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Financial Administrationof The Rural

Local Bodies

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PRINCIPLES THAT GOVERN

RURAL LOCAL FINANCE:

Independence and responsibilityAdequacy and elasticity

Integration and coordinationPublic accountabilitySimplicityEecti!e personnel managementFiscal access

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RURAL LOCAL GOVERNMENT:

SOURCES OF REVENUE

 All go!ernmental programmes "ould remain mere paperitems in the absence of adequate #nancial resources$ As amatter of fact% go!ernment cannot achie!e any of its socialand economic goals "ithout requisite #nances$ Thus% it can safely be concluded that #nances are sine quanon for the success of Panchayati Ra&$ The pattern ofre!enues of Panchayati Ra& !aries from State to State$ Butthe sources of re!enue of Panchayati Ra& Institutions% ingeneral% may be grouped under'  Ta( Re!enue%  )on*Ta( Re!enue%  +rants*in*aid%  Loans%  Share of State Ta(es% and  ,onations and -ontributions$

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 Ta( Re!enue'  E!ery unit of Panchayati Ra& is empo"ered to impose obligatory or discretionary  ta(es under the authority of la"$

 These are the follo"ing'  -hula or .ouse Ta(Local rate Ta( on profession or trade% or employment Ta( on animals and !ehicles$Pilgrimage Ta( Ta( on public entertainments  Toll /on ne" bridges0  Lighting Ta(1ater Ta(

)on*Ta( Re!enue'  The non*ta( re!enue of Panchayati Ra& consists of'

a0 fees at fairs% agricultural sho"s etc$%b0 fees for use or bene#ts deri!ed from public hospitals% dispensaries% mar2ets etc$%c0 licence feesd0 3udicial #nes $e0 remunerati!e assets f0 rents and pro#ts accruing from property !ested in or managed by Panchayati Ra&

Institutions andg0 income from trusts% endo"ments% gifts$

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Grants-In-Aid:

In all the States% the Panchayati Ra& Institutions depend hea!ily upon the grants fromthe state go!ernments$ +rants*in*aid gi!en by the States are ad hoc anddiscretionary in nature depending largely on the a!ailability of funds "ith the States$broadly be di!ided into t"o categories*general purpose grant and speci#c purposegrant$ The former is released to Panchayati Ra& Institutions to meet their general

e(penditure$ The latter grant is earmar2ed for certain speci#c purposes such as "ater supply% 4ush type latrines% se"erage system etc$

Loans:

Panchayati Ra& Institutions raise loans to meet the capital e(penditure in!ol!ed insatisfying the increasing local needs "hich are de!elopmental in character$ In India%local borro"ings are regulated by an All*India Act 2no"n as the Local Authorities

Loan Act of 5657$ The State go!ernments may impose dierent forms of restrictionson Panchayati Ra& Institutions to raise loans "hich !ary from State to State$

Share of State Taes:

Some of the state go!ernments share the proceeds of some speci#ed ta(es such asLand re!enue% local cess% sales ta( etc$% "ith the Panchayati Ra& Institutions$ For

e(ample%78 per cent of the total land re!enue collected in the !illage is gi!en to +ram

Panchayats in Pun&ab$

!onations and Contri"#tions:

Apart from the abo!e sources of re!enue% Panchayati Ra& Institutions also deri!e

income from other sources$ For e(ample% +ram Panchayat earns income fromShamlat /common0 Land gi!en on rent for culti!ation or gra9ing purposes$ Besides%they also recei!e donations and contributions from All*India bodies and institutions

for speci#c purposes li2e adult literacy% cottage% !illage and small scale industries$ Theincome from these sources is negligible no"$

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Steps in!ol!ed in Rural Fiscal :anagement';perations in #nancial administration in rural local go!ernment arethose designed to generate% regulate and distribute the #nancialresources needed to pro!ide ser!ices to the community$ These

operations are performed by 'o  The e(ecuti!e "ing "hich prepares the budget$o  The legislati!e "ing "hich alone can grant funds$  The e(ecuti!e controls the e(penditure of funds sanctioned by the

legislati!e "ing$o Audit department

o Standing -ommittee

Financial control e(ercised by the go!ernment or +o!t or +o!t agencies o!erPanchayati Ra& Institutions'

Strict control e(ercised by the go!ernment on the ta(ation po"ers of the Panchayati Ra& Institutions$

-entralised accounting procedures Accounts sub&ected to go!ernment audit Pre*audit

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PRO$LEMS OF RURAL LOCAL

FINANCE:

Improper utilisation of ta(ationpo"ers

>n"illingness on part of Institutionsto mobili9e the resources$

Present system of grants*in*aid"hich isuncertain% irregular and unrelated to

the  needs of the institutions$

Irregularities in the system of audit