Kerala 2005 - of Planning Commission

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Box 9.3: Devolution of Funds
The significant features of Kerala’s financial devolution to local governments are:
i) The quantum of Plan funds earmarked for local governments has been unique in the country in the sense of
being the highest, with the rural local governments getting a 70 to 85 per cent share in accordance with the rural
population and the District and Block Panchayats sharing only the remaining more or less equally.
ii) Around 90 per cent of the Plan funds have been given in a practically untied form to the local governments to
prepare and implement their own projects within certain broad policy framework, stipulating that at least 40 per
cent of the funds (10 per cent in urban areas) be invested in productive sectors and not more than 30 per cent
(50 per cent in urban areas) on roads, and at least 10 per cent be earmarked for gender sensitive schemes. The broad
policy framework has also fixed a consensual upper ceiling for subsidies in different categories of schemes.
iii) The entire Plan grants are fully investible (that is, without involving any staff salary or other administrative cost
commitments, which normally take away 20 to 25 per cent of the Plan at the State level).
iv) Since the entire Plan grants due to local governments are separately budgeted in a document given as Annexure IV of the
State Budget, which is passed by the Legislature, the grants remain non-divertible for other purposes by the executive.
v) There has been designed a flow of funds procedure, by which the funds flow in four instalments. A local government
is expected to spend at least 75 per cent of its allocation during a year, failing which the next year’s allotment gets
reduced by such shortfall.
covering elected representatives, officials and volunteers.
There was training for trainers at the State level and at the
district level. Five, a conscious attempt was made by the
policy makers to address the issue of gender, at each stage of
the planning process; women’s needs were also specifically
targeted through the Women Component Plan (WCP). The
panchayats were advocated (later mandated) to provide
10 per cent of the Plan grant-in-aid for schemes specifically
benefiting women.
3.2 The Repercussions of a Big Bang
While the mass mobilisation and involvement of PRI officials
and the ‘public’ in the ‘campaign’ did contribute to building
public awareness and support for decentralised planning,
the exercise was fraught with certain limitations. The initial
difficulties partially stemmed from the massive nature of
the programme. By reversing usual procedures, that is,
devolving responsibilities with finances to the local bodies
before building capacity of the functionaries to assume their
new roles, the result was a substantial underutilisation of
resources in the initial years of planning, which improved
over the years. Official figures show that over the whole
Ninth Plan period (1997-02), plan grant released to local
bodies did not reach up to the 35 per cent planned to be
allocated but almost 83 per cent of the released amount was
spent which however, was lower for the Special Component
Plan. In the case of state and centrally sponsored schemes
the expended proportions were lower, 69 per cent and
75 per cent respectively (Kerala Economic Review 2003).
While it is true that despite devolution, financial resources
with the local bodies would not be adequate to meet
diverse demands from the people, a situation of not being
able to spend the available resources emphasised the need
to strengthen technical and administrative capacity of the
PRI officials to fulfill their responsibilities. The need for
training PRI officials was felt very strongly and intensive/
extensive training programmes were organised under
the campaign. These massive programmes mobilised
substantial outside technical experts, activists including
members of voluntary organisations for providing critical
technical and organisational inputs, and constituted as
‘expert committees’. Without the support of voluntary
organisations, like the Kerala Sastra Sahitya Parishad (KSSP),
with its all-Kerala network and COSTFORD 14 (largely in
14 COSTFORD stands for Centre of Science and Technology for Rural Development, a voluntary organisation, started under
the leadership of the late C. Achuta Menon after he relinquished chief ministership. While in power he tried in vain to get
the low-cost, but eco-friendly, building technology, developed by Laurie Baker, approved by the government system. But its
diffusion accelerated principally due to the work of COSTFORD, which is also engaged in a number of rural development
programmes. However, it was largely due to the insistence of Achuta Menon that the government system took cognisance of
the need to examine `alternatives’ in construction works. It took exactly three decades for this alternative to be accepted by the
government system, albeit limited to local level work.