Strengthen local bodies, allow them to hike taxes: Montek panel

Strengthen local bodies, allow them to hike taxes: Montek panel

Ruchika M Khanna

Tribune News Service

Chandigarh, July 28

Acknowledging that there is need to improve civic amenities in Punjab, the Montek Ahluwalia-led expert group has recommended making urban and rural local bodies “financially strong” by allowing them to increase taxes.

Proposals

  • Rs8,174 cr Total local body grant for 5 yrs
  • Rs5,410 cr For rural local bodies
  • Rs2,024 cr For non-million cities
  • Rs740 cr For 2 million-plus population cities (Amritsar, Ludhiana)

In its report on “Medium Term and Long Term Post-Covid Economic Strategy for Punjab”, the group said the recommendations of the Sixth State Finance Commission on financially strengthening the urban and local bodies should be fulfilled to allow the state to access grants of Rs 8,174 crore for five years.

These recommendations, among other things, include giving away at least four per cent of the VAT collected to the urban local bodies and panchayati raj institutions. However, according to the finance commission report tabled in the Assembly earlier this year, Punjab had not released any funds to local bodies for a decade, even though it had presented the explanatory memorandum and action taken report for the fourth and fifth finance commissions.

The group pointed out that the total local body grants for five years amounted to Rs 8,174 crore, of which Rs 5,410 crore is for rural local bodies, Rs 2,024 crore for non-million cities and Rs 740 crore for the two million-plus population cities of Amritsar and Ludhiana.

But these will be available to the state only if it also ensures that in the first and second year of the award period (2021-22 and 2022-23), at least 25 per cent of the rural local bodies have both their provisional accounts for the previous year and audited accounts for the year before the previous, available online in the public domain.

From the third year (2023-24), the state will receive total grants due to the rural bodies having both provisional accounts of the previous year and audited accounts for the year before previous and making these available online.

The group has also recommended property tax reforms and fixing the minimum floor for tax rates and ensuring consistent improvement in the collection of property taxes in proportion to the growth rate of GSDP as a condition for availing the local body grant.

The report noted that in response to the recommendation of the 13th Finance Commission, the government had established the Property Tax Board in 2013, but it had not been made functional. “We recommend the government take measures to revive the Board,” it said. For rural and urban (non-millennium cities) local body grants, 40 per cent funds are given unconditionally and 30 per cent for strengthening drinking water, rainwater harvesting and water recycling and another 30 per cent for improvement in sanitation and ODF status.

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