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Preliminary Report Finanal FASFC 2010-11

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Preliminary Report Finanal FASFC 2010-11 PRELIMINARY REPORT OF THE FOURTH ASSAM STATE FINANCE COMMISSION (2011-12) P.K. Bora CHAIRMAN ASSAM SECRETARIAT DISPUR, GUWAHATI March, 2011 Table of Contents Sl No Caption Paragraph Page 1 Constitution of FASFC 1-2 1 2 TOR 3-6 2-3 3 Time Frame 7-9 3-4 4 Design of the Report 10-13 4-5 5 Approach 14 5-6 6 Design of Fiscal Transfer 15-19 6-7 7 Assessment of PRIs Finances 20-45 7-17 8 Assessment of Municipal Finances 46-61 18-22 9 Assessment of GMC Finances 62-75 22-27 10 Review of State Finances 76-84 27-32 11 Devolution 85-90 32-35 12 Interest Distribution 91-96 35-37 13 Assigned 97 37 14 Grant-in-Aid 98-101 37-39 15 Release of Fund 102-103 39-40 16 Monitoring 104 40-41 17 Accounts & Audit 105-107 41-42 18 Recommendations 108-132 42-45 19 Basic Parameters for distribution of Annexure- I 46-47 Grants to ULBs 20 Acronyms Annexure- II 48 21 Technical Supplement Annexure- III 49-136 Constitution of the Fourth Assam State Finance Commission In pursuance of the provision of Articles 243 I and 243 Y of the Constitution of India, read with Section 2(1) of the Assam Finance Commission (Miscellaneous Provision) Act, 1995, the Governor of Assam constituted the Fourth Assam State Finance Commission under Notification No FEA (SFC) 110/2009/114 dated April 23, 2010. The Commission is headed by Shri P.K. Bora, IAS (Retd), Ex-Chief Secretary, Assam. The other members of the Commission are the following: 1. Shri Arun Kumar, IAS Principal Secretary, Panchayat &Rural Development Member 2. Shri Saraswati Prasad, IAS Principal Secretary, Urban Development " 3. Dr. Ashish Bhutani, IAS Commissioner & Secretary, Guwahati Development " 4. Shri R.S. Prasad, IAS Commissioner & Secretary, Finance Member Secretary 5. Shri M.S. Manivannan, IAS Joint Secretary, Finance Secretary 2. Although the Commission was constituted on 23rd April, 2010 a good deal of time was wasted in finding a suitable accommodation for the office chamber of the Chairman. Eventually the Chairman assumed office on 11th June, 2010. All other members including the member-Secretary and Secretary are serving State Government officials. Recently, the Secretary has been posted elsewhere without giving a substitute in his place. The other staff of the Commission was gradually appointed in course of time. State Finance Commission Cell under Finance (Economic Affairs) Department was nominated to provide Secretarial assistance to the Commission. The first meeting of the Commission was held on 16th June 2010 and the Commission virtually started functioning from that day. 1 Terms of Reference 3. The substantive part of the terms of reference (ToR) is as reproduced below: To make recommendations as to the principles which should govern. (a) I. the distribution between the State of Assam and the panchayat/ municipalities of the net proceeds of taxes and duties levied and collected by the State; II. the determination of the taxes, duties, tolls and fees, which may be assigned to, or appropriated by, the panchayats/municipalities; III. the grants-in-aid to the panchayats/municipalities from the Consolidated Fund of the State. (b) The measures needed to improve the financial positions of the panchayats/municipalities with special emphasis on rationalization of property tax, collection of user charges and innovative realization method. (c) Examine the feasibility and make recommendations on raising of resources by the Urban Local Bodies (ULBs) through issuance of bonds. (d) Examine the feasibility and make recommendations on creation of urban infrastructure and other civic amenities by the ULBs, through public- private partnership (PPP) and exploring avenues of viability gap funding. (e) Any other matter referred to the SFC by the Governor in the interests of sound financial position of the panchayats/municipalities. 4. The other salient features of the ToR is to make an assessment of (i) the actual debt position of each local body as on 31.03.2010 and (ii) the estimated debt position of each local body as on 31.03.2011 and suggest suitable measures relating to the debts as are deemed necessary, keeping in view the financial requirements of the State Government also. 5. In making its recommendations on the various matters aforesaid, the Commission has been asked to adopt the population figures of latest available census in all cases where population is regarded as a factor for determination of devolution of taxes and duties and grants-in-aid. 2 Additional Terms of reference 6. The original notification constituting the Commission was amended later by a second notification No FEA (SFC) 110/2009/119 dated May 14, 2010 giving additional ToR to the Commission. As per the additional ToR, the Commission is required to make recommendations regarding an appropriate staffing pattern and corresponding revised scales of pay and allowances for the employees of Panchayati Raj Institutions (PRI) and Urban Local Bodies (ULB). The Commission is asked to obtain from the concerned departments the reports of the Study Groups relating to staffing pattern appointed by the nodal departments of Panchayat & Rural Development, Urban Development and Gauhati Development. Further, the Commission is also required to make recommendations in respect of provincialization of the services of the employees of panchayats and municipalities in the context of 73rd and 74th Constitutional Amendments. Time Frame 7. As per the original notification, the Commission was required to make its final report, covering the period of five years from 1st April, 2011 to 31st March, 2016, available to the Governor of Assam by 31st December, 2010. While in respect of the additional ToR, the Commission was expected to submit an interim report within four months i.e., by the middle of September, 2010. 8. As per the additional ToR the Commission is required to finalize an appropriate staffing pattern for the PRIs and ULBs with reference to the reports of the Study Groups appointed for this purpose by the concerned departments. In this context three Study Groups have been appointed by the Government of Assam. The Guwahati Development Department (GDD) appointed ICRA Management Consulting Services Ltd to make an assessment of the staffing pattern of Gauhati Municipal Corporation (GMC). For other Urban Local Bodies (ULB) a ten member Committee headed by Shri A.K. Arora, IAS (Retd) has been constituted. While for Panchayati Raj Institutions (PRI) a one man Committee chaired by Shri S.K. Purkayastha, IAS (Retd) has been constituted. As of now, only the Committee on PRIs has submitted its report to Panchayat and Rural Development Department recently. The Commission has asked the department 3 to give their views on the Committee’s recommendations. In respect of GMC, ICRA Management Consulting Services Ltd has come up with an inception report indicating that three more reports will be submitted in due course to arrive at a final position. The Committee on other ULBs has been still continuing with its deliberations. 9. Apart from the findings of the aforesaid Study Groups, the Commission has been seriously handicapped by the meagre flow of information, delay in submission and the poor quality of response to our questionnaire from the grass root level. As the matter stands now, there are big gaps in the information available so far and the needs for further materials in finalizing the recommendations of the Commission. The inevitable fallout being a departure from the original time frame of submitting an interim report within four month and final report by 31st December, 2010. Having regard to these serious drawbacks the Commission requested Government for extension of time upto 31st March, 2011 for the preliminary report and upto 31st December, 2011 for the final report. In response to our request Government of Assam extended the tenure of the Commission upto 31st October, 2011 with the stipulation that a preliminary report may be submitted by 31st March, 2011. In terms of the above mandate, a preliminary report is submitted now covering the first year of our award period 2011-12. Design of the Report 10. In the performance of its functions the Commission adopted such procedures as are found suitable at relevant points of time. At the first instance, the Commission gave wide publicity as to its formation including its ToR through print media published in a few English and local language news papers. That apart, public notice was issued asking views, opinions and suggestions from the members of the public including MLAs, MPs, elected representatives of local bodies, economists and other eminent personalities. 11. In the matter of eliciting information from the grass root level the Commission adopted the questionnaire method. For this purpose a set of general questionnaires covering different aspects of PRIs and ULBs administration were 4 formulated. These were circulated to all concerned asking for a time bound response. It was supplemented by field visits and inter-active sessions with Presidents/Vice Presidents of PRIs and Chairmans/Vice-Chairmans of ULBs apart from officials. 12. Till submission of this preliminary report, Commission’s officials undertook field visits covering five districts of Upper Assam and three districts of Lower Assam. The Chairman visited Goalpara, Dhubri and Bongaigaon districts and held inter- active sessions with the elected representatives and official functionaries of PRIs and ULBs. 13. So far five sittings of the Commission were held to discuss various issues facilitating the completion of the entrusted job in a time bound manner. One inter-active session was held with economists and representatives of NGOs to elicit their views and opinions in a bid to carry on the exercise in a meaningful way. That apart, one in-house meeting was held with the Director of Audit (Local Fund), Assam to ensure transparency and accountability in financial transactions of PRIs and ULBs.
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