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 Peoples 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 Peoples 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. Gandhijis Grama Swaraj was a confluence of two inter-related central tenets of
his beliefs the unique importance of the Indian village to Indias 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 Nations 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 Mahatmas 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 Gandhis 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 Panc hayats 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.

Peoples Planning Campaign

The new LDF Government that took office in May, 1996 launched a Peoples
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 Committees 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. Sens 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 Peoples Planning Campaign that
was proceeding in parallel with the work of the Sen Committee.

1
Interview of Shri. Budhadeb Bhattacharya, Peoples 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 Peoples 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 Peoples
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 Peoples 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 Peoples 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
Peoples 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 Peoples 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 Peoples 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 Peoples
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 LSGs 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 Modernizatio n 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 State Plan - Release to
Year Revised LSGs %
State LSGs % Outlay*
(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 30.54

761.38
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
1438.15 @
2003-04 4430.25 1317.00 29.73 3796.23 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 TENTH PLAN NINTH PLAN TENTH PLAN
1st three years 1st three years 4th & 5th years 4th & 5th years
(1997-98 to1999- (2002-03 to 2004- (2000-01 to 2001- (2005-06 to
2000) 05) 02) 2006-07)

State Plan 8845.20 11134.80 4753.25 NA

(Revised
Outlay)
LSG Outlay 2486.03 3660.13 1418.43 NA
% to State 28.11 32.87 29.84 NA
Plan
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 TENTH PLAN NINTH PLAN TENTH PLAN

1st three years 1st three years 4th & 5th years 4th & 5th years
(1997-98 to 1999- (2002-03 to 2004- (2000-01 to 2001- (2005-06
2000) 05) 02) to 2006-07)
 Plan % of Plan % of Plan % of Plan % of
amount state amount state amount state amount state
released plan released plan released plan released plan
1 2 3 4 5 6 7 8 9
Grama 1399.56 15.82 2276.2 20.44 762.65 16.04 NA NA
Panchayat
Block 358.41 4.05 466.05 4.19 242.36 5.10 NA NA
Panchayat
District 376.48 4.26 387.52 3.48 198.8 4.18 NA NA
Panchayat
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 32.87 1418.44 29.84 NA NA
(Rs.1174.1
Crore
more than
the first
three years
of the
Ninth
Plan)

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 TENTH PLAN NINTH PLAN TENTH PLAN

1 st three years 1 st three years 4 th & 5 th years 4 th & 5 th years
(1997-98 to (2002-03 to (2000-01 to 2001-02) (2005-06 to
1999-2000) 2004-05) 2006-07)
Expenditure Expenditure Expenditure Expenditure
Grama 1258.53 1793.01 675.18 NA
Panchayat
Block 314.22 376.25 192.63 NA
Panchayat
District 340.2 276.01 165.37 NA
Panchayat
Municipalities 189.28 226.32 112.93 NA
Corporations 128.76 177.90 79.00 NA
Total 2230.99 2849.49 1225.10 NA
(Rs.618.50
crore more
than in the
Ninth Plan)

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 DRDAs were merged with District Panchayat and orders
where issued accordingly. During Tenth Plan DRDAs 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 peoples 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 the m 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 Peoples Planning Campaign.

The Peoples 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 ye ars, 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 Boards 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 Governments 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 Peoples Participation in Panchayati

Raj and Strengthening Accountability of PRIs:

Strengthening Grama Sabhas : The Grama Sabha is the most important

institutional mechanism for peoples participation in decentralization. One of the most
important concerns raised during the assessment has been that peoples 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 Assist in collection and compilation of
the developmental scheme of the village details required to formulate developmental
plan;
Formulate proposals and fix priority of
schemes and developmental programmes
Supervise the implementation of To collect information regarding the detailed
developmental schemes and render estimates of works proposed to be
assistance in such implementation implemented in the panchayat area
Promote harmony and unity among Promote harmony and unity among various
various groups of people in the panchayat 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 Provide and mobilize voluntary service and
contributions in cash and in kind for contribution in cash and in kind necessary
community welfare programs for developmental plans
Render assistance for identification of Prepare and submit to the Panchayat a final
beneficiaries 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 Pancha yat 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 Keralas 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 Panc hayats 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 Citizens
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 PRIs 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
LSGs 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 LSGs to implement
them. IKM could have been given the responsibility of training up the staff of LSGs or
the vendors selected by the LSGs 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&AGs 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 administratio n, 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 Peoples 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
Peoples 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 comprehe nsive 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 Number of LSGIs whose

LSGIs. 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 31 st 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 Panchayats 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 taxs 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 no n-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 reve nue 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 States Own Tax Revenue as a General Purpose
Grant (Rs. 205.32 crores) and 5.5% of the States 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
presump tive 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 investme nt, entrepreneurship and economic development.

The PRIs should be provided a key role and responsibility in the implementation
of the Presidents 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 Peoples 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 Citizens
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 informatio n 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 Panchayats 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 recommendatio ns 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
Presidents 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 LSGs
especially teachers, doctors & engineers.
More involvement of LSGs in natural calamity relief activities powers to be
given.
LSGs 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 LSGs 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 31 st 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 Governments 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. Peoples 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.

Peoples 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.

SHGs 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.

LSGs 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 selectio n.
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 LSGs 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 sho uld be given to DPCs to take up projects in accordance with the nature
and needs of the district.
TACs and TCs 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 LSGIs.
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 LSGIs.
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
LSGs.
Complete the minutes of the Grama Sabha on the day of the meeting itself.
While approving the projects of LSGs 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 LSGs/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.MPs/MLAs/Ex.MLAs
1. MLAs
2. MPs
3. Ministers, Speaker, Deputy Speaker, Leader of Opposition
4. Ex-MLAs-(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 Chairmens Chamber
5. Mayors 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 Officers 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 Womens 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 1) Water-shed Management including
ii) SC/ST Development and agriculture and allied sector.
iii) Co-operation. 2) Animal Husbandry and related sectors.
10 to 12 members. 3) Local Economic Development other than
Chairman-preferably elected agriculture including local industries,
representative facilitation of private and community
Vice-Chairman - subject expert investment.
preferably a member of the voluntary 4) Poverty Reduction.
Technical Corps. 5) Development of Scheduled Castes.
Convenor implementing officer or an 6) Development of Women and Children.
officer from related Government 7) Health, Water Supply and Sanitation.
Department. 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 Convenor Senior most official transferred to
of SC/ST. the LSG in that sector.
4 general body meeting of the Task At least one member from CDS be included.
Forces.
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 LSGs have to
prepare;
1) Vision Document.
2) Development Report Updating.
3) Reform Plan.
4) Benefit Register.
 (iii) VETTING OF PLANS

Voluntary Technical Corps/Plan Appraisal Technical Advisory Committees (TACs)

Teams
Service of retired technical experts
and professionals were utilised as
volunteers to appraise the projects.
Block Level Expert Committees for Block Level Technical Advisory
scrutinisation of Grama Panchayat
Plans. Chairperson a Senior non-
official member of VTC.
Convenor Secretary, Block Panchayat. Committee
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.
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.
Committee (BLTAC) for scrutinisation
of Grama Panchayat plan.
Chairman - Decided by District Planning
Convenor and Secretary - Secretary, Block
Panchayat
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 Quorum of the Committee is decided by

members and presence of the mandatory the DPC and it should not be less than
member is essential. three (in case of sub groups)
 (iv) TECHNICAL APPROVAL

Expert Committee Technical Committees.

Grama Panchayat Block Level Expert Grama Panchayat Block Level
Block Panchayat Committee (BLEC) Block Panchayat Technical Committee
(BLTC)

District Panchayat District Level District District Level

Expert Committee Panchayat Technical Committee
(DLEC) (DLTC)
Municipality Municipal Level Municipality Municipal Level
Expert Committee Technical Committee
(MLEC) (MLTC)
Corporation Corporation Level Corporation Corporation Level
Expert Committee Technical Committee
(CLEC) (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 statio neries,
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.