Brief notes on the Decentralization before the 73rd amendment


Except for Art 40 in Part 4, there is no reference to panchayats in the Constitution. Art 40, being part of the Directive Principles, is meant to guide the government of the day, but is not a right that can be enforced in the courts.

The impetus to decentralisation came from the experience of the Community Development experiment. This was a major programme of post Independent India. It was led by Nehru and the redoubtable S.K. Dey. It was a nationwide programme launched by the Union government, and it gave a direction to how development work has since been undertaken.

The Community Development Programme had created development blocks – groups of villages to create areas of viable size – at levels below the district.


To co-ordinate and implement the schemes of various departments, this programme created the position of Block Development Officer, who could be chosen from various departments, and who became the lynch pin of the development programmes at this level.

The BDO at the local level became a major force to reckon with. The Ministry of Community Development itself was abolished in the 1970s, but the administrative machinery of the BDO continued. The result was official control over all local resources.

Government became a “mai-baap” organisation – if one needed something, they had to ask the government – and at this level, it was the BDO. Initiative was stifled, and over time, corruption became an issue.

Almost everyone agrees it has only intensified over the years. Thus, even decentralisation is something to be given to the “people”–not a right they choose to exercise! That people can do something for they is now something of a new idea that people have to be convinced of.


When the Community Development experience was being reviewed by the Balwant Rai Mehta Committee, the need for people’s participation to ensure the success of projects of community development was brought out.

The all-powerful BDO had to be checked in some way. Following upon this, several state governments enacted laws to ensure community participation through local bodies, generally called panchayats. Rajasthan, UP, Karnataka and other states passed laws for the purpose.

These bodies, however, were not seen as “government” by the various arms of the state government. They were elected and representative bodies that were expected to help the state government authorities in the proper implementation of development schemes. They gave locally powerful groups a weak voice in matters of detail when it came to implementation of schemes – the poor had no voice at all. Schemes of development were designed by the state government in its areas of responsibility-education, health, drinking water, roads and the like-the state list in the Constitution. Many were designed by the Union-the so-called centrally sponsored schemes. The locally elected bodies were seen as facilitating their implementation- nothing more. The powerful local voice in the political arena remained the MLA.

There could be another reason as well. The word “panchayat” has a traditional meaning–and it is caste driven. Historically, villages in this country had traditional panchayats, with hereditary heads–the names Patel, Gowda, Hegde, and Desai etc attest to this. As such they may have enjoyed influence, but they were not part of the constitutional and legal stream.


Officials did not have to deal with them in any formal capacity. Even today, in the elections to village panchayats, these traditional leaders play an important role. In Uttaranchal, for example, the hill people have a tradition of “siana”-a village elder who settles disputes. In many cases he decides who will be a member of the panchayat-and nobody else then contests.

The number elected unopposed is large at the village level across states. Thus, many see the current elected body as a kind of extension of the old traditional one-and the result is that it is not taken seriously by any party-the villager, the representative, and the official–and the larger government. The old system continues to matter. This is something that will have to be dealt with if this local level self government is to be made truly functional.

In order to fulfil its developmental responsibilities, each state government set up [long before the amendments departments and directorates, apart from the ministries, for the implementation of schemes.

These departments employed specialists, and worked under the directions of the ministries, headed by ministers at the political level and secretaries, [from the IAS] at the administrative level. The Departments reported to the secretaries.


The state budget made provisions for each department, which then proceeded to implement the approved schemes in its best judgement. Funds were for schemes, and given the financial rules and procedures, could not be spent except on the specified schemes and the guidelines thereof. Thus, they were rigid, incapable of adjusting to local conditions, and remained unspent. Field reports tell of unspent funds in areas of priority because of this rigidity in the financial system.

The budgets of the states are presented to the Assemblies under Art 202. Under this Article, the Governor of a state is required to lay before the legislature every year a statement of receipts and expenditures for the financial year-April 1 to March 31.

Other articles that are relevant to the budget process are 204, 266 and 267. Basically, the state must have a Consolidated Fund for its revenues and expenditures, and this can only be operated on the basis of the Appropriation Act being passed by the Assembly.

The funds of local bodies are included in the demands of different departments that implement the various schemes. Sometimes, supplementary budgets are presented, but the underlying process remains the same.


The state also has a Contingency Fund for emergencies. And finally, there is a Public Account in which the state acts as a banker. In the Public Account, the state deals with claims and receipts, such as from the Provident Fund. The various Reserve Funds of the state are shown in this Account. The state has no ownership on the Public Account, but acts as a receiving and disbursing agency. The approval of the legislature is not necessary here. Studies of the Public Account are few and far between.

Recognising this rigidity in the financial system, many states resorted to the method of setting up “autonomous” societies under the Registration of Societies Act, to undertake important projects.

These societies were designed to function under the Minister and Secretary of the concerned Department, and enjoyed considerable financial autonomy. But it must be noted that they led to greater centralisation at the state level-and they also did not come under legislative scrutiny. Many of these societies also created a parallel local structure for their work, thus bloating the bureaucracy.

The overlapping activities of the Mahila Samakhya [which comes under the Department of Education] in Karnataka, with the Women and Child Development Department, is just one case in point.

The funds available came from different sources. There were the own revenues of the state-what it collected from taxes in its jurisdiction. There were the transfers of the state’s share of union taxes, shared with the states’ on the basis of the recommendations of the Finance Commissions. And then there were transfers from the Planning Commission.

These were union finances that it passed on to the states in programmes of national importance, on soft terms. But the releases to local areas depended, increasingly so in recent years, upon the ways and means position of the state government. Thus, even after budget approval, funds were often not made available because of cash crunches in the state.

The transfers through the mechanism of the Planning Commission-and the Gadgil formula associated with them-are not in the constitutional frame. They come from Union finances that are shared in the interest of meeting national priorities.

The question arises: why has the Finance Commission recommended such a large share of total revenues to the Union? Why is it that even today, all the states together are still fighting to get around 30% of available funds among themselves? Given the constitutional responsibilities of the Union, should such a large percentage of funds go to it, rather than to the states, which have developmental, and welfare responsibilities? These are large questions that will have to be discussed elsewhere.

What finances of the state should be devolved to local bodies? Should the state government retain the largest share? Should devolution be limited to own resources, excluding transfers from the Union? Unfortunately, these issues have not yet been debated, even among academic circles.

The division of funds to lower levels in the districts and villages was made in the departments, in discussion with the Finance and Planning departments. When union funds were involved, matching grants were sometimes made. All this has been extensively studied in the public finance literature in India. The point to note here is that these are state level decisions-local bodies have no say in the process. The story is the same when it comes to the government societies.

The Department had branches in the districts-and lower down in the tehsils and villages as well. For co-ordination, the officers at the district level came under the venerable British institution of the Collector. He provided local guidance and administrative support; otherwise the departments ran their own show from the State Capital. A vertical chain of command from village to district and state capital was built up.

With increasing contributions from the Union becoming the norm in the mid and late 1970s, an agency called the District Rural Development Agency, headed by a sub-collector level officer, was set up in almost all the states, at the behest of the Union government.

The board of the DRDA consists almost completely of officials-though in recent times a few elected representatives have been brought on board. This body then took over development functions of both the union and the states at the district level . This system, with slight modifications, became the norm in all the states.

The responsibility, finances and power remained with the state government.

Scheme Implementation

Off and on, there would be elected bodies at the village and taluk level. These were to help the officials in the implementation of schemes, and had no authority of any kind in any of the states. When well run, they were consulted; often they were superseded, and forgotten. Funds moved in this hierarchical system, subject to rigid and inflexible rules-often resulting in money not being spent as intended. Audit at the local level is by the Local Fund Audit Department of the state.

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