{"id":311,"date":"2013-03-22T14:09:57","date_gmt":"2013-03-22T08:39:57","guid":{"rendered":"https:\/\/www.dvara.com\/what-we-do\/excited-about\/cities\/blog\/?p=311"},"modified":"2013-03-22T14:09:57","modified_gmt":"2013-03-22T08:39:57","slug":"funds-devolution-from-state-governments-to-ulbs-the-case-of-karnataka","status":"publish","type":"post","link":"https:\/\/www.dvara.com\/what-we-do\/excited-about\/cities\/blog\/2013\/03\/22\/funds-devolution-from-state-governments-to-ulbs-the-case-of-karnataka\/","title":{"rendered":"Funds devolution from state governments to ULBs: The case of Karnataka"},"content":{"rendered":"

By Anand Sahasranaman, IFMR Finance Foundation<\/a><\/em><\/p>\n

The revenue share between state governments and ULBs is determined by the State Finance Commissions (SFCs) which are set up by state governments every 5 years. In essence, the mandate of the SFC is to determine:<\/p>\n

    \n
  1. the principles of distribution to rural and urban local governments the net proceeds of the taxes, duties, tolls and fees levied by the state<\/li>\n
  2. taxes, tolls and fees which may be assigned to rural and urban local governments<\/li>\n
  3. grants-in-aid to rural and urban local governments from the consolidated funds of the state<\/li>\n<\/ol>\n

    In Karnataka, the third SFC was instituted to provide recommendations for the period 2008-09 to 2012-13. The report assessed the current state of ULBs in the state and developed the formula for determining the devolution of funds over this five year period.<\/p>\n

    SFC analysis of ULBs in Karnataka (2002-03 to 2006-07) reveals the following:<\/p>\n

      \n
    1. 7.35% of all ULBs2<\/sup> run a deficit, but the trend is most pronounced for City Corporations (CCs), where 33% run deficits.<\/li>\n
    2. Across ULB types, per capita income of ULBs is greater than per capita expenditure by a factor of 2.59 (in 2006-07)<\/li>\n
    3. Grants from state government (specific and general) contribute to 61% of overall ULB revenue, but there is a clear trend of increasing dependence on grants as we move to the smaller ULBs; grants contribute 59% of CC and City Municipal Council (CMC) revenues, while amounting to 63% and 71% in case of Town Municipal Council (TMC) and Town Panchayat (TP) revenues respectively. However, grants per capita show a declining trend as we move to smaller ULBs, except for the case of TPs, which have significantly higher values than CMCs and TMCs.<\/li>\n
    4. Of own-revenue sources, property tax forms the most significant lever, at 15.7% of total revenue; again significance drops as we move to smaller ULBs \u2013 CC (20.4%), CMC (16%), TMC (12%) and TP (9.2%). Property tax per capita also shows a declining trend as we move to smaller ULBs.<\/li>\n
    5. Salaries and allowances form the largest chunk of expenditure (31.9%) and expenditure per capita across ULBs<\/li>\n
    6. There is a positive association between per capita expenditure and per capita revenue. Additionally, population (-,+) and literacy (+,+) are significantly (at the 99% confidence level) correlated with variations in per capita revenue and per capita expenditure respectively.<\/li>\n<\/ol>\n

      In terms of the trends in devolution of funds from the state government over the period of the pervious SFC, the report notes the following:<\/p>\n

        \n
      1. Overall revenue of the state increased at an increasing rate from 2002-03 to 2007-08<\/li>\n
      2. In the same period, devolutions to rural and urban local governments also grew, but at a much lower rate than the state government revenues
        \n\"\"<\/li>\n<\/ol>\n

        Based on this analysis, the SFC recommended the following:<\/p>\n

          \n
        1. 33% of the Net Own Revenues (NOR)<\/strong> of the state to be shared with rural and urban local governments<\/li>\n
        2. The criteria for determining the share of funds to rural and urban local governments was to be as follows:
          \n\"\"<\/li>\n
        3. Based on these criteria, the split between rural and urban local governments of the total devolved amount worked out to 70:30. This meant that 23% of the NOR was to be devolved to rural local governments and 10% of NOR to urban local governments<\/strong>.<\/span><\/li>\n
        4. The 10% NOR devolved to ULB\u2019s was to be split into 3 components as follows:
          \n\"\"<\/span><\/li>\n<\/ol>\n

          The complete SFC report is available here<\/a>.<\/p>\n

          —
          \n
          \n1-All data, tables and charts taken from the Report of the Third State Finance Commission, Government of Karnataka
          \n2-There are four types of ULBs in Karnataka: City Corporations (CC), City Municipal Councils (CMC), Town Municipal Council (TMC) and Town Panchayats (TP)
          \n<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

          By Anand Sahasranaman, IFMR Finance Foundation The revenue share between state governments and ULBs is determined by the State Finance Commissions (SFCs) which are set up by state governments every 5 years. In essence, the mandate of the SFC is to determine: the principles of distribution to rural and urban local governments the net proceeds […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[13],"tags":[],"_links":{"self":[{"href":"https:\/\/www.dvara.com\/what-we-do\/excited-about\/cities\/blog\/wp-json\/wp\/v2\/posts\/311"}],"collection":[{"href":"https:\/\/www.dvara.com\/what-we-do\/excited-about\/cities\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.dvara.com\/what-we-do\/excited-about\/cities\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.dvara.com\/what-we-do\/excited-about\/cities\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.dvara.com\/what-we-do\/excited-about\/cities\/blog\/wp-json\/wp\/v2\/comments?post=311"}],"version-history":[{"count":6,"href":"https:\/\/www.dvara.com\/what-we-do\/excited-about\/cities\/blog\/wp-json\/wp\/v2\/posts\/311\/revisions"}],"predecessor-version":[{"id":320,"href":"https:\/\/www.dvara.com\/what-we-do\/excited-about\/cities\/blog\/wp-json\/wp\/v2\/posts\/311\/revisions\/320"}],"wp:attachment":[{"href":"https:\/\/www.dvara.com\/what-we-do\/excited-about\/cities\/blog\/wp-json\/wp\/v2\/media?parent=311"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.dvara.com\/what-we-do\/excited-about\/cities\/blog\/wp-json\/wp\/v2\/categories?post=311"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.dvara.com\/what-we-do\/excited-about\/cities\/blog\/wp-json\/wp\/v2\/tags?post=311"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}