{"id":79633,"date":"2021-02-02T16:22:04","date_gmt":"2021-02-02T10:52:04","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=79633"},"modified":"2021-02-02T18:05:04","modified_gmt":"2021-02-02T12:35:04","slug":"15th-finance-commission-reforming-financial-governance-of-indias-municipalities","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/15th-finance-commission-reforming-financial-governance-of-indias-municipalities\/","title":{"rendered":"15th Finance commission: Reforming financial governance of India\u2019s municipalities"},"content":{"rendered":"<p><strong>Source: <a href=\"https:\/\/indianexpress.com\/article\/opinion\/columns\/union-budget-2021-15th-finance-commissions-final-report-7169195\/\">Indian Express<\/a><\/strong><\/p>\n<p><strong>Gs2: <\/strong>Issues and Challenges Pertaining to the Federal Structure, Devolution of Powers and Finances up to Local Levels and Challenges Therein<strong>.<\/strong><\/p>\n<p><strong>Synopsis: \u00a0<\/strong>The reforms suggested by the 15<sup>th<\/sup> Finance commissions (interim report) can improve the financial governance of India\u2019s municipalities.<\/p>\n<p><strong>Background:<\/strong><\/p>\n<ul>\n<li>The 15<sup>th<\/sup> Finance Commission submitted an interim report for FY 2020-21.<\/li>\n<li>Now, the final report for <strong>FY 2021-22 to FY 2025-26<\/strong> is expected to be tabled along with the forthcoming Budget 2021-22.<\/li>\n<li>The Interim report for 2020-21 talks about raising the standards of <strong>financial governance<\/strong> of India\u2019s municipalities in four specific ways.<\/li>\n<li>Implementation of the suggested 4 changes can be <strong>a watershed moment<\/strong> in the <strong>financial governance reforms of India\u2019s municipalities.<\/strong><\/li>\n<\/ul>\n<p><strong>What are the four changes suggested by the 15<sup>th<\/sup> Finance commission?<\/strong><\/p>\n<p>The 15<sup>th<\/sup> Finance commission in its interim report has suggested the following changes to bring reforms to the financial governance of India\u2019s municipalities.<\/p>\n<ol>\n<li><strong>First,<\/strong> <strong>increasing the overall financial disbursement for municipalities<\/strong> (including panchayats) from the existing 30 per cent to 40 percent, in phases. This will result in increased financial resource for the municipalities over the five years.<\/li>\n<li>Second, \u00a0it has set <strong>two very important conditions<\/strong> for all municipalities, for receiving grants. <strong>First,<\/strong> Publication of audited annual accounts. <strong>Second,<\/strong> notification of floor rates for property tax. It will result in financial accountability and increased revenue of Municipalities.\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>Moreover, an Additional <strong>borrowing limit<\/strong>\u00a0has been set for states (Rs 50,000 crore). It is linked to reforms in <strong>property taxes<\/strong> and user charges for water and sanitation.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li>Third, <strong>100 percent outcome-based funding<\/strong> to 50 million-plus <strong>urban agglomerations<\/strong> (excluding Union Territories).\u00a0Conditions emphasize specifically air quality, water supply, and sanitation.\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>Note: India has <strong>4,500 municipalities<\/strong> out of which approx. 250 municipalities are urban agglomerations with 53 million-plus population. It contains 44 per cent of the total urban population.<\/li>\n<li>Whereas, the remaining 4,250-plus municipalities comprise 56 per cent of the total urban population.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li>Fourth, it has recommended a <strong>common digital platform for municipal accounts<\/strong>. This will give a consolidated view of municipal finances and sectoral outlays at the state level.<\/li>\n<\/ol>\n<p><strong>What are the suggestions?<\/strong><\/p>\n<p>Constitutional bodies like the finance commission can only prepare the grounds of reforms. The ultimate responsibility <strong>for municipal finance reforms<\/strong> remains with the state governments.\u00a0\u00a0Thus, State governments need to enact municipal legislation towards following 5 Objectives:<\/p>\n<ol>\n<li>Fiscal decentralisation by strengthening <strong>state finance commissions<\/strong>.<\/li>\n<li><strong>Revenue optimisation<\/strong> to enhance their own revenues.<\/li>\n<li>Fiscal responsibility and budget management to accelerate municipal borrowings.<\/li>\n<li>Strengthening <strong>institutional capacities<\/strong> by an adequately skilled workforce.<\/li>\n<li>Facilitate <strong>transparency and citizen participation<\/strong> for democratic accountability.<\/li>\n<\/ol>\n<ul>\n<li>Also, State governments need to shift from the present <strong>discretionary grants <\/strong>practice to <strong>predictable fiscal transfers<\/strong> to municipalities.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Source: Indian Express Gs2: Issues and Challenges Pertaining to the Federal Structure, Devolution of Powers and Finances up to Local Levels and Challenges Therein. Synopsis: \u00a0The reforms suggested by the 15th Finance commissions (interim report) can improve the financial governance of India\u2019s municipalities. Background: The 15th Finance Commission submitted an interim report for FY 2020-21.&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/15th-finance-commission-reforming-financial-governance-of-indias-municipalities\/\">Continue reading <span class=\"screen-reader-text\">15th Finance commission: Reforming financial governance of India\u2019s municipalities<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[1276,1313],"class_list":["post-79633","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-po_5","tag-po_6","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1702619471},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/79633","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=79633"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/79633\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=79633"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=79633"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=79633"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}