All the funding process from central govt to the local bodies(Zilla parishad-Taluka level-Gram panchayat). How funds has not been utilized or allocated properly which leads to Inequality distribution of income.

1. Financing & Budgeting in the
Panchayati Raj Institutions
Onkar Gandhi(12)
Jayant Gaba(11)
Ayush Jain(13)
Mohit Jain(14)
Anand Joshi(15)

2. Panchayati Raj Institutions
• It is the oldest system of local government in the Indian subcontinent. The
word raj means "rule" and panchayat means "assembly" (ayat) of five (panch).
• This was amended in April 1993 to incorporate the provisions of the 73rd
Constitutional Amendment Act, 1992. The Act envisages decentralization of
powers to three tier Rural Self Governing Bodies, viz., Village Panchayats (VP),
Taluka Panchayats (TP) and District Panchayats (DP).

3. At the state level
Secretary, Panchayat, Rural Housing and Rural Development Department
Development Commissioner
At the district level
Elected body headed by
President and assisted by
Statutory
District Development Officer
District Panchayat
Accounts Officer
District Level Officer of all departments
(functional control with Head of Department
of concerned departments)

4. At the taluka level
Elected body headed by the President
and assisted by the Statutory
Committees
Executive Officer (Taluka
Development Officer)
At the Village level
Elected body headed by
Sarpanch
Executive Talati cum
Mantri

5. Secretary, Rural Development Department
Chief Executive
Officer
President Zilla
Parishad
Sabhapati Panchayat
Samiti
Sarpanch Gram
Panchayat
Block Development
Officer
Gram Sevak
Hierarchy of PRIs
District
Taluka
Village

6. Constitution of finance commission
(A) The principles which should govern-
• The distribution between the State and the Panchayats of the net
proceeds of the taxes, duties, tolls and fees leviable by the State.
• The determination of the taxes, duties, tolls and fees which may be
assigned to, or appropriated by, the Panchayats.
• The Grants-in-aid to the Panchayats from the Consolidated Fund of
the State.
(B) The measures needed to improve the financial position of the
Panchayats.
(C) Any other matter referred to the Finance Commission by the Governor in
the interests of sound finance of the Panchayats;
The Governor is required to cause every recommendation made by the
State Finance Commission together with an explanatory memorandum as to
the action taken thereon to be laid before the Legislature of the State.

7. Types of Grant-in-aid from central
government
1). Non-Plan Grants
2). Grants for state/Union territory plan
3). Grants for central plan
4). Grants for Centrality sponsored plan schemes
5). Grants for special Plan schemes.
http://cga.nic.in/html/book2/part1e.htm

8. • FFC has recommended out a total grant of Rs 2,87,436 crore
for five year period from 1.4.2015 to 31.3.2020. Of this the
grant recommended to Panchayatas is Rs 2,00,292.20 crores
and that to municipalities is Rs 87,143.80 crores. The transfers
in the year 2015-16 will be Rs 29,988 crores. Inter-se share of
each state in respect of local bodies grant

9. Overview of Maharashtra PRIs
• There are 28813 GPs for 43711 villages in Maharashtra. Gram Sevak, a
village level functionary, functions as Secretary to GP and is also
responsible for maintenance of account.
• There are 35 districts in Maharashtra. Two districts (Mumbai and Mumbai
suburban) do not have rural area; therefore, there are only 33 ZPs in the
State. ZPs have departments for Education, Health and Sanitation, Public
Works, Social Welfare, Irrigation, Animal Husbandry, Agriculture, Public
Lighting and Forests.
• The District Fund consists of money received from the Central
Government, grants for centrally sponsored schemes through state
budget, funds from plan and non-plan state schemes, assigned tax and
nontax revenues, receipts of ZPs, interest on investments, etc.

10. Revenue structure of Maharashtra(PRIs)
Head 2005-06 2006-07 2007-08 2008-09 2009-10
State total
revenue (Tax
and Non-tax
revenues)
39475.29 47617.49 64476.42 61819.88 67458.95
Amount
required to
be allocated
as per SFC
to LBs (40
per cent)
15790.12 19047.00 25790.57 24727.95 26983.58
Allocation to
PRIs
7472.84 7321.27 8007.34 10501.98 11726.62
Percentage
of allocation
to State
revenue
18.93 15.38 12.42 16.99 17.38

11. Receipts and expenditure of PRIs
Secretary, Rural Development Department
Subject CommitteesReceipts Expenditure
Year Own Government Other Total Capital Total
Revenue Capital Totalrevenue Grants revenue revenuereceipts receipts
2005-06 154 7394 181 7729 2267 9996 7495 1984 9479
2006-07 144 7784 188 8116 2691 10807 8161 2314 10475
2007-08 161 8246 183 8590 2521 11111 8494 1923 10417
2008-09 542 11825 443 12810 3066 15876 11661 3118 14779
2009-10 481 15240 278 15999 3573 19572 15309 3365 18674
Total 1482 50489 1273 53244 14118 67362 51120 12704 63824
(Rs in crore)

12. (A) Zilla Parishads
Analysis
Increase in Capital expenditure indicates impetus given to
infrastructure development activities in PRIs. However, while revenue
expenditure increased from ` 7495 crore in 2005-06 to ` 15309 crore
(104 per cent) in2009-10, capital expenditure increased from ` 1984
crore to ` 3365 crore (69 per cent) only during the same period.
75%
21%
2% 2%
ZP Receipts FY 2005-10
Govt Grants
Caapital receipts
Own revenue
other revenue

13. (B) Gram Panchayat
Year Govt
grants
Taxes Contributi
ons
Other
Receipts
Total
Receipts
Total
expenditu
re
2005-06 293 381 112 72 858 820
2006-07 376 430 113 71 990 938
2007-08 377 482 131 69 1059 1075
2008-09 524 506 115 162 1307 1252
2009-10 627 525 155 285 1592 1359
(Source : Figures furnished by ZPs )
(Rs in crore)

14. 0
200
400
600
800
1000
1200
1400
1600
1800
2005-06 2006-07 2007-08 2008-09 2009-10
Total receipts
Total Expenditure

15. The following are the component-wise details of the
revenue/capital expenditure of GPs and ZPs including PSs during
2007-08 to 2009-10.
Components GPs expenditure ZPs & PSs expenditure
2007-08 2008-09 2009-105 2007-08 2008-09 2009-10
Education 25 32 29 3917 4768 7280
Health and Sanitation 250 312 297 965 1410 1481
Public Works 423 398 481 692 836 1092
Social Welfare 42 79 66 700 443 523
Irrigation - 6 9 211 449 429
Animal Husbandry - 7 6 123 160 213
Agriculture - 3 2 128 126 180
Public lighting 50 43 34 - 22 56
Forests - - - 6 5 5
Administration 179 235 206 610 907 1166
Other expenditure 106 129 207 1142 2535 2885
Capital expenditure - 8 22 1923 3118 3365
TOTAL 1075 1252 1359 10417 14779 18675

16. Analysis
• Allocations out of the State budget to PRIs were much less
than the 40 per cent recommended by Second Maharashtra
State Finance Commission.
• Increase in capital expenditure did not commensurate with
the increase in revenue expenditure.

17. Models
• Uttar Pradesh model- decentralization & gram nidhi where Gram
panchayat is keeping all the funds or deposit from state or zila parishad or
even income getting from Land revenue or irrigation tax.
• Madhya Pradesh model- The State is also in the process of developing a
coding system for local finances. Designed for electronic data processing
where you will get all information about the district and lower levels in the
same format. The succeeding budgets are expected to include this
innovation
• Karnataka model- Karnataka has vested administrative control of local
officials in the Chief Executive Officer (CEO) of the Zila panchayat. They
have given power that what amount of money to be disbursed and where
to disbursed. The measures needed to augment the Consolidated Fund of
a State to supplement the resources of the panchayats in the State on the
basis of the recommendations made by the Finance Commission of the
State.”
• Funding at the panchayat level is then a means to facilitate a larger
change in the way government functions

18. Challenges
• Proper accounts are the Starting point for financial
accountability and reliable financial data for determining the
need for resources for the local bodies is necessary.
• The state governments may need to frame rules and fix rates
of levy to allow the local bodies to effectively tap the existing
sources of revenues.

19. Conclusion
• Local self government is still dependent on the
patronage of the head of the State government.
• Performance grant has been assigned based on the
previous audited report and utility of the fund by the
local bodies.
• If the share of state and local bodies revenue to the
central has been substantially increase then it will lead
to increase in the amount of basic grant sanctioned by
the central government.