Chapter 1

Panchayati Raj frequent suspension/supersession/dissolution of the

Panchayat bodies, lack of functional and financial
autonomy, inadequate representation of marginalized
and weaker sections and meager, occasional and
tied Government grants. This crippled the functioning
of Panchayats and did not allow them to function as
institutions of local Self Government as had been
Background envisaged in the Constitution.
An imperative need accordingly emerged to

A
rticle 40 of the Constitution of India
provides that the State shall take steps enshrine in the Constitution of India, certain basic
to organize village Panchayats and and essential features of local self-government so as
endow them with such powers and authority to to enable local bodies to function as institutions of
enable them to function as units of local self self-governance both in planning and implementation
Government. However, even after the of development programmes. Consequently
recommendations of the Balwant Rai Mehta Constitution (73rd Amendment) Act, 1992 was
Committee and Ashoka Mehta Committee on passed and was brought into force with effect from
Panchayats had been put into force, several ills 24.4.1993. The Act does not apply to Schedule V
continued to afflict the Panchayati Raj System in the and VI Areas of Assam, Tripura, Meghalaya and
country in the post independence period. There were Mizoram, State of Nagaland, hill areas of the State
long delays in holding of Panchayat elections, of Manipur for which District Councils exist and the

Gram Panchayat meeting in progress

1
District of Darjeeling in the State of West Bengal. for economic development and social justice and
The amendment Act has not yet been extended to their implementation including those in relation to the
J&K. matters listed in the Eleventh Schedule.
The main features of the Act are – (i) a 3-tier As per Article 243-H of the Constitution, State
system of Panchayati Raj for all States having Legislatures have been empowered to enact laws:
population of over 20 lakh; (ii) Panchayat elections ✸ to authorise a Panchayat to levy, collect and
regularly every 5 years; (iii) reservation of seats for appropriate some taxes, duties, tolls and fees;
Scheduled Castes, Scheduled Tribes and women
✸ to assign to the Panchayat, some taxes, duties,
(not less than one-third of seats); (iv) appointment
tolls levied and collected by the State
of State Finance Commission to make
Government;
recommendations as regards the financial powers
of the Panchayats and (v) constitution of District ✸ to provide for making grants-in-aid to the
Planning Committees to prepare development plans Panchayats from the Consolidated Fund of the
for the district as a whole. As per the Constitution State; and
(73 rd Amendment) Act, the Panchayati Raj ✸ to provide for constitution of such funds for
Institutions have been endowed with such powers Panchayats for crediting all money received by
and authority as may be necessary to function as or on behalf of Panchayats and also the
institutions of self-government and contains provisions withdrawal of such money therefrom.
of devolution of powers and responsibilities upon The provisions of the 73rd Amendment Act can
Panchayats at the appropriate level with reference be categorized into mandatory provisions and
to (a) the preparation of plans for economic discretionary provisions. Keeping in view the fact
development and social justice; and (b) the that matters pertaining to local government are
implementation of such schemes for economic provided in the State List and thus fall within the
development and social justice as may be entrusted jurisdiction of the State Government and given the
to them. vastness and the politico-administrative diversity of
the country, States have been provided with
Financial Powers of Panchayati Raj
discretionary powers on subjects like composition
Institutions
of the Panchayats, devolution of powers, functions,
Article 243-G of the Constitution of India finances and system of auditing of panchayat
provides that the States/UTs may, by law, endow Accounts etc. However, the Amendment makes it
the Panchayats with such powers and authority as mandatory for the State Governments to hold
may be necessary to enable them to function as elections regularly every five years, reserve seats for
institutions of self-government and to prepare plans Scheduled Castes and Scheduled Tribes on

✸ Panchayat Raj Institutions constitute the bedrock for the implementation of Rural Development
Programmes.
✸ Panchayats have been given a key role in identification of beneficiaries, project selection, monitoring,
supervision of various programmes of the ministry.
✸ To provide encouragement to Panchayats to excel in performance of their role, the Ministry have
instituted a Scheme captioned ‘ Award for Best Panchayat’ in April, 2003. This award is to be given
to 6 District Panchayats, one each in the six zones, 12 Intermediate Panchayats and 50 Gram Panchayats
in the country on annual basis. The award will be Rs.30 lakhs each for the District Panchayats, Rs.20
lakhs each for Intermediate Panchayats and Rs.10 lakhs each for Gram Panchayats.

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 Chapter 1

Gram Sabha deciding the direction of development works

proportional basis, give not less than 33% reservation However, the State Governments are required to
to women, constitute a State Finance Commission amend all the relevant Acts/Rules to bring them in
and State Election Commission every five years. conformity with the provisions of the PESA, 1996.

The Panchayats (Extension to the Initiatives taken by the Ministry

Scheduled Areas) Act, 1996 (PESA, A Conference of the Chief Ministers on
1996) Panchayati Raj was held on 2.8.1997 at Vigyan
Bhavan, New Delhi, under the chairmanship of the
The Panchayats (Extension to the Scheduled
then Prime Minister to review the functioning of the
Areas) Act, 1996 (PESA, 1996) was enacted and
came into operation on 24 December, 1996. This Panchayati Raj Institutions where the outstanding
Act extends Panchayats to the tribal areas of nine issues like devolution of powers/functions and
States, namely, Andhra Pradesh, Chhattisgarh, responsibilities upon PRIs, setting up District Planning
Gujarat, Himachal Pradesh, Jharkhand, Committees, implementation of the reports of the
Maharashtra, Madhya Pradesh, Orissa and State Finance Commissions, linkage of DRDAs with
Rajasthan, which intends to enable tribal society to Zilla Parishads, training to Panchayati Raj elected
assume control over their own destiny to preserve representatives/functionaries, transparency in the
and conserve their traditional rights over natural functioning of these bodies were discussed in great
resources. detail.
All the State Governments have enacted their The Ministry convened a Conference of
State Legislations in pursuance with the PESA, 1996. State Ministers of Rural Development and

3
✸ Conference of State Ministers of Rural Development and Panchayati Raj was held on 27 th and 28th
January, 2003. The States were urged, in particular, to ensure speedy devolution of funds, functions and
functionaries and empower the Gram Sabhas.
✸ A meeting of Chairpersons of State Finance Commissions, State Finance Secretaries and Panchayati
Raj Secretaries was held on 9th May, 2003 in which matters relating to augmenting local body finances
was discussed and the State Governments were impressed upon to take early action.

Panchayati Raj on May 13, 1998 and again in Amendments proposed to Part IX of the Constitution
July, 2001 in which measures to strengthen PRIs by the Ministry, inter-alia, suggested mandatory
were discussed. devolution of certain subjects and taxes on Local
Bodies by the State Governments. The matter is being
Recent Initiatives further processed by the Ministry.
An All India Panchayat Adhyakshas Sammelan Conference of State Ministers of Rural
was held in Delhi on 5-6 April, 2002 to build a Development & Panchayati Raj was held on 27
consensus on the measures needed for revitalizing and 28 January, 2003 in which the decisions and
and strengthening the Panchayati Raj System through recommendations of earlier meetings were reiterated
interaction with elected representatives themselves and States were urged in particular to ensure speedy
alongwith the States. The Sammelan, was attended devolution of funds, functions and functionaries and
by about 1500 Chairpersons from the District, empower the Gram Sabhas. Official level meetings
Intermediate and Village level Panchayats. The have also been held regularly to monitor the progress
Sammelan was inaugurated by the then Prime in this regard.
Minister Shri Atal Bihari Vajpayee. The then Leader
A meeting of Chairpersons of SFCs, State
of Opposition Mrs. Sonia Gandhi, the then Finance
Finance Secretaries and Panchayati Raj Secretaries
Minister, Mr. Yashwant Sinha, the then Defence
was held at NIRD, Hyderabad on 9.5.2003 in which
Minister Mr. George Fernandes, the then Minister
matters relating to augmenting local body finances
for Information and Broadcasting, Mrs. Sushma
was discussed and impressed upon the State
Swaraj and several other State Panchayati Raj
Governments for early action towards this direction.
Ministers attended the Sammelan. The Sammelan,
inter-alia, resolved to augment the financial and A Performance Review Committee meeting of
administrative powers of Panchayats to enable them State Secretaries of Rural Development and
to function as vibrant institutions of self government. Panchayati Raj were held on 19-20 May, 2003 at
The Prime Minister, while inaugurating the above NIRD, Hyderabad in which progress in the
Sammelan, also emphasized the need for ushering in implementation of various Rural Development
the Second Generation of reforms on Panchayats Programmes as well as the provisions of Constitution
by further amending the Constitution (73 rd (73 rd Amendment) Act and PESA Act were
Amendment) Act. The Sammelan urged all political reviewed.
parties and the Parliament to pass amendments
considered necessary for the purpose. Panchayat Awards for Best
Accordingly, the Ministry of Rural Development Performance
initiated the process of drafting further Amendments To provide encouragement to Panchayats to
to the 73rd Amendment Act in consultation with the excel in performance of their role, the Ministry of
Ministry of Law, Department of Legal Affairs as well Rural Development has also launched a scheme
as the Legislative Department. The Draft captioned the Award for Best Panchayat in April,

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 Chapter 1
2003. This award is to be given to 6 District develop a framework to ensure fiscal discipline
Panchayats, one in each of the 6 zones, 12 and financial accountability at different levels
Intermediate Panchayats and 50 Gram Panchayats of PRIs;
in the country on an annual basis. The amount of ✸ to indicate measures needed to be taken to
award will be Rs.30 lakhs each for District ensure administrative control of the PRIs over
Panchayats, Rs.20 lakhs each for Intermediate the State Government functionaries dealing with
Panchayats and Rs.10 lakhs each for Gram subjects listed in the 11th Schedule of the
Panchayats. Constitution;
✸ to evolve a framework for preparation and
Empowered Sub-Committee of the
projectisation of local plans that reflect the felt
National Development Council needs and aspirations of the people so that
In March, 2003, an Empowered Sub- development process becomes a peoples’
Committee on Financial and Administrative movement;
Empowerment of Panchayati Raj Institutions was ✸ to assess the training requirements and work
set up by Planning Commission in pursuance of out training models/pattern for elected PRI
the decision taken in the National Development functionaries and Government officials including
Council with Minister of Rural Development as the PRIs staff; and
the Chairperson and Minister of Finance and
✸ to work out a mechanism for linking the Central
Company Affairs, Deputy Chairman, Planning
assistance to State with progress on
Commission, Minister of Social Justice and
empowerment of PRIs.
Empowerment, Minister of Tribal Affairs and Chief
Ministers of Assam, Bihar, Gujarat, Karnataka, The Empowered Sub Committee has already
Kerala, Madhya Pradesh, Punjab and Rajasthan since met twice to discuss these issues.
as its Members.
10 Years of Enactment of Panchayati
The Terms of Reference of the Raj Act – Debate in Parliament
Committee include, interalia To commemorate the completion of 10 years
✸ to review of the action taken by State of the enactment of the Constitution (73rd and 74th
Governments for empowerment of Panchayati Amendment) Acts, the then Minister of Rural
Raj Institutions (PRIs) as per the 73 rd Development, Shri Kashiram Rana introduced a
Constitutional Amendment Act so that they can Motion in both the Houses of Parliament on the 24
function as effective institutions of local self- July, 2003 to review the implementation of Part IX
governments; and IXA (on Panchayats and Municipalities). Both
the Houses of Parliament witnessed a lively debate
✸ to work out modalities for strengthening the
on the subject spanning one/two days with a record
financial domain of the PRIs through transfer
number of 39 speakers from almost all political
of resources from the Centre and State
parties having taken part in the debate in Lok Sabha
Governments;
placing their view point before the House in most
✸ to assess the capacity of the PRIs to raise forceful manner. Similar intensity of debate was
revenues and other resources and to develop witnessed in the Rajya Sabha. Both the Houses were
an action plan in this regard; unanimous in acknowledging the achievements so far
✸ to analyse the capability of PRIs at different and expressing the need to further strengthen PRIs
levels to absorb the financial allocation made as envisaged in the Constitution. All issues which
to the PRIs under different schemes and to constitute the heart of the functioning of PRIs as

5
Institutions of self governance such as those relating Performance Review Committee meeting of
to augmenting the financial and administrative Secretaries, Rural Development and Panchayati Raj
powers of the Panchayats by devolving the 3Fs i.e. was held on 18-19 December, 2003 at Kolkata
funds, functions and functionaries in respect of where implementation of provision of Constitution
subjects given in the XI Schedule on PRIs, (73rd Amendment) Act and PESA Act were
empowering the Gram Sabhas as bodies of Social reviewed.
Audit, operationalising District Planning Committees
to give effect to grassroot level planning formed part Research & Development Work
of the debate. Other suggestions related to the
rotation of seats of Chairpersons and the manner of A Research Advisory Committee headed by
elections to the post of Chairperson at the the Secretary (Rural Development) approves
Intermediate Panchayat and Zilla Panchayat level. proposals from voluntary organizations/institutions
on Action Research studies related to Panchayati
Another Conference of State Secretaries of Raj. The Ministry, apart from funding some
Rural Development and Panchayati Raj was held
continued studies, commissioned studies on issues
on 3.9.2003 at National Institute of Public Finance
such as :–
and Policy (NIPFP), New Delhi with a view to
formulate submission of proposals to Twelfth Finance ✹ Assessment of PESA;
Commission towards grants to PRIs. ✹ Decentralised Management of Rural Energy :
A meeting of Chairman, Scheduled Areas and Building Capacities of PRIs;
Scheduled Tribes Commission with Secretary (RD) ✹ Panchayati Raj & Natural Resource
was held on 30.9.2003 where implementation of Management Post 73 rd Amendment :
provisions of the PESA Act was reviewed. Institutisonal Issues & Future Strategies.
A Conference of Project Directors of DRDAs
was held on 9-10 October, 2003 in which a review Panchayat Development & Training
was taken regarding implementation of the (PD&T)
provisions of Constitution (73rd Amendment) Act
and PESA Act by the State Governments/ Union The success of the Panchayati Raj System hinges
Territories. The need was emphasized for speeding on the extent to which the capability of elected
up action towards devolution of funds, functions and representatives are developed to discharge their
functionaries, setting up of State Finance functions and responsibilities effectively. The Scheme
Commissions (SFCs) and District Planning of Panchayat Development and Training (PD&T) is
Committees (DPCs). a Centrally sponsored scheme under which Central
assistance is provided to the States, NGOs and
With a view to determine the measures needed other institutions to supplement their efforts to impart
to augment the Consolidated Fund of a State to training to the elected and official functionaries of
supplement the resources of Panchayats and the Panchayati Raj Institutions.
Municipalities on the basis of recommendation of
SFCs, a proposal in the form of memorandum has Under the Scheme, the States are released
been submitted to the Twelfth Finance Commission. funds for holistic training plans for training of PRI
elected representatives and rural development
The Consultative Committee for the Ministry
functionaries with 75% of the expenditure met by
of Rural Development to discuss the issues relating
the Centre (25% additional assistance in case of hilly
to Panchayati Raj was held on 11.12.2003 in the
and North Eastern States). The Ministry has so far
Parliament House under the Chairmanship of then
approved such action plans of 22 States. An amount
Minister of Rural Development, Shri Kashiram
of Rs.21.61 crore was released during the year
Rana.
2003-2004 under the Scheme.