixth Schedule (FOCUSS) is slated to be held on the 16th of this month to discuss the reduction in the central assistance to the councils by 50 percent in 2017-18 from Rs. 1000 croreearmarked in 2016-17. While is understandable that the central issue of the meeting will be the slashing of central assistance to the councils, it would be a good idea if the forum alsodeliberates on other fiscal issues facing the councils.
Although ADCs enjoy a wide range of legislative, judicial, executive and financial powers, functioning of the councils have been handicapped by the limited financial resources available to them and total financial dependent on higher governments, which according to the Expert Committee on Planning for Sixth Schedule areas have prevented these councils from emerging as vibrant institution for local development. In the following paragraphs we examine thesources of revenues of the councils, the utilization of fundsas well as other fiscal issues facing these local bodies.
There are three sources of revenues for ADCs in Meghalaya, namely self-generated revenue, shared revenue and grants. Self-generated revenues are tax and non-tax revenues of the councils which are collected and appropriated by them, while shared revenues are levied and collected by the state government and a percentage of which is shared with the councils. Grants from union and state governments constitute the third component of income of the councils.For the three ADCs in Meghalaya the main source of self-generated revenue are professional tax, royalty from forest, fees from trading licences, rent and levy from markets and receipts from toll gates. Motor vehicle tax and mineral royalties are the two components of shared revenue.
For the period 1993-94 to 2011-12 the average percentage share of the three sources of revenues for Khasi Hills Autonomous District Council (KHADC) shows almost proportionate contribution of shared revenue and grants (at about 35 percent each), followed by self-generated revenue (29 percent). In case of Garo Hills Autonomous District Council (GHADC) the percentage share of shared revenue is highest (42 percent) followed by grants and then its own revenue (32 percent and 26 percent respectively). The position is however very different in the case of Jaintia Hills Autonomous District Council (JHADC) where we find percentage share of shared revenue substantially higher (77 percent) than the other two sources of revenue primarily because the area under JHADC is rich in minerals (particularly coal) and hence the council receives higher proportion of mineral royalties from the state government.
When it comes to the expenditure of the councils, the bulk of it constitutes spending on current expenditure which includes salaries, pensions, allowances, and general administration. For example, in 2012-13 nearly 75 percent of the total revenue receipts of KHADC was for meeting current expenditure, with expenditure towards development projects being financed mostly from grants received from higher government.
The major sources of self-generating revenue for the three ADCs in Mizoram ( Lai, Mara and Chakma) are professional tax, land revenue, receipts under public works and royalty and sale of timber and forest products. Grants from the state government consist of non-plan grants for meeting salaries, pensions, travelling, and other expenses relating to general secretariat and education department. Another component of financial assistance is plan grants for implementation of minor development works by the councils. The three ADCs are totally dependent on grants from state government which contributes as much as 98 per cent of total revenue receipts with a very paltry amount being mobilised from own revenue sources. As with ADCs in Meghalaya, bulk of the grants to the councils are utilised for meeting expenses relating to salaries, pensions and allowance and general administration, leaving the councils with limited resources for undertaking developmental activities.
In Tripura the Tripura Tribal Areas Autonomous District Council receives funds from the state government in the form of plan funds for meeting council’s expenditure relating to pay and allowance, transport, contingencies and also for implementation of development schemes by the council as block grant. The other sources of revenue receipts is in the form of share of taxes and other revenue receipts collected by the state government and shared with the council on agreed percentage as non-plan grants. The council also receives transferred fund from state government departments for payment of salary of deputed officials and support for implementation of development activities. Another source of funds for the council is central grants in the form of awards from the Finance Commission and other grants which are for specific projects.
During 2003-04 to 2012-13 contribution of plan funds and transferred funds was about 32 percent each, followed by contribution from other receipts (central grants) at 22 percent. Share of taxes contributed an average of around 13 percent of the revenue receipts of the council. Contribution of transferred fund though substantially high is mostly for salary expenditure of the deputed officials of the state government. Also, a substantial percentage of plan funds and non-plan grants go towards meeting salary expenditure of councils’ staff. In 2012-13, salary expenditure of the council constituted 89 percent of the amount received by them under plan funds and share of taxes.
Bodoland Territorial Council was constituted in 2005 and is one of the three ADCs in Assam.The Sixth Schedule has devolved more subjects to the BTC than to any others council. The two main sources of self-generating revenue are land revenue and collection from forestry and wildlife. The council receives its share of central assistance of plan and non-plan grants for schemes and programmes that have been devolved to it, as well as grants from the state government. Despite having more avenues of raising revenue, the contribution of the BTC from its own revenue to total revenue receipts has been below 10 percent during 2010-11 to 2014-15. Thus major portion of council’s funds is in the form of grants received from union and state governments with central grants contributing between 90 to 97 percent of the total revenue receipts of the council.
Therefore, ADCs throughout the four states continue to be heavily dependent on financial support from higher government with very little contribution from own resources. While failure of ADCs in Mizoram to mobilise own resources can be attributed to limited jurisdiction of councils, the same cannot be said of councils in the other states. Other factors such as the lack of political will to raise resources through imposition of taxes and other charges/fees, particularly from tribal population, are partly to blame for the inability of the councils to generate sufficient resources. For instance, professional tax is one of the main source of own revenue of the councils. However, apart from the professional tax that is deducted at source of income, councils are reluctant to undertake effective measures to ensure payment of this tax by eligible tribal population engaged in the non-governmental sectors.Further, the councils mobilisation of own revenue is also affected by leakages and misappropriation of financial resources.
Another problem facing the ADCs is the unwillingness of state governments to devolve part of their own revenue with the councils. Except for Mizoram which has taken a decision to devolve 15 per cent of its own revenue with local bodies in the state, the other state governments have not taken any measure of sharing own revenue with ADCs to augment the financial resources of these local bodies. In Meghalaya, although the sharing of mineral royalties and motor vehicle taxes between state government and the councils is on stipulated percentage, the whole process lacks transparency.
Most of the councils are burdened by excessive spending on revenue expenditure which leaves very little funds for development purposes. The issues of overstaffing and uncontrolled administrative expenditure have plagued the financial health of most of the councils. When it comes to devolution of additional functions to the ADCs, we find that in Mizoram and Tripura the process has been marred by reluctance on the part of state governments to ensure concomitant transfer of funds and functionaries to the councils.
Another issue that deserves the attention of the Forum is with regard to improving the financial reporting system to bring in transparency and accountability in the finances of the councils. All the councils should move towards adopting accounting structures and systems that will allow for capturing the receipts and expenditure under proper heads which will in turn facilitate better control and decision making based on the financial information derived from such an accounting format. This along with timely auditing of its account will and brings clarity, transparency and accountability in the finances of the council.
(The writer teaches Economics in NEHU)