THIRUVANANTHAPURAM: The state government has rejected the recommendations of the Fifth State Finance Commission on devolution to local bodies. Result: local bodies in the state will lose Rs 6,513 crore in the next three fiscals; Rs 2,533 crore in 2018-19, Rs 2,890 crore in 2019-20, and Rs 1,090 crore in 2020-21.
The 5th SFC chairman B. Alwin Prakash said that the move would “subvert decentralisation and invite financial anarchy”.
The state opposed two crucial reforms on devolution put forward by the 5th SFC. One, the SFC wanted the state to decide the fund transfer to local bodies for a particular fiscal on the basis of the state’s own revenues for that fiscal. The state rejected the measure saying that it will stick to the existing practice of fixing the devolution to local self-government institutions for a particular fiscal on the basis of the state’s own tax revenue (SOTR) mobilised two fiscals back. Meaning, the LSG devolution for 2018-19 will be decided on the basis of the 2016-17 SOTR.
“The Centre fixes the devolution to states on the basis of forward projections. We wanted the state, too, make such a forward estimate and fix the devolution on the basis of this projected figure,” Mr B.A. Prakash said. He said that the 5th SFC had made forward projections for five years and cross-checked them with the Finance Department. “They even said that our projections were reasonable,” he added.
Two, the SFC wanted all the three types of funds to the local bodies — general purpose fund, maintenance grant and development funds — to be transferred as a share of the SOTR. The state has refused to grant development funds in this fashion, it wants these funds linked to the state plan outlay, which will be around 50 per cent lower than the SOTR. Moreover, Mr Prakash argued that the annual plan outlay was always inflated. “The utilisation will be invariably less than the projection and as a result the local bodies, too, will get a proportionately less share,” he said.
Though the SFC’s diktats on devolution were rejected, the state had accepted majority of its recommendations on the audit and plan formulation in local bodies. However, the proposals of the SFC are being implemented two years late; the Commission’s report was submitted on December 19, 2015. Besides the chairman, the 5th SFC had James Varghese and Dr. V. K. Baby as members.
