Conclave of SFCs opens with call to strengthen Panchayati Raj

Centre, States not enthusiastic about enhancing Professional Tax limit, 15th Central Finance Commission Member Lahiri

A two-day national conclave of the State Finance Commissions got under way here on Tuesday with speakers at the inaugural session led by Ashok Lahiri, Member, 15th Central Finance Commission, highlighting the significance of Panchayati Raj institutions and the need to strengthen them.

Citing how local governments were the ones in touch with the people by providing them basic services, Mr. Lahiri said there was a need to strengthen panchayats to mobilise internal revenues for efficient service delivery. He said this pointing to a 15th Central Finance Commission recommendation increasing the professional tax limit from ₹2,500, which is in force unchanged for almost 35 years, to ₹18,000 per annum. In doing so, the Commission had indexed the limit to the accumulated inflation, he said.

However, “don’t see any move [to give effect to the recommendation]. I will be very suspicious if either the Union or the State governments are enthusiastic,” he told the conclave that is being organised by the National Institute of Rural Development and Panchayati Raj (NIRDPR).

Recommending increase in the limit, the commission report said the simplest way to revise the ceiling was to index it to the accumulated inflation over the intervening years, in order to protect the real value of the 1988 ceiling. “This means that professional tax collections by urban local bodies in India have the potential to grow by more than seven times with the same number of assessees just by rationalising rates,” the report said.

Chairpersons and members of SFCs, senior officials of the Union Ministry of Panchayati Raj (MoPR) as well as the Panchayati Raj and Finance departments of States and Union territories and representatives from research institutions are participating in the conclave. From the devolution formula adopted for the local governments; processing and decisions on SFC recommendations; to issues in the implementation of recommendations as well as coordination between SFC and CFC recommendations are to be deliberated at the conclave.

Secretary to MoPR Sunil Kumar explained the role of CFC and SFCs in strengthening Panchayati Raj institutions. Additional Secretary C.S. Kumar said only nine states had constituted the 6th State Finance Commission, while another seven had established the 5th SFC. There was a considerable variation in the functioning of SFCs and their recommendations. Though taxation powers are given to Panchayats in State Panchayati Raj Acts, rules were not framed in many States. Thus Panchayats were unable to mobilise their own source revenues, he said.