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GOVERNMENT OF INDIA
MINISTRYOF PANCHAYATIRAJ
RAJYASABHA
UNSTARREDQUESTION NO 4231
ANSWEREDON 01.04.2026
FISCALEMPOWERMENTOFPANCHAYAT
4231SHRIPRAMOD TIWARI:
Will the Minister of PANCHAYATIRAJ be pleased to state:
(a) whether despite the 73rd Amendment to the Constitution of India, Government is yet to
evolve anacceptable fiscal decentralisationof Panchayati Raj Institutions (PRIs);
(b) if so, the detailsthereofand the reasons therefor;
(c) whether the availability of resources for PRIs in the combined Government revenues is
negligible; and
(d) if so, the steps takenbyGovernment toreviewthe present status of devolution of finances
toPRIs?
ANSWER
THE MINISTER OF PANCHAYATI RAJ
(SHRIRAJIVRANJAN SINGH ALIAS LALAN SINGH)
(a) and (b) “Panchayat”, being a “Local Government”, is a State subject and part of the
State List of the Seventh Schedule of the Constitution of India. Panchayats are set up and
operate through the respective State Panchayati Raj Acts. States have made their own
Panchayati Raj Act, subject to the provisions of the Constitution. As per Article 243H of the
Constitution of India, legislature of the State may, by law, authorize a Panchayat to levy,
collect and appropriate such taxes, duties, tolls and fees in accordance with such procedure
andsubject tosuch limitsand assign tothe Panchayatssuch taxes, duties, tollsandfeeslevied
and collected by the State Government for such purposes and subject to such conditions and
limitsasmaybe specified inthe law.
However, Article 280 of the Constitution of India provides the basis for the Central Finance
Commissions to assess the status of finances of the Union, States and their respective local
bodies and recommend sharing of taxes as well as grants for various purposes to the States
andLocal Bodies. The FinanceCommission grant canbe used byRural LocalBodies(RLBs)
for 29 subjects enshrined in the Eleventh Schedule of the Constitution, except for salary or
otherestablishment expenditures.
(c) and (d) Article 243G of the Constitution empowers the Legislature of a State to make
provisions, by law, for the devolution of power and responsibilities upon Panchayat at
1appropriate level, subject to such conditions as may be specified, with respect to the
preparation of plans for economic development and social justice and implementation of
schemes for economic development and social justice as may be entrusted to them including
those in relation to matters listed in the Eleventh Schedule to the Constitution. The State
legislatures are to consider the 29 subjects listed in the Eleventh Schedule for devolution of
power and responsibilities upon Panchayats. Accordingly, all matters relating to Panchayats,
includingto reviewthe status of devolutionof finances toPanchayati Raj Institutions, comes
within the jurisdiction of the StateGovernment concerned.
The Ministry of Panchayati Raj reviews performance of Panchayats, from time to
time, through studies, review meetings, field visits, video conferencing, Information
Technology applicationsetc.
The Ministry has released a report titled “Status of Devolution to Panchayats in States - An
Indicative Evidence-Based Ranking, 2024” in February 2025 to assess the effectiveness of
devolution and the role of local governments in strengthening grassroots democracy. This
report presents the Devolution Index, which provides the overall scores and ranks for all
States/Union Territories covered under Part-IX of the Constitution, based on six identified
dimensions: Framework, Functions, Finances, Functionaries, Capacity Enhancement, and
Accountability. This report reveals that the extent of devolution has increased from 39.9% to
43.9% betweenthe period2013-14 to2021-22.
Ministry of Panchayati Raj is actively involved in assisting the Rural Local Bodies (RLBs)
towards augmenting their Own Source of Revenues (OSR), thereby assisting in their
autonomy and self-sufficiency. The Ministry conducted a study to prepare a viable financial
model for the generation of Own Source Revenue (OSR) by Panchayati Raj Institutions
(PRIs). The study has been done by the National Institute of Public Finance and Policy
(NIPFP), and NIPFP has submitted the study report to the Ministry in the month of March
2025.
The Ministry of Panchayati Raj (MoPR) has also undertaken a significant step to digitise the
OSR collection of the Panchayats by developing the “SAMARTH Panchayat portal”, a
dedicated digital platform that facilitates the generation of tax & non-tax demands &
collection thereof, maintenance of tax registers, and online tracking of revenue. This digital
empowerment is designed to bring transparency, efficiency, and scalability to local financial
administration.
The incentivization of Panchayats is also being carried out under the revamped Rashtriya
Gram Swaraj Abhiyan (RGSA) scheme. Under this scheme, in 2025, the Ministry of
Panchayati Raj has launched the Atma Nirbhar Panchayat Special Award (ANPSA) on
National Panchayati Raj Day (NPRD), and it is for the first time that the Ministry has
institutionalised dedicated Special Category Awards to incentivise and acknowledge
exemplary efforts of Gram Panchayats in Atmanirbharta (Self-Reliance) through
augmentation of Own Sources Revenue (OSR). Atma Nirbhar Panchayat Special
Award(ANPSA) is to promote Atmanirbharta through augmentation of Own Source of
Revenue (OSR)byPanchayats.
To strengthen Panchayati Raj Institutions financially, Central Finance Commission grants for
Rural Local Bodies in the States have continuously increased from the 13th Finance
2Commission to the 16th Finance Commission. The allocations under the 13th Finance
Commission (FY 2010-15) were Rs. 64,408 crore, under 14th Finance Commission were
Rs.2,00,292 crore andthe allocation underthe 15thFinance Commission (FY2021-26) isRs.
2,36,805 crore. The 16th Finance Commission (FY 2026-31) has earmarked a total grant of
Rs. 4,35,236 crore for the Rural Local Bodies, which is almost 84% more than the allocation
underthe 15thFinance Commission (2021-26).
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