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Weaknesses in Integration of Local Bodies in Federal Structure

Ashok Pankaj ( is with the Council for Social Development, New Delhi.

Integrating the Third Tier in the Indian Federal System: Two Decades of Rural Local Governance by Atul Sarma and Debabani Chakravarty,Singapore: Palgrave Macmillan, 2018; pp XI+174,`10,064.90 (hardcover).

Atul Sarma and Debabani Chak-ravarty’s book, Integrating the Third Tier in the Indian Federal System: Two Decades of Rural Local Governance, coincides with the silver jubilee year of the enactment of the 73rd and 74th constitutional amendment acts, which provide constitutional status to the institutions of local self-government in India.1 This book, however, is not a cause for celebration—and rightly so—as it draws our attention to the lack of integration of the institutions of local self-government in the broader federal system in India. It points out two major structural weaknesses in this regard. One, while the distribution of power between the union and state governments has been done per the Constitution, the distribution of power between the state governments and the local self-governments follows an act of the state legislature. The former may be called distributive, while the latter is devolutionary. Two, in the federal revenue sharing arrangement, the third tier has been excluded. “Local governments are not given any statutory entitlement to a share in Union taxes as in the case of State governments” (p 5).

The Seventh Schedule of the Constitution distributes power between the union and state governments through the union, state and concurrent lists. Any dispute in this regard is the original and exclusive jurisdiction of the Supreme Court. In contrast to this, the Eleventh Schedule lists 29 functions for the panchayati raj institutions (PRIs) and the Twelfth Schedule lists 18 functions for urban local bodies (ULBs). The devolution of these functions, however, depends on an act of the state legislature. This is a weak and, in fact, inferior power sharing arrangement compared to that between the union and state governments. But, the Supreme Court has maintained that the PRIs cannot arrogate to themselves the position equivalent to that of a state vis-à-vis the union government.2 Second, any change in the Seventh Schedule can be brought about only by a constitutional amendment. On the other hand, Articles 243G and 243W provide enabling legislation for the devolution of 29 functions to the PRIs in the Eleventh Schedule and 18 functions to the ULBs in the Twelfth Schedule.

The National Finance Commission (NFC), under Article 280 (Clauses 3a and 3b), makes recommendations for sharing of the tax revenues between the union and state governments and the principles for providing grants-in-aid to the states. The 73rd and 74th amendment acts inserted Clauses 3bb and 3c into Article 280 that made provisions for measures to augment the finances of the state governments for supplementing the resources of the PRIs and ULBs. The recommendations of the NFC are, however, to be based on the reports of the state finance commissions (SFCs). Since the constitution of the SFCs do not synchronise with that of the NFC, the Clauses (3bb and 3c under Article 280) are ineffective.

Arguments for Decentralisation

The book sets the discussion by providing political and economic arguments for decentralisation. At the political level, decentralisation is favoured for promoting people’s participation. At the economic level, it promotes efficiency through better utilisation of resources: “the sum of marginal benefits equals marginal costs” (p 1). To some, decentralisation also promotes economic growth, as it yields economic gains (p 2). In Chapter 2, the authors divide the economic approaches to decentralisation into classical and contemporary, and argue that the former favours it for promoting optimum allocation of resources and the latter for increasing accountability in governance. However, experiences of other developing countries reveal that decentralisation has been useful in promoting effective governance, increasing economic stability, and promoting growth and development (p 17).

Chapter 3 provides an overview of the evolution of the institutions of local self-government in India, starting from the Vedic period till the era of the 73rd and 74th constitutional amendment acts. It gives a bird’s eye view of the institutions of local self-government in the pre-British, British, and post-independence periods. This chapter should be read with Chapter 5, wherein the authors have explained the design salience of the PRIs and elaborated on the fault lines in the design that pertain to the lack of integration of the local self-government in the federal system, the central theme of this book.

Chapter 4 deals with the institutions of local self-government in the Sixth Schedule Areas in North East India. It analyses the structure and functioning of the autonomous district councils (ADCs). It shows that the ADCs are heavily dependent on the state government for finances, which in turn cripples their functional autonomy. There is also poor coordination between the state government and the ADCs for development works. A major highlight of this chapter is the democratic deficits in ADCs, which are twofold. First, unlike the PRIs, there is no provision for the reserved representation of women. Second, there is an absence of a village-level body, equivalent to a gram panchayat. Further, ADCs in the Sixth Schedule Areas are mainly regulatory bodies with a mandate to preserve and protect the tribal identity, culture, and resources such as land and forests. Based on a comparative analysis of the role and functions of the ADCs and PRIs, the authors argue that “the Autonomous Councils in their present form have become both redundant and irrelevant” (p 65). They recommend a restructuring of these by synthesising the features of the ADCs and the PRIs (p 66).

Chapter 7 assesses the performance of the PRIs as democratic institutions of local self-government, for over two decades now. The authors have used eight performance indicators in their analysis. These are: the frequency of holding elections, representation of various social categories (including women), jurisprudence, social audit, e-governance and financial accountability, the role of the district planning committee, parallel bodies, and the devolution of fund, finances and functionaries. The authors appreciate the procedural aspects of institutionalisation of the PRIs in various states, but are critical of the lack of implementation in “the devolution of the operative core of funds, functions and functionaries with varying outcomes across States” (p 121). While these are important, a political economy perspective on the lack of devolution and variations in devolution across the states would provide a deeper understanding of this issue.

A very significant contribution of this book lies in its analysis of the positioning of the local self-government institutions in the inter-government fiscal transfer framework, particularly in context of those constitutional provisions, which fall short of fiscal federalism. It provides a detailed analysis of the observations and recommendations of the NFC since the enactment of the 73rd and 74th amendment acts, and emphasises the requirement of the NFC to suggest measures for augmenting finances of the state to supplement resources of the local self-government. A major constitutional anomaly, which the book highlights, is the non-synchronisation of the reports of the NFC and the SFCs. It also raises concerns over the qualifications of the members of the SFCs, the quality of the reports, and the commitment of the state governments towards implementing the recommendations of these commissions.

The concluding chapter of the book suggests some concrete measures, including the constitutional amendment for addressing the issues of lack of functional and fiscal integration of the local self-government institutions with the federal system in India. It makes compelling arguments to address the debilitating structural weakness in the constitutional arrangement of these institutions, which is a major contribution of this chapter. A more radical solution could be adding the list of constitutional amendments for the local self-government in the Seventh Schedule itself, instead of the devolutionary Eleventh and Twelfth Schedules.

Omission of PESA

A glaring omission in this book is the analysis of the Provisions of Panchayats (Extension to Scheduled Areas) Act (PESA) under the Fifth Schedule Areas. The implementation of PESA has been tardy and half-hearted. In some states, the spirit of the PESA has been diluted. An absence of a comparative analysis of the local self-government in the Fifth Schedule, Sixth Schedule and non-schedule areas is an important gap in the literature of the book. A treatment of the same would have made this exercise unique.

Also, decentralisation is not only an Indian phenomenon. There are rich experiences of decentralisation from other countries. Although this book is focused exclusively on India, drawing on the experiences of countries like the United States, Canada and Switzerland, where third-tier government enjoys much greater functional and financial autonomy, would have been useful. Decentralisation experiences of Brazil, China, Indonesia, etc, are rich and could have provided meaningful insights, had they been included.


1 The 73rd Amendment Act was notified on 24 April 1993 and the 74th Amendment Act on 1 June 1993.

2 In Rangareddy District Sarpanches Association v the State of Andhra Pradesh (2004), the Andhra Pradesh High Court, by a 3/4 majority decision, ruled that the Eleventh Schedule of the Constitution is not comparable, in the sense of being similar, to the Seventh Schedule, as the third tier of the multilevel governance is constitutionally and legally far from “federal” and, therefore, remains devolutionary. In a dissenting minority opinion, one judge did not concur, arguing that the background to the 73rd Amendment Act revealed the intention of the lawmakers to constitutionally empower the panchayats. He also added that no part of the Constitution is quintessentially superfluous and a meaningless appendage.

Updated On : 24th Aug, 2018


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