‘Take urgent steps to reverse this trend’: Parliamentary panel flags decline in funding to rural local bodies, asks Centre to act

The committee headed by Congress member Saptagiri Sankar Ulaka said that the reduction in untied and scheme-based transfers “not only restricts the ability of PRIs to address local developmental needs” but also hampers their credibility.

“In the absence of predictable and adequate financial support, Panchayats struggle to undertake essential functions related to basic service delivery, infrastructure creation, livelihood generation, and social welfare implementation,” it said.

“The Committee recommends that the Ministry of Panchayati Raj, in consultation with the Ministry of Finance and the Fifteenth Finance Commission, take urgent steps to reverse this trend and ensure that adequate, untied, and performance-linked resources are allocated to PRIs,” states the report titled ‘Devolution of Funds under Panchayati Raj System’.

“Additionally, mechanisms should be developed to ring-fence PRI funds, prevent diversion by state departments, and promote transparency in inter-tier fiscal transfers,” it said.

Observing that since the regular constitution of the State Finance Commission is necessary for the devolution of funds to PRIs from state finances, the committee also recommended that the Panchayati Raj ministry take up this matter at the highest level and impress upon the state governments to constitute State Finance Commissions regularly without any delay so that the flow of central grants is not stopped or minimised.

The committee further noted that, as per the information provided by the ministry, only 25 states have constituted SFCs, and only nine have constituted 6th SFC. “It is disheartening to note that some States have not even constituted 3rd, 4th and 5th SFC,” it said.

Pointing out that Punjab and Tamil Nadu have shown good compliance with regard to “constitution of SFC, report submission and laying of ATRs [action taken reports]”, the committee said that states like Arunachal Pradesh and Chhattisgarh have delays or pending submission of reports and ATRs. “Gujarat, Jharkhand and Telangana are in an early stage with reports yet to be submitted,” it said.