By Categories: ARC

Dear All ,

To summarize a huge report (143 page) in to a single article is a very challenging task. We know that everybody says they like ARC, but we know for a fact that not many of us do read it or if we read it we do so partially. The reason is the size of these reports which are huge and unlike others , each page of ARC seems important at the outset. We can summarize a 500 page book and it will take less time than summarizing ARC due its very nature. Nonetheless, demand for ARC summary was there since we started publishing it, but we could not finish it due to paucity of time.

However, we are summarizing rest of the ARCs now. And in this regard we need your help to make it better- once you go through ARC , do let us know your suggestion and ideas for improvement.

The Principle followed for Summerization:-

Mark Twain once said that, If you ask me to give a lecture for 5 minutes, I might prepare for 5 days but if you want me to lecture for 2 hours, I will take 30 mins to prepare for it. The reason being, in those 5 minutes, each and every word counts and he has to bring out the most important ones given the limited time-frame. Similarly, we followed this principle for ARC as well, bringing you the most important points in a single article. In this edition we are publishing local goverance and it is little exhaustive than other summaries but it will be worth your time.

Remember ARC never gets old, you will always find something new even though you have read it couple of times.

In this structure composed of innumerable villages, there will be ever widening, never ascending, circles. Life will not be a pyramid with the apex sustained by the bottom. But, it will be an oceanic circle, whose centre will be the individual, always ready to perish for the village, the latter ready to perish for the circle of the villages, till at last the whole becomes one life composed of individuals, never aggressive in their arrogance, but ever humble, sharing the majesty of the oceanic circle of which they are integrated units. Therefore, the outermost circumference will not wield power to crush the inner circle, but will give strength to all within and will derive its own strength from it.” –  Mahatma Gandhi


Integrating institutional reforms in local governance with economic reforms was Gandhiji’s far-sighted vision of ‘Poorna Swaraj’.

Our Constitution provides a clear mandate for democratic decentralisation not only through the Directive Principles of State Policy which exhorts the State to promote Panchayati Raj Institutions but more specifically now through the 73rd and 74th Amendments of the Constitution which seek to create an institutional framework for ushering in grass roots democracy through the medium of genuinely self-governing local bodies in both urban and rural areas of the country.

However, despite the constitutional mandate, the growth of self-governing local bodies as the third tier of governance in the country has been uneven, halting and slow.

We have allowed local bodies to atrophy and starved them of funds to such an extent that while local government revenues accounted for 15% of the total government revenues in the USA in the year 2001, the corresponding figure in India was just 3%. Even after the passing of the 73rd and 74th Constitutional Amendments, the transfer of funds, functions and functionaries has been nominal in most States with notable exceptions such as Kerala.

Local democracy is sometimes treated as synonymous with ‘decentralisation’, but the two are in fact quite distinct. In particular, decentralisation is not necessarily conducive to local democracy. In fact, in situations of sharp local inequalities, decentralisation sometimes heightens the concentration of power, and discourages rather than fosters participation among the underprivileged. To illustrate, in some tribal areas where upper caste landlords and traders dominate village affairs, the devolution of power associated with the Panchayati Raj amendments has consolidated their hold and reinforced existing biases in the local power structure.

Ancient roots of the Modern Concept

The concept of local self government is not new to our country and there is mention of community assemblies in the Vedic texts.Around 600 B.C., the territory north of the river Ganga comprising modern day north Bihar and eastern U.P. was under the suzerainty of small republics called Janapadas among which Lichhavis were the most powerful.In these Janapadas, the affairs of the State were conducted by an assembly consisting of local chieftains.

In the post Mauryan times as well, there existed republics of Malavas and the Kshudrakas where decisions were taken by “sabhas”.The Greek Ambassador, Megasthenes, who visited the court of Chandragupta Maurya in 303 B.C. described the City Council which governed Pataliputra – comprising six committees with 30 members.

Similar participatory structures also existed in South India.

In the Chola Kingdoms, the village council, together with its sub-committees and wards, played an important part in administration, arbitrated disputes and managed social affairs.They were also responsible for revenue collection, assessing individual contribution and negotiating the collective assessment with the King’s representative. They had virtual ownership of village waste land, with right of sale, and they were active in irrigation, road building and related work. Their transactions, recorded on the walls of village temples, show a vigorous community life and are a permanent memorial to the best practices in early Indian polity.

The present structure of Local Self Government institutions took shape in 1688 when the British established a Municipal Corporation at Madras which was followed by creation of similar bodies at Bombay and Calcutta (1726).

In 1872, Lord Mayo introduced elected representatives for these municipalities and this was further developed by his successor, Lord Ripon, in 1882. By the 1880s, these urban municipal bodies had a pre-dominance of elected representatives in a number of cities and towns, including Calcutta and Bombay.

A corresponding effective structure for rural areas came up with the enactment of the Bengal Local Self Government Act, 1885 which led to the establishment of district local boards across the entire territory of the then Bengal province.

The Minto-Morley Reforms, 1909 and the Montague Chelmsford Reforms, 1919, when Local Self Government became a transferred subject, widened the participation of people in the governing process and, by 1924-25, district boards had a preponderance of elected representatives and a non-official Chairman. This arrangement continued till the country’s Independence in 1947 and thereafter till the late 1950s.

The debates in the Constituent Assembly indicate that the leaders at that time were hesitant to introduce a wholesale change in the then prevailing administrative system and as a compromise, it was agreed that Panchayati Raj Institutions would find place in the Directive Principles of State Policy (Part IV, Article 40) which, inter alia, provides that the State shall take steps to organise village panchayats and endow them with such powers and authority as may be necessary to enable them to function as units of self-government.

In compliance with the provisions of the Directive Principles of State Policy pertaining to establishment of village panchayats as units of self government, an ambitious rural sector initiative, the Community Development Programme, was launched in 1952. Its main thrust was on securing socio-economic transformation of village life through people’s own democratic and cooperative organisations with the government providing technical services, supply and credit. Under this programme 100 to 150 villages formed a Community Development Block and participation of the whole community was the key element of this experiment which strengthened the foundation of grassroots democracy.

In 1953, the National Extension Service was introduced which was an amplified version of the Community Development Programme and aimed at transferring scientific and technical knowledge to agricultural, animal husbandry and rural craft sectors.

In 1957, the Balwantrai Mehta Committee offered two broad directional thrusts; first that there should be administrative decentralisation for effective implementation of the development programmes and the decentralised administrative system should be placed under the control of local bodies. Second, it recommended that the Introduction of CD/NES blocks throughout the country should be designed as administrative democratic units with an elected Panchayat Samiti at this level to operate as a fulcrum of developmental activity in the area. But the Committee made it clear that the district tier was being conceived just as an advisory body; a support structure for Panchayat Samitis.

Although a number of committees were formed between 1978 and 1986 to look into various aspects of strengthening the local self government institutions such as the committees under Shri C.H. Hanumantha Rao, Shri G.V.K. Rao and Shri L.M. Singhvi, only minor suggestions were made for any change in the ideas/structures proposed by the Asoka Mehta Committee.

Finally in 1992, after synthesising important features of the earlier exercises on this subject, Government drafted and introduced the 73rd and 74th Amendments Bill in Parliament which were passed in 1993. These introduced new Parts IX and IXA in the Indian Constitution containing Articles 243 to 243ZG.

Article 243 B of the Constitution envisages that all the States/UTs, except those with populations not exceeding 20 lakhs, will have to constitute a three-tier system of Panchayats i.e. at the village, intermediate and district levels.

While the district has been defined as a normal district in a State, the jurisdiction of village and intermediate levels have not been specifically defined in the Act. A village as per the provisions of the Constitution is to be specified by the Governor by a public notification for the purpose of this part and includes a group of villages so specified. That means the territorial area of a Village Panchayat can be specified by a public notification by the Governor of the State, and may consist of more than one village.Similarly, the intermediate level which can be a Taluk, Block or a Mandal, is also to be specified by the Governor through a public notification in this regard. This provides a certain amount of flexibility to the States in constituting Panchayats at the lower and middle levels.

Consequent to the 73rd Constitutional Amendment as well as the Supreme Court’s rulings which effectively mandate that local authorities are also to be treated as ‘Government or State;’ the PRIs have acquired substantial legitimacy, are recognised as an instrument of the Government, and have created participatory structures of grass roots democracy for the rural people. Creation of Constitutional bodies like the State Election Commissions and the State Finance Commissions have also given permanency and stability to these institutions.

However, most Panchayats continue to be treated as agencies of the State for implementation of prescribed schemes, even though essential services such as provision of drinking water, rural sanitation, preventive health and primary education are accepted as their legitimate core functions.

Due to lack of adequate finance and and in the absence of elastic revenue sources , PRIs exist as over-structured but under-empowered organisations, boasting of Constitutional status but suffering from lack of effective devolution of powers and functions from the State Governments.

The Core Principles

India is a Union of States. States can be created or amalgamated by a law of Parliament; residuary powers are vested in the Union (Entry 97 of List I); local governments were creatures entirely of State laws until the 73rd and 74th Constitutional Amendments and presently Constitutional devolution is the norm, not upward or outward delegation.

  1. Subsidiarity- The principle of subsidiarity stipulates: functions shall be carried out closest to citizens at the smallest unit of governance possible and delegated upwards only when the local unit cannot perform the task.Application of the subsidiarity principle has three great advantages in practical terms. First, local decision-making improves efficiency, promotes self reliance at the local level, encourages competition and nurtures innovation.
  2. Democratic Decentralisation- While subsidiarity should be the overarching principle in restructuring governance, in practical constitutional terms it can be applied only through effective decentralisation. It is in recognition of this, that the 73rd and 74th Constitutional Amendments were enacted in 1992. Most of the constitutional provisions relating to local governments are very similar to those pertaining to the States (SFC, SEC) with the significant exception that the Seventh Schedule of the Constitution remains unaltered. As a result, while the local government structure and attendant institutions are created by a constitutional mandate, the actual functions to be devolved on local governments are the responsibility of the States. Therefore, effective democratic decentralisation from States to Local Governments should be the cardinal principle of administrative reforms. Such a decentralisation should be influenced by four guiding norms.
    1. First, there should be a clear link in citizens’ minds between their votes and the consequences in terms of the public good it promotes.
    2. Second, decentralisation tends to promote fiscal responsibility, provided there is a clear link between resource generation and outcomes in the form of better services. People will be encouraged to raise more resources only when there is a greater link between the taxes and user fees levied and the services that are delivered. This is possible only when service delivery is locally managed to the extent feasible and the citizens as stakeholders are directly empowered to raise resources and manage the functions.
    3. Third, there is considerable asymmetry of power in our society. Only about 8 per cent of our work force is employed in the organised sector with a secure monthly wage and attendant privileges and over 70 per cent of these workers are employed in government at various levels and in public sector undertakings. This asymmetry of power is further accentuated by our hierarchical traditions combined with our colonial legacy. Any serious effort to make our governance apparatus an instrument of service to the people and a powerful tool to achieve national objectives needs to take into account these two cardinal factors plaguing our system – the asymmetry in power and the imbalance in its exercise.
    4. Fourth, in centralised structures, citizen participation and ownership are illusory despite national citizen sovereignty.The closer the government process is to the citizen, the greater the participation, stakes and understanding of the issues. Therefore, if democracy is to be real and meaningful, the locus of power should shift as close to the citizen as possible in order to facilitate direct participation, constant vigil and timely intervention.
  3. Delineation of Functions- First, since all local government subjects by definition are also State subjects, there should be clear delineation of roles of the State and the local government, in respect of each of the subjects/functions, otherwise needless confusion and undue interference by the State will be the inevitable consequences.Second, within local governments there is a need for clear functional delineation amongst the various tiers. For example, while school management can be entrusted to a Village Panchayat/parents committee, most staffing and academic matters would fall within the purview of the higher tiers of local government.
  4. Devolution in Real Terms- The principles of subsidiarity and democratic decentralisation cannot be operationalised by mere creation of elaborate structures and periodic elections. Devolution, to be real and meaningful, demands that local governments should be effectively empowered to frame regulations, take decisions and enforce their will within their legitimate sphere of action. Such empowerment should be clearly and unambiguously defined by the Constitution and State legislatures.Finally, fiscal devolution to the local governments must meet two standards: the local government must be able to effectively fulfill its obligation; there must be sufficient room for flexibility through untied resources, to establish priorities, devise new schemes and allocate funds. Equally important, there must be both opportunity and incentive to mobilise local resources through local taxes, cess and user fees, subject to norms of financial propriety and accountability.
  5. Negotiation in a federal polity- Giving effective voice to local governments to enable them to negotiate with the State on a continuing basis is equally important.
  6. Convergence- In large, complex governance structures compartmentalisation is inevitable. But as governance is brought closer to the citizens, this fragmentation should yield place to convergence based on the recognition that the citizens’ needs and concerns are indivisible. Even in an otherwise efficient and honest administration, isolated functioning of disparate government agencies and departments complicates the citizen’s life immeasurably. Therefore, Local Governance convergence must be a key principle in the organisation of local governments. There are following four broad areas of convergence which need to be addressed-
    1. Rural urban divide in the intermediate and district tiers of local governments is a colonial legacy. Hence it is not only desirable but also became a function minima to get rid of this colonial hangover.
    2.  The parastatal bodies (Owned by state) function totally independent from the local governments and are directly accountable to the State Government. Thus, the local governments are often divested of their important functions. Such proliferation of parastatals runs counter to the principle of subsidiarity and precludes effective citizens’ participation in the management of these services.
    3. The citizen must be enabled to interact with all service providers through a single window as far as practicable. Increasingly, all over the world, several disparate services provided by different agencies of government, are available to citizens under one roof. For instance, the post office is a nodal agency for voter registration and many other services in some countries. In Germany, a local government office is the point of contact in obtaining a passport, though the actual service is provided by the federal government. Similarly, collection of tariffs, fees and taxes by various service providers can be at a common kiosk and all complaints and suggestions can be received at a common call centre.
    4. Wherever a group of stake-holders can be clearly identified, for instance, the parents of children of a school, they should be directly empowered to the extent possible, so that stake-holding and power-wielding are integrally linked.
  7. Citizen Centricity- Since propensity to abuse authority is intrinsic to all authorities; and local governments are no exceptions, for local governments to be effective in fulfilling their desired objectives, a series of mechanisms need to be constituted giving voice to the citizens. Measurement of citizens’ satisfaction as the consumer of public services is an important mechanism. Report cards, citizens’ feedback at delivery and service counters, call centres and such fora for the citizens’ voice to be heard and feedback to be counted, needs to be institutionalised in decentralised governance. In addition, social audit through credible community based organisations, civil society groups and prominent citizens would ensure citizen centricity.

Common Issues & Solutions-

The Constitutional Scheme- 

The 73rd and 74th Amendments of the Constitution, which aimed at a fundamental shift in the nature of governance, were passed in 1992 and came into effect in 1993 with great hope and anticipation. However, the past experience of over a decade shows that creating structures of elected local governments and ensuring regular elections do not necessarily guarantee effective local empowerment.

While Panchayats, Nagarpalikas and Municipalities have come into existence and elections are being held, this has not always translated into real decentralisation of power. The Constitution left the issue of degree of empowerment and devolution to the State Legislature. Centralisation is not a guarantor of citizens’ ‘liberty or good governance’, it in fact delegitimises democracy, alienates the citizen, perpetuates hierarchies, and often breeds corruption and inefficiency.

A large-sized district in India is larger than about 80 Nation States in the world in terms of population. Most of our larger States would be among the large countries of the world. Uttar Pradesh, Maharashtra, West Bengal and Bihar – each would be the largest nation in Europe. Uttar Pradesh would be larger than the world’s sixth largest country. Centralisation in the face of such vast numbers, not to speak of the enormous diversity, can often lead to poor functioning of public services and marginalisation of citizens.

In this backdrop, the 73rd and 74th Constitutional Amendments were intended to be a breath of fresh air, empowering the citizens through local governments, redefining the State, invigorating our democracy, and injecting efficiency and accountability in our public services. As stated earlier, democratic institutions need patience, nurturing and long evolution, and cannot be expected to yield instant results. However, for democracy to work, there should be consistency, predictability.

An analysis of the empowerment and functioning of local governments in various States leads to the following broad conclusions:

  1. Despite the mandatory constitutional injunctions, it took years, and in some cases a decade, to even constitute local governments and hold elections.
  2. Even when local governments are constituted and elections are held, States often postponed the subsequent elections on some pretext or other. Each time it is an uphill task to ensure compliance in some States, even with the mandatory provisions of the Constitution.
  3. There has been no linear development or evolution in respect of democratic decentralisation.
  4. State Governments, legislators and civil servants are in general reluctant to effectively empower local governments. Only the bare minimum required to implement the strict letter of the Constitution prevails in many States. What is implied by the spirit of the Constitution and principles of democracy is often ignored.
  5. Even mandatory provisions like the constitution of District Planning Committees and Metropolitan Planning Committees have been ignored in many States.
  6. Where the Panchayats have been constituted and elections held regularly, they are still left at the mercy of State Legislatures and State Executive. Although local governments have a long tradition of autonomy, the fact that Union and State Governments have an established tradition of centralisation for nearly four decades, means that strong vested interests have developed over time disallowing devolution of power.
  7. Some legislators at times tend to act as ‘executives’, intervening in transfers and postings, sanctioning of local bodies’ contracts and tenders, crime investigation and prosecution – all of which are therefore often at the mercy of the local legislator. Given the compulsions of survival, the State Government which depends on the goodwill and support of legislators, does not usually intervene except where the Constitution specifically and unambiguously directs it.


Article 243G along with the Eleventh Schedule indicates the kind of functions to be discharged by the Panchayats. It does not guarantee assignments of a set of exclusive functions to the Panchayats. Hence the kind of role they would be expected to play in governance depends on the regime that controls the government of a State. The Commission, therefore, recommends that Panchayats should be categorically declared to be “institutions of self-government” and exclusive functions should be assigned to them. For this purpose, Article 243G should be amended accordingly.



After the initial hiccups, elections to local bodies are now being conducted fairly regularly in almost all States and independent Election Commissions have been constituted everywhere as constitutional authorities.

Although the Constitution entrusts the conduct of elections to the SECs (State Election Commissions), the Commission (SEC) is often helpless when the delimitation exercise is not completed in time. Article 243 C of the Constitution provides that “the ratio between the population of the territorial area of a Panchayat at any level and the number of seats in such Panchayat to be filled by election shall, as far as practicable, be the same throughout the State”. While such an explicit provision has not been made in respect of municipalities, basic principles of equity and democratic participation demand that a similar practice should be followed in urban local governments. Clause (4) of Article 243 K states as follows: “the Legislature of State may, by law, make provisions with respect to all matters relating to, or in connection with, elections to the Panchayats.”

As a result, in many cases, particularly in urban areas, the SECs have to wait until a delimitation exercise is completed by the State Governments. Though the constitutional provisions relating to elections to Lok Sabha/State Assemblies are identical, Parliament has made laws right from the inception of the Republic creating independent Delimitation Commissions with the participation of the Election Commission of India. The office of the Election Commissioner in fact acts as the Secretariat for the delimitation exercise.This salutary institutional mechanism has ensured that elections in independent India were never delayed on grounds of incomplete delimitation.


Independent SECs, especially when appointed as Constitutional authorities, can easily undertake this exercise and the government can provide the broad guidelines for delimitation either by law or by Rules. Once delimitation is carried out by SECs, State Governments cannot delay the conduct of elections on the plea of incomplete delimitation exercise.


Article 243 K vests preparation of electoral rolls for local elections in SECs. The eligibility criteria for voting rights are identical for the Lok Sabha, State Assemblies and local governments, therefore, constitute the third tier of governance and the national, Common Issuesstate and local governments should be seen as a seamless continuum. In such a situation preparation of separate electoral rolls for local governments is redundant and can only lead to confusion. Many States recognise this problem and some of the State laws have adopted the Assembly Electoral rolls prepared by the Election Commission of India for elections to local governments also. However, the laws vary from State to State and often the Assembly rolls are taken as the starting point and fresh registration is taken up by the SEC for local elections. In cases where fresh rolls are prepared, the two rolls (one for the local bodies and another for the Legislative Assembly) may differ. This is likely to lead to confusion among voters and could also pose legal complications.


Local government laws in all States should provide for adoption of the Assembly electoral rolls for local governments without any revision of names by SECs. For such a process to be effective it is necessary to ensure that the voter registration and preparation of electoral rolls by Election Commission of India is based on geographic contiguity. Similarly, the electoral divisions for elections to local bodies should follow the Building Blocks approach.

Also, The conduct of elections for the elected members of District and Metropolitan Planning Committees should be entrusted to the State Election Commission.


The composition of state election commission varies from state to state. Note the difference below-

It has been urged that the State Election Commission should be brought under the control of the Election Commission of India. Such a measure would give the State Election Commission the required independence from State Governments and they would be able to discharge their duties in an objective manner. This would also ensure a commonality of approach in the electoral process. However, one independent constitutional authority cannot function under another constitutional authority.

The only alternative would be to repeal Article 243K and amend Article 324 entrusting local elections to the Election Commission of India. Article 324 provides for appointment of Regional Commissioners. A Regional Commissioner could then be appointed for each State under this provision and it could function as the State Election Commission for local elections.

Against this it has also been argued that, as the number of local bodies is so large, the Election Commission of India would hardly have the time to attend to election related matters in respect of local governments and therefore it is better to have a decentralised mechanism with each State having its own State Election Commission. Now that every State has constituted its SEC, repealing Article 243K and abolishing these offices would be impractical. The Commission feels that the balance of convenience lies in strengthening the independence of the State Election Commission. This can be accomplished by the State legislation providing (as suggested above) for appointment of the SEC by a collegium comprising the Chief Minister, the Chief Justice of the High Court and the Leader of Opposition in the Legislative Assembly.


The State Election Commissioner should be appointed by the Governor on the recommendation of a collegium, comprising the Chief Minister, the Speaker of the State Legislative Assembly and the Leader of Opposition in the Legislative Assembly.

An institutional mechanism should be created to bring the Election Commission of India and the SECs on a common platform for coordination, learning from each other’s experiences and sharing of resources

Functions of Local Governments


“The implementation space” at local levels is thus occupied by a multiplicity of governmental agencies – Union, State and local – even in the case of a single sector. Confusion, unnecessary duplication, inefficiency, wastage of funds, poor outputs and outcomes are the result of this organisational jungle. The local organisations which should be the most directly and fully concerned are at best treated as a small part of the implementation, occasionally consulted but, in most cases, bye-passed and ignored.


There should be clear delineation of functions for each level of local government in the case of each subject matter law. This is not a one-time exercise and has to be done continuously while working out locally relevant socio-economic programmes, restructuring organisations and framing subject-matter laws.

Each subject-matter law, which has functional elements that are best attended to at local levels, should have provision for appropriate devolution to such levels – either in the law or in subordinate legislation. All the relevant Union and State laws have to be reviewed urgently and suitably amended.

In the case of new laws, it will be advisable to add a ‘local government memorandum’ (on the analogy of financial memorandum and memorandum of subordinate legislation) indicating whether any functions to be attended to by local governments are involved and if so, whether this has been provided for in the law

In case of urban local bodies, in addition to the functions listed in the Twelfth Schedule, the following should be devolved to urban local bodies:

 School education;
 Public health, including community health centres/area hospitals;
 Traffic management and civic policing activities;
 Urban environment management and heritage; and
 Land management, including registration.

Framework Law for Local Bodies


Panchayats are ‘governments at their own level’ and they must be allowed to function as governments. This means that they should have an autonomous jurisdiction of their own. However, if there are ‘governments’ at multiple levels, then government at each level will enjoy only partial autonomy.

Creating an autonomous jurisdiction for the Panchayats is based on the constitutional mandate for effective decentralisation of governmental power as opposed to mere administrative deconcentration.

This would necessitate withdrawal of certain activities or functions from the State Government and transferring them to local bodies. Such conceptualisation of Panchayats marks a break from the way local government institutions were treated in the past as bodies wholly subservient to State Governments.

In the urban sector, a similar situation prevails. Article 243P (e) defines a Municipality as an institution of self government. However they don’t have taxation power in consonance with their function.


The Eleventh Schedule of the Constitution, which gives a list of 29 activities, or functions, intended to be transferred to the local bodies, covers a broad spectrum of development activities ranging from activities in the social and economic sectors (education, health, women and child development, social security, farm and non-farm economic activities etc) to the development of infrastructure and institutions necessary for social and economic development. The thrust is, obviously, on development. However, the difference between a subject and a function remains as a major hiatus between local level activity and local governance.

First Round Table on Panchayat Raj- Kolkata

The Constitution (Article 243G) provides for “devolution”, that is, the empowerment of Panchayati Raj Institutions (PRIs) to function as institutions of self-government for the twin purposes of

i) making plans for economic development and social justice for their respective areas, and

ii) implementing programmes of economic development and social justice in their respective areas, for subjects devolved to the PRIs, including those listed in the Eleventh Schedule, and subject to such conditions as the State may, by law, specify.

Therefore, the key objective is to ensure that Panchayati Raj Institutions function as institutions of self-government rather than as mere implementing agencies for other authorities in respect of such functions as may be devolved on them;

Government of India should draft and place before Parliament, a Framework Law for local governments. The Framework Law could be enacted under Article 252 of the Constitution on the lines of the South African Act, for the States to adopt. This Law should lay down the broad principles of devolution of powers, responsibilities and functions to the local governments and communities, based on the following:
• Principle of Subsidiarity
• Democratic Decentralisation
• Delineation of Functions
• Devolution in Real Terms
• Convergence
• Citizen Centricity

Devolution of Funds

Despite the important role that local bodies play in the democratic process and in meeting the basic requirements of the people, the financial resources generated by these bodies fall far short of their requirements. (Refer Economic Survey 2017 on Bangalore and Jaipur as case studies)

Articles 243H and 243X make it obligatory for the State Government to authorise the local bodies, by law, to impose taxes, duties etc. and assign to the local bodies such taxes/duties levied and collected by the State Government. These Articles also make provision for grants-in-aid to the local bodies from the Consolidated Fund of the State. The devolution of financial resources to these bodies has been ensured through constitution of the State Finance Commissions that are required to make recommendations on the sharing and assignment of various taxes, duties etc.

Under these provisions, the Governor of a State is required to constitute the State Finance Commission within one year from the commencement of the 73rd Amendment (Articles 243 I and 243 Y), and thereafter, at the expiration of every fifth year, to review the financial position of the Panchayats and Municipalities. The composition of the Commission, the qualifications required for appointment as its members and the manner in which they are selected is decided by the State Legislature by way of a Law

The task of the State Finance Commissions is undoubtedly complex. They have to assess the resource gap in case of all the urban and rural local bodies. Even within a State, there are wide variations in the financial position of these local bodies and also in the level of services provided by them. Lack of data on various aspects of local governance makes the task of the SFCs even more difficult. Generally, the SFCs have attempted to estimate the resource gap and recommended devolution of funds accordingly. The resource gap for any local body can never be measured in absolute terms as the resource gap is a function of variety of factors such as the level and quality of civic amenities provided, the efficiency of the local body in raising resources, the quantum of service charges levied by the local body etc.


  1. Each State should prescribe through an Act, the qualifications of persons eligible to be appointed as Members of the State Finance Commission.
  2. SFCs should evolve objective and transparent norms for devolution and distribution of funds. The norms should include area-wise indices for backwardness. State Finance Commissions should link the devolution of funds to the level/quality of civic amenities that the citizens could expect.
  3. The Action Taken Report on the recommendations of the SFC must compulsorily be placed in the concerned State Legislature within six months of of submission and followed with an annual statement on the devolution made and grants given to individual local bodies and the implementation of other recommendations through an appendix to the State budget documents.
  4. SFCs should carry out a more thorough analysis of the finances of local bodies and make concrete recommendations for improvements in their working. In case of smaller local bodies such recommendations could be broad in nature, but in case of larger local bodies, recommendations should be more specific.
  5. SFCs should evolve norms for staffing of local bodies.
  6. It is necessary that a mechanism be put in place which reviews the implementation of all the recommendations of the SFCs. If considered necessary, devolution of funds could be made conditional to local bodies agreeing to implement the recommendations of the SFCs.


Capacity Building for Self Governance


The crucial issue of capacity building in urban and rural local bodies remains a largely neglected area in decentralised self governance. Beyond short term ‘training’ of personnel and elected elements of these bodies, little has so far been contemplated, and even in this sphere there has been limited initiative and fitful progress.

As a result, there is capacity deficit within the Panchayat and Municipal Institutions. With the enactment of the National Rural Employment Guarantee Act and other ‘flagship’ schemes like the Jawaharlal National Urban Local Governance Renewal Mission-JNNURM being primarily implemented through such institutions, it is clear that sustained, well planned ‘enabling exercises’ need to be undertaken to ensure that the implementing agencies have the capacity and the capability to deal with the challenges in undertaking and implementing these major national programmes apart from being able to fulfil their statutory functions.


An erroneous notion that capacity building relates only to training and imparting new skills to employees and improving their existing skills needs to be clarified. Capacity building is much more than training, and has two major components, namely:
• Individual development
• Organisational development.

Individual development involves the development of human resources including enhancement of an individual’s knowledge, skills and access to information which enables them to improve their performance and that of their organisation. Organisational development on the other hand is about enabling an organisation to respond to two major challenges that it has to confront:
• External adaptation and survival
• Internal integration

Capacity building efforts in rural and urban local self governing institutions must attend to both the organisation building requirements as also the professional and skills upgradation of individuals associated with these Local Governance bodies, whether elected or appointed. Relevant Panchayat and Municipal legislations and manuals framed thereunder must contain clear enabling provisions in this respect. There should be special capacity building programmes for women members.

State Governments should encourage local bodies to outsource specific functions to public or private agencies, as may be appropriate, through enabling guidelines and support. Outsourcing of activities should be backed by development of in-house capacity for monitoring and oversight of outsourced activities. Likewise, transparent and fair procurement procedures need to be put in place by the State Government to improve fiscal discipline and probity in the local bodies.

Comprehensive and holistic training requires expertise and resources from various subject matter specific training institutes. This can be best achieved by ‘networking’ of institutions concerned with various subjects such as financial management, rural development, disaster management and general management. This should be ensured by the nodal agencies in State Governments.

Academic research has a definite role to play in building long-term strategic institutional capacity for greater public good. Organisations like the Indian Council of Social Science Research must be encouraged to fund theoretical, applied and action research on various aspects of the functioning of local bodies.

A pool of experts and specialists (e.g. engineers, planners etc.) could be maintained by a federation/consortium of local bodies. This common pool could be then accessed by the local bodies whenever required for specific tasks.

Decentralised Planning


Till date planning has never been a core function of local bodies.


A District Council should be constituted in all districts with representation from rural and urban areas. It should be empowered to exercise the powers and functions in accordance with Articles 243 G and 243 W of the Constitution. In that event, the DPCs will either not exist or become, at best, an advisory arm of the District Council. Article 243 (d) of the Constitution should be amended to facilitate this.

A dedicated centre in every district should be set up to provide inputs to the local bodies for preparations of plans. A two-way flow of information between different levels of government may also be ensured.

Each State Government should develop the methodology of participatory local level planning and provide such support as is necessary to institutionalise a regime of decentralised planning.

States may design a planning calendar prescribing the time limits within which each local body has to finalise its plan and send it to the next higher level, to facilitate the preparation of a comprehensive plan for the district.

State Planning Boards should ensure that the district plans are integrated with the State plans that are prepared by them. It should be made mandatory for the States to prepare their development plans only after consolidating the plans of the local bodies. The National Planning Commission has to take the initiative in institutionalising this process.

Accountability and Transparency; Accounting and Audit


While democracy, including local democracy, is by no means a perfect tool to improve governance, the only antidote to imperfections in democracy is more and better democracy. The improvement of conditions through local empowerment is necessarily an evolutionary process. Experience over the last decade shows that, in many cases, local governments are beset by the same problems of corruption, patronage, arbitrary exercise of power and inefficiency which have bedevilled governance.

Generally speaking, accountability of public institutions has focused almost wholly on two issues namely, (a) prevention of activities not specifically authorised by law or any subordinate legislation and (b) integrity of the public system or maintenance of financial propriety, which is often equated with adherence to financial rules. While these are important, there are other components also for which the local bodies are expected to be accountable. One of them is responsiveness. The activities of the local bodies must meet the felt needs of the people.

Traditionally, local bodies have been subject to control by the State Government, which it exercises through financial regulations, administrative purview and legislation. The traditional system for ensuring financial propriety comprises (a) timely annual audit of accounts and other financial documents, (b) regular internal audit, (c) follow-up action on audit reports for correcting financial irregularities and (d) fixing responsibility for lapses and use of sanctions against those who are responsible for such lapses.


There should be a separate Standing Committee of the State Legislature for the local Bodies. This Committee may function in the manner of a Public Accounts Committee.

A local body Ombudsman should be constituted for grievance redressal.  The respective State Panchayat Acts and the Urban local Bodies Acts should be amended to include provisions pertaining to the local body Ombudsman.

In case of complaints and grievances related to infringement of the law governing elections to these local bodies, leading to suspension/disqualification of membership, the authority to investigate should lie with the State Election Commission who shall send its recommendations to the Governor of the State.

Each local body should have an in-house mechanism for redressal of grievances with set norms for attending and responding to citizens’ grievances.

Social audit systems should be institutionalized.

It should be ensured that suo motu disclosures under the Right to Information Act, 2005 should not be confined to the seventeen items provided in Section 4(1) of that Act but other subjects where public interest exists should also be covered.

A suitable mechanism to evolve a system of benchmarking on the basis of identified performance indicators may be adopted by each State. Assistance of independent professional evaluators may be availed in this regard.

Evaluation tools for assessing the performance of local bodies should be devised wherein citizens should have a say in the evaluation. Tools such as ‘Citizens’ Report Cards’ may be introduced to incorporate a feedback mechanism regarding performance of local bodies.

The existing arrangement between the Comptroller & Auditor General of India and the State Governments with regard to providing Technical Guidance and Supervision (TGS) over maintenance of accounts and audit of PRIs and ULBs should be institutionalised by making provisions in the State Laws governing local bodies.

It should be ensured that the audit and accounting standards and formats for Panchayats are prepared in a way which is simple and comprehensible to the elected representatives of the PRIs.

The independence of the Director, Local Fund Audit (DLFA) or any other agency responsible for audit of accounts of local bodies should be institutionalised by making the office independent of the State administration. The head of this body should be appointed by the State Government from a panel vetted by the C&AG.

Release of Finance Commission Grants to the local bodies may be made conditional on acceptance of arrangements regarding technical supervision of the C&AG over audit of accounts of local bodies

Audit reports on local bodies should be placed before the State Legislature and these reports should be discussed by a separate committee of the State Legislature on the same lines as the Public Accounts Committee (PAC).

To complement institutional audit arrangements, adoption and monitoring of prudent financial management practices in the local bodies should be institutionalised by the State Governments by legislating an appropriate law on Fiscal Responsibility for local BodiesTo complement institutional audit arrangements, adoption and monitoring of prudent financial management practices in the local bodies should be institutionalised by the State Governments by legislating an appropriate law on Fiscal Responsibility for local Bodies

Technology and Local Governance

Information and Communication Technology provides tools which could be utilised by the local governments for simplifying cumbersome processes, reducing contact between the cutting edge functionaries and the citizens, enhancing accountability and transparency and providing single window service delivery for a variety of services.

Space Technology

Space technology, involving Satellite Communication (SatCom), and Earth Observations (EO), has made tremendous impact in recent years by way of effectively addressing certain key aspects related to rural and urban development. SatCom provides the conduit information exchange/transfer; and EO provides the content/information on terrain features that are of relevance to development. In fact, India is taking lead in putting the finest of space technology, both SatCom and EO conjunctively, into effective use for rural and urban development and addressing issues at the grass roots.

Satellite Communication (SatCom) has demonstrated its operational capabilities to provide the services relevant at the village/community level, such as, healthcare, development communication and education. On the other hand, the value-added, high-resolution Earth Observation (EO) images provide community-centric, geo-referenced spatial information useful in management of natural resources – land use/land cover, terrain morphology, surface water and groundwater, soil characteristics, environment and infrastructure, etc. The SatCom and EO segments, together, provide support to disaster management, also at community level.

Satellites are providing communication infrastructure for television and radio broadcasting and telecommunication including Very Small Aperture Terminals (VSATs). In fact, the Extended-C band channels of INSAT-3B and EDUSAT are being used for the Training and Developmental Communication Channel (TDCC), a service that has been operational since 1995.

Several State Governments are using the TDCC system extensively for distance education, rural development, women and child development, Panchayat Raj and industrial training. In Madhya Pradesh, space technology harnessed under the Jhabua Development Communications Project (JDCP) is an important initiative in this direction. The JDCP network consists of 150 direct reception terminals in 150 villages and 12 interactive terminals in all the block headquarters in Jhabua district in Madhya Pradesh. The areas addressed under the overall umbrella of developmental communication included watershed development, agriculture, animal husbandry, forestry, women and child care, education and Panchayat Raj development.

Other areas where space technology is being harnessed to bring about a qualitative change in the rural areas are:-

Tele-education : The EDUSAT is specifically designed for providing audio-visual medium, employing digital interactive classroom and multimedia multi-centric system.

Tele-medicine : Today, the INSAT-based telemedicine network connects 235 hospitals – 195 District/remote/rural hospitals including those in Jammu and Kashmir, North East Region, and Andaman & Nicobar Islands; and 40 super speciality hospitals in major cities as well as a few hospitals of the Indian Air Force

Integrating Services through Village Resource Centre (VRCs): These are ‘single window’ delivery mechanism for a variety of space-enabled services and products, such as tele-education – with emphasis on awareness creation, vocational training, skill development for livelihood support and supplementary education; telemedicine – with focus on primary, curative and preventive healthcare; information on natural resources for planning and development at local level; interactive advisories on agriculture, fisheries, land and water resources management. These are implemented by ISRO through partnership with reputed NGOs and Governments

Weather and Climate: Space technology is providing round-the-clock surveillance of weather systems including severe weather conditions around the Indian region

Disaster Management: The Disaster Management Support (DMS) Programme of ISRO/DOS, embarked upon in association with the concerned Central and State agencies, employs both the space based communication and remote sensing capabilities, for strengthening the country’s resolve towards disaster management. ISRO/DOS are also networking the National Emergency Control Room and State Control Rooms through satellite based, secured, Virtual Private Network (VPN), with video-conferencing and information exchange capabilities. This VPN, during the period of natural disasters, facilitates video conferencing and real-time information exchange among the different key institutions, disaster managers, and administrative offices at the highest level. Space technology is also utilised in flood mapping and damage assessment and drought assessment and monitoring.

Natural Resources Management: Satellite remote sensing through synoptic view and repetitive coverage, provides a scientific way of gathering information on natural resources for inventory and monitoring purposes. Several national missions in the key areas of socio-economic development have been carried out in the country under the aegis of the National Natural Resources Management System (NNRMS) with the active involvement of the user agencies. The areas of importance are rural land management, rural infrastructure, conservation of water bodies, groundwater mapping and providing drinking water, wasteland Mapping, participatory Watershed Development, geo-referencing of village maps etc.

Remote sensing has provided an important source of data for urban landuse mapping and environmental monitoring. In fact, ISRO’s CARTOSAT-2 satellite has the capacity to provide panchromatic imagery with one metre spatial resolution. Such imagery could be used by the local bodies in urban infrastructure and transportation system planning, monitoring and implementation; mapping individual settlements and internal roads, urban complexes and urban utilities, etc.

In recent years, there have been tremendous advancements in data collection and their updation through satellite and aerial remote sensing, and organisation of spatial databases using GIS packages and other database management systems. GIS based studies for the Bombay Metropolitan Region; the National Capital Region (NCR); Ahmedabad Urban Development Authority (AUDA); Hyderabad Urban Development Authority (HUDA); Bangalore Metropolitan Region (BMR); towns of Pimpri, Indore, Lucknow, Mysore, Jaipur, and many other cities have been taken up.

These projects and programmes have demonstrated the utility of the multi-parameter database in arriving at useful guidelines for planning. Specifically, remote sensing data can be used for urban land use/sprawl/suitability analysis for preparation of regional plans; preparation of existing and proposed land use; preparation of sustainable urban development plan; zonal planning; optimisation of transport routes; integrated analysis for locating sewage treatment plant sites; macro level urban information system; GIS approach to town planning information system etc.

The Union Ministry of Urban Development (MUD) has taken initiative to establish a ‘National Urban Information System’ (NUIS), with Town and Country Planning Organisation TCPO) as the nodal agency.

The major objectives of NUIS are to:

(a) develop attribute as well as spatial information base for various levels of urban planning;

(b) use modern data sources:

(c) develop standards with regard to databases, methodology, equipment software, data exchange format, etc;

(d) develop urban indicies to determine and monitor the health of the towns and cities:

(e) build capacity; and

(f) provide decision support system for planning. Some of the main sources of spatial data for base maps and land maps would be from sattllite remote sensing data and aerial photographs, which would be used for integration with conventional maps, as well as statistical data, for development of GIS database.

Note- Please note that summerizing 143 page report in to a single article is difficult, nonetheless we tried our best to do it so that no important points are left out. After you have read this, if you have any queries or suggestion please do so in the comment section and we will amend it accordingly.


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