Here’s an overview of the Fourth Finance Commission of Kerala, formatted in HTML:

The Fourth Finance Commission of Kerala

The Fourth Finance Commission of Kerala, constituted to review the state’s financial position and recommend principles governing the distribution of tax revenues between the state government and local self-government (LSG) institutions, played a crucial role in shaping fiscal decentralization in Kerala.

Context and Mandate

The Commission was established against the backdrop of increasing emphasis on empowering local bodies as engines of development. The mandate included:

• Assessing the existing state of finances of both the state government and the LSG institutions (Grama Panchayats, Block Panchayats, District Panchayats, Municipalities, and Corporations).
• Determining the principles that should govern the distribution of proceeds of taxes, duties, tolls, and fees leviable by the state between the state and the LSGIs.
• Suggesting measures to improve the financial position of the LSGIs.
• Recommending grants-in-aid to be given to the LSGIs from the Consolidated Fund of the State.

Key Recommendations

The Fourth Finance Commission put forth several significant recommendations designed to strengthen local finances and improve service delivery:

• Devolution of Funds: The commission recommended a substantial increase in the devolution of funds to LSGIs. This involved assigning a larger share of state tax revenues to local bodies, providing them with greater financial autonomy.
• Formula-based Distribution: The commission emphasized a transparent and objective formula-based approach for the distribution of funds. The criteria often included population, area, backwardness, and performance, aiming for equitable resource allocation.
• Own Source Revenue: It stressed the importance of LSGIs enhancing their own revenue generation. This involved improving tax collection efficiency, exploring new revenue sources, and strengthening local financial management practices.
• Grants-in-Aid: Recognizing that devolved funds might not be sufficient for all LSGIs, the Commission recommended specific grants-in-aid to address disparities and support essential services.
• Capacity Building: Acknowledging the need for skilled personnel at the local level, the Commission highlighted the importance of capacity building programs for LSG functionaries in areas such as financial management, accounting, and project implementation.

Impact and Significance

The Fourth Finance Commission’s recommendations had a considerable impact on the fiscal landscape of Kerala. The increased devolution of funds empowered LSGIs to undertake development activities more effectively, address local needs, and improve public services. The emphasis on own source revenue encouraged local bodies to become more financially self-reliant. The transparent and objective fund allocation mechanisms promoted fairness and reduced discretion. However, challenges remained in terms of fully realizing the potential of local governance, including issues related to capacity gaps, bureaucratic hurdles, and the need for continuous monitoring and evaluation.

The commission’s work significantly contributed to the ongoing process of strengthening local self-governance in Kerala, aligning with the broader goals of participatory democracy and decentralized development.