In a significant stride towards fortifying rural governance and reshaping India’s local governance financial framework, First of its Kind, a day-long Finance Commissions’ Conclave on “Devolution to Development” was organized by the Ministry of Panchayati Raj at Vigyan Bhawan today, with over 150 distinguished participants from 22 States to deliberate on strengthening the fiscal framework of Panchayati Raj Institutions (PRIs).

Dr. Arvind Panagariya, Chairman of the Sixteenth Finance Commission, delivered the keynote address and articulated a comprehensive vision for fiscal devolution, emphasizing the imperative of enhancing Own Source Revenues (OSR) for sustainable rural development. Drawing from extensive consultations across 11 States, he highlighted the convergence of challenges between rural and urban local bodies, particularly in waste management and carbon emissions, advocating for integrated development approaches. Dr. Panagariya stressed that the path to sustainable rural development lies in strengthening Own Source Revenues (OSR). “When citizens contribute through taxes, they become active stakeholders in local governance,” he added, emphasizing how this participation leads to enhanced accountability and more responsive service delivery at the grassroots level.

Shri Vivek Bharadwaj, Secretary, Ministry of Panchayati Raj, underlined the Ministry’s strategic initiatives to reinforce the institutional capacity of State Finance Commissions. He detailed the implementation of systemic reforms, including the development of specialized OSR training modules by IIM Ahmedabad and the deployment of the Samarth portal for enhanced data analytics and demand aggregation. The Ministry's commitment to digital transformation is exemplified by its comprehensive plan to computerize 37,000 Gram Panchayats and establish Gram Panchayat Bhawans in 40,000 locations with populations exceeding 3,000. A significant reform involves the mandatory inclusion of OSR details in Gram Panchayat Development Plans (GPDPs) on the eGramswaraj portal, marking a crucial step towards fiscal transparency. The Ministry’s dedicated OSR Cell is actively engaged in reviewing and streamlining revenue rules across states, simplifying complex procedures to enhance efficiency in local governance and facilitating more efficient local resource mobilization.

A comprehensive presentation by Joint Secretary, Ministry of Panchayati Raj, Shri Alok Prem Nagar, set the stage by outlining key challenges and strategic initiatives in strengthening local body finances. The first technical session delved deep into Local Body Grants, examining the nuanced balance between Tied and Untied Grants. Participants engaged in detailed discussions on enhancing transparency through online availability of local body accounts and establishing robust audit mechanisms. State Finance Commission (SFC) Chairpersons shared valuable insights on improving grant utilization efficiency and ensuring timely fund flows. The second session focused exclusively on Panchayat Finances, addressing the critical trinity of rural governance – the three ‘F’s: Funds, Functions, and Functionaries.

A significant emphasis was placed on strengthening State Finance Commissions, with participating Chairpersons discussing challenges in fiscal devolution and proposing solutions for more effective resource allocation. The discussions highlighted the importance of standardizing SFC operations while maintaining flexibility for region-specific challenges. Special attention was given to the unique challenges faced by peri-urban Panchayats in managing rapid development.

The closing session, featuring address by Dr. Arvind Panagariya, synthesized the day’s deliberations into actionable recommendations for strengthening local body finances. The presence of senior officials from various Ministries, including Shri Ajay Seth, Secretary, Department of Economic Affairs, and Shri Ashok K. K. Meena, Secretary, Department of Drinking Water & Sanitation, reinforced the Government’s commitment to an integrated approach to rural development.

This first of its kind Conclave, with its structured focus on key aspects of local body finance and governance, represents a significant step forward in India’s journey towards effective fiscal decentralization. The comprehensive discussions and shared commitments across all four sessions promise to usher in a new era of financial empowerment and accountable governance at the grassroots level, with State Finance Commissions playing a central role in ensuring effective resource allocation and utilization.

The outcomes of these focused sessions are expected to significantly influence future policy decisions on local body finances, particularly in strengthening the institutional capacity of State Finance Commissions and enhancing the financial autonomy of Panchayati Raj Institutions. This marks a crucial step towards realizing the vision of sustainable and inclusive rural development through empowered local governance structures.

The Conclave hosted over 150 participants from 22 States, including current and former Chairpersons of State Finance Commissions (SFCs), SFC Members and Member Secretaries, Principal Secretaries and Secretaries from State Finance Departments, as well as experts from academic and research institutions.

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