Finance panel suggests review of decentralisation

NEW DELHI: The Finance Commission on Monday suggested a re-look into the issue of decentralisation in view of the lack of transfer of resources to local bodies, but said the exercise should not "rob" the autonomy of local governments.
Lamenting that decentralisation had not led to transfer of functions, functionaries and finances to local bodies," Twelfth Finance Commission chairman C Rangarajan said "the design of decentralisation may need a re-look to take care of some of these problems."
Addressing a seminar organised jointly by World Bank and National Institute of Public Finance and Policy, he said "the service delivery system should not rob the local governments of autonomy and flexibility."
Fiscal decentralisation, as things stand now, in terms of resource mobilisation and strengthening the revenue expenditure link remains "weak" and the success of the future of decentralisation depends to a large extent on strengthening the revenue base of panchayats.
Rangarajan, a former Reserve Bank governor, however, admitted that due to differences in the capacities of states to raise resources, the task of the Finance Commission at the national level had become difficult.
He also pointed out there were no studies showing that panchayats were exercising "in full" the powers given to them to raise revenues.
"The expectation that benefit taxes, where there is a direct quid-pro-quo between the taxpayer and the tax authority, can be levied more easily has not been realised," he said.