Local Finance and Various sources of Revenue for Local Bodies
Meaning and Structure of Local Finance:
By local finance we mean finance of local bodies in India. There is a large variety of local bodies in India. Different states have different types of local bodies with different functions. There are municipalities, taken in the sense of municipal committees or boards, in towns in all parts of the country. Some of the large cities have municipal corporations. Further, there are important trusts and development boards in a number of big cities, but as they do not enjoy any power of taxation, they may not be considered as local bodies for one purpose. In rural areas, we have district boards and rural boards. Rural boards operate over areas smaller than a district. District boards operate in a full district. In villages, in most states, we have village panchayats which have special functions assigned to them and have their own sources of revenue. In short, we have the following main four local bodies which are functioning today in our country:
a) Village Panchayats.
b) District Boards or Zila Parishads.
d) Municipal Corporations.
a) Village Panchayats:
Establishment: A village panchayat is an institution in the village with large variety of function. The jurisdiction of a panchayat is usually confined to one revenue village. In some cases, though not very frequently, two or more small villages are grouped under one panchayat. The establishment of panchayat raj is the avowed policy of most states in India, the panchayats have to established in all villages.
Functions: The functions of panchayats range over a wide area including judicial, police, civil, economic and so on. Thus small disputes may disposed of by panchayats on the sport. In some states, roads, primary schools, village dispensaries etc. are to be managed by panchayats. In some states supply of water, both for drinking and irrigation, falls within their field of responsibility, and in some cases even productive and unproductive activities, such as, farming, marketing, storage, etc. are entrusted to them.
Finances: Village panchayats in almost all the states have been given powers to levy taxes. However, they differ from state to state. Although the lists of tax powers of the panchayats are quite large, the taxes which have been widely adopted by them are :- (i) general property tax, (ii) taxes on land, (iii) profession tax, and (iv) tax on animals and vehicles. In a small number of panchayats other taxes are also levied, such as service tax, octroi, theatre tax, pilgrim tax, tax on marriage, tax on birth and deaths, and labour tax. As a matter of fact, taxes are levied by the panchayats only with the sanction of the state government, and there are certain limits in respect of tax rates which have to be observed.
b) District Boards Or Zila Parishads :
Establishment: In rural areas, district boards or Zila Parishads are established on a district level. The territorial jurisdiction of a district board is generally a revenue district. Some of the functions of the district boards are being taken up by the State and by the village panchayats. The district boards have been replaced by Zila Parishads in most of the states, the district-level body is known as the Zila Parishad in Andhra Pradesh, Bihar, Maharashtra, Orissa, Punjab, Rajasthan, Uttar Pradesh and West Bengal, as the district panchayat in Gujarat, Zila Panchayats in Madhya Pradesh and as the District Development Council in Tamil Nadu and Karnataka.
Functions: The functions of district boards and now Zila Parishads in most of the states differ from state to state. For example, In Karnataka and Tamil Nadu, the Zila Parishad is a co-ordinating body which exercise general supervision over the working of Panchayat Samitis and advises them on implementation of Development Schemes. Besides these duties in Andhra Pradesh, the Zila Parishad has scientific executive functions in the establishment, maintenance and expansion of secondary, vocational and industrial schools. In Maharashtra, the Zila Parishad is the strongest of the panchayat raj bodies and is vested with the executive functions in various fields including Planning and Development and advising the state government.
Finances: The tax powers of district boards or Zila Parishads are extremely limited. They derive a substantial part of their revenues from the government grant-in-aid. The sources of revenue of district boards, or Zila Parishads, are as follows:
(i) Grant-in-aid from the state government.
(ii) Land Cesses.
(iii) Total, fees etc.
(iv) Income from the property and loans from the state governments.
(v) State non-plan help.
(vi) Grants for the central sponsored schemes relating to development work.
(vii) Income from fairs and exhibitions.
(viii) Property tax and other taxes which the state governments may authorise the district boards.
Establishment and Functions: The municipalities are bodies or institutions which are established in urban areas for looking after local affairs, such as, sanitation, public health, local roads, lighting, water supply, cleaning of streets, maintenance of parks and gardens, maintenance of hospitals, dispensaries and veterinary hospitals, provision of drainage, provision of primary education, organising of fairs and exhibitions etc. However, all these functions are performed subject to the control of the state government.
Finance: The main sources of revenue of municipalities consist of (i) taxes on property, (ii) taxes on goods, particularly octroi and terminal tax, (iii) personal taxes, taxes on profession, trades, callings and employment, (iv) taxes on vehicles and animals, (v) theatre or show tax, and (vi) grant-in-aid from state government. However, the average income of municipalities is quite low and thus they cannot perform their functions efficiently.
d) Municipal Corporations
Establishment and Functions: The municipal corporation, as a distinct type of municipal organisation, is confined to only a few large cities. The municipal corporations as a class have wider functions and large powers than is usually the case with the municipalities. The pattern of municipal corporations in regard to structure and organisation is more or less the same in all the states. The municipal corporations have wide powers and enjoy greater freedom as compared to municipalities. The municipal corporations are usually entrusted with the functions, such as, water supply and drainage, lighting, roads, slum clearance, housing and town planning etc. the rapid increase in the population of cities has definitely added to the functions of municipal corporations.
Finances: The taxes levied by corporations generally include (i) taxes on property, (ii) taxes on vehicles and animals, (iii) taxes on trades, calling and employment, (iv) theatre and show tax, (v) taxes on companies, (vi) taxes on goods brought into the cities for sale, (vii) taxes on advertisements, (viii) octroi and terminal tax etc. The corporations have a fair degree of freedom in respect of their choice and modification of these taxes, subject of course to the maximum and minimum rates laid down by the law.