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Insights into Editorial: For a Truer Decentralization

Insights into Editorial: For a Truer Decentralization

02 November 2015

Decentralization is not a new concept to India. The village panchayats as institutions of governance and justice existed for a long time. However, the founding fathers of the Constitution were not keen to empower the existing structures.


Dr. Ambedkar was apprehensive that in the hierarchical society with highly skewed nature of asset and power distribution, vesting more powers at the village level would only perpetuate exploitation of the dispossessed.

Why do we need decentralization of power?

  • Decentralization is necessary to strengthen participatory democracy, facilitate responsive governance, ensure greater accountability and enable public service delivery according to diversified preferences of the people.
  • It is also seen as a means to strengthen the democratic fabric through participatory governance and responsive public service delivery.

However, there are some who advocate decentralization as an end itself.


  • Through 73rd and 74th Constitutional amendments, the local bodies in rural and urban areas were made the institutions of self-government.
  • Part IX was inserted into the Constitution with Article 243(A to O) specifying matters such as the constitution, elections and the functions to be devolved for panchayats and for urban local bodies under Article 243P to Z.
  • Article 243I and Y mandated the appointment of the State Finance Commission by the Governor every five years to balance their functions with funds.
  • Article 280 was seeded with an additional term of reference (TOR) to the Union Finance Commission to take cognizance of the resource requirements of local bodies.

Constitutional framework:

  • The Constitution assigns decentralization including funding entirely to the discretion of State governments.
  • The constitutional framework does not prescribe any pattern, standard or model of decentralisation which is left to the discretion of State governments.
  • The States are required to appoint a Finance Commissions every five years and their reports are required to be placed in the legislatures with the action taken reports.
  • There are no easy mechanisms to ensure compliance of even the prescribed provisions of the Constitution by the States.

Issues associated with the above mentioned provisions:

  • It is left to the States to decide, what and how much powers and functions should be devolved to the local bodies. The Constitution has assigned this power to the State governments to evolve the system of decentralization appropriate to a State considering the strength of its history, economy and capacity. However, this provision, sometimes, hinders the actual process of decentralization.
  • The constitution does not envisage any standard model. Thus, most States have not complied with the requirement of having to appoint gram sabhas (243A), ward committees, district planning committees and metropolitan planning committees.
  • There have also been several attempts by the states to postpone elections though they are required to hold them well before the expiry of the prevailing elected body or before six months if the body is dissolved for some reason, as required under 243K and U.
  • There is no separate list of tax bases assigned to the local bodies in the Constitution and they have to depend on the State governments to levy the taxes. State governments are also unwilling to give enough financial powers to local bodies.

Role of finance commissions:

  • There is a criticism that the Fourteenth Finance Commission (FFC) did not continue the decentralization reform initiated by the Thirteenth Finance Commission (TFC). A package of conditionalities for availing the performance grants, which was initiated by the thirteenth finance commission, was not continued by the Fourteenth Finance Commission.
  • The thirteenth finance commission recommended linking the grants to local governments to previous year’s divisible pool of taxes and linking a significant proportion of the grants for performance.
  • The fourteenth finance commission in its report explained that it did not carry on the scheme of rewards and punishment because truthful adherence to the Constitutional framework did not permit it to do so. It however continued the performance grants, but linked them directly to the actions by the panchayats and municipalities rather than the State governments.

What should be done to realize the true benefits of decentralization?

  • The functions of the local governments should be clearly stated.
  • They should have clear and independent sources of finance.
  • There should be clear mechanisms to ensure that States comply with the constitutional provisions, particularly in the appointment and implementation of the recommendations of the state finance commissions.