Roadmap for Answer Writing

1. Introduction (Brief Background)

• Purpose: Start with a brief explanation of the 15th Finance Commission’s role in India and its importance. Mention that it is a constitutional body formed under Article 280 of the Indian Constitution, which recommends the distribution of finances between the Union and the States.
• Focus of the Question: Clarify that the question is asking about the recommendations that specifically aim to enhance accountability and promote effective governance at the grassroots level.

Relevant Fact:

• The 15th Finance Commission was constituted in 2017, with a mandate to determine the financial allocation for the period 2020-2025 and to assess the financial needs of local governments in India.

2. Core Recommendations of the 15th FC

• Provide an overview of the key recommendations of the 15th Finance Commission that are directly related to enhancing accountability and improving governance at the grassroots level.

a) Entry-Level Conditions for Grant Eligibility

• Key Recommendation: Urban local bodies must prepare and publicly share audited accounts to be eligible for grants.
• Purpose: This ensures that local bodies maintain financial transparency and are accountable to the public for how they use public funds.Fact: According to the 15th FC’s recommendations, making audited accounts public is a step towards better financial management and accountability at the local level (Source: 15th Finance Commission Report, 2020).

b) Timely Release of Grants

• Key Recommendation: States must transfer grants to local bodies within 10 working days of receiving them from the Union Government. Rural grants will be distributed in two instalments (June and October).
• Purpose: Ensures timely execution of development projects and reduces delays in local governance.Fact: The 15th FC recommended a fixed timeline for grant transfers to local governments to minimize delays and enhance fund utilization efficiency (Source: 15th Finance Commission Report, 2020).

c) Strengthening State Finance Commissions (SFCs)

• Key Recommendation: States must constitute SFCs and act upon their recommendations by March 2024. Non-compliance would lead to withholding of grants.
• Purpose: SFCs are crucial for evaluating local governments’ financial health and promoting fiscal decentralization. Requiring states to implement SFC recommendations ensures financial autonomy for local bodies.Fact: The 15th FC emphasized the importance of the SFCs in ensuring equitable and efficient resource distribution at the local level (Source: 15th Finance Commission Report, 2020).

d) Urban Agglomeration-Centric Approach

• Key Recommendation: In large urban agglomerations (with populations over 1 million), one urban local body will act as a nodal agency for grant distribution and performance monitoring.
• Purpose: Streamlines fund management and performance monitoring, ensuring effective governance in sprawling urban regions.Fact: The nodal entity will oversee grants for all areas within the urban agglomeration and ensure achievement of performance indicators for these regions (Source: 15th Finance Commission Report, 2020).

e) Grants for Shared Municipal Services Centres

• Key Recommendation: A Rs. 450 crore grant has been proposed for the creation of Shared Municipal Services Centres, which will handle shared services like certificate issuance, payroll, etc., among a cluster of smaller urban local bodies.
• Purpose: This measure promotes operational efficiency and reduces administrative burdens on smaller local bodies, fostering better service delivery.Fact: The 15th FC recommended the creation of these centres to improve governance and service delivery in smaller municipalities (Source: 15th Finance Commission Report, 2020).

3. Challenges and Limitations of the Recommendations

• Key Point: Acknowledge the limitations of the 15th FC’s recommendations that might hinder the full realization of its goals.Fact 1: Reduction in Performance-based Grants: The 15th FC reduced the allocation for performance-based grants to Rs. 8,000 crores, mainly for urban infrastructure development, which may neglect rural local bodies, particularly Panchayati Raj Institutions (PRIs) (Source: 15th Finance Commission Report, 2020).Fact 2: Outdated Census Data: The Commission relied solely on 2011 census data for resource allocation, which may not accurately reflect the current demographic reality, especially for states with better population control (e.g., Kerala) (Source: 15th Finance Commission Report, 2020).Fact 3: Failure to Examine Centre’s Revenue Sources: The 15th FC did not critically assess the increasing reliance of the central government on cesses and surcharges, which are not shared with states, thereby potentially reducing the fiscal space available for states (Source: 15th Finance Commission Report, 2020).

4. Conclusion (Way Forward)

• Summarize: Conclude by reiterating that the 15th Finance Commission’s recommendations are a step forward in promoting transparency, accountability, and effective governance at the grassroots level. However, the success of these recommendations depends on their implementation at the state and local levels.
• Way Forward: Emphasize that addressing the limitations (such as performance-based grant allocations and the outdated census data) and ensuring compliance with the recommendations of the State Finance Commissions will further strengthen grassroots governance.

Key Facts to Include:

• Constitution of SFCs: States must ensure the formation and functioning of State Finance Commissions as per constitutional mandates.
• Audited Accounts for Grants: Mandatory public disclosure of audited accounts to receive grants, fostering financial transparency.
• Timely Fund Transfers: Implementation of a 10-day window for fund transfers from states to local bodies.
• Urban Agglomeration and Nodal Bodies: Nodal bodies in large urban agglomerations to monitor grants and performance.