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Fiscal Empowerment of Rural Local Bodies
Context: The Ministry of Panchayati Raj is set to launch a dedicated digital platform, the SAMARTH Panchayat Portal, to transform the financial management of India’s rural local bodies (Gram Panchayats). This initiative aims to digitise the collection of Own Source Revenue (OSR), which includes local taxes and non-tax revenues.
Why are the own sources of revenue for local bodies important?
- Financial Autonomy and Empowerment: OSR reduces dependence on state and central grants.
- Improved Accountability and Governance: When local bodies are directly responsible for raising their own funds, they become more accountable to their citizens.
- Sustainable Development: A predictable stream of OSR enables Panchayats to plan and execute development projects—like maintaining local roads, water supply, and sanitation—in a sustained manner without waiting for uncertain fund transfers.
- Enhanced Creditworthiness: A healthy OSR collection makes a local body financially credible, allowing it to borrow funds from financial institutions for larger infrastructure projects if needed.
- Strengthening Grassroots Democracy: Fiscal empowerment through OSR is a critical pillar for realising the vision of democratic decentralisation.
How can the SAMARTH Portal help in assessing the financial health of rural local bodies?
- Centralised and Transparent Database: This allows for easy tracking of collections, trends, and comparisons between Panchayats, regions, and states.
- The move is critical as more than 40% of Gram Panchayats collect less than ₹1 lakh annually, and 11 states/UTs have not yet framed their OSR rules.
- Real-Time Tracking and Monitoring: The portal enables online tracking of tax and non-tax revenue collections.
- Piloted in Himachal Pradesh and Chhattisgarh, the portal is designed to bring transparency, efficiency, and accountability to Panchayat finances.
- Data-Driven Policy Formulation: By analysing the aggregated data, governments can identify patterns.
- Benchmarking and Best Practices: Panchayats with high OSR collection can be studied, and their best practices (e.g., efficient collection methods, popular user charges) can be replicated in others.
- Improving Collection Efficiency: By digitising the entire process—from demand generation to online payments—the portal reduces leakage, minimizes manual errors, and makes it easier for citizens to pay their dues, thereby directly boosting the OSR collection of Panchayats.
