Panchayat Own Source Revenue through Rural Entrepreneurship: Solar Power Policy of Andhra Pradesh Paves a Way

Abstract

Local governments refer to Panchayat Raj Institutions created by National and State constitutions to deliver the specified services in a relatively small geographically delineated area. A Local Government, particularly Gram Panchayat, is a form of public administration that exists as the lowest level of administration in most contexts. Local governance is a broader idea and is defined as the formulation and execution of collective action of the people and government at the local level. Gram Panchayats can be treated as socio-rural entrepreneurs at village level and they fulfills the important factors called the people, the context, the deal and the opportunity - the PCDO of the social entrepreneurship in Sahlman’s model. The 73rd Constitutional Amendment Act, 1993 has made provisions for transfer of political, administrative and taxation power from state governments to local governing bodies. Though Article 243-G authorizes the State to grant panchayats the rights and powers to serve as self-governing bodies, Article 243(H) authorizes the collection, levying and payment of adequate taxes, duties, fees and charges by panchayats, with the exception of obtaining assistance from central and state government funds. Furthermore, Article 243-I provides that the State Finance Commission should be formed to review the financial position of panchayats for every five years and recommend ways of implementing the provisions of Article 243- H with a view to improving the financial position of Panchayat Raj Institutions. Nevertheless, the decision on levy of various taxes, as well as the degree of autonomy that Local Governments can have in deciding their taxation level was left to the state governments. Andhra Pradesh Government enacted AP Panchayat Raj Act (APPR) in the year 1994 to lead the PRIs in governance. According to Section 45 (3) of the APPR Act offers power to Gram Panchayats for mobilization of resources and Section 59 of the APPR Act gives power to Gram Panchayats for acquisition certain properties. Section 74 of the APPR Act provides power to Gram Panchayats for pooling of the ‘Gram Panchayat Fund’. Rural local governments account for a much smaller percentage of all taxes generated from their own sources. Even this small amount, since local councils have little ability to decide the amount they can collect, it is an overstatement of their significance in the mobilization of revenue. The failure of the Gram Panchayats to mobilize own source revenue was seen as a main reason for low Own Source Revenue.