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Sleuthing Urban Local Body Finances

T.R. Raghunandan

5 April 2021

India is fast urbanising; there is no need to use statistics to prove that, they are plentiful and available in granular detail. A Census is due this year, and when the statistics are available, we will have an idea of the decadal growth in the twenty-teens. In many states, particularly in the west and the south, urban populations will overtake rural populations in the coming decade.

Growth in the metropolises, cities with a population of a million or more, grab centre space because their problems of pollution, congestion, poverty, shortage of water and degradation of environment are easily documented and highlighted.  However, the problems of tier two and three towns, of peri-urban areas, and of villages transiting into town Panchayats, are equally intractable.

Policymakers have been grappling with the issues of rampant urbanisation and there are several broad strategies that are discussed. While the focus is on beefing up the infrastructure in metropolises, the idea is also to develop smaller towns, so that rural migration into the big cities can be dispersed into the smaller towns. This makes sense because these smaller towns then provide economy of scale, and aggregated services to a rural hinterland.

It is obvious that, in order to achieve objectives of orderly, equitable, and resource-efficient urbanisation, the inter-governmental fiscal system has to be adapted and strengthened to ensure the best expenditure choices. However, here, the chronic problems of India’s public financial architecture come in the way, as usual. Quite apart from the usual litany that urban local governments are poorly funded, there is also the issue of fiscal fragmentation.

Funds spent in urban areas are dissipated amongst a welter of agencies, ranging from local governments to mission bodies, to departments, corporations, and Special Purpose Vehicles. Expenditure responsibilities of these institutions overlap, and there is probably a great deal of duplication of expenditure, which we may discover if we are able to interpret all the accounts of such agencies.

The Accountability Initiative (AI) at the Centre for Policy Research has long held on to the conviction that if the streams of expenditure are tracked by diligent sleuthing – a task that few organisations in India attempt – then one can trigger accountability. People will sit up and ask where their money is going, for what, and who is spending it. It was this theory of change that propelled AI to take up the PAISA studies nearly a decade back.

Focussing on the tracking of expenditure under the Sarva Shiksha Abhiyaan, AI tracked the expenditures in a swathe of schools across 10 states, producing PAISA reports that were commended for their focus and insights.

Around five years back, AI took the next step in tracking multiple streams of expenditure right to the grassroots-level, using the Gram Panchayat as the unit of convergence of these expenditures. True, Gram Panchayats do not spend all the money that makes up government expenditure within their jurisdictions – we are a long way from the implementation of that idea. However, the objective of the ‘PAISA for Panchayats’ research study was to answer a simple question: ‘How much money does the government spend through all its institutional layers, including the Gram Panchayat, within the jurisdiction of a Gram Panchayat?’.

The ‘PAISA for Panchayats’ study was conducted in Karnataka, in Mulbagal Taluk of Kolar district. The study revealed that, of overall expenditure that could vary from Rs. 4 to Rs. 6 crore per annum undertaken by all governmental agencies in a Gram Panchayat’s area, only around Rs. 60 to 80 lakhs was spent by the Gram Panchayat directly.

These expenditures included allocations recommended by the Union and State Finance Commissions and released by the Union and state governments respectively. They also included large Centrally Sponsored Scheme programmes such as the Rural Employment Guarantee Programme and the Total Sanitation Programme, and the own revenues collected by the Gram Panchayats.

Futhermore, over 90 per cent of the expenditure incurred by the government within a Gram Panchayat’s jurisdiction were undertaken by state government departments, the Zilla and Taluka Panchayats. They were also undertaken by special mission bodies – parallel structures whose funding and management systems were outside the purview of the Panchayati Raj system.

Presentation of the report’s findings to the Government of Karnataka resulted in some favourable policy decisions – this should be music to the ears of researchers, who bemoan that nobody pays attention to their recommendations. The Government of Karnataka has not paid heed to the suggestion that state government departments ought to undertake an exercise to identify those programmes that should be run by the Panchayats in consonance with the powers and responsibilities devolved to them by law. But the government has amended the law to mandate that all departments should identify Panchayat-wise works that they plan to undertake and the expenditure that they have incurred, and make this information available to the public and the Gram Panchayats.

True, like all such salutary legal provisions, there will be a time lag in implementation. With greater pressure from Panchayat-elected representatives, there is hope that all departments will comply with this mandate.

In the meantime, buoyed with the experience of the ‘PAISA for Panchayats’ study, AI began to ask the same question with respect to urban financing. We asked: ‘How much money do all government departments put together, spend in each ward of a medium-sized municipal corporation?’.

The ‘PAISA for Municipalities’ study was conducted in Tumakuru, a city chosen under the Smart City initiative for urban governance reforms and enhanced infrastructure expenditure. The study has been completed and its report is in the public domain now.

However, any study has two facets to it: the final report, and all the fun and games that happen in the background as intrepid researchers doggedly pursue their prey. This blog series is about the latter. Often, that is a richer story than the bland findings contained in a research report.

Over the next few weeks, I shall relate the twists and turns of public finance sleuthing, seen from the eyes of my colleagues, Swaroop and Tanvi and I, as we unraveled the fiscal story playing out in Tumakuru city.

T.R. Raghunandan is an Advisor at Accountability Initiative. 


Also Listen To: Following the Money in Tumakuru Smart City

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