Commissioner, Panchayat Raj

Commissioner, Panchayat Raj

Government of Andhra Pradesh

Programs > Schemes > 14th Finance Commission > Guidelines

14th Finance Commission :

             Article 280 of the Constitution of India requires the Constitution of a Finance Commission every five years, or earlier. For the period from 1st April, 2015 to 31st March, 2020, the 14th Finance Commission was constituted on 2nd January, 2013 under the Chairmanship of former Reserve Bank Governor Y.V. Reddy. The Commission submitted its report on 15th December, 2014. Central Government accepts the report in principle.

Highlights of the Recommendations :

Devolution to states: States share in net proceeds from tax collections be 42% a huge jump of 10% from 32% recommend by the 13th Finance Commission, and the largest change ever in the percentage of devolution.

Big jump in tax share: Compared with 2014-15, the total devolution to states in 2015-16 will increase by over 45%.

Resource transfer: Tax devolution be the primary route resource transfer to states.

NITI connect: The government has accepted the recommendations in view of the spirit of the National Institution for Transforming India (NITI).

Grants: Should be distributed to states for local bodies on the basis of the 2011 population data; the grants be divided into two broad categories on the basis of rural and urban population constituting gram panchayats, and constituting municipal bodies.

Types of grants: A basic grant and a performance grant the ratio of basic to performance grant be 90:10, with respect to panchayats; and 80:20 in the case of municipalities.

Total grants: Rs 2,87,436 crore for a five-year period from April 1, 2015, to March 31, 2020; of this, Rs 2,00,292.20 crore to be given to panchayats and Rs 87,143.80 crore to municipalities.

Grant transfers: For 2015-16, transfers will be to the tune of Rs 29,988 crore.

Disaster relief: The percentage share of states to continue as before and follow the current mechanism to the tune of Rs 55,097 crore. After implementation of GST, disaster relief will be given according to the recommendations of the Finance Commission.

Post-devolution revenue deficit grants: A total of Rs 1,94,821 crore on account of expenditure requirements of states, tax devolution and revenue mobilisation capacity of the states. These will be given to 11 states.

Delinking of schemes: Eight centrally sponsored schemes (CSS) will be delinked from support from the Centre; various CSS will now see a change in sharing pattern, with states sharing a higher fiscal responsibility.

Cooperative federalism: There are recommendations on cooperative federalism, GST, fiscal consolidation road map, pricing of public utilities and PSUs, too..

Other Features :

⇨ Financial year 2016 Devolution of Net Taxes to States at Rs.5.26 lakh crore.
⇨ States should use Extra Fiscal Space for Productive Assets.
⇨ Fiscal Situation of Centre-States combined remains a challenge.
⇨ Most of tax share proposals of Finance Commission have been accepted.
⇨ Recommends omitting effective revenue gap from Financial Year 2016.
⇨ GST Likely to significantly boost government Tax Revenue.
⇨ Recommends Fiscal Deficit Ceiling of 3% financial year 2017 onwards.
⇨ Considerable scope for increasing Tax-GDP Ratio.
⇨ Total devolution to states at Rs, 5.26 lakh crore in financial year 2016.
The Finance Commission is required to recommend the distribution of the net proceeds of taxes of the Union between the Union and the States (vertical devolution); and the allocation between the States of the respective shares of such proceeds (horizontal devolution).
The Finance Commission is also required to recommend on the measures needed to augment the Consolidated Fund of a State to supplement the resources of the Panchayats and Municipalities in the State on the basis of the recommendations made by the Finance Commission of the State.

The Finance Commission is also required to make recommendation regarding the principles governing grants-in-aid of the States revenues, by the Centre.

In addition to the recommendations regarding Vertical and Horizontal devolution and grants, the 14th Finance Commission has made certain other recommendations. These relate to cooperative federalism, Goods & Services Tax, Fiscal Consolidation Roadmap, Pricing of Public Utilities and Public Sector Enterprises.
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The 14th Finance Commission has been floated in Government of India the period of 2015-16 to 2019-20 with the out lay mentioned below :
Grant 2015-16 2016-17 2017-18 2018-19 2019-20 2015-2020
Basic Grant 934.34 1,293.75 1,494.81 1,729.23 2,336.56 7,788.68
Performance Grants 0 169.70 192.04 218.09 285.57 865.41
Total 934.34 1,463.45 1,686.85 1,947.32 2,622.13 8,654.09

Against the allocation of Rs.934.34 crores for the year 2015-16 Government of India have been released an amount of Rs.928.41 crores and against the allocation of Rs.1463.45 crores for the year 2016-17 Government of India have been released an amount of Rs.1454.06 crores same has been distributed among the 13 districts as mentioned below:

Basic Grants :

1. The FFC grants released to the Gram Panchayats, shall be utilized for providing following Basic services in the Gram Panchayats.

1. Maintenance of CPWS Schemes and PWS Schemes. Since CPWS schemes are not under the jurisdiction of GP, maintenance cost of these schemes proportionately fixed by the authorities concerned, should be paid by the Gram Panchayats concerned.

2. Maintenance of sanitation including septic management.

3. Solid and Liquid Waste management.

4. Maintenance and upgradation of internal roads along with drains.

5. Payment of CC charges / LED street lighting including pending bills.

6. Not exceeding 10% of the grant allocated to Gram Panchayat may be utilized for the following Purposes for meeting the cost of the technical and administrative support:

a. Salary of Accountant cum Data Entry Operator in the computer center of cluster Gram Panchayat (Proportionately charged)

b. Salary of town Planning & Building Over seer (on outsourcing basis) in each Mandal. The expenditure will be charged proportionately;

c. Salary/remuneration of technical staff working for O&M of water supply and sanitation;

d. Remuneration for the GP Development Plan Team and related expenditure for the logistic support for preparation of plan;

e. Remuneration for Social Audit Team Members and also expenditure for conducting of Gram Sabha;

f. Purchase of computer and other peripherals for computer center in cluster GP.


2. The performance grants will be released from the Financial year 2016-17 on certification of MoPR that the finalized scheme in this regard has been received from the State and it confirms to the recommendations of 14th FC. The following conditions have to be fulfilled to get performance grants.

(i) The Gram Panchayats will have to submit audited accounts of receiptandexpenditurefor the year not earlier than two years preceding the year in which seeks to claim the performance grant and
(ii) The Gram Panchayats will have to show an increasein their ownrevenues over the preceding years as reflected in the audited accounts.

3. The performance grants are designed to serve the purpose of ensuring reliable audited accounts and date of receipts and expenditure and improvement in Own Source of Revenue(OSR) of Gram Panchayats.

4. The following criteria shall be adopted for release of Performance Grant.

a. The Gram Panchayats should adopt the model accounting system and upload the data in PRIA Software,

b. The Gram Panchayats should submit audited accounts that relate to years not earlier three years preceding the year in which the Gram Panchayat seeks to claim the Performance Grant. For example, for claiming the Performance grant for the year 2016-17, the audited accounts of the year 2014-15 which is approved by the Gram Panchayat shall be submitted.

c. There should not be any proved misappropriation of funds in the administration of Gram Panchayats in the audited year.

d. Gram Panchayats should conduct 4(four) statutory Gram Sabhas and minutes of the Gram Sabha displayed in the website of the Gram Panchayats i.e.,

e. The Gram Panchayat concern should collect at least 70% of the total house Tax demand and 70% of the other taxes and non taxesleavable under APPR Act for the year 2015-16. The Gram Panchayats should upload the DCB Data in RAPR Website, The Gram Panchayats will have to show an increase in their own revenues over the preceding year as reflected in the audited accounts and preceding financial year.

f. Gram Panchayats should upload the data into e-Panchayat applications(Central and State) and update the same on regular basis either with Panchayati Secretaries or with the services taken from Date Entry Operators who are paid from the Gram Panchayat funded as per norms.

g. Weightage for allocation of funds under performance grant:

h. Allocation among the eligible Gram Panchayats who fulfil the Mandatory criteria as mentioned above will be made based on following weightages indicated below and multiplied with the population of the Gram Panchayat concerned.

S.No Criteria Weightages
1 Total Own Source revenue (Taxes and Non Taxes, Contributions) 70%
2 Delivery of Drinking Water services with self-sufficient O&M cost 10%
3 Sanitation Services (regular collection and removal of waste) 10%
4 e-Panchayat and other services 10%