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Resource centre on India's rural distress
 
 

Participatory Budget knocking on Delhi's door

Quite opposite to the top-down model of budgeting, the newly elected Aam Aadmi Party-led Government in Delhi has decided to go for a 'citizen-centric' budget planning at 'mohalla'-level for the fiscal year 2015-16.

Drawing lessons from the success stories of participatory budgeting conducted at municipal-level in cities like Porto Alegre (Brazil), the AAP-led Delhi Government has decided to launch this form of decentralized budgeting on a pilot basis in a few select constituencies.

It is worth noting that the 2015 Delhi assembly election manifesto of AAP promises Swaraj Bill, under which each ward in Delhi is planned to be divided into 10-15 neighbourhood units or 'mohallas', and the general assembly of voters of a 'mohalla' (having 500-1000 families) will be called a 'mohalla sabha'. Backed financially by the Citizen Local Area Development (LAD) Fund, each 'mohalla sabha' is expected to take part in law-making process once it gets streamlined, apart from undertaking specified local level duties.

Although the 2014 Bharatiya Janata Party (BJP) election manifesto too promises to strengthen self-Governance at the local level and empower Panchayati Raj Institutions with extensive devolution of the 3 Fs - Functions, Functionaries and Funds, much is required presently to convert this into action. As usual, the forthcoming Union Budget 2015-16 has not taken into consideration what the ordinary citizens of the country needs and wishes for. It has allegedly been reduced to a mere bureaucratic exercise with the Government lending its ear more to the industry than to agriculture or social sectors.

A look at the document from Centre for Budget and Governance Accountability entitled Policy Asks and Expectations from Union Budget 2015-16, which was prepared in January 2015, will give one some idea about the demands from civil society activists and NGOs pertaining to various social sectors.

As per sympathizers of AAP, the party led by Arvind Kejriwal has consistently been talking about decentralization and giving powers to the local bodies so as to ensure transparency and accountability and curb corruption.

It is a known fact that despite the passage of 73rd and 74th Constitutional Amendment Acts, local governments have almost no tax base and their share in total government spending is less than 10%. Therefore, any step towards strengthening the position of local bodies is considered to be welcome by experts.

What is participatory budgeting?

According to the Participatory Budgeting Project website, it is a unique way to manage public money, and to engage people in government. It is a democratic process in which community members directly decide how to spend part of a public budget. It enables taxpayers to work with government to make the budget decisions that affect their lives.

The Participatory Budgeting Project informs us that the Brazilian city of Porto Alegre started the first full participatory budget process in 1989, for the municipal budget. In Porto Alegre, as many as 50,000 people have participated every year, to decide as much as 20% of the city budget.

According to a case study prepared for the World Bank, it has been revealed that participatory budgeting boosted new public housing units between 1986 and 1989 in Porto Alegre. It increased sewer and water connections in that city between 1988 and 1997. The number of schools has quadrupled since 1986. Porto Alegre’s health and education budget increased from 13 percent in 1985 to almost 40 percent in 1996. Citizens' participation in participatory budgeting grew from less than 1,000 per year in 1990 to more than 16,000 in 1998, and further to about 40,000 in 1999.

Please check the map below to locate the cities/ institutions in various nations where participatory budgeting is currently happening:


Courtesy: Participatory Budgeting Project, http://www.participatorybudgeting.org  
 
Since 1989, participatory budgeting has spread to over 1,500 cities in Latin America, North America, Asia, Africa, and Europe. Most of these are at the city level, for the municipal budget. People's budgeting has also been used, however, for counties, states, housing authorities, schools and school systems, universities, coalitions, and other public agencies.

Some of the cities where people's budgeting is happening are: New York City (US), Chicago (US), Boston (US), Toronto (Canada), Vancouver (Canada), Newcastle (UK), Rosario (Argentina), Belo Horizonte (Brazil) etc.      

Provisions for local bodies under the 14th Finance Commission

The recently released 14th Finance Commission report has recommended a grant of nearly Rs. 2,00,292.2 crore to Panchayats and around Rs. 87,143.8 crore to municipalities for the period 2015-20. In the case of gram panchayats, 90% of the grant will be the basic grant and 10% will be the performance grant. In the case of municipalities, the division between basic and performance grant will be on a 80:20 basis.

The 14th Finance Commission has considered it appropriate not to use an index or indices of devolution or decentralisation for the purpose of transfer of resources to states for panchayats and municipalities.

Earlier the 13th Finance Commission recommended a grant of Rs. 63,051 crore to panchayats and a grant of Rs. 23,111 crore to municipalities, while a special area grant of Rs. 1,357 crore was given to the Schedule V and Schedule VI areas as well as other areas excluded from the operation of Part IX and Part IX A of the Constitution.

As per the 14th Finance Commission, in case the State Finance Commission formula is not available, then the share of each gram panchayat as specified above should be distributed across the entities using 2011 population with a weight of 90% and area with a weight of 10%. In the case of urban local bodies, the share of each of the three tiers will be determined on the basis of population of 2011 with a weight of 90% and area with a weight of 10%, and then distributed among the entities in each tier in proportion to the population of 2011 and area in the ratio of 90:10.

The 14th Finance Commission report clearly says that the purpose of the basic grant is to provide a measure of unconditional support to the gram panchayats and municipalities for delivering the basic functions assigned to them under their respective statutes. The grant provided is intended to be used to improve the status of basic civic services including water supply, sanitation including septage management, sewerage and solid waste management, storm water drainage, maintenance of community assets, maintenance of roads, footpaths and street-lighting, and burial and cremation grounds.

The 14th Finance Commission has recommended that the local bodies and states should explore the issuance of municipal bonds as a source of finance with suitable support from the Union Government. The states may allow the larger municipal corporations to directly approach the markets while an intermediary could be set up to assist medium and small municipalities who may not have the capacity to access the markets directly.

The 14th Finance Commission has recommended that the Union and State Governments should examine in depth the issue of properly compensating local bodies for the civic services provided by them to government properties and take necessary action, including enacting suitable legislation, in this regard.

It has been suggested that some of the income from royalties from mining should be shared with the local body in whose jurisdiction the mining is done. This would help the local body ameliorate the ill-effects of mining on the local population.

It has been recommended that the urban local bodies should rationalise their service charges in a way that they are able to at least recover the operation and maintenance costs from the beneficiaries.

The 14th Finance Commission has suggested that the levy of vacant land tax by peri-urban panchayats should be considered. In addition, a part of land conversion charges can be shared by State Governments with municipalities and panchayats.

The report of the 14th Finance Commission has recommended that the states should review the position and prepare a clear framework of rules for the levy of betterment tax.

The 14th Finance Commission report has suggested that states may consider steps to empower local bodies to impose advertisement tax and improve own revenues from this source.

It has been suggested that State Governments should take action to assign productive local assets to the panchayats, put in place enabling rules for collection and institute systems so that they can obtain the best returns while leasing or renting common resources.   

References

Participatory Budgeting Project, http://www.participatorybudgeting.org  
 
Report of the Fourteenth Finance Commission
http://finmin.nic.in/14fincomm/14fcreng.pdf
 
 
Policy Asks and Expectations from Union Budget 2015-16, Centre for Budget and Governance Accountability, January 2015 (Please click here to access)

Budget Track: Issues before the 14th Finance Commission, Volume 10, Track 1-2, October 2014 (Please click here to access)

Participatory Budgeting in Brazil -Prof. Deepti Bhatnagar and Animesh Rathore at the Indian Institute of Management (Ahmedabad) and Magüi Moreno Torres and Parameeta Kanungo, World Bank (Please click here to access)

Whither decentralization? -Yamini Aiyar and TR Raghunandan, Livemint.com, 25 February, 2015

Delhi budget to be crowdsourced: Arvind Kejriwal, The Times of India, 25 February, 2015

CM Arvind Kejriwal says citizens of Delhi will make its budget -Neelam Pandey, Hindustan Times, 24 February, 2015 

Will the Aam Aadmi Party deliver true 'swaraj'? -TR Raghunandan, India Together, 23 February, 2015 
 
How India's budgets are prepared?, Down to Earth, 25 February, 2015, https://www.youtube.com/watch?v=7gIpK5OriR4