**Executive Summary**
This document is a response to a parliamentary question (No. 424) regarding the financial autonomy of Panchayati Raj Institutions (PRIs). The response details the government's actions to enhance the fiscal capacity and revenue-raising powers of Panchayats. The Ministry of Panchayati Raj is actively involved in assisting the Rural Local Bodies, with initiatives planned for completion by 2025.
**Key Points / Main Content**
* **Constitutional Framework:**
* Panchayats are a State subject under the Constitution of India and operate through State Panchayati Raj Acts.
* State legislatures can authorize Panchayats to levy and collect taxes, duties, tolls, and fees.
* Central Finance Commissions assess the finances of the Union, States, and local bodies, recommending tax sharing and grants.
* **Financial Allocations:**
* Central Finance Commission grants for Rural Local Bodies (RLBs) are increasing, from Rs. 64,408 Crores (FY 2010-15) to Rs. 2,36,805 Crores (FY 2021-26).
* **Ministry Initiatives:**
* The Ministry of Panchayati Raj assists RLBs in augmenting their Own Source Revenues (OSR).
* A Panchayat Revenue Enhancement Cell (PREC/OSR Cell) has been established.
* A project under the RGSA Scheme aims to transform 350 Gram Panchayats into Growth Centers over the next four years.
* The "SAMARTH Panchayat portal" has been developed to digitize OSR collection.
* A study on "Preparation of a Viable Financial Model for Generation of Own Sources of Revenue (OSR)" is being conducted by the National Institute of Public Finance and Policy (NIPFP).
* Specialized modules on OSR generation are being developed in collaboration with IIM-Ahmedabad.
* **Incentivization:**
* The Atma Nirbhar Panchayat Special Award (ANPSA) has been launched in 2025 to incentivize Gram Panchayats in augmenting their Own Sources Revenue (OSR).
**Impact Analysis**
**Rural Local Bodies (RLBs) / Panchayats**
* **Impact:** RLBs will be assisted in augmenting their Own Source Revenues (OSR), leading to greater financial autonomy and self-sufficiency.
* **Action Required:** RLBs are expected to leverage the various initiatives, including the SAMARTH Panchayat portal and training programs, to enhance their revenue generation capabilities. Gram Panchayats are also expected to strive towards being recipients of the Atma Nirbhar Panchayat Special Award (ANPSA).
**State Governments**
* **Impact:** States will need to ensure that their Panchayati Raj Acts align with the constitutional provisions and enable Panchayats to effectively levy and collect taxes.
* **Action Required:** States are expected to participate in the training programs, such as the State Level Master Trainers (SLMTs) program, and support Panchayats in implementing the various initiatives.
**Ministry of Panchayati Raj**
* **Impact:** The Ministry is responsible for implementing the various initiatives and schemes aimed at enhancing the financial autonomy of Panchayats.
* **Action Required:** The Ministry needs to continue monitoring the progress of these initiatives, providing support to States and Panchayats, and ensuring that the goals are achieved.
Key Entities Referenced
Ministry of Panchayati Raj: The central ministry responsible for Panchayati Raj Institutions and their financial autonomy.
Panchayati Raj Institutions (PRIs): Local self-government institutions at the village or rural level in India.
Constitution of India: The supreme law of India, defining the powers and responsibilities of the Panchayats and the state legislature. Specifically referencing Article 243H and Article 280.
Finance Commission: Constitutional body that provides recommendations on the distribution of tax revenues between the Union and the States.
Rashtriya Gram Swaraj Abhiyan (RGSA): A scheme for the development of Panchayats.
GOVERNMENTOF INDIA
MINISTRYOF PANCHAYATI RAJ
LOK SABHA
UNSTARREDQUESTION NO. 424
ANSWEREDON 02.12.2025
PANCHAYATI RAJ INSTITUTION
424.SHRIZIAUR REHMAN:
Will the Minister of PANCHAYATIRAJ be pleased to state:
(a)whether the Government hastaken note thatinadequatefinancialautonomy of PanchayatiRaj
Institutions (PRIs) ishamperingeffective implementation of localdevelopmentprojects;
(b) if so, the details of the measures being taken by the Government to enhance the fiscal
capacityandrevenue-raising powers of Panchayats;and
(c)if not,the reasons therefor?
ANSWER
THE MINISTER OF PANCHAYATI RAJ
(SHRIRAJIVRANJAN SINGH ALIAS LALAN SINGH)
(a) “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, which may vary from State to State, subject to the
provisions of the Constitution. As perArticle 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 and subject to such limits and assign to the
Panchayats such taxes, duties, tolls and fees levied and collected by the State Government for
such purposes andsubject tosuch conditionsandlimits asmaybe specified inthe law.
However,Article280oftheConstitutionofIndiaprovidesthebasisfortheCentralFinance
Commissions toassess thestatus offinancesof theUnion, Statesandtheirrespectivelocalbodies
and recommend sharing of taxes as well as grants for various purposes to the States and Local
Bodies. The Finance Commission grant can be used by Rural Local Bodies (RLBs) for location-
specificfeltneedsunder29subjectsenshrinedintheEleventhScheduleoftheConstitution,except
forsalaryorotherestablishmentexpenditures.CentralFinanceCommissiongrantsforRuralLocal
Bodies in the States have continuously increased from the 13thFinance Commission to the 15th
FinanceCommission. The allocationsunderthe 13thFinanceCommission (FY2010-15) were Rs.
64,408 Crores, and the allocation under the 15th Finance Commission (FY 2021-26) is Rs.
2,36,805Crores, which isaround4 timesthatof the 13thFinanceCommission allocation.
1(b) & (c) Ministry of Panchayati Raj isactively involvedinassisting the Rural Local Bodies
(RLBs) towards augmenting their Own
SourceRevenues(OSR),thereby assisting intheirautonomyandself-sufficiency. With this
objective, the Ministry has set up a dedicated Panchayat Revenue Enhancement Cell (PREC
/OSR Cell) and has launched a project under the RGSA Scheme for identification and
transformation of 350Gram Panchayats asGrowth Centre overnext four years.
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
isdesigned tobring transparency, efficiency,andscalability tolocalfinancialadministration.
The Ministry has commissioned a study on "Preparation of a Viable Financial Model for
Generation of Own Sources of Revenue (OSR)", which is being conducted by the National
Institute of PublicFinance andPolicy(NIPFP).
Ministry of Panchayati Raj, in collaboration with the Indian Institute of Management-
Ahmedabad (IIM-A), has developed specialised modules on the generation of Own Source
Revenue (OSR) by the Panchayats. Based on the specialised modules of OSR training of State
LevelMaster Trainers (SLMTs) of 31States/UTsare being trainedbythe teamof IIMA.
The incentivization of Panchayats isalso 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 SourceRevenue (OSR)byPanchayats.
*****
2