State Finance Commission (Kerala) - Substantial Devolution To Local Govts Prior To SFCs

Substantial Devolution To Local Govts Prior To SFCs

Kerala’s decentralisation shows the provision of substantial untied funds for local prioritisation and local resource allocation to identified priority areas. This was not recommended by any State Finance Commission but was a policy decision taken by the State Government at the beginning of the 9th Five Year Plan.While the State has been able to go beyond what is strictly essential (as per SFC reports) and has been able to consolidate Centrally Sponsored schemes in some cases leading to welcome increase in the untied grants recently, there has unfortunately a drop in the statutory grants which is wholly unwelcome.

Also, it has been noticed that restriction of actual flows to PRIs get aggravated every time there is a glitch in the state finances. Thus, even when credited to their Treasury accounts, the panchayats are not able to use the funds because the finance department will not release them. The performance audit shows up some lacunae which have to mostly do with the outmoded accounting and record keeping.

However all this should not detract from the many positive features in Kerala case such as transparency especially in beneficiary selection, RTI, social audit which need to be further encouraged, strengthened and emulated by other states.