Panchayat leaders protesting excessive interference from State and Central governments in Chennai
| Photo Credit: B. Jothi Ramalingam
Only 1% of the revenue of panchayats was earned by them, with the rest being raised as grants from the State and the Centre, show data. Specifically, 80% of the revenue was from Central government grants; only 15% was from State government grants. Consequently, the revenue raised by panchayats formed a minuscule share of the States’ own revenue.
Panchayats act on three levels — gram sabhas, panchayat samithis, and zila parishads. They are responsible for a variety of tasks including agriculture, rural housing, water management, rural electrification, healthcare, and sanitation. In some cases, zila parishads are also responsible for maintaining schools, hospitals, dispensaries, and minor irrigation projects.
However, due to dependence on the Centre and the State for their funds, most panchayats suffer from interference from the top two tiers of the system, according to news reports. In August last year, several panchayat heads protested in Chennai asking for the independence of the Panchayati Raj. A news report from Telangana last year stated that the failure of the State government to release funds on time forced sarpanches to use private funds. The Standing Committee on Rural Development and Panchayati Raj said in March last year that 19 out of 34 State/Union Territories did not receive any funds under the Rashtriya Gram Swaraj Abhiyan scheme in FY23. The programme was started to build capacity and train elected representatives.
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The recently released report by the Reserve Bank of India on the finances of Panchayati Raj Institutions for 2022-23 argues that one of the ways forward is to promote greater decentralisation and empower local leaders and officials. According to the report, panchayats had recorded a total revenue of ₹35,354 crore in 2022-23 (Chart 1). Of this, just ₹737 crore was earned by their own tax revenue. Panchayats can earn this through taxes on profession and trades, land revenue, stamps and registration fees, taxes on property, and service tax.
Chart 1| The chart shows the revenue receipts of panchayats in 2022-23. Figures in %
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Panchayats also earned ₹1,494 crore through non-tax revenue, which is mostly earnings from interest payments and Panchayati Raj programmes. In contrast, they earned ₹24,699 crore as grants from the Central government and ₹8,148 crore as grants from the State governments.
Chart 2 | The chart shows the average revenue per panchayat in 2022-23. Figures in ₹ thousand
In 2022-23, each panchayat earned just ₹21,000 as its own tax revenue and ₹73,000 as non-tax revenue (Chart 2). In contrast, each panchayat earned about ₹17 lakh as grants from the Central government and more than ₹3.25 lakh as grants from the State governments. In essence, just 1% of panchayats’ revenue comes from their own revenue (Chart 3).
Chart 3 | The chart shows the revenue per panchayat in percentage terms in 2022-23.
When we look at the average revenue earned per panchayat in 2022-23, there are wide variations among States. In Kerala, the average revenue raised by each panchayat was over ₹60 lakh in 2022-23. West Bengal came a close second with an average revenue of ₹57 lakh per panchayat. The revenue was over ₹ 30 lakh per panchayat in Assam, Bihar, Karnataka, Odisha, Sikkim, and Tamil Nadu; and less than ₹6 lakh in Andhra Pradesh, Haryana, Mizoram, Punjab, and Uttarakhand (Chart 4).
Chart 4 | The chart shows the average revenue per panchayat across States in 2022-23. Figures in ₹ lakh.
Due to meagre revenue raising potential, panchayats’ share in the respective State’s own revenue was poor. For instance, in Andhra Pradesh, revenue receipts of panchayats formed just 0.1% of the State’s own revenue. The revenue of panchayats in Uttar Pradesh formed 2.5% of the State’s own revenue, the highest among States.
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Chart 5 | The chart shows the revenue of panchayats as a share of the State’s own revenue in 2022-2023. Figures in %.
Source: Reserve Bank of India (RBI) report titled ‘Finances of Panchayati Raj Institutions’
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