New Delhi: Chief Economic Advisor V Anantha Nageswaran on Monday said the audit of fund flow to Panchayati Raj Institutions (PRIs) by Comptroller and Auditor General of India (CAG) of Panchayati Raj Institutions will improve their functioning and enhance ease of living at the rural level.
"The CAG audit would tell us state by state, function by function, where we actually stand. It would create an evidence base that does not currently exist, and it would create accountability for the gap between constitutional intent and administrative reality," he said here.
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He urged the Ministry of Panchayati Raj to pursue this recommendation of Committee on Datasets for State Finance Commissions with particular urgency and vigour.
Nageswaran also said there is a need to introduce uniform accounting heads for fiscal accountability of states, ensuring homogeneous treatment of all central transfers to local bodies to enable comparability.
"Because without a systematic, independent assessment of what has actually been devolved versus what was promised, we are flying blind," Nageswaran said at the launch of the report of Committee on Datasets for State Finance Commissions.
The central government transfers funds to state governments through finance commission transfers and local body grants.
The report, prepared by the Ministry of Panchayati Raj, recommended that the CAG undertake a performance audit of the 73rd Constitutional Amendment, which conferred constitutional status on panchayats.
It had also mandated the constitution of state finance commissions every five years.
The amendment had listed 29 functions that could be devolved to panchayats.
"The honest question we must ask ourselves is how much of the constitutional promise has actually been fulfilled," he said.
According to Nageswaran, a key challenge for finance commissions in determining states' financial conditions is the lack of granular fiscal information.
The report suggested that permanent state finance commission cells may be formed within state governments to maintain local government-level data and update it regularly.
"Ideally, this cell must be housed in the Department of Finance or Department of Planning," it said.
The report said while the central government earmarks the devolution amount, a lack of structure at the gram panchayat level prevents the effective use of funds.
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"It is very important, therefore, that both state governments and central government take immediate and active steps to collect and organise these datasets; standardise their format and ensure that these are seamlessly accessible to every state finance commission," it said.
This would enable the SFCs in informed, and evidence-based decision making in the devolution process, it added.
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