TEN YEARS OF PANCHAYATI RAJ IN KERALA

A RAPID ASSESSMENT STUDY

January 2006 KERALA STATE PLANNING BOARD

THIRUVANANTHAPURAM

CONTENTS I. Introduction, Objectives, Methodology and Background 1).Objectives and Methodology 2).Over View of Panchayati Raj 3).People's Planning Campaign 4).Plan Assistance under the Tenth Five Year Plan 5).Changes in the Powers of PRIs under the Tenth Five Year Plan 6). Achievements of Decentralisation in Kerala II. Key Issues 1) Enhancing the Autonomy and Freedom of PRIs 2) Simplifying the Framework for Planning, Budgeting, Project Implementation

and Fund Release 3) Strengthening District Planning Committees More Effective 4) Strengthening Grama Sabhas; Enhancing People’s Participation in Panchayati

Raj and Strengthening Accountability of PRIs. 5) Strengthening Capacity and Effectiveness of PRIs 6) Computerisation and Training 7) Ensuring Effective Accounting and Audit 8) Strengthening Panchayat Finances 9) Enhancing PRIs Role in Economic Development and Poverty Alleviation 10) Improving Productive Sector Performance 11) Improving Project Implementation and Maintenance III. Summary of Recommendations 1).Enhancing the Autonomy and Freedom of PRIs 2).Simplifying the framework for Planning, Budgeting, Project Implementation

and Fund Release 3).Making District Planning Committees (DPCs) More Effective 4).Strengthening Grama Sabhas; Enhancing People’s Participation in Panchayati

Raj and Strengthening Accountability of PRIs 5).Strengthening Capacity and Effectiveness of Panchayati Raj Institutions 6).Ensuring Effective Accounting and Audit 7). Strengthening Panchayat Finances 8).Enhancing PRI Role in Economic Development and Poverty Alleviation 9).Improving Productive Sector Performance, Project Implementation and

Maintenance 10).Incentives for Own Resource Mobilization

LIST OF ANNEXURES

Annexure 1: Opinion Survey of Elected Panchayat Officials Annexure 2: Field Survey of Projects - Major findings of the Survey Annexure 3: Views Expressed in the District Level Workshops Annexure 4: Views Expressed in the State Level Workshop Annexure 5: List of Persons/Organizations Consulted Annexure 6: Changes made to the functioning of PRIs in the Tenth Plan Annexure 7: Observations by Auditors on PRI Accounts

Preface

The State Planning Board decided to conduct a study of Ten Years of

Panchayat Raj Institutions (PRIs) in Kerala. As a part of the study, a questionnaire

was sent in June 2005 to all the elected members of Panchayati Raj Institutions of

which 10422 members responded. A field survey was conducted in selected

Panchayati Raj Institutions, covering 1642 projects, to assess the direct and indirect

benefits of development projects undertaken by PRIs. District level workshops were

held in all the 14 districts in which PRI Chairpersons and selected members, experts

and officials participated. A State Level Workshop was also held in which the

Union Minister for Panchayati Raj, Government of India and Panchayati Raj

Ministers from several States participated. Views expressed in these two workshops

have substantially contributed to the Study. Separate discussions were also held

with District Panchayat Presidents, Corporation Mayors, selected Chairpersons of

Panchayati Raj Institutions, as well as experts, Members of the Legislative Assembly

and Political leaders.

The study addressed key issues such as enhancing the autonomy and

freedom of PRIs, simplifying the frame work of Planning Process, making District

Planning Committees more effective, strengthening Grama Sabhas, effective

accounting and audit etc. The study has made several suggestions for strengthening

PRIs and decentralisation in Kerala. I hope these suggestions will be useful.

State Planning Board, C.V.PADMARAJAN January, 2006. VICE CHAIRMAN

I.

INTRODUCTION: OBJECTIVES, METHODOLOGY, BACKGROUND

The Vice Chairman of the State Planning Board asked the Planning Board in May, 2005 to carry out a rapid assessment study of ten years of Panchayati Raj in Kerala, covering both Panchayati Raj and Nagarpalika institutions (hereinafter referred to as "PRIs"). Objectives The objective of the assessment is to expeditiously assess, key lessons of experience of the last ten years, so that the new PRI office bearers who take office in October 2005 may take these into account as they commence their work. The task had to be completed within about 4 months between May 2005 and August 2005. This did not leave sufficient time to carry out a full-scale evaluation of panchayati raj. What has been attempted, instead, is a "rapid assessment" that builds on existing work and reflects the feedback received through an extensive and unprecedented consultation process that is described below. Methodology

Opinion Survey: Questionnaires were sent to 17098 elected members of PRIs (a copy of the questionnaire is in Annexure 1). 60.9% of questionnaires (10422) were completed and returned. This is a high number reflecting the enthusiastic participation of elected officials in the survey. The views expressed through answers to the questionnaires are summarized in Annexure 1. Field Survey of Projects: A field survey of 1642 projects (804 projects in the service sector, 514 projects in the productive sector and 324 projects in the infrastructure sector) in 70 randomly selected PRIs were carried out to assess physical achievement of projects and gather the views of beneficiaries. The main findings and results of the field survey are summarized in Annexure 2. District Level workshops: Workshops were held in all 14 districts as part of the assessment. A state level workshop was held on August 6, 2005 in Kochi. Besides elected PRI officials, Kerala Ministers and officials of the State government concerned with Panchayati Raj attended. The workshop was inaugurated by Sri.Mani Shankar Aiyar, Union Minister for Panchayati Raj, GOI. A number of Panchayati Raj Ministers from other States who were in Kochi on that day to attend a national meeting of

panchayati raj ministers also participated. A summary of key issues raised in the District and State level workshops is in Annexure 3 & 4. Special meetings of Mayors, District Panchayat Presidents and Heads of Departments were also held.

Views were sought and/or received from a wide range of organizations and experts and their views were duly considered in preparing this report (see Annexure 5 for a list of persons consulted).

There is a large body of research and literature on Panchayati Raj in Kerala. The assessment drew upon all available studies and analyses. The team carrying out the assessment benefited from the 2005 Report of the C&AG on Local Self Government Institutions in Kerala (for the year ended 31 March 2004) as well as from discussions with the Director, Local Fund Audit and the State Performance Auditor, who both gave very insightful advice.

The State Finance Commission responded positively to our request for interaction and made a number of useful suggestions although this Report did not have the chance to consider the recommendations of the third State Finance Commission, which are yet to be publicly released. A very large number of views and suggestions were received. Although every effort has been made to fully reflect all the suggestions here, it has not been practicable to include all the suggestions in this report. Background: Overview of Panchayati Raj

The origins of Panchayati Raj in India lie in Mahatma Gandhi's vision of “Grama Swaraj”. Gandhiji’s Grama Swaraj was a confluence of two inter-related central tenets of his beliefs – the unique importance of the Indian village to India’s essential character and spirit, and the desirability of “bottom-up” government.

Gandhiji believed that India lives in its villages. He said, "Just as the whole Universe is contained in the self so is India contained in the villages". Gandhiji also deeply believed that “independence must begin at the bottom.” Therefore he said, "Poorna Swaraj” would be achieved only through Grama Swaraj".

Gandhijis’ concept of Grama Swaraj was based on the primacy and independence of each village. Gandhiji said, “My idea of village swaraj is that it is a complete republic independent of its neighbours for its own vital wants and yet inter-dependent for many others”. He said, “Every village will be a republic or Panchayat having full powers…….self-sustained and capable of managing its affairs even to the extent of defending itself against the whole world.” He said, "the Greater the power of Panchayat the better for the people...." .

The Father of our Nation’s vision of Grama Swaraj through Panchayati Raj is reflected in Article 40 of the Directive Principles of the Indian Constitution which provides as follows:

The State shall take steps to organize village panchayats and endow them with such powers and authority as may be necessary to enable them to function as units of self-government.

When the late Shri. Rajiv Gandhi became Prime Minister, he took decisive action to translate the Mahatma’s vision into reality. In 1989, Rajivji proposed the Sixty-fourth Amendment Bill to make it mandatory for all states to establish a three-tier system of Panchayats.

Addressing the Conference of Chief Ministers in May 1989, late Shri.Rajiv Gandhi said, “What we do propose is to usher in a revolution by (giving) Panchayati Raj a status commensurate with the vision of our freedom fighters, the injunctions of our founding fathers and the dreams of our nation builders”. However, the Sixty-fourth Amendment Bill narrowly failed to be approved by the Rajya Sabha. Before he could return to office and complete his historic mission, Shri. Rajiv Gandhi fell victim to assassination in 1991.

On December 22, 1992, the Congress (I) government led by Shri. Narasimha Rao redeemed Shri. Rajiv Gandhi’s pledge to the nation by adopting the 73rd and 74th Amendments to the Constitution.

The 73rd and 74th amendments introduced Panchayati Raj institutions into the governance structure of India through Part IX (The Panchayats) and Part IX A (The Municipalities) of the Constitution. These Constitutional amendments came into effect on June 1, 1993.

Articles 243G and 243W of the Constitution respectively set out the powers, authority and responsibilities of Panchayats and Municipal bodies. These Articles provide that State Legislatures may by law endow Panchayats and Municipal Bodies with powers and authority to function as institutions of Self-Government and that such law may contain provisions for the devolution of powers and responsibilities for the preparation of plans for economic development and social justice and for the performance of functions and the implementation of schemes as may be entrusted to them including on matters listed in the Eleventh and Twelfth Schedule to the Constitution (see Annexure 2). Thus the preparation of plans for economic development and social justice and the implementation of schemes entrusted to them are a central responsibility entrusted to PRIs in the Constitution. 1994 Kerala Panchayat and Municipality Acts

Promptly after the adoption of the 73rd and 74th Amendment, in 1994, the UDF Government introduced into Kerala for the first time the Constitutional scheme of Panchayati Raj and decentralized planning.

The UDF Government introduced the Kerala Panchayati Raj Act, 1994 and the Kerala Municipalities Act, 1994 that came into effect on November 23, 1995 and provided for the devolution of 26 of the 29 functions specified in the Constitution. These laws established the subjects that would be transferred to Local Self Government Institutions and provided that all institutions, schemes, buildings and other properties connected with the subjects listed in the respective schedules dealing with these functions should also be transferred to LSGs.

This massive devolution of power to PRIs is what laid the basis for all the future

achievements of panchayati raj in Kerala.

It is not surprising that, although they have since been amended, ten years later, these two laws still remain the basic framework for decentralization in Kerala.

The first election to the three-tier Panchayati Raj Institutions were held by the UDF Government under the 1994 Kerala Laws in September, 1995 and the PRIs came into being on October 2, 1995.

The Kerala Panchayat Raj Act, 1994 and the Kerala Municipality Act, 1994, provide powers, authorities and responsibilities wider in some respects than those envisaged under the above provisions of the Constitution. The 1994 Kerala PRI legislation envisages the role of PRIs as true units of Self-Government. The Kerala Panchayat Act provides in Section 166 that “it shall be the duty of the Village Panchayat to meet the requirements of the Village Panchayat Area in respect of the matters enumerated in the Third Schedule and to render services to the inhabitants of the Village Panchayat area in respect of the matters enumerated as mandatory functions in the Third Schedule.”

Under this provision, the Village Panchayat is duty bound to meet the requirements of the Village Panchayat areas on such matters as agricultural development, animal husbandry and dairy farming, minor irrigation, fishing, social forestry, small scale industries, housing, water supply, electricity and energy, education, public works, public health and sanitation, social welfare, poverty alleviation, SC/ST development, sports and cultural affairs, public distribution system, natural calamity relief and co-operation.

In addition, the Village Panchayat is duty bound to provide services on various

matters specified in the Act.

The Kerala Acts provide that the general function of the Block Panchayat is to “utilize governmental and non-governmental technical expertise at the Block level;

provide technical assistance to Village Panchayats and to provide schemes taking into consideration the schemes of Village Panchayats in order to avoid duplication and to provide backward-forward linkage”. The Kerala Acts provide that the general functions of District Panchayats are “mobilization of the technical expertise available from Governmental and non-Governmental institutions; provision of technical assistance to Block Panchayats, Village Panchayats and Municipalities; and preparation of schemes after taking into account the schemes of Village Panchayats and Block Panchayats in order to avoid duplication and to provide backward-forward linkage”.

A comprehensive Government order was issued in September 1995, transferring

various institutions and staff to the PRIs. The budget of the UDF Government for 1996-97 introduced a separate document,

Appendix IV, providing grants- in-aid (including untied funds) and schemes transferred to the PRIs. This step provided legislative sanctity to the transfer of resources to PRIs, thus pre-empting any administrative action to reverse the set-aside.

The last state budget of the then UDF Government (1996-97) took a key step

forward when it allocated Rs.212 crores to PRIs as untied funds "in order to enable panchayats to initiate the preparation and implementation of local level need based plan programmes for development." This initiative was unfortunately nipped in the bud by those who believed that PRIs were not using these funds effectively and therefore needed to be regulated.

People’s Planning Campaign

The new LDF Government that took office in May, 1996 launched a People’s Planning Campaign in July, 1996, led by the State Planning Board (People's Campaign for Formulation of Ninth Five Year Plan). The LDF Government also decided, as stated in the July 1996 G.O. that "at least 35-40% of the plan programmes should consist of schemes formulated and implemented by local bodies within their areas of responsibilities."

In the event, the goal of transferring 35-40% of plan funds to LSGs was never

achieved in the Ninth Plan In the last ten years it has been achieved only once, when 37.88% of the plan fund was released to PRIs in 2003-04 (taking into account Rs.335 crores reallocated to PRIs that reverted back to the State from PRIs on closure of PD Accounts).

The Government Order dated 30 July 1996 that established the Campaign also set out the modalities for decentralized planning under the Campaign. Its stated objective was "greater autonomy and involvement of local bodies in the planning process". In the event, the planning process did exactly the opposite -- it diluted

the role of elected PRI officials by providing key roles in the planning process to political parties, activists and experts and by providing the state government/state planning board a key role in the decentralized planning process.

Whereas the 1994 Act had provided for plans to be developed by elected bodies, the G.O. introduced into the process a large number of persons who were not elected PRI officials. The process included a “development seminar” to assess the socio-economic status of the local area and the problems identified by the Grama Sabhas. Participants in the development seminar would include panchayat samiti members, selected representatives from Grama Sabhas/Wards, representatives of political parties and mass organizations, representatives of all the line departments, professionally trained citizens from the local area and experts from the outside. The Development Seminar would then establish Task Forces of “experts, officials and activists” to identify local developmental problems and then prioritize and projectize them into schemes. Following this, the all-important task of drawing up a panchayat/municipal development plan was entrusted to an Expert Group constituted by the Grama Panchayat/Municipality on the basis of the report of the Task Forces. A "High-Level Guidance Council" chaired by Shri. E.M.S. Namboodiripad was also established by the July 30, 1996 GO to provide guidance to the Campaign.

In parallel, the new Government also appointed a Committee on Decentralization of Powers in 1996 under the late Dr. S.B. Sen, a leading Marxis t thinker and then Vice Chairman of the West Bengal Planning Board. The Committee submitted its interim report in August, 1996 and its final report in December, 1997. Dr. Sen passed away after the submission of the interim report.

The Committee’s main author, Prof. Sen, had concerns about the political impact of decentralization. He saw it as a source of danger, unless it was properly controlled.

In a July 4, 2004 interview, Shri. Budhadeb Bhattacharya, Chief Minister of West

Bengal, described Prof. Sen’s view of Panchayati Raj as follows: “I still remember one point which [Comrade Satyabrata Sen] used to hammer again and again. He used to say that Panchayat system was a sharp two faced weapon. If you can use it properly it will turn into a sharp weapon for political mass movement. And if you cannot use it properly, you yourselves will bleed.”1

It was not surprising therefore that the Sen Committee came up with a complex

set of arrangements to control the functioning of Panchayats so as to “use it properly as a weapon for political mass movement”

The Sen Committee worked closely with the “People’s Planning Campaign” that

was proceeding in parallel with the work of the Sen Committee.

1 Interview of Shri. Budhadeb Bhattacharya, People’s Democracy, July 4, 2004

The legal and administrative framework of Panchayati Raj put in place in 1994 was revised and a new framework put in place with a main objective of controlling Panchayati Raj to serve the goal of political mobilization in the interests of a particular political ideology.

The result was the Kerala Panchayat Raj Act and the Kerala Municipality Act amendments of 1999.

The emphasis of the People’s Campaign was less on establishing sustainable

institutional capacity in PRIs to carry out their constitutional and statutory responsibilities than on running a campaign. The planning method established through the Campaign over-emphasized process aspects while not paying adequate attention to development outcomes. A large number of meetings and conventions were conducted by the Campaign Cell at a huge cost to the public exchequer. A large number of political activists were supported and trained even though they would not have a permanent contribution to the functioning of PRIs. A large international conference on decentralization was held, the durable benefits of which to the State are unclear.

The assessment was unable to get any records or accounts of the activities and

expenditures of the Campaign or the Campaign cell. As a result, the assessment could not carry out a detailed review of the Campaign.

The contribution of the Campaign towards raising public awareness and building public support for decentralization is to be acknowledged. However, this has come at a large cost to the State. One of the clear findings of the assessment is that the People’s Campaign has had a negative impact (i) on the planning process; (ii) on the efficiency of utilization of funds; and (iii) on the autonomy of PRIs.

The 2005 CAG report attributes under-utilization to the fallacy of the “big bang”

approach of the People’s Campaign under which, the “traditional wisdom” of building capacity commensurate with transfer of funds/functions/functionaries was reversed and funds were provided without adequate capacity or safeguards. It is noteworthy that a similar big bang approach was not followed in West Bengal.

The adverse impact of the People’s Campaign on PRIs is evident from the

following figures: (1) 93% of the outlay for PRIs was spent by PRIs in 1997-98, before the

People’s Campaign started to have an impact. This percentage soon declined dramatically to 62% in 1998-99, 71% in 2000-01, 57% in 2001-2002 and 43% in 2002-2003. (NOTE: This high percentage in 1997-98 is due in part to extension of time to utilize funds by three months).

(2) After the commencement of the Kerala Development Plan and its steps to build capacity and improve utilization, 102% of the outlay was spent

in 2003-04 although the outlay was much larger than in the previous years.

Under the People’s Campaign, reflecting its lack of confidence in entrusting

responsibilities to the grass roots level, Grama Panchayats were relatively neglected in the allocation of funds.

As against nearly 20% of plan funds released to Grama Panchayats under the

Tenth Plan (Table-3), only about 16% of Ninth Plan funds were released to Gram Panchayats. This also has had an adverse impact on utilization because the best utilization rates amongst the three tiers is at the Grama Panchayat level (see Table-3).

During the Ninth Plan there was a strong bias in favour of the “general category”

and an increasing neglect particularly of tribal sub-plans. Therefore implementation of TSP was withdrawn from PRIs during the last year of Ninth Plan

The poor utilization of resources in the Ninth Plan was because of the

politicization of the process and non-official control of the planning process under the Campaign, needless bureaucratic complexity of the People’s Campaign and because of the failure to institutionalize and build necessary capacity in PRIs.

Thus, although notwithstanding these obstacles, PRIs did a commendable job in

creating new assets in some areas (such as in infrastructure), as a result of the People’s Campaign, the Ninth Plan resources (Rs.3904 crores of Plan assistance) could not be utilized as effectively as it should have been.

In an era of scarce resources, quick and effective utilization of resources is the

central need for achieving good development results on the ground to meet the needs of people.

Utilization of resources is the best available indicator of the physical and

developmental effectiveness of resources provided to PRIs. The random sample of panchayats carried out under the assessment also points to poor physical progress and developmental impact under the Ninth Plan.

The main policy challenge for the new Government that took over in 2001 was the institutionalization of Panchayati Raj, rescuing it from partisan politics and placing it back on a sustainable path. This is a challenge that is still unfinished. Several of the observations and recommendations of this assessment are intended to take forward this challenge. Tenth Plan: Kerala Development Plan

The Government that came to power in 2001 took a number of steps to strengthen and institutionalize Panchayati Raj in the State in keeping with the objectives of the Constitutiona l amendments and the original Kerala laws. In 2002-2003, under the Tenth Plan, the decentralization programme was renamed “Kerala Development Plan”.

The three main thrusts of the Kerala Development Plan were (i)

institutionalization and building sustainable capacity in PRIs; (ii) catalyzing economic development through PRIs; and (iii) improving the quality of services, particularly in health and education.

In the ninth plan, PRIs prepared annual plans. In the tenth plan, they prepare five

year plans that allow them greater room for long term planning with an emphasis on development.

A program of institutional development is being carried out with emphasis on

updating of records, completion of asset registers, preparation of road registers, preparation of benefit registers, increasing local resource mobilization through taxes, user charges and contributions, developing innovative means of financing through taxes, BOT, community contributions and borrowings, establishing performance standards for institutions and officers, reducing waste and leakage, combating corruption and improving the quality of mandatory functions of Grama Panchayats and Municipalities. The full Planning Board under the chairmanship of the then Chief Minister Sri. A.K. Antony decided on a number of steps to strengthen PRIs under the Tenth Plan. The State Development Council would be reactivated and all major policy decisions on decentralization would be taken after discussion in the Council. The Rural Development Board would be wound up. The Kerala Urban Development Finance Corporation would be restructured. Development Authorities and other local level parallel structures would be synchronized with PRIS. The Ombudsman system would be strengthened and an Appellate Tribunal system brought into effect. Five year plans would be developed for watershed management, poverty alleviation, women component plan, special component plans for SC/ST and the special group plan for destitute, handicapped, aged and children. Action would be taken to address issues relating to the development of transferred farms, better implementation of village water supply schemes, maintenance of street lights, improving standards and services for health and education, independent monitoring and social audit of plan implementation, computerization, transfer and placement of staff, strengthening the administrative capacity of PRIs and strengthening accounting systems and audit. The Tribal Sub Plan component of the Annual Plan for the year 2001-02 was taken back from PRIs and placed at the disposal of the Director ST Development Department. From 2003-04 onwards as part of empowering of Tribals within the Local Government system, 50% of TSP funds were allotted to LSGIs. The planning process for TSP has been restructured and new guidelines issued. Hamlets are to be taken as the unit

and the general body of the hamlet called ‘Oorukoottam’ has been significantly empowered for the preparation and implementation of their plan. A special TAC was also set up at the district level under the District Collector for the processing of plans of TSP projects of LSGIs and a special document is being prepared for TSP. A major shift under TSP is the condition that atleast 50% of the fund should be earmarked for providing a package of care services to the poorest of the poor identified by the Oorukoottams on the basis of transparent criteria. Also TSP funds are not allowed to be earmarked for road works by PRIs. It was in the Tenth Plan the concept of Anti Poverty Sub Plan was introduced as a part of LSG Plan. As part of this initiative, specific projects for destitutes are also being prepared (Ashraya Projects). A separate document is also being prepared for the same. The Kudumbasree program has considerably strengthened poverty alleviation efforts of the State integrated with PRIs. The Tenth Plan insists that the LSG’s should earmark 5% of the plan allocation for the benefit of children, disabled and the aged. A number of steps have also been taken under the Modernization of Government Program to strengthen PRIs to improve the quality of services delivered by PRIs. Plan Assistance under the Tenth Plan During the assessment, a view was expressed by some persons that plan assistance to PRIs was reduced in the Tenth Plan in comparison to the Ninth Plan, as well as during the UDF Government (from 2001-2002 to date) in comparison to the period of the LDF government starting with the 1997-98 Annual Plan (1997-98 to 2000-01). As this view was expressed to us formally by elected officials during the consultations that took place during the assessment, we felt duty bound to look into the issue carefully and present an accurate picture. A review of facts shows clearly that plan assistance for PRIs during the tenth plan was substantially larger than under the ninth plan; and financial assistance during the UDF Government (from 2001-2002 to date) was substantially larger than during the LDF government.

• Overall, a total to Rs.3247.4 crores was released in the 4 year period between 1997-98 and 2000-01. As against this, Rs.4317.2 Crores was provided between 2001-02 and 2004-05 i.e. Rs.1070 crores more funds were provided between 2001-02 and 2004-05 than in the 1997-98 to 2000-01 period. (See Table-1)

Provision of funds by the State Government to PRIs increased significantly in the

Tenth Plan, across the three tiers and for each tier of Panchayat.

Table-1 Plan Outlay and Release to LSGs.

(Rs. crores)State Plan --Budgeted Outlay

Year State LSGs %

State Plan - Revised Outlay*

Release to LSGs

%

(1) (2) (3) (4) (5) (6) (7) 1997-98 2855.00 749.00 26.23 2698.66 745.20

27.61

1998-99 3100.00 950.00 30.65 3039.09 910.33 29.95

1999-00 3250.00 1020.00 31.38 3107.45 830.50 26.73

2000-01 3535.00 1045.00 29.56 2493.25 761.38

30.54

TOTAL 12,740.00 3764.00 29.54 11,338.45 3247.41 28.64%

2001-02 3015.00 850.00 28.19 2260.00 657.05 29.07

2002-03 4026.00 1342.00 33.33 3425.00 1058.26 30.90

2003-04 4430.25 1317.00 29.73 3796.23 1438.15 @ 37.88

2004-05 4800.00 1350.00 28.13 3913.57 1163.72 29.74

Total 16271.25 4859.00 29.86 13394.80 4317.18 32.23%

2005-06 5369.81 1375.00 25.61 - - - * Approved by Planning Commission @ Includes Rs.335 crore re -allocated to LSGs consequent to the closure of PD accounts as on 09.07.2003. Source: Outlay - State Planning Board Release - IKM (1997-98 to 2003-04) DPO (2004-05)

As indicated in the Table - 1, Rs.1095 crores more funds were provided as budgeted outlays to PRIs in the 2001-2005 period than in the 1997-98 to 2000-01 period.

The amount provided for PRIs for 2005-06 is Rs.1375 crore (25.61% of State Plan outlay).

• Amount of plan funds released to PRIs in the Tenth Plan is more than the proportion of plan funds released to PRIs in the Ninth Plan.(See Table-2).

Table-2

PLAN OUTLAYS - Revised (Rs. Crores)

NINTH PLAN 1st three years (1997-98 to1999-2000)

TENTH PLAN 1st three years (2002-03 to 2004-05)

NINTH PLAN 4th & 5th years (2000-01 to 2001-02)

TENTH PLAN 4th & 5th years (2005-06 to 2006-07)

State Plan (Revised Outlay)

8845.20 11134.80 4753.25 NA

LSG Outlay 2486.03 3660.13 1418.43 NA % to State Plan

28.11 32.87 29.84 NA

Source: State Planning Board

o 28.11% of the States Ninth Plan was released to PRIs in the first

three years. o As against this, 32.87% of the Tenth Plan was released to PRIs in

the first three years (2002-03 to 2004-05). o Rs.2486 crores was released in the first three years of the Ninth

Plan to PRIs. o Rs.3660 crores has been released in the first three years of the

Tenth Plan.

• During the tenth plan period, there has been a significant increase in the

proportion of plan funds released to Grama Panchayats over the Ninth Plan period. (See Table -3).

Table-3 PLAN AMOUNTS RELEASED

(Rs. Crores) NINTH PLAN 1st three years (1997-98 to 1999-2000)

TENTH PLAN 1st three years (2002-03 to 2004-05)

NINTH PLAN 4th & 5th years (2000-01 to 2001-02)

TENTH PLAN 4th & 5th years (2005-06 to 2006-07)

Plan amount released

% of state plan

Plan amount released

% of state plan

Plan amount released

% of state plan

Plan amount released

% of state plan

1 2 3 4 5 6 7 8 9 Grama Panchayat

1399.56 15.82 2276.2 20.44 762.65 16.04 NA NA

Block Panchayat

358.41 4.05 466.05 4.19 242.36 5.10 NA NA

District Panchayat

376.48 4.26 387.52 3.48 198.8 4.18 NA NA

Municipalities 209.17 2.36 270.25 2.43 119.61 2.52 NA NA Corporations 142.41 1.61 260.11 2.33 95.02 2.00 NA NA Total 2486.03 28.1 3660.13

(Rs.1174.1 Crore more than the first three years of the Ninth Plan)

32.87 1418.44 29.84 NA NA

Source: IKM

• 15.82% of the State Plan was released to Grama Panchayats

during the first three years of the ninth plan • As against this, 20.44% of the Tenth Plan has been provided to

Grama Panchayats in the first three years more than 50 percentage of plan funds released to Grama Panchayats under the Ninth Plan in the first three years.

There was also a significant increase in the amount of funds released to

Grama Panchayats. • Rs.1399.56 crores was provided to Grama Panchayats in the first three

years of the Ninth Plan. • As against this, Rs.2276.20 crores has been provided to Grama Panchayats

in the first three years of the Tenth Plan. • The percentage of Plan funds provided to Block Panchayats during the

Ninth and Tenth Plan did not change significantly 4.05% of the State's Ninth Plan was provided to Block Panchayats in the Ninth Plan and 4.19% has been provided to Block Panchayats in the Tenth Plan. However, there was an increase in the amount of funds provided to Block Panchayats in the Tenth Plan. • Rs.358.41 crores was provided to Block Panchayats in the first three

years of the Ninth Plan.

• Rs.466.05 crores has been provided to Block Panchayats in the first three years of the Tenth Plan.

• More funds were released to District Panchayats in the Tenth Plan than in the corresponding period of the Ninth Plan even though the percentage of plan funds provided to District Panchayats declined slightly from 4.26% to 3.48%.

• Rs.376.48 crores was released to District Panchayats in the first three years of the Ninth Plan.

• Rs.387.52 crores was released to District Panchayats in the first three years of the Tenth Plan.

• The percentage of fund released to Municipalities during the Ninth Plan (2.36%) and Tenth Plan (2.43%) are virtually the same. However, there was an increase in the amount of funds provided to Municipalities in the Tenth Plan.

• Rs.209.17 crores was released to Municipalities in the first three years of the Ninth Plan.

• Rs. 270.25 crores was released to Municipalities in the first three years of the Tenth Plan.

• Funds released to Corporations also increased in the Tenth Plan as

against the Ninth Plan although the percentage of Plan funds provided did not change substantially (1.61% in the Ninth Plan and 2.33% in the Tenth Plan).

• Rs.142.41 crores was provided to Corporations in the first three years of the Ninth Plan.

• Rs.260.11 crores was provided to Corporations in the first three years of the Tenth Plan.

Table-4

LSG-WISE PLAN EXPENDITURE (Rs. Crores)

NINTH PLAN 1st three years (1997-98 to 1999-2000)

TENTH PLAN 1st three years (2002-03 to 2004-05)

NINTH PLAN 4th & 5th years (2000-01 to 2001-02)

TENTH PLAN 4th & 5th years (2005-06 to 2006-07)

Expenditure Expenditure Expenditure Expenditure Grama Panchayat

1258.53 1793.01 675.18 NA

Block Panchayat

314.22 376.25 192.63 NA

District Panchayat

340.2 276.01 165.37 NA

Municipalities 189.28 226.32 112.93 NA Corporations 128.76 177.90 79.00 NA Total 2230.99 2849.49

(Rs.618.50 crore more than in the Ninth Plan)

1225.10 NA

Source: IKM

Changes in the powers of PRIs under the Tenth Plan/Kerala Development Plan.

During the consultations for the assessment, a concern was expressed to us that the powers of PRIs were materially reduced after the UDF Government came to power. No one could point out a specific instance in which powers were reduced (other than the chairmanship of one non-PRI committee (on tourism) being changed from the District Panchayat president to the Collector).

Again, we felt duty bound to review this concern carefully and present the

objective facts. Our clear finding is that it is not true that the powers of PRIs have been reduced

after the UDF Government came to power. Some changes have been made as part of larger processes for Governmental policy change unrelated to PRIs (e.g., regarding minor irrigation works, see below) and other changes have been made to strengthen and institutionalize PRIs.

The assessment could identify only two changes to the powers of PRIs during the

tenth plan. These are as follows:

(1) As per Panchayat Raj Act, Minor Irrigation work was entrusted to District Panchayat. Formerly the irrigation project with an ayacut upto 50 ha. was termed as Minor Irrigation. Later the concept of Minor Irrigation was redefined and as such irrigation project with an ayacut upto 15 ha. are considered as a Minor Irrigation work. The scope of District Panchayat to take up Minor Irrigation work was reduced to that extent.

(2) During Ninth Plan DRDA’s were merged with District Panchayat and orders where issued accordingly. During Tenth Plan DRDA’s permitted to act independently. During Ninth Plan the Rural Development portfolio was taken from the Minister concerned and entrusted with Minister for Local Administration. But now it is dealt by two different Ministers.

In addition, a number of specific changes were made in the Tenth plan to improve the planning processes. These are described in Annexure 7 so as to remove any mistaken apprehension that the powers of PRIs have been reduced in the Tenth Plan.

In our view, the thrust, direction and priorities of the Kerala Development Porgram are correct. However, action is urgently required in a number of areas, discussed below, to ensure that the story of the ninth plan (poor utilization) is not repeated in the tenth plan. Action is needed to strengthen the autonomy of PRIs, streamline and simplify the processes for planning, budgeting and accessing funds, enhance transparency and accountability and improve effective utilization of resources. Achievements of Decentralization in Kerala

Notwithstanding these variations and aberrations, on the whole, it is clear that

over the last decade Panchayati Raj has been mainstreamed in Kerala. While there may be important differences on rationale and methodology for decentralization, there is widespread consensus across the political spectrum in Kerala that Panchayati Raj must be strengthened and supported in Kerala.

Kerala has achieved many successes in the area of Panchayati Raj and is justly

celebrated for its pioneering achievements in Local Self-Government. Perhaps the most important achievement is political empowerment, including

through the election to political office of women and leaders from SC/ST backgrounds. The other main achievement appears to be that a firm basis has been laid for a

lead role being played by local self-government institutions in governance. This can only enhance accountability and effective utilization of resources.

However, there are a number of challenges that need to be addressed if the goals

of the 73rd and 74th Amendments are to be fulfilled.

A key challenge is improving PRI capacity to effectively utilize the funds available to them. As discussed later, the main reasons for poor utilization are weaknesses in the plan process as well as weaknesses in selecting, developing, implementing and monitoring projects. The poor performance of the productive sectors, especially agriculture, is another key challenge.

A recent (August 2005) Kerala University (Department of Economics) study on

the implementation of plans by Grama Panchayats reviewed in detail the implementation of projects supported by Plan assistance in 36 sample Panchayats across the State and concluded that ten years of decentralized government had not made an appreciable impact on addressing vital issues faced by the State such as poor investment, the power crisis, backwardness in industry, the collapse of traditional cottage industries, the decline of the agriculture sector, unemployment, poor quality of public services in health and education, drinking water shortage, housing shortages, poor irrigation and so on.

There is very little reliable evidence on the extent of the development benefits that have been realized under 10 years of Panchayati Raj, in comparison to benefits that would have been delivered through central and state government implementation (on which Rajiv Gandhi famously estimated that some 15 paise of benefits result from every rupee of expenditure). The overall consensus that we gathered during the assessment was that benefits delivered through PRIs may be about 30%-40% more than the benefits delivered through central and state government implementation, i.e., some 20-22 paise of every rupee spent on development may be reaching beneficiaries. The effectiveness of expenditures is still very low. There are also strong concerns about diversion, waste and corruption. The field survey carried out as part of the assessment confirmed the picture of inadequate implementation and poor maintenance (see below, Annexure 2). The challenge ahead of us is to empower PRIs adequately so as to ensure that they are able to effectively address development needs and priorities.

II.

KEY ISSUES The consultative process during the assessment identified a large number of issues

and suggestions. These are summarized in the Annexures. We do not repeat all the suggestions here. They may be considered when Government reviews this report and decides on further steps to strengthen PRIs.

This chapter briefly discusses ten selected issues that emerged from the feedback

received during the assessment (through the elected officials’ survey, results of the field survey of projects, views received through consultation with organizations and experts as well as issues identified in various studies). These are:

(1) Enhancing the autonomy and freedom of PRIs; (2) simplifying the framework for planning, budgeting, project implementation and fund release; (3) strengthening DPCs;

(4) strengthening Grama Sabhas; enhancing people’s participation in

Panchayati Raj; (5) strengthening administrative capacity and operational efficiency of PRIs; (6) ensuring effective utilization of funds, accounting and audit; and

(7) strengthening PRI finances; and

(8) making panchayats engines for economic development and poverty alleviation.

(9) improving performance in the productive sectors; and (10) Improving project implementation.

(1) Enhancing the autonomy and freedom of PRIs PRIs should be given full authority to appoint, post and terminate the services of staff. This is a minimum requirement for efficient functioning (e.g., as in the case of cooperatives). PRIs should be allowed to build their own technical staff strength and strengthen their capacity.

PRIs should be given every support to raise own resources within the powers conferred on them under the Constitution. This issue is not discussed in detail in this assessment because the matter is under consideration of the Third Finance Commission whose findings are expected to be released soon. PRIs should also be given greater autonomy in setting visions and strategies for development, developing and finalizing plans for implementing these strategies, implementing plans and monitoring them. This is also discussed in greater detail below. Such increased freedom should be accompanied by greater accountability and transparency, including stronger accounts and audit. These aspects are also further discussed below. One specific suggestion that was received and we endorse in principle is that PRIs should be given a greater role in responding to, as well as improving preparedness for natural disasters. (2) Simplifying the framework for planning, budgeting, project implementation

and fund release:

The Constitution provides that the preparation of plans for economic development and social justice and the implementation of schemes for economic development and social justice are key responsibilities of PRIs.

In addition, Article 243ZD of the Constitution provides for the establishment of

District Planning Committees with responsibility “to consolidate the plans prepared by the Panchayats and Municipalities in the district and to prepare a draft development plan for the district as a whole.” As a complementary measure, the Constitution also provides for the establishment of a Finance Commission to review the financial position of Panchayats

The Constitutional scheme is therefore quite simple and straightforward –

Panchayats and Municipal bodies prepare plans for economic development and implement schemes under such plans.

The Kerala legislation originally envisaged an equally straightforward process in

Section 175. Every village panchayat would prepare an annual development plan and submit it to the Block Panchayat. The Block Panchayats in turn would prepare block-level plans based on the plans of the villages in the Block and submit it to the District Panchayat which would, in turn, prepare a district plan based on the plans of the Blocks and submit the same to the DPC. Each tier of panchayat was also required to prepare a master plan for a longer-term period (which was not stipulated) and submit it through the next higher tier to the DPC.

From 1996, this provision was not followed. Instead, the process was made more

complicated, reduced the autonomy of PRIs, the role of the Block and District Panchayats and provided the state government added power over the planning process in a manner

that went against the objective of decentralization. The 1999 amendments wrote these new procedures into law.

First, the scope of the responsibility was reduced to preparing a development plan

“in respect of the function vested in it for the respective Panchayat area” rather than, as originally worded, “a development plan for the village”. This crucial change provided the state government the centralized power to regulate the scope of the development plan to be prepared by panchayats and, to this extent, cut against the spirit of decentralization.

Second, the development plan of the panchayats were required to conform to a

prescribed “form and manner” – a provision that was to be used – and continues to be so used– to construct a bureaucratic labyrinth of red tape within which Panchayats are struggling today.

Third, the planning process was centralized around the DPC. The statutory roles

of the District and Block Panchayats to consolidate the plans of the tiers below them were removed.

Fourth, the flexibility to prepare forward looking master plans for periods that

made sense in the context of each panchayat was altered to require in all cases a 15 year perspective plan “with special focus on spatial planning for infrastructure development and considering the need for further development” – a requirement that was quite unrealistic given the capacity and information available to panchayats and a level of planning that even the state and central governments do not possess.

Based on the revised law, in 1999 the State Planning Board assumed a central role in the decentralized planning process that is not envisaged in the Constitution. The Board in effect took over centralized control of the overall process of decentralized planning through the “People’s Planning Campaign”.

The “People’s Planning Process” established a detailed mandatory process as

prescribed for PRI planning, applicable to all panchayats. This process includes: (i) “situation analysis”: done once in five years, identifying sectors of

development and possible ways of tackling them; (ii) “Working Groups” are constituted by each LSG for at least ten different

sectors, each headed by an elected member. An official is the convenor and an expert in the sector is the vice chairman. Members are experts on the areas, including activists. The Working Groups prepare proposals for plans and projects which are subsequently considered by Grama Sabhas.

(iii) “Development Seminar”: sets priorities and strategies for development; (iv) “Plan Appraisal”: The plans appraised by PRIs are appraised by Technical

Advisory Groups constituted at the District and Block Levels by the DPCs, consisting of officials and non-official experts. The TACs ensure that the projects are prepared according to guidelines established by the Government and review costing and funding.

(v) “Plan and project approval”: With the comments of the TACs, plans and projects are considered and approved by DPCs.

PRIs are required to spend at least 40% of plan funds on productive sectors

(agriculture and allied activities, industries, self-employment, etc.) and not more than 30% on infrastructure. 10% has to be spent on Women Development.

The Planning Board’s intervention in the decentralized planning process reduced

the central role of PRIs in two important ways. First, the Planning Board injected tens of thousands of experts in the 1997-2001 period into the decentralized planning process who played a crucial role in developing and approving local plans. This reduced the autonomy of PRIs and also introduced further levels of complexity (as noted earlier). Second, the Planning Board, along with the Government’s Local Administration Department, built up a vast and complex regulatory structure over the decentralized planning process that has, in effect, significantly reduced the autonomy of PRIs and rendered them to a large extent mere implementing agencies. As a result of these interventions, PRIs today are unable to even buy their own computers or photocopiers without State Government approval.

Simplifying the Planning Process: We would recommend that planning framework – currently over-regulated -- be simplified and restructured so as to restore to elected officials control over the development and implementation of plans. The multiple volumes of GOs on planning – micro-managing every aspect of the process – should be replaced by a simple and concise set of guidelines.

Experts and others may be involved in the decentralized planning process as

determined by the concerned local bodies. The decision to convene working groups and expert groups should be left to each PRI rather than be mandated centrally.

These “parallel bodies” are ostensibly meant to assist PRIs. In reality, they have

been politicized in many instances and are not providing the technical inputs that PRIs need. It seems that in most cases, they are not carrying out required technical review of projects and, on the other hand, many PRIs are reduced to have to go to their homes and beg for their endorsement of projects.

There is widespread consensus across party lines that the roles of technical advisory committees, which include officials, activists and other unelected persons, have become an impediment to the smooth functioning of PRIs.

It is time that mandatory TACs be abolished. Instead, the PRIs should be required

to secure needed technical or other assistance from the Government or elsewhere in accordance with stipulated procedures and processes. Where PRIs feel that TACs of similar bodies are needed they may constitute there as a matter of their choice at the level of individual PRIs. PRIs should be provided adequate capacity to provide technical sanctions themselves. To this end, redeployment of staff should be completed.

Sectoral allocations are necessary, but should provide for geographical, regional and local variations. However, the minimum allocations for SC/ST, women and other vulnerable sections should not be disturbed. Introducing an Outcome Budget: In line with the decision of the Central Government, PRIs should also move towards outcome budgeting. This will require detailed further work by a Task Group.

Harmonizing Central and State Plans and Schemes with PRI Plans and Schemes: There is legitimate need for national and state programmes to address respectively national and state concerns. However, these programmes should be adequately coordinated with the programmes of PRIs. At the minimum, PRIs should be informed about central and state programs. At the moment, this coordination is insufficient. The functioning of the DRDA is a source of concern. There have been previous recommendations that the DRDAs should be integrated into PRIs. This should be implemented at the earliest. Another issue raised is the inter-relationship between development authorities and PRIs. In our view, development authorities have a useful role to play and can complement and supplement PRIs. However, their roles should be integrated so that these authorities do not undermine the role or jurisdiction of PRIs. Considerable concern exists amongst PRIs about the manner in which MP/MLA Local Area Development Funds are allocated and implemented. As PRIs are not kept informed there often is duplication and waste of resources. The priority setting of local people is also disturbed. MPs/MLAs should be encouraged by Government to consult with PRIs in identifying and implementing projects supported by them. This would be in the best interest of all concerned.

Our recommendation is that a detailed policy framework be developed to ensure that the functions of the state and local governments be fully synchronized and needless duplication avoided. As a general principle, each level of government – village/municipality, block, district and state should respect fully the jurisdiction of the level below on all matters that fall within the physical jurisdiction of the lower level.

One of the strong concerns expressed during the assessment was that the

procedures for availing of RIDF funds is too complicated and entails delay because of the need for NABARD approval from Bombay. The procedures for accessing RIDF funds should be simplified.

(5) Making District Planning Committees (DPCs) more effective:

Article 243-ZD of the Constitution provides that “there shall be constituted in every State at the district level a District Planning Committee to consolidate the plans prepared by the Panchayats and the Municipalities in the district and to prepare a draft development plan for the district as a whole.”

Article 243-ZD leaves it to the States to determine by legislation the composition

of the DPC and the manner in which the seats shall be filled, provided that 4/5ths of such members shall be elected by and from amongst, elected members of the district panchayat and the municipalities in proportion to the distribution of population between rural and urban areas in the district.

Section 51 of the Kerala Municipal Act provides for the establishment of DPCs in

Kerala. It provides for 12 elected district panchayat members, one government nominee and the District Collector (as Secretary of the DPC as well). District level officers of the Government Departments in the District are Joint Secretaries of the Committee. MPs and MLAs are permanent invitees.

There is concern across the board that DPCs are not functioning as effectively as

they should. Collectors are seen as not giving DPCs as much importance as they ought to. The District Development [Council] is in effect a competitor of the DPC and since it is chaired by the Collector he/she tends to rely more on it than the DPC.

DPCs need to be strengthened. Their mandate and terms of reference need to be

clarified. They need to be held accountable to produce District level plans, which are currently not being produced.

Rules should be issued on the role and functions of the DPC, including with respect to the development of district plans, which should be mandatory. The District Planning Offices, which serve the DPCs, should also be considerably strengthened. A detailed plan should be developed for this purpose. (4)Strengthening Grama Sabhas ; Enhancing People’s Participation in Panchayati

Raj and Strengthening Accountability of PRIs: Strengthening Grama Sabhas : The Grama Sabha is the most important institutional mechanism for people’s participation in decentralization. One of the most important concerns raised during the assessment has been that people’s participation in Grama Sabhas is declining substantially. It is said that participation today is largely limited to women from Below the Poverty Line families – their participation is largely to be credited to the activities of Kudumbasree. It has been suggested that those who participate do so mainly to secure their names in the list of eligible beneficiaries. The concern has also been expressed that officials of transferred institutions are not participating adequately in Grama Sabha meetings.

There are two sets of issues that have contributed to the weakening of Grama Sabhas – first, gaps in the role and responsibilities of Grama Sabhas and second, the manner they have been constituted. Grama Sabhas and their discussions are now said to be more driven by allocation and distribution of funds handed down by government than by issues of self-government and development. Gaps in the Role and Responsi bilities of Grama Sabhas: Article 243A provides that a Grama Sabha may exercise such powers and perform such functions at the village level as the Legislature of a State may by law provide. Section 3 of the original 1994 Kerala legislation set out powers for the Grama Sabha that included supervising the implementation of developmental schemes; and assist in preparing and promoting the developmental scheme of the village. The 1999 amendment to the Kerala Panchayat Raj Act subtly shifted the role and powers of Grama Sabhas more clearly towards its role as an implementing agency for plan-funded development projects and schemes rather than towards Grama Sabhas as the basic units of self-government.

The powers of the Grama Sabhas under the two versions of the Act are as follows:

1994 Act 1999 Amendment

Assist in the preparation and promotion of the developmental scheme of the village

Assist in collection and compilation of details required to formulate developmental plan; Formulate proposals and fix priority of schemes and developmental programmes

Supervise the implementation of developmental schemes and render assistance in such implementation

To collect information regarding the detailed estimates of works proposed to be implemented in the panchayat area

Promote harmony and unity among various groups of people in the panchayat

Promote harmony and unity among various groups of people in the panchayat and organize arts and sports festivals to develop goodwill among the people of the locality

Mobilize voluntary labour and contributions in cash and in kind for community welfare programs

Provide and mobilize voluntary service and contribution in cash and in kind necessary for developmental plans

Render assistance for identification of beneficiaries

Prepare and submit to the Panchayat a final list of beneficiaries on the basis of criteria fixed [by whom?] To verify eligibility of persons getting various kinds of welfare assistance from the Government such as pensions and subsidies

1994 Act 1999 Amendment Discuss suggestions on literacy schemes and assist in implementation thereof

Suggest location of street lights, water taps, wells, sanitation units, irrigation facilities and other public utility schemes; Find out deficiencies in the arrangements for water supply, street lighting, etc.

To formulate schemes to impart awareness on matters of public interest such as cleanliness, environmental protection, pollution control and to give protection against social evils like corruption, illicit and clandestine transactions.

To monitor and assist beneficiary committees engaged in developmenrtl activities in the Panchayat area

To make available details regarding the services to be rendered and the activities proposed to be done by concerned officials in the succeeding three months

To know the rationale behind every decision of the Panchayat regarding the area of the Grama Sabha

To know the follow up actions taken on their decisions of the Grama Sabha and the detailed reasons for not implementing any of the decisions

To cooperate with Panchayat employees in the sanitation processes and render voluntary service for the removal of garbage

Assist in the activities of parent-teacher associations of the schools within the areas of the Grama Sabha

To assist public health activities especially prevention of diseases and family welfare

Such other functions as may be prescribed Such other functions as may be prescribed

Constitution of Grama Sabhas: Article 243 (b) of the Constitution defines a “Grama Sabha” as a “body consisting of persons registered in the electoral rolls relating to a village comprised within the area of Panchayat at a village level”. Article 243(g) defines “village” as a "village specified by the Governor by public notification to be a village".

The Kerala Panchayat Raj Act has defined a “village” as a constituency of a member of a Panchayat (a “ward”) whereas the Constitution, while giving the Governor the right to specify what constitutes a village, defines “villages” as corresponding to the area under the jurisdiction of a village panchayat. This has been referred to in a KILA publication as creating a “fourth tier” of Panchayat in Kerala, below that of Village Panchayat. The decision that Grama Sabhas in Kerala would be drawn from an area smaller than a Village Panchayat is justified by Kerala’s density of population – a Grama Sabha formed by a Village Panchayat would be unmanageably large. While this is a valid consideration, it has thrown up two sets of problems. First, the accountability of Village Panchayats to Grama Sabhas has been diluted. There is no “Grama Sabha” in Kerala corresponding to the Village Panchayat. On the other hand, each Village Panchayat has several Grama Sabhas falling within its area. This has diluted the accountability of Village Panchayats to Grama Sabhas as envisaged in the Constitution as there is no single Grama Sabha body that can hold the Village Panchayat accountable. This inability of any single Grama Sabha to be the “mass parliament” of the Village Panchayat may also be a reason for declining participation in Grama Sabhas as the only substantive power left in them is now identifying beneficiaries. We would recommend that neighborhood sabhas (ayalkootmam sabhas) may be created that can feed into and support the enlarged Grama Sabha and its activities. These neighbourhood sabhas could be modelled along the lines of “residents associations” that have become popular and effective in urban areas – indeed; resident associations may be recognized as “ayalkootam sabhas” for the purposes of Panchayati Raj and brought into the Panchayatu Raj framework. Grama Sabhas should be provided a physical space within which its members can come together to discuss common problems and obtain necessary assistance from the Panchayat. Grama Sabhas should also be more than the forum where beneficiaries are selected. They should be the forums in which needs and demands of the community are prioritized, projects developed and monitored. This will require a significant expansion in the amount and nature of information provided to Grama Sabhas. These measures are necessary to enhance the participation of all sections of the community in Grama Sabhas in addition to BPL families. Transparency and the Right to Information : Transparency is fundamental to the success of governance. Transparency is a pre-requisite for reviving public interest in participating in Grama Sabhas. Chapter XXVA of the The Kerala Panchayat Raj Act, introduced by the 1999 Amendment, provides for the Right to Information. Section 271B

provides that “every person bona fide requiring any information shall have the right to get such information in accordance with the procedure prescribed.” This section provides to the Government the power to classify any document as a notified document, which should not be disclosed. The section also empowers the Government to direct the panchayats to publish categories of information that the Government may specify for the general information of the people living in the area. This law has been considerably strengthened by the recently enacted central law on the right to information. At the moment people do not have adequate information about the functioning of PRIs. Our recommendation is that Government use its powers to direct PRIs to display prominently in every Panchayat office on a painted board details regarding matters such as: the development needs raised by people in preparing plans, the projects and schemes formulated for meeting these needs, the status of implementation of such projects and schemes, funds received by the Panchayat or raised by it, main details of the use of funds and expenses, and details of contracts awarded by the Panchayat. The ability of citizens to easily obtain information they demand should be ensured on the ground on matters including details of estimates prepared, measurements taken and expenditure incurred. Citizens’ Charter: Although work on preparing Citizens’ Charters by PRIs has begun, it is yet to be completed. The State Planning Board has prepared a model Citizen’s Charter. This should be finalized and issued to Panchayats who should discuss the model Charter in the Grama Sabha, modify it as needed and adopt it in the Grama Sabha. Election of Presidents/Chairpersons/Mayors: A strong recommendation received during the assessment was that the heads of Grama Panchayats, Municipalities and Corporations should be directly elected. This will deepen public involvement and strengthen the democratic foundations of Panchayati Raj. We would support this recommendation.

(5) Strengthening Capacity and Effectiveness of Panchayati Raj Institutions

Inadequate Capacity of PRIs: The 1994 Kerala laws sought to make PRIs true

units of self-government, vesting them with responsibility and obligations to provide or arrange for the provision of nearly all local public services with few exceptions such as police and judicial powers) (S.166, PRA).

To discharge these onerous responsibilities, PRIs will require strong institutional

capacity – both technical and administrative. They will also require necessary financial resources.

It is clear from our assessment that PRIs today lack such capacity and also lack

necessary financial resources even after ten years of Panchayati Raj. This lack of capacity has led to the paradoxical situation of PRIs on one hand not having adequate funds to carry out its functions while at the same time being unable to fully utilize available resources. The transfer of functions and associated staff in many of these areas even while PRIs lacked adequate capacity appears to have had a number of negative

consequences such as poor performance of government services in a number of areas (especially in the area of maintenance).

Why is it that, notwithstanding extensive expenditure on training (running to crores of rupees) over ten years, PRIs have not yet developed required capacity?

A key factor that has deterred the development of PRI’s in-house capacity has

been the use of outside expertise to provide critical technical inputs into the work of PRIs, through such organizations such as Working Groups and Technical Advisory Committees, these parallel bodies were not envisaged in the Act which, on the other hand, had provided for capacity to be built within PRIs. Section 176 of the Kerala Panchayat Raj Act, 1994, provides, for example, that “where the Government entrusts a scheme…, to a Panchayat it shall allot to that Panchayat such fund and staff as may be necessary to enable the Panchayat to implement that Scheme.” The technical experts, many of who were retired officials and who changed from time to time, did not constitute a professional, permanent cadre within the PRIs.

This process of bringing in technical experts and non-statutory parallel bodies into

the process was started in the 9th Plan period. The Government did not take necessary action in the 10th Plan period to end this practice and abolish these groups although there has been for some time now a strong sentiment. During the 10th Plan period necessary steps were taken to build technical capacity within the Local Administration Department, but the Government stopped short of abolishing the role of non-official experts and institutions that included them such as working groups and technical advisory committees.

There is now a strong sentiment across the board that the role of Working Groups

and Technical Advisory Committees must be ended once and for all and that PRIs must have internal technical committees.

It is clear that the use of outside technical experts and the introduction of extra-statutory parallel bodies such as Working Groups and Technical Advisory Committees was a mistake. This strategy undermined the independent strength and capacity of PRIs and deterred the development of internal capacity in them. It also diminished the independence of PRIs. We would endorse the view that the Working Groups and Technical Advisory Committees should be abolished and that necessary technical expertise should be built within PRIs at an appropriate level (Village, Block and District).

A second reason is the framework within which staff and resources have been

provided to PRIs with respect to functions transferred to them under the Act. As noted earlier, the Act envisaged that staff shall be “allotted” to PRIs.

The allotment of staff with respect to transferred functions has been completed to

a large extent. However, the posting and disciplinary actions with regard to transferred staff are still with the parent departments and not with PRIs. There is a widespread view among PRIs that they should be provided full and effective control over transferred staff.

In our view, a professional cadre of technical, managerial and financial staff needs

to be developed for PRIs. Government should set up a committee to examine this issue in greater detail and make an appropriate recommendation for government consideration.

Such staff should be formed into a separate professional cadre. The staff should

be fully under the PRIs – at an appropriate tier depending on the nature of the skills/functions of the concerned staff. Where staffs are part of a Kerala or national cadre, disciplinary action against them will need to be subject to the consent of the parent government.

The lack of effective training is another reason that has contributed to the lack of

capacity of PRIs. Issues pertaining to training are discussed below.

There is also need to improve the coordination between state and local government in devolution of functionaries and funds. Although functions have been transferred to PRIs, the full scope of the deployment of staff is yet to be completed. Staff deployed are not selected and appointed by PRIs, nor are they under the effective control of the PRIs.

Strengthening the Administrative Efficiency of PRIs: Section 180 of the

Kerala Panchayat Raj Act provides “the control of officers of the Panchayat”. Section 181 provides that the Government “shall lend the services of Government officers and employees to the Panchayats as may be necessary for the implementation of any scheme, project or plan assigned or delegated to the Panchayat.”

The legislative framework is sensible and appropriate. However, the manner in

which functionaries were transferred to PRIs has created several anomalies. Deficiencies in the administrative structure of Panchayats seriously impede their performance.

Transferred staff still function under a dual system, Panchayats feel they do not

have adequate control over their staff. Many staff feel a lack of belonging to either the parental department or to the panchayats. The parent department feels that they are made to be responsible for the transferred staff without adequate authority.

The possibility of developing a new separate cadre of PRI staff should be studied,

providing PRIs full powers to engage, discipline and terminate the services of such staff. The expansion of the Local Self Government Department by including technical staff in it does not appear to be a viable or sustainable solution in the long run.

There is no clear demarcation of responsibility between elected officials and staff.

With many committees and working groups as well as the involvement of activists and experts, it is difficult to pin down accountability for non-performance.

Administrative facilities are woefully inadequate in most PRI institutions. Although there has been a huge increase in work and responsibility following the 1994 Act and the decision to transfer a third of Plan resources to Panchayats, there has not been a commensurate increase in staff numbers. Staffs are overworked with very little recognition.

Even crucial functions such as accounting are neglected, contributing to the

failure to submit accounts on a timely basis. There is widespread concern about corruption. Needless to say this is not confined

to Panchayats and is equally applicable to government at the state and national levels. However, that is no reason to tolerate corruption at the level of local government. The administrative structure should provide adequate mechanisms to reduce corruption.

The administrative framework should also provide for social audit by citizens. The establishment of a clear administrative framework for Panchayats is

imperative. This arrangement should be consistent with the spirit of the legal provisions quoted above. It should provide clear accountability.

Steps should be taken to measure, monitor and improve administrative efficiency

commensurate with strengthening administrative capacity and staff resources. Computerization: E-Governance and effective use of ICT can greatly enhance

better governance of PRIs, transparency and accountability to people, quality of services provided by PRIs, planning, monitoring and evaluation and financial management.

Yet, PRIs in Kerala are not computerized or networked. This is indeed one of the

greatest disappointments in the progress of Panchayati Raj. The reason for this failure is the decision of the Government in 1999 to centralize computerization through the Information Kerala Mission. Six years later, after IKM has spent several crores of rupees, computerization is yet to reach Panchayats. IKM was placed under the State Planning Board initially and later transferred to the Local Self Government Department in July 2001.

The present system of IKM setting up and managing the various activities of the LSG’s has led to lack of ownership among the LSG staff, the pilots implemented have not been as effective as they could have been.

IKM could have just developed the software and allowed the LSG’s to implement them. IKM could have been given the responsibility of training up the staff of LSG’s or the vendors selected by the LSG’s – what they have been doing is recruiting people as project staff and then posting the staff at the LSG

Looking at the costs that IKM has incurred it would have been much cheaper to have given the contract to some company including a public sector company to develop the software.

This activity has been audited by the Comptroller and Auditor General of India (C&AG) as part of its transaction audit of Local Self Government Institutions for the period up to March 31, 2004 (referred to earlier). The C&AG’s findings are summarized below.

In 1998, the Government submitted a Rs. 47.25 crore project report to the Planning Commission. Special central assistance of Rs. 33 crores was received for the project between 1998 and 2001 (representing an average of Rs 2.72 lakhs per PRI).

The initial approval for the project in 1999 was for Rs. 19.75 crores, subsequently

revised upwards to Rs. 26.59 crores in October 2000, excluding administration, training and maintenance costs.

In July, 2001 Government entrusted the purchase of hardware and software to

local bodies and directed that project costs be limited to the central assistance of Rs. 31 crores (then available).

In December 2002 the Government decided to implement the project on a BOLT

(Build-Operate-Lease-Transfer) basis as public-private partnership. It was intended that this decision would substantially reduce the cost of hardware and software. However, the project cost was not revised to reflect the cost reduction.

The final cost is now estimated at Rs. 205. Crores. The C&AG reports that computers have not yet been provided to PRIs and they

have not been networked although some Rs. 8.3 crores has already been spent on the project by Macrh 31, 2004 (an average of some Rs. 68312 per PRI)

The C&AG Report notes that (i) the project report was not well conceived; (ii) in

the absence of a well conceived project report with component-wise cost, Government-released funds on the basis of ad hoc proposals submitted by IKM; (iii) inconsistent procurement policies and delayed procurement (the final decision on the BOLT tender, issued in July, 2004, is still to be taken after over a year); (iv) central assistance of Rs. 33 crores was not utilized.

Our recommendation is that PRIs should be allowed to purchase or lease their own computers, the specifications could be standardized at the state level. This would also indirectly add to local employment and encouraging of local entrepreneurs. The LSG would also be better off in terms of service support as the supplier would be local.

PRIs may be given the option to use open source software as against the present Mandatory use of Microsoft.

Training: Inadequate capacity is one of the most important challenges facing

PRIs. Capacity is needed at two levels. First, panchayat members need to be equipped with the knowledge and skills necessary for them to carry out their functions. Second, pnchayats need to be provided adequate number of well-trained staff with relevant skills to carry out their functions.

Neither has been achieved even after a decade although an enormous amount of

resources have been spent on training. However, these resources have not been effectively utilized.

A key program in supporting capacity building for decentralization is CAPDECK, the Swiss-supported Capacity Development Project for Decentralisation.

The first phase of the project (1999-2003) involved Swiss assistance of Rs. 10.54

crores of which some Rs. 8.95 crores were spent. The second phase of the project (2003-2006) involves assistance of Rs. 5.37 crores of which Rs. 22 lakhs have been disbursed.

From 1999 to September 2000 the first phase of the CAPDECK project provided

support from the Swiss Development Corporation fo r the People’s Planning Campaign Cell (PPCC). By 2001, CAPDECK support shifted from PPCC to Kerala Institute of Local Administration (KILA).

Between 1999-00 and 2002-03, CAPDECK has provided some Rs. 8.95 crores to

support training and capacity building for decentralization in its first phase. The second phase of CAPDECK has since commenced, involving SDC assistance. The bulk of the expenditure (Rs. 3.65 crores) was incurred in 2000-2001. CAPDECK training has covered some 1,20,000 trainees.

CAPDECK has also provided support to NGOs and to the People's Campaign. The key Government agency for training is the Kerala Institute of Local

Administration (KILA), established in 1990-91. KILA had a modest role in training until 2001-2002 (training less than 2000 people from 1990-91 to 96-97). There was a modest increase in the number of trainees to 6240 in 97-98. The number of trainees jumped to 31,667 in 1999-00 and again dropped back to 8607 in 2000-2001. In the last two years (2003-04 and 2004-05) the number of trainees has increased respectively to 62,160 and 71,516. The total number of people trained in KILA is 217,289.

The Institute for Management in Government spent Rs.1.31 crores for conducting training programs on decentralization and Panchayati Raj.

A design decision was made to implement decentralized planning as a “campaign”. This meant that people had to be mobilized through a “campaign mode”. A large part of the training and capacity building resources were spent on this campaign.

A positive outcome of this was that a substantial amount of public participation

was indeed generated in decentralized planning. The downside of this approach was, however, that the campaign mode is not sustainable both operationally and financially and so, inevitably, public interest and participation flagged. As the campaign was directed by a team with a large number of political appointees and retired officials, they did not continue their involvement along the lines of non-political civil servants. As a

result of these factors, the 9th plan period did not see sustained capacity being built in PRIs through training in spite of vast resources being spent on training.

A substantial part of the resources were spent on celebrating and promoting the

“People’s Planning Campaign” even though it was only taking shape (e.g., by holding an international conference).

There are a number of key challenges facing training and capacity building for PRIs in Kerala. These include inadequate availability of trainers, limited local facilities to deliver training to PRIs, limited training infrastructure; and inadequate availability of training material in Malayalam.

During the 10th Plan, important steps have been taken to institutionalize training

and capacity building and shift from a “campaign mode” to “building sustainable institutions”. KILA was made the nodal agency for capacity building. It has taken a number of steps to improve its functioning and strengthen faculty.

The success of decentralization will depend to a great extent on effective training

of elected officials, PRI staff, staff of transferred institutions, state government senior staff, policy makers and policy leaders as well as civil society and members of the public. The experience of KILA, IMG and other agencies that have been involved in training should be harnessed. The material they have developed should be shared. Better coordination of training is required at the State Government level. Perhaps the first priority is strengthening PRI staff. Better use should be made of technology.

At present various institutions like IMG, SIRD conduct trainings for capacity

building of PRIs. The line departments also give training to staff transferred to PRIs. The ultimate result is duplication and sometimes overlapping in training. To avoid wastage of time and money, the Government should consider revising its training policy. To evolve a training strategy all training institutions and departments involved in capacity building of LSGIs should be brought together.

A comprehensive and systematic new training strategy should be developed, with

clear goals and objectives and performance benchmarks. (6) Ensuring Effective Accounting and Audit

Panchayat Raj Institutions in Kerala are audited by five agencies:

(i) Comptroller and Auditor General of India (ii) Local Fund Audit, Kerala (iii) State Performance Audit, Government of Kerala (iv) Finance Department (Inspection Wing), Government of Kerala; and (v) Store Purchase Wing of General Administration Department, Government of

Kerala (which is also a part of the Finance Department).

The State Government took very important steps during 2002-2004 to strengthen the accounting and audit systems for PRIs.

In 2002, the Kerala Government entrusted the audit of Local Self Government

Institutions to the C&AG for the purposes of providing technical supervision of audit to the Director of Local Fund Audit. In June 2003, the State Government accepted the budget and accounts formats for Panchayat Raj Institutions prescribed by the C&AG and they came into force with effect from April 1, 2004. The Kerala Government also accepted the formats for Urban Local Government Institutions prescribed by the C&AG, as of September 2003.

Amounts spent from the consolidated fund, whether Central Government or State Government are audited by the C&AG. In Kerala accounts of 10% of PRIs are audited annually by C&AG. Audit of all PRIs is hence practically impossible. Hence the C&AG has not published the audit of PRIs. Local Fund Audit Department has been made statutory auditor, as per the provisions of Panchayat Raj Act, Kerala Municipalities Act and Kerala Local Fund Audit Act. All Funds received by PRIs from all sources are audited. Audit reports of Local Fund Auditor are placed in the Legislative Assembly, every year. State Performance Audit Officer conducts the audit based on the recommendations of the Sen Committee and the State Performance Audit Authority is appointed by the Local Government Department. Inspection wing of Finance Department, the Government of Kerala examine financial discipline/misappropriation. Store Purchase Wing inspects Store Purchase rules followed by Panchayati Raj Institutions, since store purchase rules are applicable to the PRIs.

Notwithstanding these requirements, the state of financial management of PRIs is alarming as noted by the C&AG in its recent report on Local Self Government Institutions (Report of the Comptroller and Auditor General of India for the years ended Macrh 31, 2004 (Local Self Government Institutions), Government of Kerala.

The C&AG report notes that “a comprehensive picture of the Local Self

Government Institutions (LSGIs) in the State is not available as the consolidated accounts of the LSGIs were not prepared as prescribed in the Acts. Every LSGIs is required to submit to an officer authorized by the Government in this behalf, an abstract of its annual report, showing receipts and payments under each head of account as certified by the Auditor, not later than the fifteenth day of the second month of the next financial year. The Acts prescribe that the authorized officer shall submit a consolidated report to Government forthwith and the Government shall cause the accounts together with the Audit Report to be laid before the Legislative Assembly. The Government have not authorized till now an officer to consolidate the accounts of the LSGIs in terms of the provisions of the Acts. Consequently, consolidated accounts of the Panahyats and Municipalities have never been prepared and laid before the Legislative Assembly.” (Paras 1.8.1 and 1.8.2)

The C&AG report also notes that “in spite of receiving the Eleventh Finance

Commission grant of Rs. 1.83 crores for the period 2000-01 to 2003-4 for the

maintenance of the accounts of the Grama Panchayats and Block Panchayats, the accounts are still heavily in arrears. Government has stated (in December, 2004) that they propose to update the accounts with the help of the retired hands and performance audit teams.” (Para 1.9.2)

The C&AG notes further that “Government have not taken any effective action to support the LSGIs in updating their accounts. As a result, the statutory obligation to place the annual accounts before the Grama Sabha/Ward Sabha is not being observed by most of the LSGIs”.

As set out in the Table below which is extracted from the C&AG Report, some 41% of accounts due from PRIs are yet to be submitted over the nine-year period between 1995-96 and 2003-04 reviewed by the C&AG. Of these, some 223 accounts are in arrears for nine years.

Year Total Number of LSGIs.

Number of LSGIs whose Accounts are in arrears*

1995-96 1214 223 1996-97 1214 143# 1997-98 1214 236 1998-99 1214 336 1999-00 1214 361 2000-01 1215 492 2001-02 1215 638 2002-03 1215 937 2003-04 1215 1212 Total * 4578

*as on 31st March 2004 # Some LSGIs submitted accounts without submitting accounts for previous years

and they were audited by DLFA

This is a serious issue that requires urgent and effective remedial action by the Government.

Again, the C&AG notes that in the absence of detailed accounts, proper utilization of loans, the trend of repayment and the amount of interest paid/payable etc., could not be ascertained.

Amendments to the Acts are needed to prescribe the date of preparation of the

Annual Financial Statements and its submission to audit, to incorporate the Scheme of Technical Guidance and Supervision of the C&AG, to prescribe the issue of Audit Certificate by Auditors on completion of audit, to prescribe the presentation of the

Annual Financial Statements in the Grama Sabhas/Ward Sabhas and to prescribe the due date for submission of accounts to the authorized officer.

Supplementary audit carried out by the C&AG in 2003-04 of PRIs in seven

districts revealed a number of serious problems relating to maintenance of accounts and carrying out of audit.

These included failure to maintain books of account and other records (including

failure to carry out daily closing of accounts in any of the 23 PRIs) and lapses in preparation of budgets and annual financial statements.

The C&AG also found a number of instances of non-compliance by the Director,

Local Fund Audit with a number of statutory requirements including conduct of audit without receiving annual financial statements, conduct of audit of incomplete accounts and without receiving and auditing annual financial statements for previous years. The C&AG also expressed concern that the Director prepared parallel accounts.

“Auditing standards for PRIs and Urban Local Government and Guidelines for

Certification Audit of Accounts of PRIs prescribed by C&AG should be adopted and implemented as soon as possible.

On asset accounting, the C&AG Report notes that “Government had transferred

assets and liabilities of the institutions relating to the transferred subjects to the LSGIs in the process of decentralization. The transferred institutions included Krishi Bhavan, Health Centres, Government Dispensaries, Hospitals, Schools and Agricultural Farms having considerable assets in the form of land, buildings and movable properties. Government have not taken any steps for the identification of the nature and location and for the valuation of assets and liabilities of the transferred institutions. The transferred assets had not been incorporated in the asset registers of the LSGIs and formal transfer in the revenue records had not been made… the assets transferred had not been valued so far…”

Observations by Auditors: A very large number of negative comments have been made by auditors with respect to financial management of PRIs. Main points raised by the various auditors are set out in Annexure 6.

Strengthening Accountability: Given the large number of bodies involved in its activities, it is difficult for a citizen to hold a PRI accountable today, if it fails to carry out its responsibilities. A clear system of accountability to the public needs to be developed through a consultative process. The dispute settlement processes involving the Ombudsman and the Appellate Tribunal were not studied in detail as part of this assessment for want of time. This needs to be done and appropriate remedial steps taken.

Accountability will be enhanced by greater transparency through better communication of information to the public about the activities of PRIs, funds received or raised by them and their audited accounts. Posting such information publicly in the PRI premises will be helpful in this regard. Financial details of Panchayats should be prominently displayed in PRI offices – budget allocations, expenditures, contracts awarded, accounts and audit reports. The preparation and issuance of Citizen Charters may also be expedited and implemented. (7) Strengthening Panchayat Finances

Fiscal pressures on PRIs are increasing as the demands and expectations for expenditures from them expand. Urgent measures are needed to augment Panchayat’s own source finances. In the last analysis, this must come from panchayats playing the role of catalyst of investment and economic development.

PRIs have five possible sources of funds: (i) own funds; (ii) plan funds provided by the State Government from out of the State plan for decentralized planning and for implementing state sponsored schemes; (iii) funds provided from the Central Government to finance centrally sponsored schemes; (iv) loans; and (v) other sources.

The sources of “own funds” include tax revenue, non-tax revenue assigned taxes;

shared taxes; and grants (for Grama Panchayats, Municipalities and Corporations) and non-tax revenue (excluding license fees and registration fees), assigned taxes and establishment grants (for Block Panchayats and District Panchayats).

Plan funds devolved by the State Government for decentralized planning and state

sponsored schemes consists of "Category A funds and Category B funds". Category A funds consists of plan grants for schemes formulated by PRIs for

which the Government makes allotments directly to District Panchayats and Municipal Corporations, the Director, Municipalities allots funds to the Municipalities; the Commissioner for Rural Development allots funds to the Block Panchayats while the Director of Panchayats makes allotments to the Grama Panchayats through the Deputy Director of Panchayats of each District.

Category B funds include Plan Grants for State sponsored schemes, non-plan

grants for the maintenance of the transferred institutions, assets and schemes and budgetary transfer of centrally sponsored schemes. The District Officers of the Departments concerned allot Category B funds excluding centrally sponsored scheme funds to each PRI of the District.

Plan grants and state sponsored schemes together form about 35-40% of the state plan. Subject to sectoral norms, some 80% of the funds are untied, i.e., not linked to particular projects. Non-plan grants include statutory and non-statutory grants, of which statutory grants are the largest, consisting of assigned taxes and vehicle tax compensation (20% of the motor vehicle tax’s net collection). The assigned tax consists of a basic tax on land and a surcharge of 4% on stamp duty on the value of property.

“Other sources” include donations, voluntary contributions and beneficiary

contributions. Accounts needed to identify revenues under this heading are not available. A World Bank study on Fiscal Decentralization to Rural Governments (January,

2004) argues that, in Kerala, own revenues have been increasing although as a proportion of total Grama Panchayat revenues it declined from 31% in 1994 to 18% in 1999 mainly due to increases in state transfers. Within own source revenues, it is reported that non-tax sources have been more buoyant than tax revenues.

On an average Grama Panchayat (GP) spent Rs.328 per capita, with total

spending by GPs being about 1.4% of the State domestic product. The share of GP expenditures is some 8% of total state government spending in 1999.

Revenue raising efforts by PRIs is weak. Own source revenues are negligible –

less than 1% of Gross SDP. A World Bank study on Fiscal Decentralization to Rural Governments (January, 2004) argues that the main factors constraining revenue raising by PRIs in Kerala include an unwillingness by local officials to enforce tax laws, limited capacity of PRI officials to administer a tax system; weak administrative procedures; poor definition of property tax base, need for more productive bases to tax; etc.

The assessment identified the failure to update tax rates and property tax values as

a major constraint on PRIs (GPs and Nagarpalika) raising revenues. The Bill system has been introduced for PRIs with effect from December 1, 2004

as recommended by the Second Finance Commission. Although the initial implementation of the system has created many problems, it is expected to improve the efficiency of the system for provision of funds and avoid the need to go to treasuries to get payment from PRIs.

The treasury ban system was raised as an issue in the feedback we received. This

is a problem linked to broader fiscal issues and will be resolved as part of an overall fiscal strengthening process.

Centrally sponsored schemes were disbursed through DRDAs, Directorate of

Urban Affairs and Kudumbasree. As noted previously, a very important step taken by Government is the decision to

set aside from April 1, 2004, 3.5% of the State’s Own Tax Revenue as a General Purpose

Grant (Rs. 205.32 crores) and 5.5% of the State’s Own Tax Revenue as Maintenance Grant (Rs. 325.79 crores), thus increasing by some 50% the funds transferred to PRIs.

Under this initiative, an amount of Rs.531.11 crore was provided to PRIs during

2004-05. This is a measure of great importance given the increasing burden of PRIs to

maintain assets created over the last ten years. The Government has also accepted critical recommendations of the Second

Finance Commission to improve PRI finances. These include the introduction of a presumptive profession tax, issue of rules for assessment and collection of advertisement tax, issue of rules for service tax, removal of ceiling on surcharges on property tax, fixing of minimum fees and removal of the cap on fees; setting up of a single financial agency for PRIs; providing a statutory basis for sharing the general purpose and maintenance grants, conduct of survey of PRI assets; linking tax and non-tax items to value of money through legislation; penalizing unauthorized diversion of funds,

The Third Finance Commission is due to submit its report shortly. In deference to

its report and until the Planning Board has a chance to consider the Report, we are holding off on any firm recommendations on the topic of panchayat finances at this stage.

In July 2003, the State Government closed the Personal Deposit Accounts of PRIs

(General/Plan) and credited back to Government account a total amount of Rs. 581.20 crores relating to previous years remaining unutilized in those accounts.

PRIs also received donations and beneficiary contributions. The C&AG report notes that due to non-formulation of annual plans in time, the

PRIs could not incorporate estimates of receipts and expenditures relating to plan schemes in their budget. Consequently, PRIs incurred plan expenditure without budget approval, indicating “poor budgetary control and lack of accountability.”

As of March 31, 2004, loans worth Rs. 274.18 crores availed by PRIs from

various sources (Government, Government guarantee, financial institutions) were outstanding.

Due to weaknesses in the financial and accounting systems of PRIs there are discrepancies in figures depending on the source, including the figures used by the C&AG in its reports. However, the various sets of figures appear to be in broad agreement on the overall trends and issues discussed above. In other words, to our knowledge, no figures are available that would contradict the numbers presented here. However, if there any errors in the figures and these are brought to our attention, we are fully prepared to make corrections.

What is the extent of capital assets created through plan assistance provided to PRIs? As accounts are incomplete, the answer to that is not available. However, according to the C&AG, the PRIs had spent Rs.552.82 crores during 2002-03 and 2003-04 on creation of capital assets, the correctness of which was certified by DLFA. However, the details of assets created were not available due to lack of recipient wise details of amount received and expenditure incurred. (8) Enhancing PRIs role in economic development and poverty alleviation: PRIs play a crucial role in addressing social justice concerns. One of the areas needing greatest strengthening is the role of PRIs in catalyzing private sector investment, entrepreneurship and economic development. The PRIs should be provided a key role and responsibility in the implementation of the President’s 10 Missions along with the 3 Missions of the Kerala Government. (9) Improving Productive Sector Performance One of the most significant findings of the assessment is the poor performance of PRIs in the productive sectors particularly agriculture. IT is beyond the scope of this assessment to delve deeper into this issue and suggest solutions. We wish to highlight the need for PRIs to identify and provide better support to "lead farmers". This is an issue that requires detailed further study by a suitable working group. (10) Improving Project Implementation and Maintenance : It is clear from the assessment that a major impediment to effective utilization of funds by PRIs is poor capacity to prepare, implement and monitor projects. This is an area that increasingly requires specialized skills and cannot be effectively addressed through ad hoc Working Groups and Technical Committees. A detailed strategy needs to be developed to strengthen the internal capacity of PRIs to develop and manage projects effectively.

III.

Summary of Recommendations

(1) Enhancing the autonomy and freedom of PRIs PRIs should be given full authority to appoint, post and terminate the services of staff. This is a minimum requirement for efficient functioning (eg., as in the case of co-operatives). PRIs should be allowed to build their own technical staff strength and strengthen their capacity. PRIs should be given every support to raise own resources within the powers conferred on them under the Constitution. This is discussed in greater detail below. PRIs should also be given greater autonomy in setting visions and strategies for development, developing and finalizing plans for implementing these strategies, implementing plans and monitoring them. This is also discussed in greater detail below. Such increased freedom should be accompanied by greater accountability and transparency, including stronger accounts and audit. These aspects are also further discussed below. PRIs should be given a greater role in responding to, as well as improving preparedness for natural disasters. To enhance the autonomy and freedom of PRIs, whenever the State Goverment enact and amend laws, there should be where relevant a statement regarding the implication of such laws and amendments on PRIs of the state. (2) Simplifying the framework for planning, budgeting, project implementation and fund release:

Simplifying the Planning Process: We would recommend that planning framework – currently over-regulated -- be simplified and restructured so as to restore to elected officials control over the development and implementation of plans. The multiple volumes of GOs on planning – micro-managing every aspect of the process – should be replaced by a simple and concise set of guidelines. These guidelines should be made available on the Internet in addition to hard copy publications.

Technical Advisory Committees should be abolished.

PRIs should be provided adequate capacity to provide technical sanctions themselves.

Redeployment of staff should be completed. All existing vacancies must be filled by direct recruitment after completion of deployment. Working Groups and expert bodies may continue, at the discretion of PRIs with greater transparency in their functioning. Needless to say, if particular PRIs wish to establish TACs or their equivalent, they should have the right to do so. However, the establishment of these parallel bodies should not be mandatory, nor should they be politicized. Sectoral allocations are necessary, but should provide for geographical, regional and local variations. However, the minimum allocations for SC/ST, women and other vulnerable sections should not be disturbed.

Central and State Schemes should be adequately coordinated with the programmes of PRIs. At the minimum, PRIs should be informed about central and state programs. The functioning of the DRDA is a source of concern. There have been previous recommendations that the DRDAs should be integrated into PRIs. This needs to be implemented. Another issue raised is the inter-relationship between development "authorities" and PRIs. In our view, development authorities have a useful role to play and can complement and supplement PRIs. However, their roles should be integrated so that these authorities do not undermine the role or jurisdiction of PRIs. Our recommendation is that a detailed policy framework be developed to ensure that the functions of the state and local governments be fully synchronized and needless duplication avoided. As a general principle, each leve l of government – PRIs at the village/municipality, block and district levels and state and national governments should respect fully the jurisdiction of the level below on all matters that fall within the physical jurisdiction of the lower level. In line with the decision of the Central Government, PRIs should also move towards outcome budgeting. This will require detailed further work by a task group. (3) Making District Planning Committees (DPCs) more effective:

DPCs need to be strengthened. Their mandate and terms of reference need to be clarified. They need to be held accountable to produce district level plans, which are currently not being produced.

Rules should be issued on the role and functions of the DPC, including with respect to the development of district plans, which should be mandatory.

The District Planning Offices, which serve the DPCs, should also be considerably strengthened. A detailed plan should be developed for this purpose. The availability of data -- and the quality of data where available -- are very poor. This is true of financial flows as well as physical progress in implementing projects and schemes. The DPOs -- and the decentralized planning division of the State Planning Board -- should be strengthened and entrusted responsibility to collect comprehensive and accurate databases on PRIs.

(4) Strengthening Grama Sabhas ; Enhancing People’s Participation in Panchayati Raj and Strengthening Accountability of PRIs: We would recommend that neighborhood sabhas (ayalkootam sabhas) may be created that can feed into and support the enlarged Grama Sabha and its activities. These neighbourhood sabhas could be modeled along the lines of “residents associations” that have become popular and effective in urban areas – indeed; resident associations may be recognized as “ayalkootam sabhas” for the purposes of Panchayati Raj and brought into the Panchayati Raj framework. Grama Sabhas should be provided a physical space within which its members can come together to discuss common problems and obtain necessary assistance from the Panchayat. This space may be called a "Grama Bhavan". Grama Sabhas should also be more than the forum where beneficiaries are selected. They should be the forum in which needs and demands of the community are prioritized, projects developed and monitored. This will require a significant expansion in the amount and nature of information provided to Grama Sabhas. These measures are necessary to enhance the participation of all sections of the community in Grama Sabhas in addition to BPL families. Transparency and the Right to Information : Our recommendation is that Government use its powers to direct PRIs to display prominently in every Panchayat office on a painted board details regarding matters such as: the development needs raised by people in preparing plans, the projects and schemes formulated for meeting these needs, the status of implementation of such projects and schemes, funds received by the Panchayat or raised by it, main details of the use of funds and expenses, and details of contracts awarded by the Panchayat. The ability of citizens to easily obtain information they demand should be ensured on the ground on matters including details of estimates prepared, measurements taken and expenditure incurred. Citizens’ Charter: Although work on preparing Citizens’ Charters by PRIs has begun, it is yet to be completed. The State Planning Board has prepared a model Citizen’s Charter. This should be finalized and issued to Panchayats who should discuss the model Charter in the Grama Sabha, modify it as needed and adopt it in the Grama Sabha.

Election of Presidents/Chairpersons/Mayors: A strong recommendation received during the assessment was that the heads of Grama Panchayats, Municipalities and Corporations should be directly elected. This will deepen public involvement and strengthen the democratic foundations of Panchayati Raj. We would support this recommendation.

(5) Strengthening Capacity and Effectiveness of Panchayati Raj Institutions

A new cadre of "Panchayat Development Officer" should be created along the

lines of the Block Development Officer (BDO) cadre, with focal responsibility to catalyze development in the Panchayat/Municipality. These posts -- one for each Panchayat/Municipality/Corporation -- should be filled by brilliant young people (such as MBAs/engineers/social science experts) through direct recruitment.

A new cadre of "panchayat secretaries" should be created and provided with

effective training, infrastructure and staff to play a crucial role in ensuring the effective functioning of PRI institutions.

In our view, a professional cadre of technical, managerial and financial staff needs

to be developed for PRIs. Government should set up a committee to examine this issue in greater detail and make an appropriate recommendation for government consideration.

Such staff should be formed into a separate professional cadre. The staff should

be fully under the PRIs – at an appropriate tier depending on the nature of the skills/functions of the concerned staff. Where staffs are part of a Kerala or national cadre, disciplinary action against them will need to be subject to the consent of the parent department.

A review of the policy towards training is required. A strategic approach is

needed. KILA has done commendable work within many constraints. KILA should be strengthened and developed further as the key agency responsible for training. KILA's research capabilities should also be built. The deployment of staff should be completed and deployed staff should be brought under the effective control of the PRIs.

The possibility of developing a new separate cadre of PRI staff should be studied,

providing PRIs full powers to engage, discipline and terminate the services of such staff. The expansion of the Local Self Government Department by including technical staff in it does not appear to be a viable or sustainable solution in the long run.

There is no clear demarcation of responsibility between elected officials and staff.

With many committees and working groups as well as the involvement of activists and experts, it is difficult to pin down accountability for non-performance. This should be addressed.

Administrative facilities are woefully inadequate in most PRI institutions. Although there has been a huge increase in work and responsibility following the 1994 Act and the decision to transfer a third of Plan resources to Panchayats, there has not been a commensurate increase in staff numbers. Staffs are overworked with very little recognition. This should be addressed.

Even crucial functions such as accounting are neglected, contributing to the

failure to submit accounts on a timely basis. There is widespread concern about corruption. Needless to say this is not confined

to Panchayats and is equally applicable to government at the state and national levels. However, there is no reason to tolerate corruption at the level of local government. The administrative structure should provide adequate mechanisms to reduce corruption. The Ombudsman should be suitably strengthened further. This is an area that requires detailed further study.

The administrative framework should also provide for social audit by citizens. The establishment of a clear administrative framework for Panchayats is

imperative. This arrangement should be consistent with the spirit of the legal provisions quoted above. It should provide clear accountability.

Steps should be taken to measure, monitor and improve administrative efficiency

commensurate with strengthening administrative capacity and staff resources. Computerization:

Our recommendation is that PRIs should be allowed to purchase or lease their own computers, the specifications could be standardized at the state level. This would also indirectly add to local employment and encouraging of local entrepreneurs. The LSGIs. would also be better off in terms of service support as the supplier would be local.

PRIs may be given the option to use any software (including open source software) suitable to their needs.

The success of decentralization will depend to a great extent on effective training

of elected officials, PRI staff, staff of transferred institutions, state government senior staff, policy makers and policy leaders as well as civil society and members of the public. The experience of KILA, IMG and other agencies that have been involved in training should be harnessed. The material they have developed should be shared. Better coordination of training is required at the State Government level. Perhaps the first priority is strengthening PRI staff. Better use should be made of technology.

A comprehensive and systematic new training strategy should be developed, with

clear goals and objectives and performance benchmarks.

(6) Ensuring Effective Accounting and Audit Strengthening Accountability: Given the large number of bodies involved in its activities, it is difficult for a citizen to hold a PRI accountable today if it fails to carry out its responsibilities. A clear system of accountability to the public needs to be developed through a consultative process. The dispute settlement processes involving the Ombudsman and the Appellate Tribunal were not studied in detail as part of this assessment for want of time. This needs to be done and appropriate remedial steps taken.

Accountability will be enhanced by greater transparency through better communication of information to the public about the activities of PRIs, funds received or raised by them and their audited accounts. Posting such information publicly in the PRI premises will be helpful in this regard. As previously noted, financial details of Panchayats should be prominently displayed in PRI offices – budget allocations, expenditures, contracts awarded, accounts and audit reports. The preparation and issuance of Citizen's Charters may also be expedited and implemented. (7) Strengthening Panchayat Finances

Urgent measures are needed to augment Panchayat’s own source finances. In the last analysis, this must come from panchayats playing the role of catalyst of investment and economic development.

The Third Finance Commission has submitted its report. In deference to its report

and until the Planning Board has a chance to consider the Report, we are holding off on any firm recommendations on the topic of panchayat finances at this stage.

(8) Enhancing PRI role in economic development and poverty alleviation: PRIs play a crucial role in addressing social justice concerns. One of the areas needing greatest strengthening is the role of PRIs in catalyzing private sector investment, entrepreneurship and economic development. The PRIs should be provided a key role and responsibility in the implementation of the President’s 10 Missions along with the 3 Missions of the Kerala Government. (9) Improving Productive Sector Performance We wish to highlight the need for PRIs to identify and provide better support to "lead farmers". This is an issue that requires detailed further study by a suitable working group.

(10) Improving Project Implementation and Maintenance: A detailed strategy needs to be developed to strengthen the internal capacity of PRIs to develop and manage projects effectively. (11) Incentives for Own Resource Mobilization

It is important that own resource mobilization of Local Self Governments should be substantially enhanced to enable the Local Self Governments to meet their responsibilities and respond to local needs. The matter is being examined by State Finance Commission and Government should take up appropriate steps in the light of the Commission recommendation.

Follow Up Action: The implementation of the recommendations in this report will require establishing Working Groups/Task Forces to study identified issues in depth. Necessary amendments to law and regulations will also need to be prepared.

Annexure 1:

A. Summary of Results of Opinion Survey of Elected Panchayat Officials

Questionnaires were sent to all 17098 Panchayat Raj/Nagarapalika Institution's elected members. Out of them 10422 members responded (60.9%). These included Block Panchayats (68%) District Panchayats (51%), Corporation (20.8%), and Municipalities (45%). Out of the total respondents 1315 (12.6%) were SC and 175 (1.7%) ST. 8932 (85.7%) were from the general category. Male respondents were 6319 (60.6%) and female 4103 (39.4%) respectively.

In Block Panchayat 42% were female respondents while in Grama Panchayat

they were 38.9%. The broad feedback obtained from elected panchayat officials may be

summarized as follows.

1.Areas in which change is required:

(1) The participation of APL families and women in Grama Sabhas should be enhanced. 76% of the respondents felt that participation in Grama Sabhas is either declining (51%) or remaining unchanged (25%). 65% of respondents felt that APL participation is most inadequate; 28% felt that participation of women is most inadequate; and 6% felt that the participation of SC/ST is inadequate.

(2) An overwhelming number of participants feel that existing project Proforma and related documents should be simplified.

(3) The majority feel that technical scrutiny is only partially effective or is ineffective and feel that the procedures for obtaining TS are either unsatisfactory or only partially satisfactory.

(4) An overwhelming number feel that sectoral allocations are not helpful in attaining developmental needs and should be allowed to be varied by region.

(5) The strongest consensus is that powers and responsibilities of PRIs should be increased.

2.Areas in which there is need for improvement in current arrangements: (1) Participation in Grama Sabha meetings is low, with the majority of elected

officials having attended only 1 Grama Sabha/Ward Sabha meeting in 2004-2005. (2) The participation of APL population in Grama Sabhas/Ward Sabhas is declining

most; followed by that of women and SC/ST. (3) Block/District Panchayat members are not participating adequately in the meetings

of Grama/Ward Sabhas.

(4) Officers of transferred institutions participate in Grama Sabhas/Ward Sabhas, although such participation needs improvement.

(5) Discussions in the development seminars should be made more useful. (6) The majority felt that cooperation of officers of transferred institutions should be

improved. (7) The process of project preparation should be improved. (8) Availability of transferred officers and their services should be improved. (9) The majority felt that DPCs functioning does not need change, although the

largest number of respondents feel that DPCs should be made more effective. (10) Technical Advisory Committees are only either partially effective, or are

ineffective. (11) Panchayati Raj activities over the past ten years have only been partially effective

in poverty reduction in their locality, have only partially helped reduce backwardness and have only partially contributed to income and employment generation.

3.Areas in which current arrangements and implementation are largely

satisfactory:

(1) Grama Sabha meetings are generally held 3 or more times a year. (2) Group discussions in the Grama Sabhas/Ward Sabhas are effective or at least

partially effective (but see below on poor participation in Grama Sabha/Ward Sabhas).

(3) Grama Sabhas/Ward Sabhas are involved in Plan formulation and implementation and do so well or at least partially well. (but see below on poor participation in Grama Sabhas/Ward Sabhas).

(4) NHGs are functioning satisfactorily in Grama Sabhas/Ward Sabhas and are strengthening Grama Sabhas/Ward Sabhas.

(5) The process of submitting plan documents before the DPCs is satisfactory. (6) Technical Sanctions are being satisfactorily issued by Technical Committees.

Services of experts in the Technical Advisory Committee are either effective or at least partially effective (see, however, the somewhat contradictory opinion below that technical scrutiny is ineffective). Only some 30% support Technical Sanctions being provided by officers.

(7) Women component plans are implemented effectively or at least partially effectively. SCP/TSP schemes are effectively implemented, although a larger number feel that these schemes are ineffective compared to the number that feels the women sub-component plans are not well executed. Schemes for disabled/elderly and children are effectively implemented, although a larger number feel that these schemes are ineffective compared to the number that feels the women sub-component plans are not well executed (at the same level of dissatisfaction as SCP/TSP plans).

(8) The ability of PRIs to raise their own resources has increased in the last ten years.

B. QUESTONNAIRE CIRCULATED TO ELECTED OFFICIALS

A. Functioning of Grama Sabha/Ward Sabha 1. Number of Grama Sabha/Ward Sabha held during 2004-05

(i) One (ii) Two (iii) Three/Four 2. Participation trend in Grama Sabha/Ward Sabha increasing; decreasing.

(i) decreasing (ii) increasing (iii) no change 3. If declining which category

(i) APL (ii) Women (iii) SC/ST 4. Whether the plan formulation and implementation by the Grama Sabha/Ward Sabha

are as per PRIs Act. (i) effective (ii) partially effective (iii) less effective

5. Whether the Group discussions in the Grama Sabha/Ward Sabha are effective (i) effective (ii) partially effective (iii) Not effective

6. Whether the representatives of the Block/District Panchayat participate in the Grama Sabhas/Ward Sabhas

(i) Yes (ii) occasionally (iii) Never 7. Whether the officers of the transferred institutions participate in the Grama Sabhas/

Ward Sabhas (i) Yes (ii) Partially (iii) Never

8. Whether the functioning of the NHG's in the Grama Sabhas/Ward Sabhas are satisfactory

(i) satisfactory (ii) not satisfactory (iii) not functioning 9. Whether the NHG's system are strengthening the Grama Sabhas/Ward Sabhas

(i) strengthening (ii) partially strengthening (iii) No B. Working Groups, Development Seminars and Formulation of Projects 1. Whether the activities and discussions of the working group are satisfactory.

(i) Satisfactory (ii) partially satisfactory (iii) not satisfactory 2. Whether the discussions in the development seminars are useful

(i) useful (ii) partially useful (iii) repetitions 3. Whether the officers of the transferred institutions actively co-operate in the project

preparation (i) Co-operating (ii) partially co-operating (iii) not co-operating.

4. Whether the process of project preparation is satisfactory (i) Satisfactory (ii) partially satisfactory (iii) not satisfactory

C. Deployment, Transfer and Control of Officers 1. Whether the services of the transferred officers are fully available

(i) Available (ii) partially available (iii) not available 2. Whether the services available are satisfactory

(i) Satisfactory (ii) partially satisfactory (iii) not satisfactory D. Planning Committee, Plan Formulation and Consolidation 1. Whether the procedures for submitting the plan document before the District Planning

Committee is satisfactory. (i) Satisfactory (ii) partially satisfactory (iii) need changes in procedures

2. Whether the functioning of the Planning Committee is effective (i) Effective (ii) partially effective (iii) need changes in functioning. 3. Whether the existing project proforma and related documents be simplified. i) need simplification (ii) need partial simplification (iii) no need 4. Whether the functioning of the Technical Advisory Committee is effective

i) effective (ii) partially effective (iii) not effective 5. Whether the Technical Advisory Committees are essential

i) Essential (ii) not essential (iii) present officers may give Technical Sanction E. Functioning of the Technical Advisory Committees 1. Whether the service of the Experts in the Technical Advisory Committees is effective (i) effective (ii)partially effective (iii) not effective 2. Whether the technical scrutiny is effective

(i) effective (ii)partially effective (iii) not effective due to poor performance of the technical committee

3. Whether the procedures for obtaining technical sanction is satisfactory (i) Satisfactory (ii) partially satisfactory (iii) not satisfactory

F. Sectoral Allocation of Plan Fund 1. Whether the Women Component plan is effectively implemented (i) Effective (ii) partially effective (iii) not effective due to conditions 2. Whether the SCP/TSP schemes are effectively implemented.

(i) effective (ii)partially effective (iii) new developmental approach required

3. Whether the schemes for children, disabled and old aged are effectively implemented (i) Effective (ii) partially effective (iii) appropriate projects could not be prepared.

4. Whether the present system of sectoral allocation are helpful in attaining your developmental needs

(i) helpful (ii) partially helpful (iii) sectoral allocation should vary for each

region G. Plan Activities of Panchayat Raj Institutions

1. Whether it has been possible to reduce the poverty of your locality due to the

activities of the PRIs for the past ten years

(ii) Reduced (ii) Partially reduced (iii) Not reduced

2. Whether it has been possible to solve the backwardness of your locality

(i) Solved (ii) Partially Solved (iii) Could not Solve

3. Whether income and employment of our area could be increased through

Decentralized Planning

(i) Increased (ii) Partially Increased (iii) Not Increased

4. Whether the powers and responsibilities of the PRIs' to be increased

(i) To be increased (ii) Not to be increased

5. Whether the Past ten years activities of the PRIs' have decreased the potential of

mobilizing their own resources

(i) Reduced (ii) Increased (iii) No change

Annexure 2

Field Survey of Projects

Major Findings of the Survey The major findings of the review of 1642 projects in 70 PRIs are summarized

below:

Projects taken up by PRIs for implementation are not properly formulated and

implemented as envisaged and therefore assessment of physical targets and achievements

is practically difficult. Accounts of funds expended are not systematically collected and

filed. The majority of projects are not completed as targeted.

The survey reveals that several completed projects remain idle or unused. For

instance, several completed water supply projects remain un-operated due to lack of

electricity connection. Similarly, hospital buildings remain unused due to lack of

electricity, water and doctors.

The survey reveals that several projects completed and operated are poorly

maintained, particularly water supply, streetlights, hospital buildings, roads, industrial

estates, etc. When a PRI formulate a project, maintenance responsibilities have to be

clearly defined and adequate fund set apart.

Project preparation and implementation lack technical expertise. Several roads are

water logged causing damage to roads and some roads are washed away due to rain. In

several water supply projects, water source is a problem particularly during summer. In

mini industrial estates, buildings are constructed but remain unused. In some cases of

industrial estate projects, only land has been purchased. In some other cases, land and

buildings are ready but rooms are not ready for occupation. In such cases, investments

remain idle.

The survey reveals that several employment oriented training programmes are

either ineffective or do not effectively promote employment.

Projects like dairy units, goat farming, vegetable cultivation, garment-making

units, are not sustained and maintained. Cases are noted where such assets have either

been sold or do not exist.

Resource scarcity is a major problem at all levels and therefore additional

resource mobilisation need to be emphasized. Here the survey reveals that beneficiary

contribution to projects is almost nil though projects envisage beneficiary contribution.

Similarly mobilisations of institutional finance to projects are very poor.

Poor monitoring and evaluation of projects during and after implementation is a

major drawback revealed in the survey. Non-completion of projects due to resource

scarcity and its spill over liability could be avoided through proper monitoring.

The Survey found that the weakest area is maintenance of projects, especially in

the productive sectors.

ANNEXURE 3

Views expressed in the District Level Workshops

Note: The following is a summary of key points made in the District level workshops.

They were made by individual participants. Hence they may be mutually contradictory.

They are not necessarily the views of the State Planning Board.

1. Powers, Functions and Responsibilities of Panchayati Raj Institutions in Development

• LSGs should be given full freedom to formulate need based plans & projects

• Co-ordination between different tiers of LSG Institutions is lacking – also

between Urban and Rural.

• Capacity building – intensive training to elected representatives and officials are

essential.

• Powers of DPC are to be clarified.

• Deployment of staff to be completed at the earliest.

• Appointment of essential staff on temporary basis to be allowed to LSG’s

especially teachers, doctors & engineers.

• More involvement of LSG’s in natural calamity relief activities – powers to be

given.

• LSG’s also be given plan approval and funds along with approval of budgets by

Legislature.

• The Local Self Governments have no control over State Sponsored Schemes.

They should have control over the integration of State Sponsored Schemes and

LSG Plan Funds.

• DRDA should be brought under District Panchayats.

• Complete institutionalization is not implemented as envisaged in the Panchayati

Raj Act.

• A workshop for the Presidents and Secretaries may be conducted.

• The number of Grama Sabha meetings may be cut short to two times and may be

conducted more effectively.

• Government is insisting to provide funds for certain schemes like SSA, Akshaya

and at the same time the Panchayat have no role/control over such institutions

which is a failure of decentralization.

• Sector allocation may be at panchayat level and the DPC may be empowered to

accord sanctions for the local level changes.

• KSEB, KWA, SC and ST Departments may also be transferred to three-tier

system.

• The control over the officers of the transferred departments by the Panchayats is

limited.

• There is insufficiency of staff in the local bodies.

• In the case of most of the transferred institutions, the LSG’s have no power to

intervene into the functioning even though a lot of funds are expended for

maintenance, furniture etc.

• DPC to be empowered as an appellate authority.

• Municipal Common Services to be abolished.

• Role of Development Authorities to be redefined.

• Preparation of Master Plan at the corporation area be the responsibility of

Corporations.

• Filling of all vacant posts to be made more regular.

• Infrastructure facilities under natural calamities may have to be executed through

Grama panchayats and if possible, a fixed amount may be provided to each Local

Body President.

• In agriculture and industrial sectors beneficiary oriented department projects may

have to be executed through Local Government. In other words, Local

Government may have to be given total powers in productive sectors for selecting

area and beneficiaries.

• Basic facilities in Panchayats must increase for which more investment is

required.

• Service delivery must improve in all transferred institutions. Here even if Local

Governments provide physical facilities, more staff have to be provided to

improve the service delivery.

• All Government benefits that go to people from different agencies must be routed

through Grama Panchayats for their integration and co-ordination.

• The responsibility of transfer and posting of staff in the local bodies should be

vested with panchayats

• Avoid discrepancy in the deployment of engineers.

• Politicization of development activities should be avoided.

• The necessity of three-tier system is to be assessed. Block Panchayat should be

avoided.

• The post of Panchayat Secretary should be upgraded to a Gazetted post.

• DPC meetings should be conducted in the panchayat at the time of approving

projects.

• Non-co-operation of the transferred staff of departments should be rectified.

• Prepare individual beneficiary list at the panchayat level.

• Transfer of implementing officers over which the LSGs has no control should be

accorded as this affects the plan implementation process.

2. Financial Resources, Resource Mobilization and Utilisation

• Steps should be taken to avoid withdrawal of plan funds already allotted.

• Consider the backwardness of Panchayats when the grant is allotted.

• Plan allocation to Panchayats should be untied.

• Provide grant in aid to Panchayats as a contingency fund for the speedy

implementation of the projects like drinking water, road, minor irrigation,

agriculture etc.

• Steps may be taken to abandon RIDF instead of merging with the plan fund.

• Treasury restrictions may be exempted at least for TSP.

• Treasury ban causes delay in execution of projects.

• Criteria for fund distribution need to be changed.

• Avoidable complications in respect of the bill system. It should be studied and

procedures simplified.

• Plan grant must be distributed on a regular and timely basis.

• There is no source for Block Panchayats for resource mobilization. Therefore

steps may be taken to provide a portion of the own fund of the Grama Panchayats

to Block Panchayats.

• Steps may be taken to avoid the lapse of funds on 31st March.

• The taxing pattern of Panchayats may be revised.

• General purpose Grant of Block Panchayats may be enhanced.

• Loans from Co-operative Banks may be enhanced with the co-operation of co-

operative societies.

• New areas of taxation may be permitted for increasing the income of the

Panchayats.

• A portion of the plan funds may be set apart under the discretion of the

Panchayats for meeting unavoidable expenses.

• Tax structure must change to enable LSGs to collect more funds from building,

entertainment and non-tax sources. Statutory grant to Grama panchayats must be

based on clear and well-defined norms. Building tax rates must be updated.

• Funds for sponsored schemes also be earmarked to LSGs.

• All Self- financing Institutions must be brought under Local Government’s tax net

because in the name of charitable Society Act, these Institutions are doing profit

oriented commercial activities.

• Panchayats must be given the right to fix building tax.

• 25% of national saving collection may be given to the Grama panchayats from

where it is collected.

• Collection of arrears and recovery proceedings must be given to Grama

panchayats.

• Tax on advertisement may have to be extended giving more powers to Grama

panchayats.

• Frequent changes in Government orders for fund utilization, create difficulties for

the Local Governments.

• Curtailing of plan funds after finalization of plan inhibits implementation of plan.

• The restriction of the Maintenance Grant should be relaxed as in the case of

General Purpose Grant.

3. People’s Participation

• Participation in Grama Sabha was more in the initial years but is coming down. • In general, "Ayalkoottam" does not work but "Kudumbashree" works effectively.

• Efforts should be made to increase participation in Ward Sabhas/Grama Sabhas.

• The Panchayats are not in a position to take up even the important proposals of

the Grama Sabha. This affects people's participation.

• The beneficiaries of schemes implemented through Departmental Officers should also be selected in the Grama Sabhas.

• Introduction of tender system results in decrease of peoples participation.

• Due to non-realization of suggestions made by the Grama Sabhas for projects

under the plan, participation in Grama Sabhas decreases.

• Ensure transparency in administration through Social Audit.

• The Panchayat is not in a position to implement the decision of the Grama Sabha, hence the participation of the Grama Sabha is decreasing.

• People from APL families are not attending the Grama Sabha since many

schemes are benefiting members of BPL families.

• District Panchayat is not considering the suggestions of Grama Sabha.

• People’s participation has been decreasing in the fields of construction and development activities.

• Steps may be taken to simplify the rules/Acts for providing individual benefits to

the BPL families with respect to poverty alleviation schemes.

• Awareness programmes to be intensified to encourage attendance in Grama Sabhas.

• Individual benefits should be given only to those attending Grama Sabha.

• SHG’s should attend the Grama Sabhas, and grading should be on that basis.

• Special marks should be given to those who attend all four Grama Sabhas for individual benefit schemes.

• Funds may be utilized on the basis of decisions of Grama Sabha, ins tead of sector

wise earmarking of funds. 4. Plan formulation, Implementation, monitoring and institutionalization of

decentralised planning.

• Planning procedures should be simplified.

• Process for plan formulation and approval should be simplified. • Sectoral distribution of funds should not be imposed from above. • MP-MLA fund should either be stopped or be linked with LSG Plan.

• Difficulty in utilisation of SC/ST Funds: more flexibility is needed.

• Review meetings are to be convened at least quarterly so as to clear all hurdles in

plan implementation.

• Tender formalities and restriction should be reviewed.

• Utilisation of SC/ST fund and general fund to be made proportional wherever the SC/ST beneficiaries are below 51%.

• Planning Cell at LSG level to be formed.

• Computerisation to be entrusted to each LSG. In ordinate delay by IKM to be

taken into account.

• Sector allocation of schemes under KDP should be based on regional needs.

• For project formulation, a Block Level Co-coordinator is required for the smooth functioning of Kerala Development Plan.

• Avoid BLTAC, DLTAC, MLTAC.

• Income limit for BPL families may have to be revised from time to time. • In order to improve transparency in project formulation and effective

implementation, some allowance may have to be given to Monitoring Committee Members.

• Participation and discussions are effective in Vikasana Seminar, but sectoral distribution norms do not permit formulation of plans and submission to DPC as suggested in the seminar. Therefore, the suggestions in the Vikasana Seminar are not totally accepted and hence the seminar becomes a routine exercise.

• Monitoring Committee is generally ineffective. However, in infrastructure works,

monitoring committee becomes partially effective.

• Several Beneficiary Committee Works were executed through contractors.

• Padasekhara Samithies function only marginally because the beneficiary contribution is only on paper but not realized.

• Working Groups & TACs should be made effective. At present they are not

functioning as desired. Smooth functioning should be ensured.

• LSG’s should be allowed to execute work through NGOs.

• Concept of preparation of Five Year Plan for District should be followed.

• Training should be given to Panchayat Committee Members with respect to plan formulation and implementation.

• The existing pattern of beneficiary contribution to water supply schemes may be

avoided.

• Sectoral allocation should be under the discretion of the LSGs..

• The existing format for project proposals may be shortened. • Technical Committee and Technical Advisory Committee should be merged.

• The ceiling of funds for the activities taken up by the Beneficiary Committee may

be enhanced.

• Ensure the services of a permanent Engineering Wing in every Panchayat to assist in the phases of project formulation and implementation.

• Certain schemes have not been implemented effectively due to the non-co-

operation of the KSEB, KWA etc.

• Funds may be set apart for seasonal projects irrespective of the period (such as Agriculture, Check dams, Side protection of Canal etc.)

• Technical Committees may be formulated in the Panchayat level itself.

• There is scarcity of implementing officers.

• TAC meeting may be conducted periodically.

• SSA fund should be earmarked to panchayats and the complete implementation of projects by panchayats.

• The preparation of Annual Plan of LSG should be similar to that of preparation of

SGRY action plan. The DPC should approve only the action plan.

• The Panchayat should be made aware of the departmental programmes.

• Expenditure should be monitored every three months. Block level Monitoring Committees should be formed.

• Technical Advisory Committees should be formed at the panchayat level.

Scrutiny of projects should be through these committees.

• Preparation of projects should be through Panchayat Samithies.

• Monitoring Committee should be appointed by the State Government and the duration of the Committee will be co-terminus with the term of the Panchayat Committee.

• Guidelines should reach on time from the State Planning Board.

• Schedule of estimate rate should be revised in each year.

• Estimate should be prepared in Malayalam.

ANNEXURE - 4

Views expressed in the State Level Workshop

Summary of Key Points raised in the Workshop 1. Peoples participation

• Grama Sabhas should have a proper development agenda.

• Separate Grama Sabha should be convened for beneficiary selection.

• In special situations like natural calamities, Panchayats should be given freedom

to change their plan priorities subject to ratification in the DPC.

• Handbook on productive sector should be given to LSGs for awareness in

productive sector.

• To have a correct picture on productive sector, panchayat development statistics

should be prepared through subject councils.

• Hurdles in spending plan funds should be reduced.

• Sectoral allocation should be based on geographical peculiarities.

• The post of District Collector may be renamed as Chief Executive Officer under

the administrative control of the Planning Department.

• A share of the income raised by agencies like DTPC should be given to the

concerned LSGI.

• Government servants should also act as organisers of Grama Sabha.

• Officials of KWA, KSEB, Revenue Dept etc. should attend the Grama Sabha

• An official may be appointed to assist in the smooth functioning of Grama Sabha.

• Participation in Ward Sabha is are very low

• Grama Sabha should not be convened in all the wards simultaneously.

• Due to the non projectisation of Grama Sabha recommendations, peoples'

participation is decreasing.

• Steps have to be taken to increase the representation of men in Grama Sabha.

• Progress report of plan implementation should be given to the Grama Sabha/ward

Sabha.

• All efforts are to be initiated for increasing attendance in Grama Sabhas

• In order to increase participation in Grama Sabha, Ward Vikasana Samithi may be

constituted.

• Special Grama Sabhas should be held for development issues, beneficiary

selection etc.

• In order to increase the participation in Grama Sabha, special campaign may be

conducted with the involvement of voluntary agencies, cultural organizations,

Grandhasala, Working Group etc.and Ward Vikasana Samithis. • District Panchayat/Block Panchayat members/MLAs should attend Grama Sabhas.

• Special funds may be given to implement the recommendation of those Grama

Sabhas for which the participation is very high.

• Training should be provided to "Ayalkoottam" for increasing participation.

• A fixed centre may be identified/earmarked for convening the Grama Sabha. The

centre may be attached with Anganwadis for accommodating about 300 people.

• Due to restriction in entitlements to subsidies, APL families keep away from

Grama Sabha.

2.Powers,Functions and Responsibilities of Panchayati Raj Institutions

in

Development.

• Financial power of the Panchayat President on emergency situations should be

enhanced from Rs. 5000 to Rs.25000.

• Redeployment of officials should be completed and sufficient staff should be

provided.

• Accountability and responsibility of the transferred officials should be clearly

specified.

• Block level meeting of Grama Panchayat members should be conducted at least

once in every six months.

3.Financial Resources, Resource Mobilizations and Utilizations

• Untied funds may be given to LSGs.

• A proper accounting system may be established to LSGIs

• Monthly allotment of plan fund may be avoided and it should be given as one time grant at

the beginning of the financial year

• Guidelines for distribution of 22.5% share of SCP under IAY/SGSY/SJSRY may be reversed

according to actual need of LSG.

• Funds to LSG’s may be given directly by Centre for Centrally Sponsored Schemes.

• A lumpsum provision may be earmarked for spill over works

• Norms for redefining building tax should be clarified

• Tax structure should be revised to enhance LSGI resource mobilization.

• Mobilisation of own resources to Block Panchayat/District Panchayat – should be identified.

• The panchayat funds lapse on 31st March. But MLA/MP funds are retained. This

discrepancy may be avoided.

3. Plan formulation, implementation, monitoring and institutionalization of

Decentralised Planning

• Sufficient facilities (both infrastructure and manpower) should be created in the DPC

Secretariat for facilitating the proper scrutiny and approval of projects.

• In order to avoid duplication in the projects, the list of proposals under MLA/ MPLAD

should be given to the LSGIs/DPC in advance.

• Enough freedom should be given to DPC’s to take up projects in accordance with the nature

and needs of the district.

• TAC’s and TC’s should be avoided and power should be given to the LSG engineers

themselves.

• The DPC should invariably be informed about all development activities in the District.

• Steps should be taken to implement Ashraya Project in all LSGI’s.

• Powers may be given to Grama Panchayats for maintenance of any asset located in the

panchayat, even though they are not transferred to the concerned LSGI’s.

• The suggestions made by Grama Panchayat to higher levels is not considered properly by

Block Panchayats and District Panchayats.

• Full time Co-ordinator at Block level may be appointed either by deployment or by giving

honorarium or voluntary service.

• Control over redeployment may be entrusted to LSGIs.

• Comprehensive district development plans should be prepared by the DPC.

• The Power to appoint and take disciplinary action with respect to department officials may

be entrusted to LSGs.

• Steering Committee meetings of Standing Committee Chairmen should be convened at least

twice in a month

• Complete freedom may be given to LSGIs to formulate Annual Plans

• Ensure co-ordination between three Tier Panchayats.

• Plans formulated by Block Panchayats and District Panchayats should be in accordance with

Grama Sabha decisions.

• DPC should undertake the scheme for rehabilitation of landless and houseless puramboke

dwellers

• Restrictions on sectoral allocation may be avoided.

• Development issues may be discussed in DPC meetings.

• Working Calendar may be prepared in each LSGI.

• Active participation of SC/ST department officials may be ensured in formulation and

implementation of programmes for SC/ST.

• Freedom for Sectoral allocation may be given to DPC based on the geographical area of the

LSG’s.

• Complete the minutes of the Grama Sabha on the day of the meeting itself.

• While approving the projects of LSG’s by DPC, the minutes of the Grama Sabha may also be

verified in order to ensure that all recommendations are projectised.

• Since the Village Extension Officers are field staff, an office staff may also be appointed to

assist VEOs.

• An Accountant may be posted in LSGs as the accounting capability of the existing staff is

inadequate.

• Re-define the role of Heads of Departments/DPC members

• Performance appraisal of officials should be entrusted to LSGs.

• Arrange Training and awareness programmes about monitoring of programmes both for

officials of LSG’s/peoples representatives

• Integrate MGP schemes with LSG programmes

ANNEXURE 5

List of Persons/Organisations consulted

Views and suggestions sought from various individuals and organisations in

the Panchayati Raj field:

I.MP’s/MLA’s/Ex.MLA’s

1. MLA’s

2. MP’s

3. Ministers, Speaker, Deputy Speaker, Leader of Opposition

4. Ex-MLA’s-(49 nos.)

II.Association of Local Governments

1. Kerala Grama Panchayat Association

2. Kerala Block Panchayat Association

3. Chamber of District Panchayat Presidents, Kerala

4. Municipal Chairmen’s Chamber

5. Mayor’s Council

III.Employees Organisation

A.Panchayats

1. Kerala Panchayat Employees Organisation

2. Kerala Panchayat Employees Association

3. Panchaytat Secretaries Association

4. Kerala Panchayat Non-Gazetted Officers Federation

5. Kerala Panchayat Departmental Ministerial Staff Association

6. Secretaries Union

7. Kerala Panchayat Employees Union

8. Kerala Panchayat Engineering Staff Association

B. Municipalities and Corporations

1. Kerala Municipal and Corporation Staff Union

1. Kerala Municipal and Corporation Staff Association

C. Rural Development Department

1. Kerala State Block Development Officer’s Association

2. Kerala State Community Development Extension Officers Association

3. All Kerala Lady Village Extension Officers Association

4. Kerala Rural Development Employees Organisation

5. All Kerala Women’s Welfare Officers Association

IV. Experts

V. State Planning Board Ex-Members (3 Nos.)

ANNEXURE 6

CHANGES MADE TO THE FUNCTIONING OF PRIs IN THE TENTH PLAN

(i) SECTORAL ALLOCATION

Ninth Plan Tenth Plan

A. Panchayat A. Village Panchayat/Block Panchayat

i. Productive sector – 40% (Minimum) I. Productive Sector – 30% (Minimum)

ii. Infrastructure – 30% (Maximum) II. Infrastructure – 30% (Maximum)

B. Municipalities B. District Panchayat i) Productive Sector – 20% (Minimum)

I. Productive Sector – 25% (Minimum)

ii) Infrastructure – 35% (Maximum) II. Infrastructure – 30% (Maximum) iii) Slum improvement – 10% (Minimum) C. Municipalities/Corporation

I. Productive Sector – 10% (Minimum) II. Infrastructure – 50% (Maximum) III. Slum improvement – 10% (Minimum) § Atleast one third of the plan grant

under productive sector in the general sector should be earmarked for schemes of rain water harvesting, roof water harvesting in public buildings, rehabilitation of water bodies.

§ RIDF is given to District and Block Panchayat as part of grant- in-aid.

§ Plan for children, disabled and aged – 5% of the total plan allocation

§ Assistance to co-operatives and charitable societies are restricted upto 2004-05. During 2005-06 producers societies are given assistance based on norms.

(i) PLAN PREPARATION

Ninth Plan Tenth Plan Task Forces.

Working Groups § Task Forces for each sector § Working groups for each sector § Mandatory Task Forces § Mandatory Working Groups

i) Women Development ii) SC/ST Development and iii) Co-operation. § 10 to 12 members. § Chairman-preferably elected

representative § Vice-Chairman - subject expert –

preferably a member of the voluntary Technical Corps.

§ Convenor – implementing officer or an officer from related Government Department.

1) Water-shed Management including agriculture and allied sector.

2) Animal Husbandry and related sectors. 3) Local Economic Development other than

agriculture including local industries, facilitation of private and community investment.

4) Poverty Reduction. 5) Development of Scheduled Castes. 6) Development of Women and Children. 7) Health, Water Supply and Sanitation. 8) Education. 9) Infrastructure. 10) Social security including care of the aged and disabled. 11) Development of Scheduled Tribes (if the Panchayat have allocation on TSP)

§ Joint Convenor – Local resource person. § Chairman – elected member. § 30% of the members shall be women. § Vice-Chairman – Expert in the Sector. § Population proportion of representation

of SC/ST. § Convenor – Senior most official transferred to

the LSG in that sector. § 4 general body meeting of the Task

Forces. § At least one member from CDS be included.

§ SC Promoters be included. § Working Group have the power to co-opt

members as well as set up Task forces to perform assigned functions.

§ Quorum of the Working Group is 4 members including the mandatory presence of the convenor.

As part of Tenth Five Year Plan LSG’s have to prepare;

1) Vision Document. 2) Development Report – Updating. 3) Reform Plan. 4) Benefit Register.

(iii) VETTING OF PLANS

Technical Advisory Committees (TAC’s) Voluntary Technical Corps/Plan Appraisal

Teams

§ Service of retired technical experts and professionals were utilised as volunteers to appraise the projects.

§ Experts from professional colleges, academic institutions, public/private sector organisations, NGOs, Bankers and from among retired personnel and practitioners as members. The TAC's should have sub groups for different sectors.

§ Block Level Expert Committees for scrutinisation of Grama Panchayat Plans. Chairperson – a Senior non-official member of VTC.

Convenor – Secretary, Block Panchayat.

§ Block Level Technical Advisory Committee (BLTAC) for scrutinisation of Grama Panchayat plan.

Chairman - Decided by District Planning Committee Convenor and Secretary - Secretary, Block Panchayat

§ District level Expert Committee for Block Panchayat and District Panchayat.

Chairperson – District Collector. Convenor – District Planning Officer. § Municipal Level Expert Committee

for Municipalities. Chairperson – a Senior non-official member of VTC. Convenor – Senior District level Officer.

§ Corporation Level Expert Committee for Corporation Plan.

Chairperson – a Senior non-official member of VTC. Convenor – Senior District level Officer.

§ District Level Technical Advisory

Committees for Block Panchayats, District Panchayats, Municipalities and Corporations.

Chairman – District Collector Convenor and Secretary – District Planning Officer

Chairperson of BLTAC and Chairperson and Convenors of Sub group of TAC both Block and District level be decided by DPC.

Quorum of subject committee is two members and presence of the mandatory member is essential.

§ Quorum of the Committee is decided by the DPC and it should not be less than three (in case of sub groups)

(iv) TECHNICAL APPROVAL

Expert Committee Technical Committees.

§ Grama Panchayat Block Panchayat

Block Level Expert Committee (BLEC)

§ Grama Panchayat Block Panchayat

Block Level Technical Committee (BLTC)

§ District Panchayat District Level Expert Committee (DLEC)

§ District Panchayat

District Level Technical Committee (DLTC)

§ Municipality Municipal Level Expert Committee (MLEC)

§ Municipality Municipal Level Technical Committee (MLTC)

§ Corporation Corporation Level Expert Committee (CLEC)

§ Corporation Corporation Level Technical Committee (CLTC)

(v) IMPLEMENTATION OF WORK

Ninth Plan Beneficiary Committee/Public Committee can be entrusted.

Tenth Plan

§ Work costing more than Rs.25,000/- should be tendered. The ceiling is enhanced to Rs.50,000/- during 2005-06.

§ All road works involving tarring should be tendered.

§ All building works are tendered except Schools and Anganawadies

where the P.T.As are willing to undertake.

§ Irrigation and Water Supply works which have the mandatory contribution can be executed through the Beneficiary Committee.

CDS could be entrusted with execution of public works as community contracting.

ANNEXURE 7

OBSERVATIONS BY AUDITORS ON PRI ACCOUNTS

1) The auditing of accounts of PRIs is not taken seriously. Local Fund Audit Act

stipulate that the audit of local bodies is to be completed within six months after

submitting their accounts and within four months of the completion of financial

year. But audits as envisaged in the Act, rarely materialise in the 1215 Local

Governments. Similarly Audit Reports are to be placed in the Legislative

Assembly and published annually.

2) Local Fund Audit Department does not fully exercise their powers as envisaged in

the Panchayati Raj Act apparently due to lack of legal or constitutional protection

for it to function as an independent institution.

3) Authority entrusted with the Audit and Accounts of the PRIs should not have any

functional responsibilities in regard to those bodies. Hence, the accountability not

seems ensured. Secretary and other staff working in Local Governments, who

implement schemes and meet expenditure, would audit their own schemes, when

they are promoted to Performance Audit Wing. This very often violates the audit

principles.

4) C&AG is the authorised authority of prescribed formats suitable for the

preparation of budgets as well as keeping of accounts by the PRIs. But

responsibility to maintain accounts seems to have been extended to other agencies

such as IKM with no relevant expertise.

5) One half percent of the total expenditure incurred by the PRIs should be placed

with the C&AG for the audit of accounts to be done through his own staff or by

engaging outside agencies on payment of remuneration fixed by them.

6) Most of the Local Governments do not keep proper accounts for plan grant that

they spent or maintain proper registers with receipts and vouchers. For Audit

Teams, this creates difficulty for the proper conduct of the audit.

7) Generally accepted accounting principles in Government offices are not seen

followed in Local Bodies to preserve transparency in accounting system.

8) Lack of clarity in delegation of powers and work entrusted leads to officials

avoiding responsibilities.

9) Laxity in fixing accountability leads to several socio-economic problems. For

example, loss incurred in the use of plan fund through unscientific cultivation,

dumping of tools and equipment without distributing to bene ficiaries, undue delay

in finalising bills for the work done by Beneficiary Committees and realising the

advance amounts given etc. (Performance Audit Report 2002-03, Municipalities

Page 1, 2 & 3)

10) Lag in implementing projects having perspective and social outlook. For

example, education projects (Performance Audit Report 2002-03 Municipalities

Page-3)

11) Misuse of plan funds without considering benefits to the public or the institution

(eg:Rs.10 lakh given as advances to officials not collected back - Performance

Audit Report 2003-03 Municipalities - Page-5)

12) Diversion of plan funds is a common phenomenon in PRIs, including diversion

from approved projects to non-approved projects, diversion from sectoral

allocations, diversion from SCP/TSP norms etc. (e.g.(1) Rs.2.40 lakh diverted

from plan fund for giving salary by Punalur Municipality - Performance Audit

Report - 2002-03 (Municipalities) Page-3 (2) Page 6 item 4 Performance Audit

Report - 2002-03 (Municipalities)

13) Most of the PRIs are not able to fully utilise grant- in-aid. Hence, a share of

grant- in-aid seem non-utilised each year. (Page 5 item 6 of Performance Audit

Report - 2002-03 (Municipalities).

14) Projects formulated for implementation after the approval of the DPC, are either

kept in abeyance or partly implemented or in neglected stage in several local

Bodies. This is due in part to the lack of allocation of the responsibilities and

accountabilities. (P.4 Items 3, 4, 1 Page-5 Items 1, 2, 3, 4 P-6 Items 1, 2, 3, 1, 2,

Page 7 Items 3, 4, 1, 2, 3, 4)

15) Audit Reports reveal the lack of follow up action in the implementation of

projects by the officers as well as people elected to LSG. For instance, against

the target for the construction of 180 houses, only 80 houses have been completed

and amount distributed is only Rs.39,25,000 against the total allotment of

Rs.72,00,000/- received from Kudumbashree (Kayamkulam Municipality) (Ref:

Performance Audit Report 2002-03 of Municipalities)

16) Unclaimed deposits: Most of the PRIs have deposited huge amounts unclaimed

with agencies like KSEB, KWA, Nirmithi Kendra, Housing Board etc.

(Performance Audit Report 2002-03 Municipalities Page 1 and Annexure II).

17) Breaking of office procedures- matters related in the purchase of stationeries,

tools and equipments etc. for distribution to beneficiaries existing government

procedures are not only followed but are violated in most of the cases but no

actions are initiated against the violation.

18) Diversion of benefits to individuals/families is noticed and in several cases,

beneficiaries exceed the number of applications received and in some cases

benefits are given to non-beneficiaries neglecting the real beneficiaries.

19) Beneficiary Contribution is always inflated and it is not always realised and it

badly affects the project implementation. (P.44 of Performance Audit Report

2002-03 Item 5)

20) Effective Steps have not been taken to complete the spill over schemes for the

past years. Only the protection of the local and personal interests. As a result of

the introduction of various new projects started in each year, multiplicity of

schemes and the scarcity of required funds were the main obstacles for the

successful completion of the various schemes.

21) There is no careful compilation of the suggestions obtained from Grama Sabhas,

development seminars etc.

22) Most of the Panchayats have marked the beneficiary contribution in the plan

document. But in the last stage of the activity, the funds was not available at

required time and the beneficiary contribution has also merged in the plan fund.

23) Lion Share of the Plan Fund used for the construction of shopping complexes,

charitable societies etc in the name of Block Panchayat is now in the hands of

private individuals as their property. Therefore the Panchayat has no control

over the activities of these institutions and expenditure.

24) Estimate of projects are prepared without proper enquiry and field survey. This

leads to the increase in expenditure and delay in the execution of these projects.

25) The performance of the technical employees (Engineering) is not satisfied,

especially unnecessary delay has occurred in the preparation of bills,

measurements etc.

26) For the past years, the accounting of panchayats and the accounting of treasury

are not in a position to reconciliation in majority of the Block Panchayats.

27) Effective steps have not been taken by the Block Panchayats against the

institutions/individuals who are responsible for the mis-utilisation/loss of the

plan funds.

28) Care is not taken to keep the minutes books of Administrative Committee, other

Sub Committees by majority of Panchayats.

29) Plan funds which was given to various Co-operative institutions and charitable

societies by Block Panchayats have not been evaluated whether utilisation has

achieved intended benefits.

30) Without understanding the requirements of any project and how to ensure that the

project would be implemented, lakhs of rupees of materials are purchased and

remain inactive and unutilised.

31) In case of housing schemes, many projects to be implemented during 2001-02

have been abandoned.

1) Efficiency, responsibility and punctuality have not been ensured by Government

agencies like Water Authority, Nirmithikendra, Costford, Electricity Board,

Habitat Technology Group etc.

2) Many completed buildings according to the estimates prepared by the

Nirmithikendra, Costford etc. are in inadequate facilities in their super division.

Many projects started from the financial year 1997-98 remain incomplete.

References

Performance Audit Report (1997-98 to 2001-02)

Performance Audit Report (2002-03)

Consolidated Audit Report; Local Fund Audit Report (2002-03)

Audit Suggestions: In our discussions with auditors, a number of suggestions were

received on how to strengthen financial management in PRIs. These include the

following:

1.Local Fund Audit Department must be strengthened with more staff and empowered

with more functions and responsibilities to audit PRIs independently, similar to C&AG.

This would enable the department to audit the accounts of all PRIs on a regular and

timely basis.

2.The Accountant General may be authorised to undertake compulsory audit exclusively

of Plan Funds provided to PRIs since it is a part of the Consolidated Fund of India, in a

time bound manner;

3. The Performance Audit staff should be appointed from the departments other than

Panchayat/Rural Development/Municipality Departments so as to avoid violation of audit

principles.

4. A "Grant- in-aid Finance Code" should be prepared and published, comprising all the

rules and regulations dealing with Plan formulation, implementation, monitoring and

evaluation, resource mobilisation, fund transactions, keeping of registers, receipts and

vouchers, filing of annual accounts, and common accounting principles, computerised

accounting systems, fixing of liabilities, misappropriation of funds and its disciplinary

actions and procedures, process of audit and accounts etc. applicable to PRIs staff,

elected members of the PRIs, audit groups related to PRIs etc.

5. Delegation of powers to elected members and staff of PRIs may be fixed along with

liabilities and accountabilities.

6. A State level and District level virtual organization for "Performance and Plan Management Cell" may be formed to address problems faced by PRIs in implementation of annual plan.