REPORT OF THE

PANCHAYAT FINANCE COMMISSION

OCTOBER 1985

CHAIRMAN

Shri. K. AVUKADERKUTTY NAHA

DEPUTY CHIEF MINISTER, KERALA

1
 REPORT OF THE

PANCHAYAT FINANCE COMMISSION 1985

Chairman Shri K. Avukaderkutty Naha,
Deputy Chief Minister, Kerala.

Members Shri. T.V. Swaminathan, Commissioner and Secretary to Government,

Local Administration and Social Welfare Department.
Shri. S. Varadachary, Secretary to Government,
Planning and Economic Affairs Department.
Shri Sundaresan, Director of Panchayats.
Shri K. George Mathew, Additional Secretary, Finance Department.
Member-Secretary Shri M. Subbayyan.
Officers: Shri K. Bhanuvikraman Nair, (retired Director of Panchayats),

Additional Secretary. Shri K.A. Ommer,

Joint Secretary Shri K.G. Sukumara Pillai,

Financial Assistant Shri V. Sadanandan,

Section Officer Shri S. Narayanan Nair,

Section Officer Shri C. Vikraman Nair,

Taluk Panchayat Officer Smt. R. Valli Ammal,

Fair Copy Supervisor.

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CONTENTS

Introductory Note
I Village Panchayats in Kerala Origin and Growth
II Taxes reserved for utilisation by or for local bodies
III Taxes levied by the Panchayats in Kerala
IV Non-Tax Revenue
V Grants
VI New measures for augmenting the Resources of Panchayats
VII Expenditure
VIII Financial viability and norms for regrouping of Panchayats
IX Miscellaneous
X Summing up
Summary of Recommendations
Appendix I to X

LIST OF APPENDICES

I Government order constituting the Panchayath Finance

Commission and Terms of reference

(1) G.O.(MS) No. 149/83/LA&SWD dated 27-9-1983

(2) G.O.(MS) No. 89/85/LA&SWD dated 23-4-1985

II Authorisation to the Commission to call for information/records from Departments,

Boards etc. G.O(MS) No. 324/84/LA&SWD dated 22-12-1984

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III Permission to the representatives of Service Organisations and Employees of
Panchayat Department etc., for presentation of memorandum and discussion with
Commission G.O.(MS) No. 304/84/LA&SWD dated 21-11-1984

IV Duties and functions of Panchayats

V Statement showing the area, population etc., of Panchayats in the State.

VI Statement of total receipts of Panchayats under various items and percentage of

receipt of each to gross income during the years 1979-80 to1983-84

VII Statement showing district-wise collection of Building Tax during the period from
1979-80 to 1983-84

VIII Government order appointing Commissioner and Secretary to Government, Local

Administration and Social Welfare Department as Ex-Officio Member of Panchayat
Finance Commission (G.O.MS. No. 192/84/LA&SWD dated 23-8-1984)

IX Statement showing sanctioned posts and name of Staff

X Circular instructions for supply of factual information and details to the Commission
by Departments including Secretariat and Public Sector undertakings (Circular No.
19106/C2/84/LA&SWD dated 22-10-1984)

PREFACE

I have great pleasure in presenting the report of the Panchayat Finance Commission.
Even though our State has an impressive record of having a well established system of
Panchayats there was no attempt in the past to analyse the problems of Panchayat
finances. The present Commission is an attempt towards that direction and I am happy
that I was called upon to head this Commission. Although I knew that the task was
burdensome I quite happily accepted the assignment as I has the opportunity to serve the
State for a long period as Minister in charge of Panchayts.

In this context I would like to record my deep sense of appreciation to the Members of
the Commission for their learned and valuable contributions in formulating the
recommendations of the Commission. Shri. Arun Kumar, Secretary to Government ,

4
Local Administration Department who attended the meetings of the Commission on our
invitation has also made valuable contributions to the work. I place on record the
exemplarary services rendered by Shri. M Subbayyan, Member Secretary to the
Commission, Shri. K Bhanuvikraman Nair, Additional Secretary, Shri.K.A Ommer, Joint
Secretary and Shri K.G. sukumara Pillai, Finnancial Assistant. Other Officers and staff
have also come up at all times to our requirements and expectations in finalising the
report in time.

I would also like to express my gratitude to the Director, Deputy Directors of Panchayats,
District Panchayat Officers and other field Officers of the Department of Panchayats for
having successfully arranged the Meetings at various district headquarters convened for
collection of evidence and for other purposes. Thanks are also due to the District
Collectors for making available the Conference halls for holding the meetings. I am
grateful to the Officers and staff of the Department of Local Administration secretariat
for the active co-operation extended to us. I am also thankful to the Presidents, former
Presidents, Members of Panchayats ad representatives of Public, Servcice Organisations,
Kerala Panchayat association and Executive Officers of Panchayats for their active co-
operation and valuable suggestions.

The Commission was very much benefited by the comparative study of Panchayat
Finances conducted by our Officers in the neighbouring States of Karnataka, Tamil Nadu
and Andhra Pradesh. The National Institute of Rural Development, Hyderabad had also
provided useful details on local body finances. I am grateful to the Secretaries to
Government and other Officials of the Department of Rural development in the above
States as well as to the experts of NIRD for their co-operation.

I take this opportunity to express my gratitude to Shri., C. M. Sundaram, Minister for

Local administration for the valuable support extended tot he commission.

K. AVUKADERKUTTY NAHA,
Chairman,
Panchayat Finance Commission.

INTRODUCTORY NOTE

While presenting the budget for 1983-84 the Minister for Finance announced that
Government are contemplating constitution of a Panchayat Finance Commission.
Following this, Government issued orders in G.O. (MS) 149/83/LA&SWD dated 27th
September, 1983 (vide Appendix I ) constituting a Panchayat Finance Commission with
Shri K. Avukaderkutty Naha, M.L.A (now Deputy Chief Minister of Kerala) as Chairman
with the following terms of reference:

(i) Assessment of the existing Panchayat services and amenities and their cost.

(ii) Assessment of the cost of Panchayat services and amenities as satisfactory standards.

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(iii) Assessment of the gap between the existing resources and cost of services and
amenities at satisfactory standards.

(iv) Assessment of the degree of exploitation of the existing local taxes by the Panchayats
and possibilities of improving them.

(v) Examination of the present Panchayat taxation structure and suggestions for
augmenting the resources of Panchayats.

(vi) Examination of the possibilities for the raising of non-tax revenues.

(vii) Suggestions for the basis of Government grants (both statutory and non- statutory) to
Panchayats.

(viii) Assessment of arrears due to Government from the Panchayats as on 31-3-1983 and
suggestions on measures to be taken to clear these arrears and also to ensure that arrears
do not accumulate in future.

Later in G.O. (MS) No. 89/85/LA&SWD dated 23rd April, 1985 (Appendix I)
Government have ordered that following items will also be included in the terms of
reference of the Commission.

(i) Study on uneconomic Panchayats which are not able to meet even the establishment
expenditure, let alone, other developmental activities and suggestions for making them
viable or for amalgamating with other viable Panchayats.

(ii) Examination of the existing norms regarding the Panchayat and suggestions, if any,
for their regrouping in consonance with the financial capacity of the Panchayats.

Though orders constituting the Commission was issued on 27-9-1983. Office could start
functioning in full swing only from April 1984 as it took time to locate an office building,
to appoint necessary staff on deputation basis etc.

The first meeting of the Commission, held on 21-3-1984 in the chamber of the Deputy
Chief Minister, decided to issue a General Questionnaire to the Presidents of Panchayats
and the public and a Data questionnaire to the Panchayat Executive Officers. The second
meeting of the commission held in its office at Kumarapuram (Trivandrum) on 17-4-1984
approved the drafts of the above two questionnaire. The two questionnaire were got
printed and issued to all concerned during May-June 1984.

Meanwhile Shri. M. Subbayan, formerly Director of Panchayats and since working a s

Managing Director of the Kerala State Development Corporation for Scheduled Castes
and Scheduled Tribes, Trichur was appointed as Member Secretary to the commission.
Shri Subbayyan assumed charge on 15-5-1984, Shri K. Bhanuvikraman Nair who was
Secretary to the Commission till them, appointed as Additional Secretary consequent on
appointment of Shri Subbayyan.

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Though replies to the questionnaire were required to be furnished on or before the end of
August 1984 the time limit was adhered to by the executive Officers numbering less than
50 only. Similarly the response from the Presidents to the General Questionnaire was also
not encouraging. Though the time limit was since extended upto the end of September
1984 the response was luke warm.

With a view to expedite replies to the detailed questionnaire conferences of Executive

Officers were held at various district headquarters. Despite sustained efforts replies to the
data questionnaire from all Panchayats were received only by the end of January 1985.
Soon after receipt of replies to questionnaire compilation was started.

Case study of 50 typical Panchayats in the State selected on the basis of income, location,
backwardness etc., was also undertaken from September 1984 onwards. In November
1984 office was shifted from Kumarapuram to Sasthamangalam in Trivandrum.

Being the first attempt by our Government to analysc and find out means for improving
the finances of Panchayats extreme care was taken to elicit the views of maximum
number of Panchayat functionaries and other public men associated with local body
affaires. To ensure this, the Commission held sittings at various district headquarters
from February 1985 onwards. The Commission received several suggestions both written
and oral during the course of collection of evidence. The suggestions covered a variety of
topics relating to the different facets of Panchayat administration. Some of the
suggestions were of such a nature that would entail additional expenditure to Panchayats.
A number of creative and original suggestions were also received during the sittings. The
Commission has carefully considered all suggestions and shades of opinions while
formulating its views on various subjects enumerated in the terms of reference. The
Commission could not, however, give due consideration to certain suggestions having a
bearing on re-organisation of Panchayat administration in the State as we had to confine
within the frame of the terms of reference issued by the Government.

Eventhough the data questionnaire was drafted so carefully and comprehensively and
forwarded to the Executive Officers with detailed guidelines and instructions a good
many of the replies were either incomplete, or imperfect and in certain instances details
were furnished in a slip-shod style. Much time was lost in sorting out the details in such
cases.

The officials of the Commission had visited the neighbouring States viz. Karnataka,
Tamil Nadu and Andra Pradesh and conducted comparative studies of local body
finances of those States. The studies were found very useful in making our
recommendations for improving the finances of Panchavats in our State.

The Commission finalised their report during the sittings held in the months of August,
September and October 1985.

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CHAPTER I VILLAGE PANCHAYATS IN KERALA ORIGIN AND
GROWTH

1.1 Local Bodies are regarded as "nursery of democracy"; It is a precious training ground
for the local people in public administration as well as in politics which enables them to
participate in national politics in a more effective and purposeful way. It is also a ground
for the local people to solve their own problems and to do things by themselves. They can
execute schemes for their own betterment with the aid of such resources as are made
available to them by the State Government or which they are able to raise by their own
efforts. The fact that only with the help of local self Government it will be possible top
provide the basic amenities in rural areas in the manner in which the people living in
those areas want them has been recognised by the founding fathers of our Constitution
and this has found expression in Article 40 of the Constitution of India which enjoins that
"the state shall take steps to organise Village Panchayats and endow them with such
powers and authority as may be necessary to enable them to function as units of self
Government".

1.2 The period that immediately followed the enactment of the Constitution of India
witnessed the establishment of more and more Village Panchayats in rural areas by
bringing into force legislations in the States assigning more duties and functions to
Panchayats. New legislations viz. T-C Panchayat Act, 1950 in T-C State and Madras
Village Panchayats Act, 1950 in Madras State etc. were in pursuance to the above
movement for establishing democratic units of administration at village level in order to
provide civic amenities and services to the local people.

1.3 The Kerala State with an area of 38863 Sq. km. was formed on 1st November, 1956
by merging erstwhile States of Travancore-Cochin and the district of Malabar and the
Kasargode areas of former Madras State. The system of Panchayat for a village or a
group of villages has been in existence in Kerala even before its formation in 1956. It
would be quite interesting in this context to have a birds eye-view on the Local Self
Government Administration that prevailed in the erstwhile States of Travancore-Cochin
and Malabar area (Part of madras State). The ensuing paras will give an idea of the
position prior to the formation of Kerala State.

1.4 In the former Travancore region the system of Local Self Government existed in
urban areas only. Later, in August, 1925 it was extended to rural areas by a regulation
called 'Village Panchayat Regulation VII of 1100 M.E.' passed in Karkatakom 1100 (ie.
in August 1925). In pursuance to this Act only seven Village Panchayats were
constituted, Cleaning of streets, construction, maintenance of wells and tanks for supply
of drinking water to public, opening and maintenance of burial and burning grounds,
maintenance and control of local roads and ferries, supervision of primary education etc.
were the main functions entrusted to the Village Panchayats as per above Act. A special
feature of this Act was that it delegated certain judicial functions to the Panchayats. The
Village Panchayats were vested with the power of taxation. Main sources of income were

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land cess, profession tax, licence fees, vehicle tax and contributions from Government.
Later in 1940, another Act under the title "Village Union Act", was passed and it
envisaged almost the same functions and duties as the village Panchayats though the
Village Unions enjoyed only less powers than the Panchayats. The Act of 1940 took
away the judicial functions exercised by the Panchayats under the Village Panchayat
Regulation of 1925. The Village Union also collected taxes and licence fees. Besides they
got Government contributions, equal to the amount collected by them by way of taxes,
fee etc. Thus there were two categories of Panchayats in the Travancore area-One
category under the Village Panchayat Act of 1925 and the other under the Village Union
Act of 1940 at the time of integration of Travancore and Cochin States in July 1949.
Total number of Panchayats then existed were seven Village Panchayats and 195 Village
Unions covering a population of 28 lakhs.

1.5 In Cochin area Village Panchayats were established as early in 1914 under the Cochin
Village Panchayat Act, 1089 M.E.(1914). As a first step under the above enactment, five
Panchayats (ie. one for each taluk then existed) were constituted in the Cochin State. By
the year 1934 Panchayats were formed in the entire rural areas of the Cochin State
increasing the number from 5 to 87. Important activities of Panchayats were construction
and maintenance of minor irrigation works, village roads, canals, supply of drinking
water, sanitation, control over vaccination and registration of vital statistics and
supervision of elementary education etc. Panchayats in Cochin State were not levying
taxes of any kind their income was confined to receipts from usufructs, trees etc. which
was not of much significance. However, the Panchayats carried out their civic duties by
means of liberal grants from Government. The Panchayats did not have any machinery to
execute works and the staff for the execution of several works in the Panchayat area were
directly engaged and paid by Government. Certain Panchayats were vested with judicial
powers of Village Courts. Later, the Village Courts were separated from the Panchayats
and placed under the control of Judicial Department of the Cochin State. There were 100
Panchayats in the Cochin State at the time of integration with Travancore in July 1949.

1.6 Eventhough Travancore and Cochin were integrated in July 1949 the pattern of
Panchayats that existed in the erstwhile states continued to function under the relevant
Act of each State till 15-8-1951 when the unified Act called "Travancore-Cochin Village
Panchayat Act, 1950" came into force. Panchayats in T-C State were regrouped under the
new Act and 550 Panchayats were constituted. The first Panchayat elections to the
Village Panchayats in T-C State were held in 1953 and these Panchayats started
functioning from 15th August, 1953.

1.7 Consequent on the promulgation of the above new Act and the Rules made
thereunder sphere of activities of Panchayats widened and they were entrusted with
responsibilities:

(i) to construct, repair and maintain all the roads other than those under the Public Works
Department;

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(ii) to preserve all poramboke paths, lanes and canals useful for purpose of
communication, cattle grazing grounds etc.

(iii) to carry out petty Irrigation works;

(iv) to light all public roads and public places;

(v) to provide public latrines, urinals;

(vi) to open and maintain burial and burning grounds etc.

(vii) Opening and maintenance of Public Markets, Public Slaughter houses etc.

(viii) Control of Dangerous and Offensive Traces;

(ix) Planting and preservation of road side trees;

(x) Registration of births and deaths.

1.8 As mentioned earlier, taxation was not in existence in the Panchayas of Cochin unlike
Travancore, With the introduction of the unified Act of 1950 collection of taxes by all
Panchayats in the T-C area was started during the year 1953-54. The items of taxation
included Profession Tax, House Tax, Vehicle Tax, Licence Fees. However these were all
discretionary taxes. Based on annual income, Panchayats in T-C area are classified into
three grades. Panchayats having an annual income of Rs. 15,000 and above are classified
as Grade I and those below Rs.15,000 but above Rs. 5,000 as Grade II and the remaining
Panchayats were grouped under Grade III. Consequent on the States Reorganisation,
Panchayats in five taluks in the former T-C area viz. Thovala, Agastheeswaram,
Shencottah, Vilavancode and Kalkulam were added to the Madras State.

1.9 In the Malabar district and Kasargode area, which were parts of erstwhile Madras
State, Village Panchayats were functioning under the "Madras Village Panchayat Act,
1950" Which came into force from 1st April, 1951; Under this Act every Village or
hamlet with a population of 500 and above will have a Panchayat. Villages with a
population of less than 500 were made part of an adjoining Panchayat or grouped with
other contiguous villages and a single Panchayat formed for the group. Panchayats
having a population above 5000 and with income exceeding Rs.10,000 were classified
under Class I and all the others under Class II. The duties and fundtions of the Panchayats
under this Act were almost similar to those contained in the T-C Act, 1950 (explained in
pre-para No. 1.7). Further certain judicial functions vested with Village Courts and
Panchayat Courts under the Madras Village Courts Act, 1888 were also attended to by
the Village Panchayats. The main sources of revenue of the Panchayats were share of
land cess, and duty on transfer of property. Further house tax, profession tax and vehicle
tax were levied compulsorily. Under the Madras act, Panchayats were not eligible for any
statutory grants. But Government paid ex gratie grant to Panchayats. Entire Malabar area
was not covered by Panchayats. Such areas which were not covered by Panchayats were

10
under the administrative jurisdiction of the Malabar District Board. The District Board
carried out all the statutory functions of Panchayats in respects of the non-Panchayat area.
Eventhough activities of District Boards were mainly concerned with non Panchayat
areas they have been empowered to carry out the affairs relating to Education, Medical
and Public Health in Panchayat areas also. The District Boards derived their income from
Profession Tax, Entertainment Tax, Education Cess, Land Cess, Surcharge on Stamp
duty, Licence fees and Grant-in-aid by Government. As a result of the States
Recorganisation, Malabar District and Kasargod areas were added to T-C State to form
Kerala State on 1-11-1956. Consequently 364 Class II and 35 Class I Panchayats in the
Malabar and Kasargode area were transferred to the Kerala State thus making a total of
892 Panchayats in the newly formed State of Kerala. The District Boards continued to
exist even after the States Reorganisation in 1956 till Kerala Panchayat Act, 1960 was
brought into effect from January,1962.

Panchayats after formation of Kerala State

1.10 In 1958, the Ministry headed by Shri E.M.S. Namboodiripad brought in a draft
Panchayat Bill for the purpose of adopting a uniform law throughout the Kerala State.
But because of dissolution of Legislature in 1959, the Bill could not be passed by the
Assembly. It was only in 1960, after formation of a new Ministry headed by Shri. Pattom
Thanu Pillai, a uniform Panchayat Act was passed to cover the entire State of Kerala. But
this unified Act called "The Kerala Panchayat Act, 1960" came into force only from 1st
January 1962. The present Panchayat system in Kerala is based on the above Act. This
Act envisages to provide for a unified and decentralised system of administration of
village affairs throughout the State through Panchayats by organising them as units of
Local Self Government at Village level. Functions and duties assigned to Panchayats are
those which are contemplated under Section 57 of the above Act which is extracted in
Appendix IV. Above Act empowers Government to declare any village or group of
adjacent villages or portions thereof to be Panchayat area. For the purpose of the Act,
each Panchayat is to consist of such number of members to be notified by the Director in
accordance with the prescribed scale. A Panchayat having a population upto 10,000 is to
have 8 members. Panchayats with population exceeding 10,000 will have 8 members for
the first 10,000 of the population and one additional member for every 4500 of the
population in excess of 10,000 subject to a maximum of 15 members. In every
Panchayat, one seat is reserved for Scheduled Castes and Scheduled Tribes and one for
women. Elections of members to Panchayats are held on the basis of adult franchise by
the system of secret ballot. The members of the Panchayat will elect a President and a
Vice President from among themselves. Elections to the Panchayat council, were
however, postponed pending finalisation of delimitation of the areas under each
Panchayat in the State. Having completed the process of a delimitation, the first
Panchayat election in Kerala State was held by the end of 1963. The new Panchayats
came into existence on the first of January, 1964. There were 922 Panchayats in the State
on the above date.

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Organisational set up of Panchayats

1.11 Section 33 of the Kerala Panchayat Act, 1960 provides for appointment of a whole
time Executive Officer who should be a Government Servent. Other Officers and
personnel in the service of the Panchayart shall work under him. Personnel other than the
Executive Officers have been brought under a common service for each district. The
recruitment to Panchayat Common Service has been entrusted to the Kerala Public
Service Commission. However, selection to Part-time posts, to each district is made by a
committee consisting of the Secretary to Government, Local Administration, Director of
Panchayats and a Representative of the Kerala Panchayat Association of the district
concerned. District Panchayat Officer is the convener of the Committee.

Existing position of Panchayats

1.12. The new Panchayat Councils which came into power on January, 1st 1964,
continued to be in power until 1979 as elections were postponed from time to time for
some reason or other. The councils which were elected in 1979, completed their statutory
period of five years in 1984, have ceased to exist. These Pancayats are now placed under
the control of Special Officers appointed by the Government. The powers and duties of
the Panchayat Councils are now being exercised by the above Special Officers as per
Section 55(4) of the Kerala Panchayat Act.

Population of Kerala-Panchayat Level Picture

1.13 Kerala is ahead of all States in the matter of density of population. Density is as high
as 558 per sq. km. in rural areas as against all India Average of 161. The total population
of Kerala according to the 1981 census is 254.54 lakhs. Of this, 217.89 lakhs are in rural
areas in the State and it constitutes 85.6% of the total population of Kerala. There are
1001 Panchayats in Kerala. There are 1001 Panchayats in Kerala. The list showing name,
grade, population, area etc. of Panchayats is furnished in Appendix V. Table given below
gives districtwise position of Panchayats.

TABLE

Showing the number of Panchayats in each district indicating The most populous
and least populous Panchayat in each District as per 1981 census

Most populous Least populous

Number of
District Panchayat Panchayat
panchayats
Name Population Name Population
1. Kasargode 37 Bedadka 35,485 Belur 7,614
2. Cannanore 85 Payyannur 53,992 Malapattam 7,283
3. Wynad 25 Meppadi 48,514 Vengappally 7,336

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4. Kozhikode 77 Quilandy 51,301 Kayanna 10,561
5. Malappuram 95 Vengara 49,258 Chungathara 9,212
6. Palghat 91 Ottappalam 37,541 Nelliampathy 8,871
7. Trichur 98 Koorkancherry 44,028 Vettilappara 9,107
8. Ernakulam 86 Eloor 52,528 Pothanicad 8,878
9. Idukki 51 Munnar 78,833 Vattavada 3,554
10. Kottayam 73 Mundakkayam 43,034 Thalanad 8,182
11. Alleppey 69 Punnapra 40,422 Perumbalam 8,614
12 Pathanamthitta 55 Pandalam 35,391 Thumpamon 7,574
13 Quilon 75 Kottarakara 53,349 Munore 9,938
Island
14 Trivandrum 84 Parassala 40,867 Kallikkad 10,978
1001

The Kerala Panchayat Act does not stipulate a minimum population for the formation of a
Panchayat. The average population of a Panchayat in the State comes 22,103. Trichur
district with 98 Panchayats has the largest number of Panchayats in a district followed by
Malappuram District (95). Wynad, the least population district in the State, has also the
lowest number of Panchayats (25). 30 Panchayats in the State have a population of less
than 10000. All Panchayats in Trivandrum and Kozhikode districts have a population of
10000 and over. 834 out of the 1001 Panchayats have a population ranging between
10000 and 30000. Panchayats with a population of 30000 and over comes to 137 of
which 6 have above 50000. Munnar Panchayat in Idukki District having a population of
78833 is the most populous Panchayat in the State. Idukki district also has the distinction
of having a Panchayat viz. Vattavada with the least population in the State with only
3554 persons. The other 5 Panchayats in the State having a population of 50000 and
above are Payyannur (53992) in Cannanore District, Quilandy (51301) in Kozhikode
District, Eloor (52528) in Ernakulam District, Kottamkara (53349) and Kilikolloor
(50734) in Quilon District. Area-wise, Valapattanam Panchayat in Cannanore district is
the smallest Panchayat in Kerala (2.04 sq. km.) with a population of 8080. But
Karumkulam Panchayat in Trivandrum District with an area of 2.43 sq. km. and
population of 22,412 has registered the highest density among panchayats in Kerala.

1.14 Panchayats in Kerala are classified into four categories according to their annual
income excluding non-statutory grants and contributions. The classification of
Panchayats as on 31-3-1984 is as follows:-

Classification Annual Income No. of Panchayats under each

category
1. Special Grade, More than Rs. 1.75 lakhs 350
Panchayats
2. Grade I Panchayats More than Rs. 1 lakh and upto 435
Rs. 1.75 lakhs
3. Grade II Panchayats More than Rs. 50000 and upto 206

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 Rs. 1 lakh
4. Grade III Panchayats Upto Rs. 50000 10

Grouping of Panchayats is done once in three years. Last regrouping of Panchayats was
done in May, 1983 on the basis of average income for the years 1979-80, 1980-81 and
1981-82 vide G.O. (MS) 52/83/LA &SWD dated 10-5-1983 and proceedings No. E1-
35949/82 dated 22-12-1984 of the Director of Panchayats.

Panchayat Raj and Kerala

1.15. The Balwant Rai Mehta Study Team Report on Community projects and National
Service emphasised the need for decentralisation of responsibility and power and
recommended a three-tier system of local self government with Village Panchayat at the
lowest level and Panchayat Samithi at intermediate level (Block) and Zilla Parishad at the
district level. By the above recommendation the Panchayat Samithi was to be in charge of
all development activities in the Block and the Zilla Parishad was expected to co-
ordinate, supervise and advise the Panchayat Samithis. As far as the composition of these
bodies was concerned, the Study Team recommended a system of indirect elections
whereby the Presidents of the lower body could become ex officio members of the next
higher body. The National Development Council in their meeting held in January, 1958
agreed to the idea of giving developmental responsibility to the people's representatives
below the state level. It, however, took the view that the manner in which the principle
was to be applied was a matter for the states to consider. In short, each state was free to
have its own legislation and to set up Panchayat Raj Institutions of its own choice suited
to the local genius, conditions, environment and needs and requirements. While enacting
the Kerala Panchayat Act, 1960 due regard was given to the idea of sharing of powers
and responsibilities to Panchayats as envisaged by the Mehta Study Team. But three tier
system of Panchayat Raj Administration as suggested by the Balwant Rai Mehta
Committe has not been introduced in Kerala though most of the other states in India have
a three tier pattern. The Panchayats in Kerala are empowered to attend civic functions
only. Plan implementation work under rural development programmes is not being
assigned to Panchayats but to Community Development Blocks under the administrative
control of Development Department. In other words, the rural development programmes
and Panchayat functions (civic functions and related welfare measures) are executed by
two separate departments in Kerala.

Resources

1.16. The Panchayats in the State are utilising major chunk of their resources (after
making provision for establishment cost) for construction and maintenance of roads
(Communications) sanitation, street lighting and water supply.

The main sources of income of Panchayats in Kerala are:-

(a) Compulsory taxes

14
1. Building Tax

2. Profession Tax

3. Vehicle Tax on non-motor vehicles

4. Entertainment Tax and Additional entertainment tax

5. Show tax and surcharge on show tax

(b) Optional Taxes

1. service Taxes

2. Surcharge on building tax

3. Land Cess

(c) Non-tax revenue

1. Licence fees

2. Income from Panchayat properties (including income from markets)

3. Miscellaneous receipts (Receipt from interest etc.)

(d) Assigned Revenue (Statutory Grants)

1. Basic Tax (Land Revenue collected by the Revenue Department and assigned to
Panchayats)

2. Surcharge on stamp duty on transfer of immovable property (collected by the

registration Department and assigned to Panchayats)

3. Vehicle Tax Compensation (share of Motor vehicle tax collected by the M.V.
Department and assigned to local bodies).

(e) Non-Statutory Grants (Discretionary Grants) for various specified purposes.

(f) Loans and Advances from Government for specific purposes.

(g) Loans from Kerala state Rural Development Board for creating remunerative assets.

15
 CHAPTER II TAXES RESERVED FOR UTILISATION BY OR
FOR LOCAL BODIES

2.1. The Acts and Rules which have come into force in the various States of India in
order to regulate the functions of Panchayats contained long list of functions entrusted to
the Panchayats, which have been classified as obligatory and discretionary. Even though
the Panchayats were called upon to discharge such a long list of mandatory and
discretionary functions they were not adequately equipped with the financial resources
required for it. There has been a general demand from the early days of freedom that the
local bodies should have a definite and assured source of tax revenue and that this should
be secured by the inclusion in the Constitution of a separate list of taxes which could be
levied exclusively by and for the local bodies. Such a demand was based on the fact that
under the Scheduled Taxes Rules framed under the Government of India Act, 1919, the
following taxes were to be utilised by or for local authorities:-

1. Toll;
2. Tax on land or land values;
3. Tax on buildings;
4. Tax on vehicles or boats;
5. Tax on animals;
6. Tax on menials and domestic servants;
7. Octroi;
8. Terminal tax;
9. Tax on trades, profession and callings;
10. Tax on private markets;
11. Tax imposed in return for services rendered such as;

(a) Water rate;

(b) Lighting rate;

(c) Scavenging, Sanitary or sewage rate;

(d) Drainage tax.

2.2. But the Constitutional status enjoyed by the local taxes in the Government of India
Act, 1919 was lost when the Government of India Act, 1935 came into force. It repealed
the Scheduled Taxes Rules and provided for three lists viz., the Federal list, the
Provincial list and the Concurrent list. The Constitution of India has closely followed the
above three lists which came to be known as the Union list, the State list and the
Concurrent list. There is no separate list for local bodies. However local Government is

16
included in the State list. The relevant entry in State list under the Seventh Schedule of
the Constitution of India reads as follows:-

Item No. 5.- "Local Government, that is to say, the constitution and powers of Municipal
Corporations, Improvement Trusts, District Boards, Mining Settlement Authorities and
other local authorities for the purpose of Local Self Government or Village
Administration".

The local bodies in India thus derive their power of taxation from the powers delegated to
it by the State legislatures through various enactments.

2.3. The Government of India was responsive to the problems of local body finances right
from the beginning of independence as could be seen from the attempts made by them to
find out the solutions through studies undertaken by various Commissions and
Committees. The terms of reference of the Local Finance Enquiry Committee (1951),
appointed by the Government of India required it to examine whether the existing
resources are adequate for the performance of the functions assigned to the local bodies
and to consider whether and if so, what further sources of revenue should be provided".
The Local Finance Enquiry Committee 1951 had in its report recommended one tax from
the Union list and twelve taxes from the State list should be reserved for utilisation by or
for local bodies. They are:-

Union List

(1) Item No. 89

Terminal taxes on goods or passengers carried by railway, sea or air,

State List

(1) Item No. 49

Taxes on lands and buildings

(2) Item No. 50

Taxes on mineral rights subject to any limitation imposed by Parliament by law relating
to mineral development.

(3) Item No. 52

Taxes on the entry of goods into a local area for consumption, use or sale therein.

(4) Item No. 53

Taxes on the consumption on sale of electricity.

17
(5) Item No. 55

Taxes on advertisements other than advertisements published in the newspapers.

(6) Item No. 56

Taxes on goods and passengers carried by road or inland water ways.

(7) Item No. 57

Taxes on vehicles (other than those mechanically propelled)

(8) Item No. 58

Taxes on animals and boats.

(9) Item No. 59

Tolls

(10) Item No. 60

Taxes on professions, trades, callings and employments.

(11) Item No. 61

Capitation taxes.

(12) Item No. 62

Taxes on entertainments including amusements.

The Committee had also suggested that the State, while investing local bodies with wider
responsibilities, must also place at their disposal adequate funds to supplement their
revenue.

2.4. Another Commission, viz., "Taxation Enquiry Commission (1953-54)" headed by

Shri John Mathai, had also recommended some of the above mentioned items for
reservation by local bodies. The taxes recommended to be reserved for exclusive
utilisation of local bodies by the above Taxation Enquiry Commission were:

(1) Taxes on lands and buildings;

(2) Taxes on the entry of goods into the area of a local authority for consumption, use or
sale therein, popularly known as octroi;

18
(3) Taxes on vehicles other than those mechanically propelled;

(4) Taxes on animals and boats;

(5) Taxes on professions, trades, callings and employments;

(6) Taxes on advertisements other than advertisements published in the newspapers;

(7) Theatre/show tax; and

(8) Duty on transfer of property.

But no statutory action was taken by the Government of India on these recommendations.
However in our State, all the items of taxes recommended by the Taxation Enquiry
Commission have been made available to the local bodies except item No. (2) as levy of
such a tax does not exist in our State. None of our neighbouring States have transferred
so much of items of local taxes to the extent as the State of Kerala have done eg.
Profession Tax in Karnataka is levied and appropriated in full by the State Government.
Similarly Entertainment Tax in Karnataka, Tamil Nadu and Andhra Pradesh is levied by
the State Government and assigned only a portion of the proceeds to Panchayats whereas
in Kerala Entertainment Tax is levied by them as their own revenue.

2.5. In certain States, some taxes are obligatory and others are optional. In Assam,
Jammu and Kashmir, Manipur, Meghalaya, Orissa, Rajasthan, Sikkim, Tripura and Uttar
Pradesh all taxes are optional for Grama Panchayats. In the remaining States, one or more
taxes are compulsory in addition to the optional taxes available to them. The recent
tendency, however, on the part of those State Governments where all taxes are optional,
is to make some taxes compulsory. The idea of making a few items of tax compulsory is
gradually gaining momentum in recent times.

2.6. The Kerala Panchayat Act, 1960, which came into force from 1st January, 1962 and
Kerala Local Authorities Entertainment Tax Act, 1961 brought into effect from 1st April
1962 and Kerala Additional Tax on Entertainments and surcharge on Show Tax Act,
1963 introduced from 1-5-1963 empower every Panchayat in Kerala to levy in its area,
the following taxes:

(a) Compulsory taxes

(1) Building Tax

(2) Profession Tax

(3) Vehicle Tax (other than those vehicles coming under the purview of M.V. Act).

19
(4) Entertainment Tax (including Additional Tax on Entertainment)

(5) Show Tax (including Surcharge on Show Tax)

(b) Optional Taxes

(1) Service Tax

(2) Surcharge on Building Tax

(3) Land Cess

(c) Assigned Revenue

Proceeds from the following items of taxes collected by the State Government are passed
on to Panchayats (after deducting collection charges at 3%) in the form of statutory
grants.

(1) Basic Tax Grant (Land Revenue collected by the Revenue Department)

(2) Surcharge on Stamp Duty on Transfer of Immovable Properties (collected by the

Registration Department) at the time of Registration of documents.

(3) Similarly a portion of the proceeds out of the vehicle tax collected by the State
Government under M.V. Act and Rules is transferred to the Panchayats under Section 19
of Kerala Motor Vehicles Taxation Act, 1976.

Details of receipts from the above sources for the five year period from 1979-80 to 1983-
84 have been furnished Appendix VI. Detailed analysis of each of the above sources of
income to the Panchayats together with our recommendations are given in the ensuing
chapters.

20
 CHAPTER III TAXES LEVIED BY THE PANCHAYATS IN
KERALA

1. BUILDING TAX

3.1. Tax on building is a compulsory tax levied under Section 68 of the Kerala Panchayat
Act, 1960 which came into force on 1st January, 1962. The original provision empowered
the Panchayat to levy tax on building (other than those exempted by the provision of K.P.

Act, 1960) at such percentage of the net annual rental value on the building as may be
fixed by the Panchayat by resolution subject to a minimum of 4% and maximum of 10%.
The minimum rate was since enhanced to 6% with effect from 1-4-1978. The maximum
rate however continues to be without change for more than three decades. (The
th
Travancore-Cochin Panchayat Act which came into force on 15 August 1951 provides
for levy of Building Tax at a minimum of 4% and maximum 10% and this maximum
rates still continues in the Kerala Panchayat Act). The Building Tax levied annually is to
be paid in two equal half yearly instalments within 30 days of the commencement of each
half year.

3.2. According to Kerala Panchayat (Building Tax) Rules, 1963, net annual rental value
of buildings is determined by the Executive Authority once in five years on the basis of
gross annual rent at which buildings are reasonably let out, less a deduction of 10% of
annual rent towards allowances for repairs or any other account whatever. In the case of
Government buildings or any other buildings for which annual rental value cannot be
determined by the Executive Authority the annual rental value is calculated at 6% of the
total estimated present cost of construction of the building together with the value of the
appurtenant land after allowing depreciation of an amount not less than 10% of the cost
of building. The assessee, if aggrieved by the assessment can file a revision petition
before the Executive Authority. Appeal, if any, against the orders on revision petition will
in the first instance lie to the Panchayat. Persons who are still aggrieved by the order or
other action taken by the Panchayat can appeal to the Deputy Director of Panchayats,
Government have the revisionary powers under the Act.

3.3. Building Tax is the largest single source of tax revenue of Panchayats in the State.
*The decadal growth of collection of Building Tax during the period from 1974-75 to
1983-84 is furnished in the Table given below:-

TABLE

Growth of collection of Building Tax during the 10 year period from 1974-75 to
1983-84

Percentage of
Receipt Percentage of
Year growth from the
(Rs. in lakhs) annual growth
base year 1974-75

21
1974-75 168.41 .. ..
1975-76 182.16 8.16 8.16
1976-77 176.89 (-) 2.89 5.04
1977-78 182.54 3.19 8.39
1978-79 293.92 61.02 74.53
1979-80 311.77 6.07 85.13
1980-81 317.29 1.77 88.40
1981-82 356.21 12.27 111.51
1982-83 401.33 12.67 138.31
1983-84 608.92 51.73 261.57

From the above table it may be seen that the receipts during 1974-75 which was Rs.
168.41 lakhs rose to Rs. 608.92 lakhs during 1983-84. The decadal growth is 261.57%.

3.4. As mentioned earlier, the minimum rate of Building Tax was enhanced from 4% to
6% with effect from 1-4-1978. This enhancement has fetched an increase in receipt to the
tune of Rs. 111.38 lakhs during 1978-79 compared to the preceding year (1977-78). The
annual growth rate from 1979-80 to 1982-83 on an average is 8.20%. The spurt (51.73%
increase over 1982-83) in receipt during 1983-84 is due to the impact of quinquennial
revision brought into effect from 1983-84 onwards. In other words enhancement of the
minimum rate of tax from 4% to 6% with effect from 1-4-1978 and quinquennial revision
from 1-4-1983 are two main factors behind the leap in receipt noticed during the decade
1974-75 to 1983-84. We have observed that the above increase in receipts does not
commensurate with the increase in expenditure towards establishment and maintenance
of services such as roads, street lighting, water supply etc. In fact income from Building
Tax is not even sufficient to meet 54% of the establishment cost. Though Building Tax is
the major source from which the Panchayats can tap the maximum revenue by exercising
the statutory powers vested with them, there is hardly any earnest efforts on their part to
collect it atleast on a scale to cover the cost of establishment.

3.5. The following are the factors that have led the Panchayats to a situation in which
they could not exploit the maximum income from Building Tax.

1. Defects in the existing system of assessment of Building Tax.

2. Exemption of buildings from the purview of tax in underserved cases.
3. Reluctance on the part of the Panchayats to fix the rate of tax suitably (within the
limits prescribed) to meet their needs.

3.6. We are of the view that if effective, remedial measures are adopted substantial
revenue can be earned from Building Tax alone. The recommendations contained in the
ensuing sections are mainly confined to the rectification of the loop-holes in the existing
system of levy of Building Tax.

22
Method of assessment of Building Tax

3.7. According to Section 68 of the Kerala Panchayat Act, 1960 Building Tax has to be
assessed on rental value basis and in cases where it is not possible, on capital value of the
building. The system of assessing Building Tax on the basis of annual rental value of
building is in vogue as early from 1951 when the Travancore-Cochin Panchayat Act,
1950 came into force. During the course of collection of evidence and in reply to the
questionaire issued by the Commission certain representatives of Panchayats have
expressed apprehensions about the efficacy of assessing Building Tax, on the basis of
rental value of buildings. However, they have not pinpointed on any particular defect in
the method except saying that it is not yielding the desired results and that it may be
substituted by the system of assessment based on capital value of buildings. Even though
the idea of levying Building Tax on the basis of its capital value has been a subject of
debate among those concerned with local body finances the various Commissions and
Committees of experts which have gone into the problem seem to have favoured
determination of tax on rental value basis. The Taxation Enquiry Commission (1953-54)
constituted by the Government of India have expressed their opinion in the following
words.

"The levy of the tax on the basis of actual or reasonable rent is a levy on the actual or
potential income from the property and to that extent is a more equitable method of
taxation than one based on capital value. We recommend that the annual value based on
the rent at which properties are reasonably be expected to be let, as at present interpreted
in practice, should be the normal basis for the levy of property tax, subject to the basis of
capital value being adopted in special cases of the type already noticed". The Local
Finance Enquiry Committee 1951 which made an indepth study on the subject had also
suggested that there should be no change from the well-tried basis of rent to the more or
less uncertain basis of capital value.

3.8. Assessment of Building Tax on the basis of rental value seems to be more realistic
and logical since the tax levied is directly related to the income likely to be obtained from
the property whereas tax based on capital value seldom have relation to it. With the
unprecedented hike in the cost of building materials and land value in recent times
assessment of building tax in terms of capital value is not likely to reflect the rent at
which the property can be reasonably let. While cost of construction of buildings may be
more in Panchayats in rural areas due to difficulties in obtaining raw materials, cost of
transportation etc., it will be comparatively less in Panchayats of an urban nature. But
income by way of rent from buildings in urban Panchayats will always be higher than
those in Panchayats in rural areas. Even in the same Panchayat rent for buildings with the
same capital value may vary from place to place depending on the location, conveniences
and other positive factors of the building. In such a context if tax is assessed on the basis
of capital value, the buildings in rural Panchayats may be liable to be taxed at a higher
rate while it will be less in urban Panchayats on account of the difference in capital cost
as mentioned above. An inevitable consequence of this anomolous position is that the
owner of a building having a low rental value but higher capital value will be liable to
pay more tax than the owner of a building the capital cost of which is less but fetching
more rent.

23
3.9. Apart from the above, there are other considerations weighing in favour of assessing
tax on rental basis. Assessment of tax, based on capital value requires a certain degree of
technical expertise on the part of assessment officers. This will necessitate appointment
of special staff having technical qualification. Appointment of technically qualified staff
exclusively for the purpose of assessment (valuation of capital cost) will create problems
administrative and otherwise because of the fact that their services are required only for a
limited period once in five years. In the circumstances explained above, the Commission
does not consider it advisable to switch on to the practice of assessment on capital value
basis. The system of assessment of building tax on rental value basis as per existing
provision may continue without any change.

Quinquennial Assessment by an officer outside from the Panchayat

3.10. A point on which the Commission found unanimity of opinion among those who
have furnished evidence (both written and oral) is that the existing system of assessment
of Building Tax in Panchayats is inadequate and to a great extent defective in several
respects. One of the major pitfalls, they pointed out, is that rental value is usually
assessed at nominal rates due to extraneous reasons and this is mostly responsible for a
low tax return. Unless the rental value which forms the basis of Building Tax is fixed on
a reasonable basis there will not be any increase in the revenue even if tax is realised at
the maximum rate. According to the provisions in Kerala Panchayat Act & Building
Rules revision of Building Tax assessment is done once in five years by the Executive
Authority of the Panchayat concerned. The Executive Officer, though working in the
Panchayat and drawing his salary from Panchayat funds, is an employee of the State
Government unlike other employees in the Panchayat. His authority and responsibility
flow direct from the statute and are not derived from the elected council. However, in
actual practice it is found that the Executive Authority cannot be too rigid in the matter of
assessment of Building Tax strictly in accordance with the rules and regulations laid
down in relevant statutes. A majority of buildings in the Panchayat areas are owner
occupied buildings, the Executive Officer has to exercise his discretion in arriving at the
reasonable rental value of buildings. It is in the exercise of this discretionary power that
the Officer is often subjected to local pulls and pressures not to mention threats on rare
occasions. Possibility of corruption among assessment officers in isolated cases cannot
also be ruled out altogether. The cumulative effect of these aberrations arising out of the
constant contact of the assessment officer with the public of the locality along with a
number of other attendant factors render his assessment unrealistic and underpitched
resulting in substantial loss of income from the most lucrative source of revenue to the
Panchayats.

3.11. The evidence before the Commission is strongly in favour of engaging an Officer
from outside the Panchayat for assessment of Building Tax. The various Commissions
and Committees on local body finances have also emphasised the need for having
independent and centralised valuation agencies to undertake the work of assessment of
Building Tax with a view to secure fearless, impartial, uniform assessment by persons
who are independent of the suffrage of the persons whom they assess. Having regard to
the foregoing factors, the Commission is inclined to suggest that the work of tax revision

24
be entrusted to Officers outside the Panchayat. The Commission however, does not
consider it as a panacea for all the troubles prevalent in the field of assessment of
Building Tax. However, we hope that with the assessment of tax by an independent
Officer, tax base can be strengthened by which Panchayats will be able to earn more
revenue than the present level.

3.12. The Commission recommends that an Officer of the Department of Panchayats not
below the rank of a Taluk Panchayat Officer may appointed as Tax Revision Officer in
charge of quinquennial assessment of Building Tax in all the Panchayats of a Taluk.
Before his appointment advance action for preparation of list of houses, numbering etc.,
shall be taken by the Executive Officers of the concerned Panchayats and completed
within three months preceding the commencement of the work of the Tax Revision
Officer. The latter will complete the revision work of all the Panchayats in the taluk
within 3 to 6 months in the maximum. The expenditure towards the salary of the Tax
Revision Officer will be apportioned among the Panchayats concerned in such proportion
as may be fixed by the Department of Panchayats. In between the quinquennial revisions
Executive Officers may be authorised to assess Building Tax on new additions as per the
existing provisions with the approval of the Taluk Panchayat Officer who will ensure that
the assessment made by the Executive Officer is in confirmity with the standards adopted
by the Tax Revision Officer. Necessary enabling provisions may be incorporated in the
Kerala Panchayats (Building Tax) Rules, 1963 to bring into effect the above
recommendation.

Appeal and Revision

3.13. Section 144 of the Kerala Panchayat Act provides for appeal on the order or action
taken by the Executive Officer. The appeal, in the first instance shall lie to the Panchayat.
Influence and pressures play a dominant role in this stage also. The Panchayat council,
being an elected body, in their enthusiasm to keep the public in good humour and to
ensure continued popularity, may often reduce the original assessments beyond any
reasonable limits. Stray cases of enhancements for extraneous reasons also cannot be
ruled out. In the rules there in no limit upto which reduction of the enhanced amount can
be made by the Panchayats on appeal. Absence of such a provision has given rise to
indiscriminate reductions on appeal. Unless the power for reduction of the enhanced
amount of tax is kept at a reasonable level, the benefits derived from assessment made by
outside officer will be lost at the stage of appeal. The Taxation Enquiry Commission
(1953-54) which considered the question of appeals on assessment of properties went to
the extent of suggesting that no revisional or appellate functions should be vested in
Municipal Councillors. The Commission, however, does not want to make serious
inroads into the appellate jurisdiction of democratically elected representatives. But at the
same time it is advisable to insist on fixing a maximum percentage beyond which the
enhanced tax should not be reduced. In Tamil Nadu reduction on appeal has been
restricted to 10% of the enhanced amount. In Andhra Pradesh it is 25% of the additional
levy. Taking into account the above aspects and considering the state of affairs in our
State, the Commission recommends that the maximum reduction that can be effected by
the Panchayat should be restricted to 20% of the enhancement (ie. 1/5th difference

25
between the revised tax and the existing tax) assessed by the Tax Revision Officer. The
powers of Deputy Director for reduction may be restricted to a maximum of 33 and 1/3rd
per cent i.e. 1/3rd of the quantum of enhancement made by the Tax Revision Officer.
Apart from ensuring uniformity in appellate decisions such a restrictive clause will
eliminate chances of abuse of power by appellate authorities. Suitable amendments may
be incorporated in the relevant Act and Rules to give effect to the above
recommendation.

Exemption of Buildings for purpose of assessment of Building Tax

3.14. Apart from factors like under-valuation and under assessment of buildings etc.,
which contributed to the low return of income from Building Tax, a growing tendency is
noticed in the matter of granting large scale exemptions of households from levy of
Building Tax. The Kerala Panchayat Act, 1960 has specifically categorised the types of
buildings that can be exempted from levy of tax. 'Huts' as defined in sub clause 14 of
Section 2 of the Kerala Panchayat Act are totally exempted from the purview of levy of
Building Tax by Panchayats. Besides, certain other categories of buildings used for
religious, charitable and educational purpose as specified under Section 72 of the Act are
also exempted from paying Building Tax. The Panchayats in the State have not been
following any uniform standard in regard to granting exemption for 'huts' as criterion
adopted for exemption of 'huts' varies from Panchayat to Panchayat. Case study of
selected Panchayats has revealed that the percentage of exemption (to the total number)
has been alarmingly high in certain Panchayats. The number of houses exempted in
Anchal Panchayat comes to 61%. Similarly it is 59% in Muttom (Near Thodupuzha) 55%
in Mundakkayam, 54% in Krishnapuram (Near Kayamkulam) and more than 50% in
Njarakkal. Position in respect of a few Panchayats is indicated in the following Table.

TABLE

Panchayats which have exempted more than 50% of buildings from levy of Building
Tax (noticed during case study)

Name of Name of Total No. of Percentage of

Sl. No. Exempted
District Panchayat houses exemption
1 Trivandrum Anjengo 3585 2196 61
2 Trivandrum Uzhamalakkal 4079 2785 68
3 Quilon Anchal 7286 4444 61
4 Quilon Krishnapuram 4889 2649 54
5 Quilon Sakthikulangara 8673 4663 54
6 Kottayam Kallara 2765 1393 50
7 Kottayam Mundakkayam 9362 5133 55
8 Idukki Muttom 3206 1889 59
9 Ernakulam Njarakkal 5076 2562 50
10 Malappuram Irimbiliyam 3768 2114 56

26
11 Kozhikode Kayanna 2480 1383 56
12 Wynad Manantoddy 7980 4286 53

Reasons for such large scale exemption of building under the guise 'huts' seems to be due
to the indiscriminate stretching of the definition of the term 'hut' in the Act which is too
elastic to be interpreted according to the local condition prevailing in each Panchayat.
What is required is a more concrete definition of the term 'hut' in relation to what little
rental value it can fetch.

3.15. The Taxation Enquiry Commission 1953-54 has viewed the problem of exemption
thus: "The justification for exemption below a certain level rests on two-grounds. Firstly,
when the value of the property is below the very low minimum fixed, it represents, on the
part of the owner or occupier a standard of income or living which deserves exemption.
The second and more valid ground is the disproportionate administrative cost, at the
lowest level, the yield may not be even equal to the cost of collection". The Taxation
Enquiry Commission has therefore recommended that, below a specified minimum which
should be so fixed as to cover only the lowest rental values, properties might, though not
as an invariable rule, be exempted from the property tax, provided the owner does not
own any other building or land assessed to the tax and is not liable to pay profession tax
or income tax. It is also observed that such exemptions would be particularly justified if
they were reinforced by the existence of administrative considerations mentioned. The
Local Finance Enquiry Committee 1951 has however, gone to the extent of expressing
the opinion that there should be no exemption from the property tax merely on the ground
of the annual values being below a particular monetary limit and that such exemptions,
wherever they exist, should be abolished.

3.16. It is a fact universally recognised that exemption of huts having very low rental
value is intended to act as a belief to the poor towards whom the local bodies have a
positive duty to be generous in the mater of levying tax. But we cannot overlook the fact
that a sizable number of house owners in many Panchayats take undue advantage of this
leniency clause in the Act and manage themselves to get exempted from payment of
Building Tax while owners of similar 'huts' in other Panchayats are assessed for Building
Tax. Statistical comparison of this anomaly with supporting comparative statements is
not attempted here as it involved collection of details from the field at an extensive scale.
However, instances of large scale exemption noticed during case study of selected
Panchayats and opinions expressed during the course of collection of evidence about the
prevalance of the state of affairs mentioned above, reinforce the need for making this
exemption clause more specific and sharp.

3.17. The definition of 'hut' as it exists in the Kerala Panchayat Act, is meant to serve the
purpose of a guideline to the assessment authorities in general. Having convinced that
there is absolutely no uniformity among Panchayats in following the definition of 'hut' in
so far as it relates to the question of exemption, the Commission considers that buildings
with rental value below a certain level should only be exempted from the purview of
Building Tax.

27
3.18. The Commission would therefore recommend that only those huts (as defined in
sub clause 14 of Section 2 of the Kerala Panchayat Act) whose gross annual rental value
is Rs. 240 and below alone need be exempted from the purview of levy of Building Tax.
Section 2 (14) may be suitably amended for the purpose. No buildings other than those
specifically exempted under Section 72 of the Kerala Panchayat Act, 1960 should be
exempted from the purview of levy of Building Tax.

Rate of Tax

3.19. Section 68 of the Kerala Panchayat Act, 1960 empowers the Panchayats to levy tax
on buildings at such percentage of the annual rental value of the building as may be fixed
by the Panchayat by resolution subject to a minimum of 6% and maximum of 10%. The
idea behind laying down minimum and maximum rate for levy of Building Tax at the
discretion of local bodies is intended to provide them freedom to fix the rate at the
appropriate level by which they can expect a reasonable return from Building Tax to meet
the expenditure on their evergrowing needs. This is, however, not to imply that there
shall be strict co-relation between the receipts on account of Building Tax and the
expenditure required to discharge the obligatory functions. Statistical details available
with the Commission indicate that out of 1001 Panchayats in the State 703 Panchayats
(more than 70% of the total) are levying Building Tax at the minimum percentage of 6%
only. Table below shows the number of Panchayats levying Building Tax at different
rates.

TABLE

Rate at which Building Tax is levied Number of Panchayats

6% 703
7% 94
7.5% 4
8% 155
9% 12
10% 33
Total 1001

3.20. It may be seen that vast majority of Panchayats are reluctant to enhance the rate
above the minimum eventhough statute conferes absolute powers to the Panchayats to fix
rate of tax at appropriate level in the minimum and maximum prescribed, after taking into
account local needs. In Trivandrum, Quilon, Pathanamthitta and Kottayam there is not a
single Panchayat which is levying Building Tax above 8%. In contract to the above, 13
out of a total 25 Panchayats in Wynad District, tax is being levied at the maximum rate of
10%. Only two Panchayats in Wynad District are collecting at the minimum rate of 6% .
During case study it was noticed that generally the major Panchayats are averse to raise
the percentage in contrast to poor Panchayats. For example Mulloorkara (Trichur
District) Thennala and Cherukavu (Malappuram District)which can be considered as poor
Panchayats are realising Building Tax at 8% while major Panchayats like Narakkal,

28
Eloor, Kalamassery (Ernakulam District), Ulloor, Vattiyoorkavu, Balaramapuram,
Chirayinkil (Trivandrum District), Karunagappally, Kottarakkara, Kundara, Eravipuram
(Quilon District), Adoor (Pathanamthitta District) Aroor (Alleppey District) Ollur,
Ollukkara, (Trichur District) Ottappalam, Alathur (Palghat District) Feroke, (Kozhikode
District), Payyannur, Taliparamba (Cannanore District)etc., which have urban
characteristics are not keen to raise Building Tax above minimum rate of 6% even after a
lapse of more than 6 years since its introduction in 1978-79 though they are in need of
additional resources for providing basic amenities to local people, not to speak of a 2 to 3
fold increase in their establishment cost itself over a period of six years.

3.21. The general trend of opinion found among the representatives of Panchayats during
collection of evidence is that the Panchayats are badly in need of financial assistance
from Government to discharge their obligatory functions. When asked the reason why
they could not raise additional resources by increasing the rate of Building Tax above the
minimum level (of course within the permissible limit) it was explained that there are
several compelling factors in fixing the Building Tax at the minimum rate. One of the
reasons pointed out is that the public will not tolerate a particular Panchayat to enhance
the rate beyond the minimum while neighboring Panchayats are not doing so. The other,
and perhaps the more important reason which the Commission could perceive was that
unlike the State Government the Panchayats are in close contact with the people. Further,
there seems to exist something like a keen competition among Panchayats to keep the rate
of tax as low as possible in order to win popularity. Thus, need are being sacrificed for
the same at extraneous considerations of the representatives are not however opposed to
the idea of enhancing the minimum rate by Government by making appropriate
amendment to the existing provision in the Kerala Panchayat Act as the element of
compulsion arising from Government side will absolve the Panchayat Councild from
being responsible for the hike in percentage of tax. It is to be recalled in this context that
it was the reluctance of Panchayats to move beyond the minimum rate of Building Tax
from 4% for nearly 15 years that prompted Government in 1978 to enhance the minimum
rate from 4% to 6% which fetched an additional income to the tune of Rs. 111.38 lakhs at
a single stroke during 1978-79. Hence it is clear that the Panchayats want the unpleasant
task of enhancement of the rate of Building Tax to be done by Government.

3.22. The Commission considers that Building Tax, if properly harnessed, will yield
substantial resources. Commission therefore recommends that the existing minimum and
maximum rate may be revised as follows:-

Grade of Panchayats Minimum Maximum

Grade II & Grade III Panchayats 8% 12%
Grade I Panchayat 8% 15%
Special Grade Panchayat 10% 15%

29
2. PROFESSION TAX

3.23. Article 276 of the Constitution of India authorises a state or other local authority in
a State to levy tax on profession. Panchayats in Kerala have been empowered to levy
Profession Tax under Section 69 of Kerala Panchayat Act, 1960 and the Kerala
Panchayat (Profession Tax) Rules, 1963 framed thereunder. It is levied every half year on

(i) every company which transacts business in the Panchayat area for not less than 60
days in the aggregate in that half year; and

(ii) every person who in that half year-

(a) exercise a profession, art or calling or tansacts business or holds any appointment,
public or private.-

(i) within such Panchayat area for not less than 60 days in, the aggregate; or

(ii) outside such Panchayat area but who presides within that Panchayat for not less than
sixty days in the aggregate or

(b) resides in such Panchayat area for not less than sixty days in the aggregate and is in
receipt of any pension or income from investments.

3.24. The profession Tax shall be levied by the Panchayat at such rates as may be fixed
by the Panchayat at the rate not exceeding the maximum rates prescribed by the
Government , under Rule 3 of Kerala Panchayat (Profession Tax) Rules, 1963. The
classes into which companies, and persons are divided for the purpose of assessment to
Profession Tax and the maximum half yearly tax leviable on each class etc. as per above
rule are as follows:-

Class Half yearly Income Maximum half yearly tax

Rs. Rs. Rs.
I. More than 15,000 125.00
II. More than 12,000 but not more than 15,000 100.00
III. " 9,000 " 12,000 75.00
IV. " 6,000 " 9,000 50.00
V. " 4,800 " 6,000 25.00
VI. " 3,000 " 4,800 12.00
VII. " 1,800 " 3,000 6.00
VIII. " 1,200 " 1,800 4.00
IX. " 600 " 1,200 2.00
X. " 300 " 600 1.00

Last two classes have since been deleted by Government by Notification No. G.O. MS.
97/85/LA&SWD dated 9-5-1985. As such only those whose aggregate half yearly income
is above Rs. 1200 alone need pay Profession Tax. The maximum half yearly rate of
Profession Tax has been limited to Rs. 125 in consistent with proviso to Article 276(2) of

30
the Constitution of India in which maximum of Profession Tax has been limited to Rs.
250 per year.

3.25. Profession Tax is not a tax on income but tax on profession, trade, calling or
employment for which State Government or local bodies have neen empowered to levy
such tax by the Constitution of India subject of course within the maximum limit of Rs.
250 per annum. However, the basis of taxation is income derived from profession or
business transacted within a Panchayat area.

Receipts under Profession Tax

3.26. District-wise receipts of Panchayats under Profession Tax during five years from
1979-80 to 1983-84 are furnished in the Table at next page.

TABLE

Statement Showing District-wise Collection of Profession Tax During the Period

From 1979-80 to 1983-84

Receipts in lakhs of Rs. Total from

Name of No.of
1979-80 to
District Panchayats 1979-80 1980-81 1981-82 1982-83 1983-84
1983-84
Trivandrum 84 10.04 12.10 15.48 19.01 20.13 76.76
Quilon 75 17.46 15.84 19.93 25.07 27.66 105.96
Pathanamthitta 55 A 8.31 11.95 13.66 14.39 48.31
Alleppey 69 12.95 11.05 13.72 16.41 18.05 72.18
Kottayam 73 13.29 16.67 19.99 24.55 23.95 98.45
Idukki 51 10.19 11.55 14.42 16.27 16.11 68.54
Ernakulam 86 17.90 20.91 25.29 32.91 35.17 132.18
Trichur 98 14.89 18.05 23.19 27.43 35.65 119.21
Palghat 91 14.69 16.85 20.21 23.66 27.29 102.70
Malappuram 95 9.26 11.01 13.83 16.90 20.49 71.49
Kozhikode 77 17.70 15.22 18.71 17.78 23.95 93.36
Wyand 25 A 5.11 6.78 7.32 8.28 27.49
Cannanore 85 16.84 14.33 16.88 20.62 22.65 91.32
Kasargod 37 A 5.22 6.18 7.59 8.26 27.25
Grand Total 1001 155.21 182.22 226.56 269.18 302.03 1135.20

A. Figures relating to Pathanamthitta, Wyand and Kasargod for 1979-80 have been
included in the respective districts from which the new districts were carved out.

Receipts during 1983-84 accounts for 24.07 percent of gross receipts of Panchayats in the
State vide Appendix VI. Among the districts Ernakulam tops in collection and in that
district Kalammassery Panchayat had netted the highest collection in the State towards

31
Profession Tax during the five-year period from 1979-80 to 1993-84. Though
Trivandrum is the second largest district in the State in rural population it stands only at
eighth place in the matter of collection of profession Tax. Trichur , Quilon and Palghat
Districts which have less rural population compared to Trivandrum District occupy
second third and fourth position respectively in collection of Profession Tax. Vattavada
Panchayat in Iddukki District, which is the least populous Panchayat in the State, has
recorded the lowest return from Profession Tax during the above five-year period.
Though the total receipts under Profession Tax have recorded an increase by 95%
between 1979-80 to 1983-84 it is squarely attributable to the increase in emoluments of
the salaried classes of employees of both Government and industrial sectors from whom
the lion's share of Profession Tax is levied by the Panchayat in the State. Compared to the
years preceding 1979-80, the five-year period from 1979-80 to 1983- 84 has witnessed a
steep rise in the wholesale price index cost of living index, resulting in substantial
increase in D.A./ Variable D.A. For the State Government employees alone, 20
installments of D.A.have been granted during the above period. This aspect is highlighted
in order to show that Panchayats in the State are almost exclusively dependent on the
salaried class of employees of all sectors in the matter of collection of profess on Tax.
This observation is not without regard to the fact that certain Panchayats are levying this
tax at nominal rates from persons engaged in trades and callings other than salaried
groups.

3.27. Though Agriculture is a profession liable to be taxed under Profession Tax Act
majority of the Panchayats in the State are reluctant to levy it form agriculturist. Pursuit
of agriculturists. as a calling has been upheld in court decisions. Kerala being a
predominantly agrarian society is earning sizable income form cash crops and other
seasonal crops. But Profession Tax collection in the Panchayats located in Agricultural
area where there is high degree of income potential from agriculture produce / cash crops
is fare from satisfactory. Trend of receipts in those Panchayats indicates that the
agriculturists / Planters have been totally left form the purview of levy of Profession Tax.
A few examples of Panchayats located in Plantation areas of the State showing receipts
under Profession Tax are given below.

(Rs in lakhs)

(Rs. in lakhs)
Area inSq.
Population Profession Tax
K.M.
collected
Wynad District 1982-83 1983-
84
1. Mananthody 80.10 31150 0.65 0.43

32
2. Vythiri 47.84 13573 0.29 0.30
Idduki District
3 Kumily 816.72 34918 0.43 0.45
Trivandurm District
4 Peringammala 217.95 27542 0.30 0.27
5 Vithura 131.59 22574 0.34 0.32

This shows that Panchayats have not been making an earnest approach in realising
Profession Tax form highly affluent agriculturist. With the abnormal hike, in the price of
agricultural produce in recent times coupled with many fold increase in land value there
is not justification in totally neglecting this lucrative source of tax income. The
Commission does not consider it necessary to add or modify the existing rules for levy of
Profession Tax on agricultural income. What is required is enforcement of rules in their
true spirit. Government may issue suitable instruction in this regard.

Deduction of Profession Tax at source

3.28. Another reason for downward trend in collection in the High ranges may be due to
difficult in idendifying the workers form whom tax is due. During a case study conducted
in Vandiperiyar Panchayt ( Idduki District) It was explained by the Executive Officer that
large number of seasonal workers engaged by the planters are not paying Profession Tax.
Though their income is taxable under the rules. They escape form being assessed since
they move from one factory to another within the same panchayat area according to job
opportunity available there. When the Panchayat make demand from a particular factory
the worker might have gone elsewhere. Consequently collection of Profession tax during
1983-84 has come down even the receipt during 1981- 82 vide details given below.

Year ReceiptsRs.
1981-82 55,100
1982-83 64,800
1983-84 51,900

Similar difficulty is experienced in other areas also where labour classes are concentrated
Few cases are given below:

Name of panchayat Receipts in Rs during

1982-83 1983-84
Quilon District
1 Kilikollur 65,300 62,600
2 Kottarakara 2,01,600 1,95,200
Pathanamthitta District

33
3 Adoor 1,11,900
Alleppey District
4 Ambalapuzha 57,800 51,000
Kottayam
5 Ettumanoor 66,000 54,000
6 Kumaranallorr 58,400 51,200
Cannor District
7 Chirakkal 40,800 19,300

3.29. Making the employer responsible for the realisation and remittance of Profession
Tax, as in the case of Income tax seems to be the only possible remedy for this. During
evidence collection Panchayt Presidents and others have unanimously demanded to
incorporate a provision in the Act for collection of Profession Tax at source. In Karnataka
State , this tax is deducted form the salary of the employees by the Disbursing Officer. In
Andhra Pradesh too there is provision in the Grama Panchayt Act, making the employer
responsible for collection and remittance of dues in respect of employees working under
them. Extracts of relevant provision in the respective Acts quoted below:

(Section 4 of the Karnataka Tax on Profession Trades, Calling and Employment Act,
1976)

"Employer's liability to deduct and pay tax on behalf of employees:-The tax payable
under this Act by any person earning a salary or wage shall be deducted by his employer
form the salary or wage shall be deducted by his employer from the salary or wage
payable to such person before such salary or wage is paid to him, and such employer,
shall, irrespective or whether such deduction has been made or not when the salary or
wage is paid to such person be liable to pay tax on behalf of all such persons. Provided
that, if the employer is an officer of Government, the State government may
notwithstanding anything contained in this Act, prescribe by rules the manner in which
employer shall discharge the said "liability"

( Extract of section 72 (9) of the Andhra Pradesh Grama Panchayat Act, 1964):

"The Gram Panchayat may, but notice require employer or the head or secretary or
Manager of any public or private office, hotel, boarding house or club or of a firm or
company to recover every month during the period beginning form the Ist August, and
ending with 31 Ist March of each year, form the salaries of all such persons employed by
such employer or by such Office hotel, boarding house club, form or company the
Profession Tax due form such persons at the rate of one eight of the tax payable for the
year and remit the same to the Grama Panchayt within seven days form the date of such
"recovery"

3.30. Commission would recommend that a suitable provision for deduction of

Profession tax at source be incorporated in our Act, so that the present difficulties in
collecting tax demanded may be mitigated.

34
Emoluments for the purpose of assessement of Profession Tax

3.31. Certain other points which were highlighted during the course of collection of
evidence as well as in various memoranda received by the Commission are:-

(1) Assessment of Profession Tax in the case of salaried employeed must be on the basis
of basis pay instead of aggregate income.

(2) Classses (Income slab) prescribed for assessment to Profession Tax may be revised in
such a way as to afford. Some relieg to employees form Payment of tax at higher rates.

(3) Enhancement of the Existing maximum limit of Rs. 250 prescribed by the
Constitution.

3.32. Point No.(1) is on account of the fact that in Panchayat Profession tax is assessed on
the basis of aggregate income ( total emoluments) of employees whereas in
Municipalities and Municipal Corporations it is assessed on the basis of basic pay only.
According to the relevant provision of Kerala Municipalities Act and Kerala Municipal
Corporation Act aggregate income shall not include allowances of various kinds sepcified
therein. But in Kerala Panchayat act and Profession tax rules "agreated "has not been
defined in clear terms. However sub- section (3) under section 69 of the Act stated that "
a person shall be chagreable under the class appropriate to his aggregate income from all
sources Statutes prescribed for Panchayts, Municipalities and Municipal Corporations are
not same but different form one another There are differences in the matter of rated of
tax, range of half yearly income for which tax is levied etc. Prescribed in the above
statues. Even rates adopted in Municipalities and Municipal Corporations arte different.,
It is to be assumed that statute relating to Profession Tax for Panchayats is prescribed
taking into account the limited sources of income available to Panchayts to raise funds for
discharging its mandatory functions. As such, argument for adopting a lesser rate in
Panchayat area as is being adopted in Municipal area cannot be conceded. The basis f
levy of Profession tax by Panchayats Municipalities and Corporations adopting different
yardstick has been the subject of litigation by employees, working in Panchayat areas,
The Honorable High Court of Kerala had, on several occasions, upheld hat levy of
Profession Tax on employees working in Panchayat area on the basis of total emoluments
viz aggregate income, is in order. The observation made by the honuorable high court of
Kerala While disposing of a batch of unity petitions filed by the Toshiba Anand Workers
Association and other hallenging the assessment of Profession Tax on " aggregate
income" mad by the Executive Officers, Nedumbassery, Kalamassery Eloor,
Arror,etc.Panchayts in Ernakulam nad Alleppey Districts are extracted below. (vide O.P
No. 1799/83 decided on 2/1/1985)

"Panchayats Municipalities and Municipal Corporations are, no doubt part of the

Structure of local self- Government, Article 276 of the Constitution no doubt, refers to
Profession Tax leviable by Panchayts, Municipalities and other local authorities subject
to a maximum of Rs. 250 per year Article 40 of the Constitution expresses special
concern for Panchayats as instruments of local self- government in the rural set up of the

35
county. It says that the State shall take steps to organise Village Panchayats and endow
them with such power as may be necessary to enable them to functions as units of self -
government. Any successful projects of self- government must necessarily depend for its
success on the resources and powers at the command of the instrument of local self-
government. Of the three statues, Kerala Panchayats Act was enacted first and the other
statues were enacted later. In enacting the latter statues legislature introduced a provision
to state that aggregate income does not include special allowance such a provision was
not introduced in the Kerala Panchayats Act. One of the objects of the Legislature was
evidently to assure financial resources for Panchayats in the State. So far as the rate of tax
is concerned, the Constitution itself provides maximum of Rs. 250 per year. Any scheme
of tax must operate subject to this maximum. It was evidently in the light of these
circumstances and to effectuate is anxiety to assure resources for Panchayts that the
Legislature refrained from introducing any provision of exclusion regarding allowances
in the Kerala Panchayat Act. In other words. Legislature wanted that income assessable
for the purpose of Profession tax should not be allowed to be curtailed. Panchayat on the
one hand and Municipalities and Municipal Corporations on the other cannot be regarded
as equal institutions. They are institutions of different kinds. If these institutions of
different kinds are treated differently, particularly in the light of Article 40 of the
Constitutions and need to provide strong financial base for the Panchayats, it cannot be
said that there is hostile discrimination. This is not a case of equals being tested
unequally. This is case of unequal being treated unequally . It could even be said that this
is an attempt to reduce the inequality between institutions so that the institutions could
subserve public good".

"It is difficult to find anything vague or unreasonable about the concept of aggregate
income found in the statute and the rules. Expression aggregate income. Has not been
defined in any technical way. Therefore. it must receive its natural meaning, being total
income from various sources:

3.33. For the reasons mentioned in the foregoing paras, the Commission is not inclined to
suggest any modifications to the existing practice assessment of Profession tax on "
aggregate income " by the Panchayats in the State

Revision of Income slabs

3.34. As regards 2nd point the Commission has received representations from several
organisations of employees complain that the existing classification of income slabs are
so irrational and arbitrary that a annual increase of a rupee in emoluments of an employee
often results in payment of the next higher rate of tax, which in certain cases is double the
rate applicable to him earlier. They have, therefore demanded some relief from the steep
increase in Profession Tax, consequent on increase in emoluments. Further the employees
have pointed out that the existing slabs were prescribed in 193 and need review and
revision taking into accounts the changes in pay and allowances occurred in the last two
decades. Other arguments in favour of revision of slabs are summarized as follows:-

36
1) Existing slabs have not been fixed in such a way as to levy tax proportionate to the
income of employees.

2) Employees drawing salary on a monthly average of Rs. 501 and Rs. 800 have to pay
same rate of tax ie, Rs. 12 per half year, Similarly those drawing Rs. 1001 and Rs. 1500
on an average per month have to pay at the same rate of Rs. 50 per half year in spite of
substantial variations in their half yearly income.

3) Another glaring disparity pointed out is that while those having a monthly income of
Rs.800 need pay only Rs. 12 per half year, others with a monthly income of Rs. 801 have
to pay Rs. 25 per half year ie, at more than twice the rate payable by the employees
falling under the former class simply because of the increase in emoluments by one
rupee.

3.35. Computation principle adopted in the 1963 Rules of levy of Profession Tax form
persons falling under different income group appears to be as follows:-

Half yearly Income Rate Basis of rate

I Above15000 125 1/120th of the minimum of slab
II Above Rs. 12000 but not above 100 ie,83 paise per Rs. 100.
15000
III Above Rs. 9000 but not above 75
12000
IV Above Rs 6000 but not above 9000 50
V Above Rs 4800 but not above 6000 25 1/200th (approximate of the
minimum of slab ie,50 paise per
Rs. 100.
VI Above Rs. 3000 but not above 12 1/250 of the minimum of slab ie,
4800 40 paise per Rs. 100
VII Above Rs 1800 but above 3000 6
VIII Above Rs. 1200 but not above 4 1/300th of the minimum of slab ie,
1800 33 paise per Rs. 100.
IX Above Rs, 600 but not above 1200 2
X Above Rs. 300 but not above 600 1

Existing rates of tax range from 33 paise to 83 paise for an income of every 100 rupees.
Percentage wise the rate works out to 1/3^% to 5/6% of the income.

3.36. The Commission considers that the inequality in the rate of levy of Profession Tax
from different categories has to be reduced to a reasonable level. With this end in view,
we would suggest that a uniform rate of half percent of aggregate income ie, 50 paise for
every hundred rupees of income per half year may be adopted as the basis of levy of
Profession tax. However for the sake of assessment and accounting it would be better to
classify the income slabs in multiples of thousand and tax levied at half percent of the
minimum of the slab. This will bring down the gap between two consecutive slabs to

37
Rs.5 instead of the existing jump form one slab to another, which is said to be the main
cause of grievance of the employees on the present classification of income slabs. This
method will ensure that the maximum Profession Tax payable by a tax payer in a year not
to exceed half percent of his annual income

3.37. As a policy Profession Tax need not be collected form person who belong to very
low-income groups. The 1963 rules itself have exempted those whose half yearly income
was below Rs. 300 ( ie Rs. 50 P.M) Considering the steep rise in the cost of living during
the last two decades this limit has to be enhanced. Government has recently exempted
those whose half yearly income is below Rs. 1200 form the purview of levy of Profession
Tax. The Commission considers that the exemption limit may be further enhanced so as
to exempt those whose half yearly income is below Rs. 2000. Accordingly, we suggest a
revised table below in respect of half yearly income from Rs 2000 and above

Revised table for Calculation of Profession Tax

Present Revised rate

Class Half yearly income
rate recommended
1 Rs. 25,000 and above 125 125
II Rs, 24000 and above but Rs 25000 125 120
below
III Rs.23000 Do Rs 24.000 125 115
IV Rs. 22000 Do Rs.23,000 125 110
V Rs.21,000 Do Rs.22,000 125 105
VI Rs. 20,00 Do Rs.21,000 125 100
VII Rs.19,000 Do Rs. 20,000 125 95
VIII Rs.18,000 Do Rs.19,000 125 90
IX Rs.17,000 Do Rs.18,,000 125 85
X Rs.16,000 Do Rs.17,000 125 80
XI Rs.15,000 Do Rs.16,000 100&125 75
XII Rs.14,000 Do Rs.15,000 100 70
XIII Rs.13,000 Do Rs.14,000 100 65
XIV Rs.12,000 Do Rs.13,000 75&100 60
XV Rs.11,000 Do Rs.12,000 75 55
XVI Rs.10,000 Do Rs.11,000 75 50
XVII Rs.9,000 Do Rs.10,000 50&75 45
XIII Rs.8,000 Do Rs9,000 50 40
XIV Rs.7,000 Do Rs.8,000 50 35
XX Rs.6,000 Do Rs7,000 25&50 30
XXI Rs.5,000 Do Rs.6,000 25 25
XXII Rs.4,000 Do Rs5,000 12&25 20
XXIII Rs.3,000 Do Rs.4,000 6&12 15

38
XXIV Rs.2,000 Do Rs.3,000 6 10

Assessment of Profession Tax on the basis of turnover of business

3.38. In the Case of a company or person transacting business, half yearly income for the
purpose of assessment of profession Tax is required to be determined on the basis of
profits and grains as assessed to income tax or Agricultural Income Tax or both and
where the amount of such profits and gains is not ascertainable in the above manner,
income is to be calculated on the basis of percentage of turnover of business as laid down
under Rule 6 of Kerala Panchayts (Profession Tax) Rules, 1963

3.39. As already pointed, Profession Tax is not a tax on income but a tax on
Profession/trade. It is for the purpose of assessment of tax at different rates, income is
reckoned. This being a tax on profession, there is no harm in levying Profession Tax even
on the basis of Turnover without wasting time for ascertaining profits and gains
determined by the Income Tax/ Sales Tax authorities.

3.40. Present Procedure for calculation of half yearly income in respect of cases
mentioned under para 3.38 has to be simplified. The Commission would therefore
recommend that in the case of a company or person transacting business, Profession Tax
for each half year may be levied at the maximum rate of Rs. 125 if the estimated annual
turnover of business for that year is Rs, 5 lakh and above. (For this purpose turnover of
previous year may be provisionally reckoned as basis) If the estimated annual turnover is
below Rs. 5 lakh half- yearly income may be calculated at 5 % of estimated annual
turnover and tax levied for the income so worked out for each half year at the rate
recommend under para 3.37 at the rate in the table, On the above basis we recommends
the following table of tax for levy of Profession Tax in the case of a company or person
whose income has to be determined on the basis of annual turnovers of business

Table for Assessment of Profession Tax on the basis of Business Turnover

Half yearly tax

prosed 05 % of Basis adopted for arriving half yearly
Annual Turnover
Income shown under Income
col.(3)
Rs. 5 laksh above Rs 125 Half yearly income is arrived at 5% of rs. 5
lakshs (ie 25.000
Rs. 4 laksh and above Rs.100 Half Yearly income is 5% of Rs. 4 laksh (ie
but less than 5 laksh arrived at Rs. 20,000)
Rs. 3 lakhs and above Rs. 75 do. 5% of Rs. 3 lakhs (ie.
but less than 4 lakhs Rs. 15,000)
Rs. 2 lakhs and above Rs. 50 do. 5% of Rs. 2 lakhs (ie.
but less than 3 lakhs Rs. 10,000)
Rs. 1 lakhs and above Rs. 25 do. 5% of Rs. 1 lakhs (ie.
but less than 2 lakhs Rs. 5,000)

39
Turnover of Rs. Rs. 20 do. 5% of Rs. 80,000 (ie.
80,000 and above but Rs. 4,000)
less than Rs. 1 lakh
Rs. 60,000 and above Rs. 15 do. 5% of Rs. 60,000 (ie.
but less than Rs. Rs. 3,000)
80,000
Less than Rs. 60, 000 Rs. 10 Minimum

Levy of Profession Tax at flat rate on certain Profession

3.41. In regard to certain categories of Profession, tax may be levied at a flat rate as is
being done in State like Karnataka, instead of calculating income on the basis of
estimated annual turnover. This is intended to simplify the existing procedure of
assessment of Profession Tax in respect of certain categories of Professions. Accordingly
we recommend flat rate of Profession Tax for the following professions.

Profession Half Yearly rate proposed

1 Licensees of Foreign Liquor shops/ Arrack shops/Toddy Rs.125.00
shops, Proprietors of Bar attached Hotels, Petrol/Diesel
Pump station dealers Distributors of L.P.Gas, Film
(Motion picture) studio owners, Owners of cine theatres
(lessee in case theatre is leased out) Scheduled Banks and
all Banking institutions tansacting money lending business,
located in Panchayat.
2 Owners of private transport vehicles, Trucks, Buses, Rs.50 per vehicle subject to
Luxury coaches, tourist buses, Tempo vans, Truckers etc., the condition that the total
used for transport of passengers or goods as per permit amount payable by the
under Motor Vehicles Act/Rules owner for all the vehicles
should not exceed Rs. 250
in a year.
3 Owners of Taxi car (including tourist Taxis) Jeeps and Rs. 25 per vehicle subject to
Jeep Taxis, Autorickshaws, used for transport of the maximum limit
passengers and goods as per permit under Motor Vehicles specified above.
Act/Rules.

Enhancement of Maximum limit of Profession Tax

3.42. Under Article 276 of the Constitution of India, the maximum tax on profession,
trades or callings, that can be levied by State Government or local bodies is limited to Rs.
250 per year. The Local Finance Enquiry Committee 1951, and the Committee of
Ministers of Local Administration have recommended the raising of the Upper limit from

40
Rs. 250 to Rs.1,000. Various State Governments have also moved the Government of
India to enhance the ceiling. So far, the Constitutional provision in this regard has not
been amended with the result that the local bodies are not in a position to levy Profession
Tax beyond Rs. 250 in a year from individuals or institution with huge income.

3.42. The Commission would therefore urge the State Government to move the
Government of India to get the ceiling enhanced to Rs.1,000 per annum. In case the
ceiling is enhanced the revised table recommended by the Commission under para 3.37
may be modified in respect of income slabs exceeding Rs. 25,000 by incorporating
suitable slabs.

3. VEHICLE TAX

3.44. Under Section 70 of the Keraka Panchayat Act, Vehicle Tax on vehicles (other than
those taxed under the Kerala Motor Vehicle Taxation Act, 1976) shall be levied by the
Panchayats at the rates not exceeding those shown in the following Table (vide Rule 3 of
Kerala Panchayat (Vehicle Tax) rules, 1963).

TABLE

Maximum Half
yearly tax

Rs.
For every Motor Boat or steam launch plying for hire and carrying 30.00
more than six passengers
Do. Steam or motor tug 50.00
Do. Barge or other vessel attached or attachable to a steam or 25.00
motor tug
Do. Other Motor boat or steam launch 15.00
Do. Cabin boat 2.50
Do. Valloms of a capacity of 4 tons and above 2.00
Do. Valloms of a capacity above 2 tons and below 4 tons 1.00
Do. Cart or carriage drawn by horses 6.00
Do. Carriage drawn by other animals 4.00
Do. Hand cart or push cart 2.00
Do. Bicycle, tricycle, cycle rickshaw or rickhaw 2.00

3.45. Receipts under Vehicle Tax during the period from 1979-80 to 1983-84 are as
follows:-

Year Receipts (Rs. in lakhs)

1979-80 7.63
1980-81 6.60

41
1981-82 6.84
1982-83 6.82
1983-84 6.63

District-wise distribution of Receipts is as follows:- (Rs. in lakhs)

District 1979-80 1980-81 1981-82 1982-83 1983-84

Trivandrum 0.39 0.33 0.42 0.40 0.36
Quilon 1.03 0.73 0.78 0.77 0.72
Pathanamthitta ** 0.50 0.57 0.59 0.53
Alleppey 1.48 1.07 1.15 1.09 1.02
Kottayam 0.58 0.59 0.56 0.54 0.66
Idukki 0.12 0.12 0.11 0.12 0.10
Ernakulam 0.74 0.69 0.59 0.58 0.54
Trichur 1.92 1.23 1.26 1.32 1.32
Palghat 0.65 0.64 0.64 0.67 0.66
Malappuram 0.21 0.22 0.25 0.25 0.24
Kozhikode 0.24 0.16 0.17 0.15 0.17
Wynad ** 0.06 0.07 0.07 0.06
Cannanore 0.27 0.19 0.19 0.18 0.17
Kasargode ** 0.07 0.08 0.09 0.08
Total 7.63 6.60 6.84 6.82 6.63

3.46. The trend of collection during the above five year period is not appreciable.
Average annual receipts is around Rs. 7 lakhs only. In fact, there was downward trend in
collection after 1979-80. While the collection in 1979-80 was Rs. 7.63 lakhs it has come
down to Rs. 6.63 lakhs during 1983-84. Out of 1001 Panchayats Vehicle Tax is not being
levied in 74 Panchayats eventhough it is a compulsory tax. Major portion of Vehicle Tax
is collected from Panchayats in Trichur and Alleppey Districts and it accounts for more
than 1/3rd of the total receipts in the State. Statistics collected from Panchayats indicate
that majority of Panchayats collect only nominal amounts ranging from Rs.100 to Rs.200
per annum under Vehicle Tax. Most of the Panchayats are not keen in levying tax on
bicycles presumably due to the fact that the rat of tax is very low (Rs. 2 per half year) and
the receipt is often disproportionate to the expenses incurred for collection. Case study of
certain selected Panchayats has revealed that Panchayats are not at all interested in
collecting tax on vehicles plying in water. Njarakkal Panchayat in Ernakulam District
having a long stretch of coastal area and situated adjacent to the Cochin Port is not
levying any Vehicle Tax on mechanised boats or other types of fishing boats or valloms
eventhough tax shall be levied on such vehicles as per Rule 3 under Kerala Panchayat
Vehicle Tax Rules, 1963. Karumkulam and Anjengo Panchayats in Trivandrum District
and Sakthikulangara Panchayat in Quilon district where also large number of mechanise
fishing boats and country boats are used for fishing and other purposes, no Vehicle Tax
on the vessels is being realised. In reply to a query, the Executive Officers have stated

42
that there is no specific mention in the Rules about levy of tax on mechanised fishing
boats. But the rules in this regard are very clear. The explanation given under Section 70
of the Kerala Panchayat Act mentions that vehicle will include boat and vallam. Table
under Rule 3 of the Vehicle Tax Rules, 1963 specifies a rate of Rs.15 for half year as tax
for "other motor boats or steam launch". In view of the above specific provision the
Panchayats should have levied Vehicle tax from mechanized fishing boats and country
boats.

3.47. In our view, it is on account of the reluctance of certain Panchayats in invoking

mandatory powers vested on them that Vehicle Tax is not being collected by them. The
Director of Panchayats do not show lack of interest and administrative indifference in
collecting obligatory items of taxes.

3.48. According to Rule 4 of Kerala Panchayats (Vehicle Tax) Rules, 1963, a person
having possession, custody or control of taxable vehicles becomes liable to the payment
of Vehicle Tax only if the vehicle is kept or used within the Panchayat area for an
aggregate period of not less than sixty days in that particular half year. If such aggregate
perios is less than sixty days but more than thirty days only half yearly tax shall be levied.
However if such aggregate period does not exceed 30 days no tax shall be leviable for the
half year. Stipulation of minimum Number of days during which vehicle must have been
in use or kept within the Panchayat area, as a pre-condition for levy of vehicle tax will be
an obstacle for assessment of tax. As the vehicles will move from one Panchayat to other
according to requirements of the persons who hired or used it, it will be a difficult task
for the Executive Officer to assess the Vehicle Tax after verifying the number of days
during which vehicles were available in the Panchayat in a particular half year. This
difficulty may perhaps be another reason for poor collection of Vehicle Tax in certain
Panchayats. Besides, a large number of mechanized fishing boats from Tamil Nadu and
Karnataka (Mangalore coast) are coming to Kerala coast for seasonal operations. Rules,
as it exists at present, offer opportunities for evasion of tax. Existing rules in this regard
may therefore be amended deleting the condition regarding the minimum number of days
for which the vehicle has to be kept or used for the levy of tax. License from any one of
the local bodies in Kerala is sufficient.

3.49. In regard to taxable vehicles under the rules we would like to have a fresh look at
the system of levying tax on bicycles. It has been said that cycle is the common man's
vehicle. The maximum tax levied by Panchayats for a bicycle during a half year is Rs. 2.
Very often it is found that receipts from cycle tax is disproportionate to the expenses
incurred for its collection. The Commission would therefore recommend cycles including
cycle-rickshaws/rickshaws, may be exempted from the purview of Vehicle Tax.

3.50. As regards the prevailing rates of tax payable for every half year we are of the view
that the rates require revision as these were fixed two decades and two years ago in 1963.
Further no minimum rates but only maximum are prescribed under the rules. A
comparative assessment of the drop in money value during the period between 1963 and
1985 shows that value of a rupee in 1985 has been reduced to 1/5th of its original value.
Besides this, collection charges and other related expenses have also gone up manyfold.

43
In order to compensate the loss on account of the erosion in money value and to bring the
receipts at least on a par with the administrative expenses, we recommend minimum rate
for each category as follows:-

Half yearly tax

Category Existing rate Minimum rate
(Maximum) Rs. proposed Rs.
1. For every motor boat or steam launch plying 30.00 60.00
for hire and carrying more than six
passengers
2. Do. Steam or motor tug 50.00 100.00
3. Do. Barge or other vessel attached 25.00 50.00
to/attachable to a steam or motor tug.
4. Do. Other motor boat or steam launch 15.00 30.00
including mechanized fishing boats
5. Do. Cabin boat 2.50 10.00
6. Do. Vallom of a capacity of 4 tons and above 2.00 10.00
including machine fitted valloms
7. Do. Vallom of capacity above 2 tons and 1.00 5.00
below 4 tons (including machine fitted)
8. Do. Cart or carriage drawn by horses 6.00 10.00
9. Do. Carriage drawn by other animals 4.00 10.00
10. Do. Hand cart or push cart 2.00 5.00
11. Do. Bicycles, tricycle, cycle rickshaw or 2.00 Nil
rickshaw.

3.51. Under Rule 10 (2) of the Vehcle Tax Rules, 1963 a fee of 24 paise shall be leviable
by the Panchayats for affixing number to the vehicles for which license is granted. We
would recommend that this fee may be dispensed with as the proposed revised rates
would over all such sundry expenses.

4. ENTERTAINMENT TAX

3.52. Entry 62 of List 11 of the Seventh Schedule to the Constitution of India empowers
the State Governments to levy a tax on entertainments. Among the southern States the
State of Kerala alone has delegated the powers to levy Entertainment Tax to the local

44
authorities. In Karnataka entertainment Tax is collected by the State Government
(Department of Commercial Taxes) and 90% is assigned to the concerned local bodies. In
Tamil Nadu Entertainment Tax is colleted by the State Government and only 60% is
assigned to local bodies and this 60% apportioned between the concerned Gram
Panchayats and Panchayat Union at District level. In Andhra Pradesh too Entertainment
Tax is collected by the State Government and 90% of the proceeds assigned to concerned
local bodies.

Local Bodies in Kerala derive their power of taxation on entertainments under the Kerala
Local Authoritie Entertainments Tax Act, 1961 (Act 20 of 1961) which came into force
with effect from 1-4-1962. Later on, in May, 1963 the State Government imposed an
Additional Tax on Entertainments the proceeds of which, after allowing a margin to the
local bodies towards collection charges (two percent of proceeds), are appropriated by the
Government. The State Government continued to appropriate the Additional Tax on
Entertainments till 31-7-1975. From 1-8-1975 onwards the entire receipts from
Additional Entertainment Tax were assigned to the local bodies. Thus at present receipts
from the Entertainment Tax and Additional Entertainment Tax are the income due to
local bodies.

3.53. Under Section 3 of the Kerala Local Authorities Entertainment Tax Act, 1961,
Local Authorities are empowered to levy a tax at a rate not less than fifteen percent and
not more than thirty percent on each price of admission to any entertainment. In the case
of dramatic and circus performance in Panchayat areas are Rs. 25 and 15 respectively, on
each performance as per Section 6A of Act. In addition to Entertainment Tax, Additional
Entertainment Tax at the rate of 60% of the entertainment tax is collected. Thus, for
every one rupee ticket of admission 24 paise is towards Entertainment Tax and
Additional Entertainment Tax together (ie. Entertainment Tax 15 paise+Additional
Entertainment Tax 9 paise) and the balance 76 paise is exhibitor"s share on the case of
theatres where Entertainment Tax is levied at the minimum ie. 15%. If the levy is made at
the maximum rate of 30%, total tax component will be 48 paise and exhibitor will get 52
paise on every one rupee ticket. Though the percentage at which Entertinment Tax and
Additional Entertainment Tax and Additional Entertainment Tax are collected
25/1089/MC varies from Panchayat, Entertainment Tax has come to preval as one of the
major source of tax revenues of Panchayats, next to Building Tax. Entertainment Tax
constitutes 27% in 1982-83 and 24% in 1983-84 of the gross income from tax sources. In
fact in certain Panchayats receipt from Entertainment Tax outstrips Building Tax. As at
the end of 1983-84 there are 1102 cinema theatres spread over 719 Panchayats in the
State. The remaining 282 Panchayats do not have cinema theatres.

Receipts from Entertainment Tax and Additional Entertainment Tax

3.54. Table below indicates the district-wise receipts from Entertainment Tax and
Additional Entertainment Tax in the Panchayats during the period from 1979-80 to 1983-
84

45
TABLE

Statement Showing Collection of Entertainment Tax and Additional Entertainment

tax \ During the Years from 1979-80 to 1983-84

Sl. Name of No. of Theatres 1979- 1981- 1982- 1983- No. of Theatres
1980-81
No District in 1979-80 80 82 83 84 during 1983-84
Perm- Tem- Perm- Tem-
Total (Rs. in. lakhs) Total
anent porary anent porary
1. Trivandrum 20 59 79 10.99 10.50 12.17 12.75 14.95 16 80 96
2. Quilon 32 96 128 22.74 26.04 28.93 30.41 34.04 28 95 123
3. Pathanamthitta ... A ... ... 5.59 5.43 5.8 6.36 8 45 53
4. Alleppey 15 71 86 9.36 8.79 10.38 11.11 11.41 11 72 83
5. Kottayam 16 52 68 8.10 10.66 12.13 14.36 15.67 17 59 76
6. Idukki 14 33 47 6.70 8.83 8.20 7.20 8.64 16 47 63
7. Ernakulam 17 69 86 16.30 18.28 19.16 19.42 21.94 23 76 99
8. Trichur 23 85 108 20.01 28.52 32.81 37.66 46.67 28 105 133
9. Palghat 28 54 82 20.84 25.79 29.09 33.23 36.49 29 68 97
10. Malappuram 6 40 46 15.04 17.39 21.57 25.57 30.49 10 62 72
11. Kozhikode 12 68 80 24.53 18.92 22.76 24.58 30.00 12 60 72
12. Wynad ... A ... ... 12.03 13.03 13.48 15.28 6 27 33
13. Cannanore 9 68 77 23.30 16.27 20.46 21.86 23.95 12 71 83
14. Kasargode ... A ... .... 5.60 6.55 6.62 7.68 2 17 19
Total 192 695 887 177.91 213.21 242.67 264.06 303.57 218 884 1102

A. These districts were not in existence during 1979-80. The details relating to these
districts are included in the districts from which the new districts were carved out.

3.55. While the theatres in all the 7 districts north of Eranakulam district have yielded
sizable income from Entertainment Tax and Additional Entertainment Tax to the
Panchayats, theatres located in the Panchayats of Trivandrum, Pathanamthitta, Alleppey
and Idukki districts were very poor in the collection of the above tax. It is noticed that
from 96 theatres in Trivandrum District, receipt was Rs. 14.95 lakhs only during 1983-
84. At the same time in Wynad District where there are only 33 theatres ie.1/3rd of the
number in Trivandrum District Tax received by the Panchayats during the above year
was Rs. 15.28 lakhs which was more than the amount colleced in Trivandrum District. If
we make a comparison with Palghat District it may be seen that in Palghat District where
there is only one theatre more than the number in Trivandrum District, tax collected (Rs.
36.49 lakhs) during 1983-84 was more than 21/2 times of tax received by the Panchayats
in Trivandrum District. It has therefore to be doubted that large scale evasion of
Entertainment Tax and Additional Entertainment Tax is going on in Trivandrum District
without being detected.

46
3.56 Despite the above evasion the total receipts in the Panchayats in the State from
Entertainment Tax and Additional Entertainment Tax has increased from 177.91 lakhs in
1970-80 to Rs. 303.57 lakhs in 1983-84 the increase during the five year period amounts
to 125.66 lakhs which indicate a growth of 70% compared to receipts in 1979-80. The
overall increase in receipt would prima facie appear to be somewhat satisfactory. But
viewed from the point of view of increase in the No. of theatres, increase in the cost of
tickets, increase in the No. of audience and general improvement of socioeconomic
conditions in the rural life during the five year period since 1979-80, it is doubtful
whether increase in receipts to the above extent is adequately reflecting the real growth in
income that would have actually accrued.

3.57. Cinema as an entertainment, is becoming more and more popular among the rural
population in Kerala. The No. of theatres in the Panchayats which was 887 in 1979-80
has increased to 1102 in 1983-84. The fact that more and more theatres are coming up in
rural areas indicates that investment in cinema theatres is a profitable venture in rural
areas. Naturally income from Entertainment Tax and Additional Entertainment Tax ought
to have registered significant growth rate with the increase in the No. of theatres and
daily shows. But the details of receipts under Entertainment Tax and Additional
Entertainment Tax available with the Commission give a different picture. Generally
there are 2 shows daily in theatres. On Saturdays, Sundays and other festival days No. of
shows will be 3 or more. Assuming that the number of shows are two every day and gross
collection for each show is Rs. 100 only, the receipts at minimum rate on account of
Entertainment Tax and Additional Entertainment Tax (ie. at 24 paise on every one rupee)
for 2 shows should have been Rs. 48 per day. But an analysis of the receipts during the
years 1982-83 and 1983-84 indicates that average daily receipts towards Entertainments
Tax and Additional Entertainment Tax was below Rs. 48 in the case of 300 theatres in
Panchayats. This means that the gross collection for a show was below Rs. 100 in
theatres of those Panchayats. Usually exhibitor's share will be between 40 to 50% of the
net receipt after payment of all taxes (Entertainment Tax Additional Entertainment Tax
and Show Tax). Therefore, for a gross receipt of Rs. 200 for two shows daily the
exhibitor's share will be normally leass than Rs. 75 which will not be adequate to meet
the wages of employees, current charges and other allied expenses of exhibitor. Therefore
it is to be presumed that unless the average daily gross collection is above Rs. 200 (even
Rs. 200 is a loss) no exhibitor will carry on the business incurring loss. The above
analysis invariably uravel the truth that the daily collection will be much more than what
is reflected in the accounts rendered to the Panchayats for the purpose of payment of
entertainment tax.

3.58. The system as it exists today offers ample opportunities for evasion of tax by all
conceivable means and several malpractices resulting in huge loss of tax revenue to
Panchayats. It is true that malpractices like sale of bogus, duplicate, unsealed,
unnumbered and used tickets are rampant in theatres. During collection of evidence the
attention of the Commission was drawn to he widespread prevalence of double D.C.Rs.
(Daily Collection Reports) maintained by theatre owners (Exhibitions). It is alleged that
one D.C.R. is maintained for rendering accounts to the distributor and another D.C.R. for
the purpose of payment of tax to Panchayats with the sole intention of misappropriating

47
major portion of the tax due to Panchayats by showing false accounts of sale of tickets.
Though there is provision to check the theatres daily by an Officer duly authorised by the
Panchayats with a view to detect malpractices, if any, in practice it is found to be
impossible for the employees so authorized to conduct the checking in its true spirit,
honestly and impartially. Representatives of employees of Panchayats have explained
before the Commission that the checking staff could not carry out their work in the
proper manner since most of the theatre owners are persons wielding considerable social
and political influence in the locality who will not hesitate to wreak vengeance on the
inspecting staff. Surprise inspection by Executive Officers will be a risky operation
unless there is sufficient protection by police authorities.

Levy of Entertainment Tax and Additional Entertainment Tax on seating capacity

basis

3.59. The trend of opinion found during the course of collection of evidence is that the
existing system of collection of Entertainment Tax should be replaced with a more
effective method that will minimise, if not wholly eliminate, the nefarious practices
through which evasion and mal-practices are perpetuated. There was unanimity of
opinion among all those who have furnished evidence to the Commission, that levying of
tax on the basis of seating capacity (gorss collection capacity) per show, will prevent the
evasion to a great extent besides assuring a fixed percentage of income to the Panchayats.
Collection of Entertainment Tax on the basis of gross collection capacity of seats is
successfully practiced in Andhra Pradesh, where Entertainment Tax is levied from
theatres in Gram Panchayats at 20 per cent on the gross collection capacity per show. The
Commission would recommend to introduce such a system in Kerala too as expediously
as possible as to precent the erosion of revenue that is legitimately due to the Panchayats.

3.60. Incidentally the Commission would like to draw attention of Government to the
announcement made in the Budget Speech 1981-82 regarding introduction of a system of
collection of Entertainment Tax at a fixed percentage of the gross collection based on
scating capacity in the theaters. But this has not yet been implemented. It is understood
that a Draft Bill was since introduced in the legislature. The more the delay in introducing
the proposed system, the more will be the loss of revenue to Panchayats. Hence the
Commission reiterate the need for early implementation of the new system of assessment
of Entertainment Tax on gross collection based on seating capacity

Minimum amount to be levied as Entertainment Tax

3.61. In the meantime the Commission would make the following suggestions with a
view to avoid evasion of Entertainment tax to some extent.

(1) Minimum Entertainment Taxi including Additional Entertainment Tax per show may
be fixed as Rs.35

(2) In the case of theatres where at present rate of Entertainment Tax and Additional
Entertainment Tax together is more than 35% Minimum tax per show shall be fixed at an

48
amount equal to total rate (percentage) of taxes (Entertainment Tax+Additional
Entertainment Tax) ie. Rs. 40 if total tax is 40% and Rs.45 if it is 45% and and so on.

Merging of Additional enterainment Tax with Entertainment Tax with

Entertainmnt Tax

3.62. As already mentioned, there are 2 categories of tax viz. Entertainment Tax, and
Additional Entertainment Tax. Entertainment Tax, from its very inception was meant as a
revenue to local bodies whereas Additional Entertainment Tax was introduced
subsequently as an additional source of income to the State Government. But power of
levy of Additional Entertainment Tax was since transferred to local bodies and at present
the proceeds from both are appropriated by local bodies. Since income from both items
are now appropriated by local bodies. Since income from both items are now
appropriated by the same body, the Commission does not consider it necessary to levy
the two items separately as separate accounting of the two components does not serve any
special purpose now. Entertainment Tax and Additional Entertainment Tax may therefore
be merged and levied as a singe items, by suitably refixing the rate and incorporating
necessary amendments to the relevant Acts and Rules. This combined tax may be termed
as entertainment Tax.

* Disttict-wise details of receipts of Panchayats under 'Building Tax' for the years 1979-
80 to 1983-84 have been furnished under Appendix VII.

** figures relating to Pathanamthitta, Wynad and Kasargode districts for 1979-80 have
been included in the respective districts from which the new districts were carved out.

Enhancement of Minimum rate of Tax

3.63. As per the existing rules minimum Entertainment Tax is 15% of the ost of ticket
and Additional Entertainment Tax is 60% of the Entertainment Tax making the total to
24% of the cost of ticket. Studies undertaken by the Commission have revealed that out
of 719 Panchayats having theatres 269 Panchayats are levying tax only at the above rate
which is the minimum prescribed under the rules. Only very few Panchayats numbering
about 14 are collecting Entertainment Tax at the maximum rate of 30 percent. At the
maximum rate the total tax payable will be 48 per cent (Entertainment Tax 30% +
Additional Entertainment Tax 18%) of the price of the ticket.

3.64. In pre Para No. 3.62 we have suggested to merge the two components viz.
Entertainment Tax and Additional Entertainment Tax and to levy it as a single item of
tax. We would suggest to fix the minimum rate for single tax at 25% as against the
prevailing rate of 24%.

49
5. SHOW TAX

3.65. Show tax is levied by Panchayats under authority conferred under subsection 5(i) of
Section 66 of Kerala Panchayats Act, 1960. The rates of Show Tax prescribed under
Kerala Panchayat (Show tax) Rules 1962 are as follows:-

Rate of tax per show

1. Cinematograph exhibitions 1
2. Dance, Dramatic or Circus performance 3
3. Other shows 3

In addition to show tax, surcharge at the rate of 25% of the rate of Show Tax shall be
levied on every show under the Kerala Additional Tax on Entertainments and Surcharge
on Show Tax Act, 1963. As explained under "Entertainment Tax", was originally mean
for Panchayat and 'surcharge' for State Government. But with effect from 1-8-1975
onwards power to levy and appropriate both the taxes are vested with the Panchayats.

3.66. Table showing the receipts under show Tax including surcharge on Show Tax
during the period from 1979-80 to 1983-84 is given below:

TABLE

Statement showing Receipts under Show Tax

(Rs. in lakhs)
Name of District 1979-80 1980-81 1981-82 1982-83 1983-84
1. Trivandrum 0.81 0.89 0.95 1.00 0.97
2. Quilon 1.19 1.14 1.18 1.24 1.21
3. Pathanamthitta A 0.44 0.49 0.55 0.50
4. Alleppey 0.79 0.64 0.72 0.80 0.71
5. Kottayam 0.62 0.65 0.66 0.68 0.68
6. Idukki 0.32 0.37 0.38 0.38 0.39
7. Ernakulam 0.83 1.00 1.02 1.00 0.97
8. Trichur 1.52 1.19 1.35 1.43 1.47
9. Palghat 0.82 0.94 1.01 1.05 1.06
10. Malappuram 0.51 0.63 0.66 0.79 0.84
11. Kozhikode 0.76 0.62 0.74 0.80 0.83
12. Wynad A 0.29 0.30 0.32 0.32
13. Cannanore 0.86 0.67 0.79 0.90 0.89
14. Kasargode A 0.17 0.18 0.19 0.20
Total 9.03 9.64 10.43 11.13 11.04

3.67. The rates of Show Tax are fixed in 1962 ie. about 23 years back. The Commission
have received have received representations during collection of evidence. and other-wise
urging the need for revising the rate of show tax. They have pointed out that the tax

50
levied, from an area having a high tax potential, which at the same time does not cast any
burden on the tax payer, is too low. The President of the Kerala Panchayat Association
has demanded revision of show tax on cinema shows from R.1 to Rs. 10. It is only just
and reasonable that the rate prescribed 23 years back is revised in such a way as to
compensate the erosion in money value and also in consideration of other factors.
Accordingly the Commission would recommend to revise the rate as follows:-

Existing Proposed Rate

Rate
1. Cinematographic Re. 1 Rs. 10 for one show and Ra. 5 for every additional
Exhibition show on the same day.
2. Other shows Rs. 3 Rs. 10 for a show.

3.68. The surcharge on show tax may be dispensed with as the revised rated
recommended are intended to include the income on account of surcharge also.

6. OPTIONAL TAXES

(i) Service Tax

3.69. In addition to Building tax, Panchayats are empowered under Section 66 of the
Kerala Panchayat Act, 1960 and Kerala Panchayat (Service Tax) Rules, 1962 to levy
Service Taxes for Sanitation, Water Supply, Street Lighting and Drainage at such
percentage of annual rental value not exceeding the maximum rate shown below with the
approval of the Director of Panchayats.

Item Maximum
Rate
1. Sanitary Tax (General sanitation of Panchayats) 1%
2. Water Tax (Construction, improvement, extension, maintenance, repairs 2%
etc. on water works)
3. Lighting Tax (for expenses connected with lighting in the Panchayat 2%
area)
4. Drainage Tax (Construction, improvement, extension, repair, 1%
maintenance etc. of drainage works)

3.70. Details of receipts towards Service Tax are furnished below

(Rs. in lakhs)

51
 Name of No.of panchayats levying Receipt
District Service Tax 1979-80 1980-81 1981-82 1982-83
1983-84
(1) (2) (3) (4) (5) (6) (7)
1. Trivandrum 8 1.11 0.45 0.44 0.52 0.78
2. Quilon 20 2.10 1.58 2.00 2.02 3.06
3. Pathanamthitta 16 A 1.30 1.52 1.60 2.39
4. Alleppey 18 1.65 0.68 1.08 1.09 1.84
5. Kottayam 23 2.53 2.58 2.77 2.99 3.91
6. Idukki 2 0.38 0.17 0.16 0.21 0.24
7. Ernakulam 4 1.16 0.95 0.96 1.15 1.44
8. Trichur 7 2.37 0.56 0.63 0.66 1.22
9. Palghat 12 1.56 1.18 1.61 1.35 2.24
10. Malappuram 15 0.31 1.36 1.63 1.83 2.51
11. Kozhikode 16 0.55 1.27 0.95 0.92 1.39
12. Wynad 7 A 0.10 0.28 0.31 0.33
13. Cannanore 20 1.80 1.00 1.09 1.27 1.58
14. Kasargode 2 A 0.01 0.01 0.01 0.01
Total 170 15.52 13.19 15.13 15.93 22.94

A Vide Foot Note below Table under Para No. 3.26.

The increase noticed during 1983-84 is on account of the quinquennial revision of

Building Tax from 1-4-1983.

3.71. As in the case of Building tax, Service tax shall be levied annually in two half-
yearly instalments. But because of the fact that this is not a compulsory tax it is being
levies at present by 170 only out of 1001. This is another example how Panchayats are
absolutely indifferent in the matter of collecting tax revenue for which they are statutorily
empowered. It may be noted that Service Tax for Water Supply, Drainage, Street
Lighting and Sanitaion is being levied compulsorily in Municipalities in our State. (The
property tax levied by Muncipalities include Building Tax as well as the above
components). We cannot overlook the fact that since the enactments of Panchayats Act
and Rules during 1962 the rural scenario in our State has under gone a change for the
better during the last 2 decades as a result of the developments brought into being by the
Five Year Plan Schemes. The benefits of Rural Water supply Schemes and rural
Electrification and other Rural Works Programe s have now embraced a vast majority of
the population in rural areas. These visible benefits have directly cast on the Panchayats
the additional burden of expenditure for maintenance and improvement of such services.
A three fold increase in electricity charges since 1979-80 has become an unbearable
burden to many Panchayats. Similaraly the maintenance charges of Water Supply
Schemes has also added to the burden of Panchayats. The State Government with its
finacial constraints, cannot be expected to come to the rescue of Panchayats. The

52
Panchayats should therefore no longer hesitate to invoke their power to levy Service Tax
for service like Water Supply, Street lighting etc. provided by them.

Levy of Service Tax to be made compulsory

3.72. The Commission has considered whether Service Tax has to be levied compulsorily
for all the items mentioned under the Service Tax Rules and if so the tax is to be collected
to cover full expediture incurred for rendering each service. Compulsory levy of Servicce
Tax for all the items may cause additional burden to the tax payers. Further, it is neither
desirable nor practicable to insist that the receipts from Service Tax should cover the
whole expenditure towards its maintenance. Therefore compulsory levy of Service Tax
need be confined only in respect of those items for which sizable income is to be spent
for its maintenance and the tax need be levied only for meeting a part of the expenditure
incurred for such maintenance. Accordingly the Commission recommends that the
Service Tax at minimum rate of one percent each shall be compulsorily levied in respect
of 'Street Lighting' and 'Water Supply' by those Panchayats whose annual expenditure for
maintenance of the above services exceeds 10% of the Building tax under each, provided
Building Tax together with Service Tax should not exceed maximum rate of Building tax
recommended by the Commission under Para 3.22. This tax may be levied along with
Building tax, showing it as a separate component in the Demand Notice. Levy of Service
Tax for the remaining items may continue to be optional taxes as at present.

(ii) Surcharge on Building tax

3.73. This is also an optional tax under Section 73 of the Kerala Panchayat Act, 1960.
The above section enjoins that the Panhayats may levy from the whole or specified
portion of Panchayat area, a surcharge on Building Tax, for a specified period in order to
cover unusual expenses incurred by the Panchayat in respect of any one of the following
services.

(i) Education

(ii) Treatment of diseases including maternity and child welfare services.

(iii) Supply of protected water

(iv) Scavenging or

(v) Drainage.

Rules insist that at a time Panchayats shall not levy surcharge or more than two items
specified above and the surcharge so levied for each item shall not exceed one fourth of
the Building tax. Surcharge levied under Section 73 of Kerala Panchayat Act shall be
demanded and collected in the same manner as if it were the Building tax levied under
section 68 of Kerala Panchayat ACt. No Panchayat in the State is collecting surcharge
under this item. Already there is provision to levy Service Tax for some of the services

53
mentioned above. Besides, we have recommended in para 3.72 to make the levy of
Service Tax compulsory in respect of Water Supply and Street Lighting. In such a
context Government may decide whether there is any need for retaining the provision for
levy of Surcharge on Building Tax in the statute especially when no Panchayat in the
State is collecting it.

(iii) Land Cess

3.74. According to original Secton 66 (2) of the Kerala Panchayat Act, 1960 "a cess on
all lands in the Panahcyat area other than any land or class of lands which the
Government may, by notification in the Gazette exempt, shall be levied at the rate of two
paise per annum for every five cents of land or part thereof". Imposition of this cess was
challenged in the High Court of Kerala in O.P.No. 2127/64 filed by the Kannan Devan
Hill Produce Company Ltd. The Kerala High Court in their judgement dated 30-11-1965
held that section 66(2) of the Kerala Panchayat Act was unconstitutional in so far as if
authorised the levy of cess at a uniform rate on all lands within the jurisdiction of a
Panchayat. Following this, Government omitted sub-section (2) of Section 66 and Section
66 (A) was inserted by Act 13 of 1969. According to the amendment a land cess at the
rate of on sixteenth percent of the capital value of the land was to be levied on every land
in Panchayat area. The cess levied was payable by he owner of the land annually. Even
though assessment of land cess in 950 Panchayats was completed during 1974-75 and an
amount of Rs. 101.49 lakhs was assessed only, Rs. 26.65 lakhs was collected.

3.75. Land cess which was originally a compulsory item o tax ws subsequently made
optional by Ordinance No. 11 of 1975 and subsequent Act 3 of 1976. Besides, land
valued at Rs. 20,000 and below were exempted from the operation of the ces. Collection
of land cess during each year rom 1974-75 is shown below:-

Year Amount collected (Rs. in lakhs)

1974-75 26.65
1975-76 100.82
1976-77 79.12
1977-78 30.94
1978-79 22.85
1979-80 13.61
1980-81 5.76
1981-82 7.68
1982-83 4.54
1983-84 1.63

Modification o land cess as an optional item on the one side and wide spread protest from
public against the levy, gradually gave rise to a situation in which the entire Panchayats
in the State have opted out of this taxation, and thereby loosing a sizable revenue which
was nearly one crore during 1975-76. To compensate this loss the Commission has

54
recommended in Chapter VI another compulsory tax on the lines prevailing in other
States in India.

Copyright © 2003 by Information Kerala Mission , A-23, Jawahar Nagar,

Thiruvananthapuram - 695041, Tel:-91-471-2313835, Email:ikm@eth.net

CHAPTER IV NON TAX REVENUE

1. LICENCE FEES

4.1. Income from 'Licence fees' and 'Panchayat Properties' are two major receipts of
Panchayat under 'Non Tax Revenue'. General provision under Section 109 (2) of Kerala
Panchayat Act, 1960 empowers Panchayat for levy of fees at such rates as may be fixed
by the Panchayat, or grant of licences and permissions or renewal of licences which
under the provision o the Act are required to be issued by the Panchayats for:

(i) Conducting private markets under Section 86 and 87 of the Act.

(ii) Conducting private cart stands under Section 92 of the Act.

(iii) Conducting private slaughter houses under Sections 93 to 95 of the act

(iv) Use of places (Panchayat area) for Dangerous and offensive Trades under Section 96
of the Act.

(v) Construction or establishment of factories, workshops or work place and installation

of machinery under Section 97 of the Act.

(vi) Construction of buildings in Panchayat where Municipal Building Rules are

extended.

(vii) Keeping dogs or pigs in the Panchayat area.

(viii) for permanent and Temporary theatres under Cinema Regulation Act.

(ix) for places o Public Resort under P.P.R. Act, 1963.

(x) for occupation of poramboke lands vested with Panchayats.

Besides Panchayats levy ees rom Public markets/Cart stands/Slaughter Houses etc. run by
the Panchayats and also for various other purposes contemplated under Registration of
Births and Deaths Rules, 1970, Prevention of food Adulteration Act, Taxation and

55
Appeal Rules, 1963, etc. Total income derived towards Licence fees and other fees levied
by the Panchayats during the years from 1979-80 to 1983-84 are as follows:-

TABLE

Receipts under Licence fees, fines etc.

(Rs. in lakhs)

Name of District 1979-80 1980-81 1981-82 1982-83 1983-84

Trivandrum 1.87 4.61 3.98 5.50 6.45
Quilon 3.29 4.00 4.03 4.44 4.84
Pathanamthitta .. 1.60 2.47 1.91 2.01
Alleppey 2.48 2.85 3.19 3.57 3.48
Kottayam 1.40 2.26 2.73 3.08 2.79
Idukki 0.85 1.78 2.01 2.23 1.95
Ernakulam 3.18 3.56 4.23 4.01 4.24
Trichur 4.20 4.05 4.59 4.93 5.44
Palghat 2.59 4.52 4.62 6.03 5.01
Malappuram 2.08 7.19 6.41 6.72 7.47
Calicut 3.86 6.27 5.93 6.31 7.03
Wynad .. 1.64 2.23 2.30 2.67
Cannanore 4.80 5.40 6.33 6.81 7.41
Kasargode .. 2.25 2.83 3.23 2.93
Total 30.60 51.98 55.58 61.07 63.72

4.2. Granting of licences for different purpose are meant for observance of rules and
regulations laid down for public safety, convenience and health. The general tendency is
always to observe the rules and regulations more in its breach than in observance. It is to
prevent such tendencies that the local bodies are empowered to issue licences to such
trades and other activities. The fees to be levied for granting licences should
commensurate with the administrative and other expenses of Panchayat or regulation and
supervision of such activities in the Panchayat. The existing rates for licences etc., were
fixed as early in 1963 on the basis of the administrative expenses of those days. The
administrative expenses have gone up by five or six times since then. Despite this fact, no
attenpts have been made to revise the rates so far.

4.3. If a revision in the rate of licence fee is proposed taking into account the
proportionate increase in the administrative expenses during the period from 1963 to
1985 it will be viewed as abnormal and unjustifiable eventhough it is quite reasonable
from the point of view of erosion in money value since 1963. Had the rates been
reviewed and revised at reasonable intervals, say, at least once in five years, a revision on
the basis of the present standards will not be viewed as an abnormal hike. Therefore the
maximum that the Commission could recommended is only a two increase in the rate

56
except in one or two speciic cases in which a higher rate has been recommended
eventhough a five fold increase is quite justified, as already pointed out. Similarly the list
of items for which licences are to be granted ought to have been revised along with the
revision of rates, after considering the changes occurred from time to time. Incidentally it
is pointed out that the Commission did not receive any suggestions worth considering
either or enlarging the list of items requiring licences or revision of rates. However the
Commission has attempted a general study on certain selected areas and suggestions are
made in the ensuing paras, keeping in view our observation regarding the maximum
increase that can be thought for in the present circumstances.

(i) Markets

4.4. Provision under Section 86 of the Kerala Panchayat Act, 1960 insists a licence from
Panchayat to conduct private market in Panchayat area. Such licence shall be got renewed
by the licence every year. Licence fees prescribed under Section 86 (4) of the Act is an
amount not exceeding 331/3rd per cent of the Gross income off the owner from the
market in the preceding year. for new private markets opened during a year licence fee is
fixed at the rates noted below:-

Area Rates/fees
For area not excceding 25 cents Not less than Rs. 50
Above 25 cents but not more than 50 cents Not less than Rs. 100
Above 50 cents Not less than Rs. 150

4.5. The existing practies of levy of licence fees on the basis of previous years collection,
will not yield the desired income to the Panchayats, since licensee cannot be expected to
disclose the details of his real income or reasons best known to all. Therefore the
Commission would recommend to fix the rate for the existing and new markets in terms
of area, of course taking into account the location, importance, scope for levy of fees,
extent of trading activities likely to be carried out in the market and all other attending
factors. As regards rates the Commission would suggest to have a minimum two fold
increase in the existing rates of licence fee which is quite reasonable in the context of the
erosion in money value since the introduction of the Act in 1962. The Department of
Panchayats may examine the scope for enhancing the rates still further, if deemed
necessary, after taking into account the aspects mentioned above.

4.6. As regards the fees, leviable from the markets for various uses by licensees and
lesees prescribed in the schedule under Rule 7 of Kerala Panchayats (Public & Private
Market) Rules, 1964 the Commission is not inclined to suggest any revision as it may
inevitably lead to increase in prices of commodities sold through such markets.

4.7. During the Course of collection of evidence there were suggestion to dispense with
the system of encouraging private markets in Panchayat areas as private parties are
deriving huge profits by exploiting traders and public alike. The Panchayats can do
practically nothing to prevent the private party from perpetrating such practices. The
Commission therefore suggest that, as a policy, Panchayats may start opening of public

57
markets and that no new private markets to be permitted in future. Even in areas where
private markets are existing, efforts should be made to climinate it in a phased manner by
converting them into public markets.

4.8. In the case of Public markets ie., markets owned and maintained by the Panchayats,
the right of levying fees from markets at prescribed rates is sold in auction annually to the
highest bidder. This system appears to be more profitable than direct collection by the
Panchyats as direct collection will invariably involve expenditure which may often be
disproportionate to receipts. Panchayats, if any, collecting fees directly may be advised to
switch on to the practice of selling the right of collection of fees by auction, at the earliest
opportunity.

(ii) Private Cart Stand

4.9. According to Section 92 of the Kerala Panchayat Act no person shall open Private
cart stands without obtaining a licence from Panchayats and such licence shall be got
renewed by the licensee. Section 92 (5) empowers the Panchayats to levy on every grant
or renewal of a licence a fee not exceeding two hundred rupees. No minimum rate is
prescribed in the Act. In the absence of a minimum rate there is scope for fixing the rates
as low as possible thereby causing loss to Panchayats. In order to avoid any possible
misuse of the provision in favour of the owners of cart stands, the Commission would
recommend to adopt the system of levying fees based on area, after fixing a minimum
rate as in the case of private markets.

(iii) Slaughter Houses

4.10. The Kerala Panchayat Act provides for the establishment of public Slaughter houses
and to charge rent and fees or the use of the same (Sections 93-95). Kerala Panchayat
Slaughter House and Meat Stall Rules, 1964 elaborates the procedure or establishment
and maintenance of slaughter houses and its inspection by the Executive Authority and
other authorised officers.

4.11. Most of the Public Slaughter Houses are attached to the public Market and some are
located in isolated places. Meat is one of the main items in the market for which separate
meat stalls are provided for. There are complaints and objections from public that the
slaughter houses are not maintained properly, the sofequarels and the precautions as also
conditions prescribed as per rules are not properly adhered to. There are complaints of
unauthorised slaughtering of and slaughtering deceased, dying or dead animals. There are
no separate receptacles to be provided for putting refuse and allowing blood to flow.
Besides , slaughtering of animals and transport of meat for sale are done in unhygenic
conditions. Sale of adulterated meat is also rampant.

4.12. In view of public safety and to abate nuisance the Commission feel that there
should be an approved plan for the construction of slaughter house and the existing
slaughter houses should provide necessary arrangements or water and other facilities to
prevent the nuisance. There should also be arrangement for the inspection of animals

58
brought for slaughtering regularly and random inspection of meats for sale in the stalls
periodically. Hygenic condition of slaughter houses should be ensured by the Veterinary
Surgeon of the Block by making suitable arrangements. The Doctor may be given some
additional remuneration for the work. The District Panchayat Officer can identify the
Doctor. from the point of view of public hygiene, establishment of private slaughter
houses should be discouraged and dispensed with in a phased manner wherever they
exist. Public Slaughter Houses may be establisted in all Panchayats fulfilling hygenic
conditions and the right of collection of fees may be sold in auction as suggested in the
case of public markets.

Fees for Private Slaughter Houses

4.13. According to Section 94 of the Kerala Panchayat Act, 1960 the owner of any place
within the Panchayat area which is used as slaughter house for the slaughtering of
animals shall obtain licence from the Panchayat. The licence fee prescribed under Rule
35 of 'Slaughter Houses And Meat Stall Rules, 1964' is 20% of the gross income of the
slaughter house for the year immediately preceding rounded to the nearest rupee subject
to a minimum of Rs. 20 in the case of existing houses. for a new slaughter house licence
fee is Rs. 20 per annum. Licence is renewable every year. The minimum rate in both case
may be enhanced to Rs. 100 per annum. In the preceding para we have suggested to
dispense with the practice of private slaughter house. The enhancement suggested above
is or those private slauhghter house which are allowed to be continued by Panchayats in
exceptional circumstances.

(iv) Licence or Dangerous and Offensive Trades

4.14. According to Section 96 of Kerala Panchayat Act, 1960 no place in the Panchayat
area shall be used without obtaining licence from Panchayat for the purposes of trades,
which are likely to be offensive or dangerous to 25/1089/MC. human life or health or
property, specified under Schedule I appended to Kerala Panchayats (Licensing of
Dangerous and Offensive Trades & factories) Rules, 1963. There are about 126 such
items included in the above schedule. Licence has to be renewed every year. Panchayat is
at liberty to fix the licence fee at such rates as are deemed sufficient by them, with the
approval of Deputy Director of Panchayats (vide Rule 7). Since the Rules do not
prescribe any minimum or maximum rates, Panchayats are levying licence fees at
different rates which do not appear to be on reasonable basis. Case study of certain
Panchayats has revealed that while poor Panchayats are levying the fees at a higher rates
rich Panchayats are collecting it at low rates. for example, for sale and storing of coconut
shells, Ulloor Panchayat which is considered to be a rich Panchayat is levying only Rs. 2
while Kadakampally and Balaramapuram Panchayats are levying Rs. 15 or the same
trade. This disparity is visible in other Panchayats too. A few cases are Illustrated below:-

Rate levied by the Panchayats for Dangerous and Offensive

Name of Trade Trades
Kadakampally Ulloor Vattiyoorkavu Pothencode Balaramapuram
1. Manufacture of 5.00 5.00 10.00 10.00 25.00

59
acrated water
2. Bamboos
manufacturing/storing 5.00 3.00 3.00 7.00 25.00
for sale
3. Bricks manuacturing 20.00 10.00 30.00 25.00 75.00
4. Bread baking 10.00 3.00 3.00 7.00 25.00
5. Coffee and Tea
5.00 6.00 6.00 15.00 50.00
shops Grade A
Coffee and Tea shops
3.00 3.00 4.00 10.00 25.00
Grade B
Coffee and Tea shops
2.00 2.00 2.00 5.00 10.00
Grade C
6. Hotels Grade A 5.00 6.00 6.00 20.00 75.00

In order to prevent the Panchayats from fixing rates at too low a rate it is advisable to
have a minimum rate or licence under Section 96 of the Kerala Panchayat Act.

4.15. Licence from Pachayat is also required for the following purposes specified under
section 97 of the Kerala Panchayat Act.

(a) Construct or establish any factory, work shop or work place in which it is proposed to
employ steam power, water power or other mechanical or electrical power

(b) Install in any premises any machinery or manufacturing plant during by any power as
aforesaid not being machinery or manufacturing plant exempted by the Rules.

According to Dangerous and Offensive Rules, fees to be charged for licences granted or
for its renewal under Section 97 of the Kerala Panchayat Act shall not exceed the
maximum specified in Schedules II & III appended to the above Rules. In these cases
also no minimum has been prescribed but only maximum rate and this maximum rate in
certain cases is as low as fifty paise. As these maximum rates were fixed about 22 years
back, a revision is quite necessary, besides prescribing minimum rate for each.

4.16. As regards revision of maximum rates for grant of licences, the Commission has not
received suggestions of a serious nature deserving consideration from any quarter. So
also no suggestions were received for addition of any items to the existing list or for
deletion. The past two decades have indeed witnessed and unprecedented flowering in the
various facets of the socio-economic life of our rural population bringing them face to
face with new technologies and avocation and this change has brought in several trades
and occupations not contemplated in the Schedules appended to Dangerous and
Offensive Trade Rules, 1963. The Commission therefore recommends that the existing
schedule which is prepared long back, may be revised by the Director of Panchayats
incorporating new items and deleting unnecessary items. further a two fold increase is
absolutely justifiable in the case of existing maximum rates for licence under Section 97
and the same is recommended. Similarly minimum and maximum rates may also be

60
prescribed for licence issued under Section 96 of the Kerala Panchayat Act, 1960.
Minimum fees for grant or renewal of a licence should be not less than Rs. 10 in both
cases (ie. Sections 96 and 97).

(v) Fees or Permanant and Temporary Theatres under Cinema Regulation Act

4.17. Rule 22 of the Kerala Cinemas (Regulation) Rules, 1975 prescribes fees for grant of
permission for construction/re-construction of cinema theatres as stated below:-

(1) For every permission under section 6 of the Kerala Cinemas (Regulation) Act, 1958
granted or renewed under these rules, a fee shall be collected at the following rates:

Temporary theatre Rs. 5

Permenant theatre Rs. 10

The above rates are applicable to cinema theatres in Corporation, Municipal and
Panchayat areas. The rates require revision as the income derived by the theatre owners
have increased manyfold since the rates were fixed in 1975. The Commission would
therefore recommend to revise the rates as indicated below:-

Temporary theatre Rs. 50

Permanent theatre Rs. 100

(vi) Licence fees for other items

4.18. Panchayat are levying fees/licence fees for various other purposes also such as for
use of poramboke lands, places of public resorts, keeping dogs etc., etc. As pointed out
earlier the fees or the above purposes were prescribed more than two decaded back.
Similarly revision of rates for fines, Distraints fees, Demand Notice, Warrants etc. is long
overdue. We would therefore recommend that the existing rates of fees, fines etc., or all
other items may be refixed by making a two fold increase to compensate the increase in
the cost of administrative services incurred in discharging duties connected with the
licensing work of Panchayats. In certain cases no minimum rates of licence fees are seen
fixed but only the maximum. In the absence of minimum rates the Panchayats will be
generally inclined to levy the rate as low as possible to appease the beneficiaries. The
Commission would therefore recommend to fix minimum rates for all minimum rates or
all items or which licences are to be granted and the minimum fee or each licence, valid
for a year should not be less than Rs. 10. We would also recommend that in future all
kinds of licence fee, other fees, fines etc., should be reviwed and revised once in five
years.

61
2. Income from Panchayat Properties
4.19. Income from 'Panchayat Properties' is mainly derived from remunerative enterprises
like market complexes, shopping centres, lodgings, bus stands, Kalyanamandapams etc.
Income derived by Panchayats during the Period rom 1980-81 1983-84 is as shown
below:-

TABLE

Statement showing income from Panchayat Properties

(Rs. in lakhs)

District Year
1980-81 1981-82 1982-83 1983-84
Trivandrum 18.60 19.57 22.20 33.97
Quilon 15.64 19.73 23.19 27.10
Pathanamthitta 14.61 19.64 20.34 24.29
Alleppey 9.26 11.02 11.91 14.66
Kottayam 9.98 10.99 12.40 14.51
Idukki 5.06 7.28 7.73 8.56
Ernakulam 20.00 23.93 25.78 29.83
Trichur 12.62 14.96 16.37 19.55
Palghat 6.21 8.34 9.51 11.72
Malappuram 12.26 15.43 14.18 20.12
Kozhikode 9.07 10.05 13.35 14.30
Wynad 5.25 5.93 8.01 10.97
Cannanore 7.21 8.77 10.14 12.90
Kassargode 4.12 4.56 5.40 5.76
Total 149.89 180.20 200.51 248.24

The above table indicates that receipts from Panchayat properties from an important
source of income to Panchayats. In fact receipt is equal to about 41% of the income from
Building Tax during the year 1983-84. While Ernakulam and Trivandrum districts are in
the forefront in the matter of receipt on this account, Kasargode, Wynad and Idukki
districts are backward due to the fact that these districts are having only less number of
Panchayats.

4.20. Inspite of the various sources of income viz. taxes, licence fees, statutory and non
statutory grants, many of the Panchayats are not in a position to carry out their obligatory
functions in a satisfactory manner. Over a quarter of a century since the enactment of the
Panchayat Act the horizo of development has widened the activities and services to be
rendered by the Panchayats. Income from tax sources is heading towards a saturation
point and local bodies are now forced to concentrate their efforts on resource
mobilisation more on non tax avenues. The limited tax resources on the one hand and the
ever expanding needs on the other are the compelling factors that make them go in search

62
of fresh avenues of resources and in this process remunerative enterprises are found to be
excellent potential of non-tax sources which of properly harnessed will yield substantial
income and therefore it deserve encouragement. Compared to other States in India a
unique feature of our state is the establishment of the Kerala State Rural Development
Board. This Board was constructed on September 15, 1971 under the K.S.R.D.B. Act,
1971 which empowers it to arrange for the execution of any of the prescribed types of
schemes in a Panchyat area namely water supply schemes, sewerage schemnes and
development schemes which include the construction of bus stand, cart stand, market
buildings etc. The two main functions which the Kerala State Rural Development Board
has taken up for implementation were Rural water supply and remunerative schemes. The
water supply schemes in Panchayats implemented by the K.S.R.D.B. were those which
were aided by the Life Insurance Coporation of India 50% of the cost of the scheme was
paid as loan from Life Insurance Corporation and the remaining 50 % was met by the
State Government as grant. On completion of the scheme 25% of the capital cost was
treated as share of the Panchayat which was to be repaid by the Panchayat in 25
instalments. Thus Panchayat was required to meet only 25% of the capital cost of the
scheme. Later, it was found that most of the Panchayats were not having adequate funds
even to meet the above 25% portion, with the result that annual instalment of repayment
fell heavily in arreats and Govenment was forced to come to the rescue of those
Panchayats to clar the arrears though special grants. Tereupon the K.S.R.D.B. turned its
attention mainly to assist the Panchayats for the establishment of remunerative assets.

4.21. The remunerative enterprises launched under the auspices of the K.S.R.D.B. have
been instrumental in giving a new facelift to many Panchayats in the last decade. Besides,
the remunerative schemes have helped those Panchayats to augment their non-tax
resources to such an extent enabling some of them to embark on more and more new
schemes utilising the Income derived from the original schemes. For example
Perinthalmanna Panchayat which had investded Rs. 13.37 lakhs in 1979 for construction
of shopping centre-cum-bus stand could collect an appreciable income of Rs. 5.37 lakhs
during 1983-84. No other Panchayat in the State was able net to so much income from an
investment of Rs. 13.37 lakhs. This is a rare phenomenon and it deserves compliments.
The increase in receipts under "Income from Panchayat properties as many be seen from
the Table under para-4.19 is a direct dettection of the financial gains accrued to them
from remunerative enterprises.

4.22. Having received opinion from certain quarters expressing apprehensions about the
economic viability of the schemes in recent times, the Commission has attempted a case
study of some selected Panchayats which have undertaken remunerative schemes with
the assistance of the K.S.R.D.B. The study has revealed that schemes executed by the
K.S.R.D.B. from 1980 are comparatively non-remunerative often landing Panchayats in
an unfortunate situation in which they have to divert their hard-earned tax revenue for
repayment of instalmnents of loan to the Rural Development Board.

4.23. Considering the fact that Banks in the Nationalised and Cooperative sector offer
attractive rate of interest on long term investment it has to be concluded that unless
returns at least at tje rate of 12% per annum on the capital invested by the Panchayat i

63
received back by way of rent etc. the enterprises cannot be considered as remunerative.
Viewed from the above perspective an analysis of the cost benefit factor made reveals
that remunerative enterprises undertaken prior to 1980-81 are profitable except in one or
two cases while income derived on schemes executed from 1980-81 are not only
inadequate to meet even the repayment of loans but also disappointing from the point of
view of 12% returns per annum on investment. Table below explains the above position.

TABLE

Statement showing Profit/Loss in certain schemes executed by the Rural

Development Board

12%
Income return Profitable
Capital
Name of Name of Year of during on or not with
cost
Panchayat Scheme completion 1983-84 capital reference to
Rs.
Rs. cost col. 6
Rs.
A. SCHEMES EXECUTED PRIOR TO 1980-81
Shopping
1. Anchal 1977 4,54,700 66,700 54,564 Profit table
complex
Shopping
2. Adoor complex at 1975 1,52,200 57600 18264 Profit table
Parakode
Shopping
3. Ollur 1978 80400 17600 9648 Profit table
centre
Shopping
4. Nemmara 1975 44100 22300 5292 Profit table
complex
Shopping
5 .
centre cum 1979 1337000 537200 160440 Profit table
Perinthalmanna
bus stand
6. Shopping
1980 402400 59920 48288 Profit table
Parappanangadi complex
7. Muttom
(Idukki Market stall 1977 8250 4700 9900 Loss
District)
B. SCHEMES EXECUTED FROM 1981 ONWARDS
Shopping
1. Ulloor centree at 1982-83 475600 18400 57072 Loss
Mannanthala
Shopping
centre at
2. Adoor 1983-84 1090400 48000 130848 Loss
Sreemoolam
centre

64
 Shopping
3. Vandiperiyar 1981 1115600 22400 133872 Loss
centre
Shopping
4. Quilandy centre Bus 1982 1805000 169200 216600 Loss
stand
Shopping
5.
center at 1983 619600 55600 74352 Loss
Sakthikulangara
Kavanad
Shopping
6. Chirakkal centre & 1981-82 738400 72000 88608 Loss
Market
7. Shopping 20 lakhs 120000
1985 240000 Loss
Mundakkayam centre (Approx.) (Approx.)

4.24. In the case of Muttom Panchayat in Idukki District the loss, it is stated, is attributed
to the selection of locality where the market stalls are constructed. The proximity of
Thodupuzha town is stated to be another factor for the loss. Opinion expressed by the
Presidents and Executive Officers generally indicate that at present schemes are executed
in such a manner that on completion they find it an unbearable burden to the Panchayat.
Their views can be summarised as follows:-

1. Exorbitant rate of centage charges levied by the Kerala State Rural Development
Board.

2. Selection of sites are often made on pressures and sites so selected are not conducive
for shopping activities.

3. Once the work is started the Panchayat is not consulted on alternations, deviations and
other structural changes which involve considerable additional financial commitment.

4. Avoidable time lag between the commencement and completion of work resulting in
increase in the cost of materials warranting frequent revision in estimates.

There is majority opinion among Presidents and Executive Officers that the work can be
carried out more efficiently, economically and quickly if it is entrusted to the Panchayat
itself, under the guidance and supervision of the Local Bodies Engineering Wing
constituted by the Government for the public works of local bodies. In support of their
argument they have pointed out that remunerative enterprises in Municipal areas are
being executed by the Municipalities temselves with financial assistance from Kerala
Urban Development Financial Corporation. Many Presidents and Executive Officers have
urged for adoption of a similar method in the matter of execution of remunerative
schemes by Panchayats.

4.25. The Commission is of opinion that remunerative enterprises originally intended as a

boon to the Panchayats should not become a curse and an unbearable burden to them. At
the same time it is not wise to abandon the venture altogether on grounds that the

65
schemes executed after 1980-81 are uneconomical. Wisdom consists not in retracting
from challenges and problems but in devising ways and means to harness them. With this
perspective in mind the Commission would recommend that the system of remunerative
enterprises should be redesigned in such a way that the Schemes should indeed be
remunerative to the Panchayats. Government may take appropriate steps in the matter.
Further the Kerala State Rural Development Board may be provided with more powers
and opportunities to enlarge the scope for availing more and more institutional finances
with a view to providing adequate financial assistance to the needy Panchayats to
undertake remunerative enterprises.

CHAPTER V GRANTS

5.1. Altogether there are 26 types of grants that are being sanctioned by the Government
to the Panchayats in the State. According to information available with the Commission
no other State Government in India is providing grants for so much items as our State
Government is providing. Of the 26 items of grants mentioned below 3 are statutory in
nature. These 3 items of grants are taxes collected by the State Government and assigned
to them in the form of grants. Details of the grants are mentioned below:

Name of Grant Head of debit of expenditure in the State

Budget

A. STATUTORY GRANT

(Tax levied by the Government and assigned to Panchayats in the manner laid down in
the statutes)

Duty on Transfer of 030 Stamps & Registration C(d) Payment to Local Bodies
1.
Property of net proceeds of Duty on Transfer of Property.
314 (A) (c) Other Expenditure Basic Tax Grant to
2. Basic Tax Grant
Panchayats.
Motor Vehicle Tax 363 (a) Taxes on Vehicles Compensation & Assignment to
3.
Compensation Grant Local Bodies.

66
B. NON STATUTORY GRANT

1. Special Grant
2. Building Grant
3. Establishment Grant
4. Establishment Grant as per audit report.
5. Initial Grant 314 A General (c)
6. Block Grant Other Expenditure-
7. Ad hoc grant Assistance to Panchayats.
Matching Grant to meet pay and allowances
8. of the conservancy staff transferred from
Public Health Department
9. Ferrymen Grant
Matching grant for maintenance of water
10.
supply scheme.
Grant for opening and maintenance of 314 C Rural Works Programme (a)
11.
burial and burning grounds. Water Supply & Sanitation.
Grant for construction of drains and latrins
12.
in Panchayats
314 C Rural Works Programme (b)
13. Minor Irrigation Grant
Minor Irrigation
314 C Rural Works Programme (c)
14. Village Road Maintenance Grant
Roads.
Grant for Maintenance of Railway level 314 C Rural Works Programme (c)
15.
crossings Roads.
314 C Rural Works Programme (e)
16. Grant for lighting of Public Roads
Other Expenditure.
314 A General (c) Other Expenditure
Seven Point Programme Grant (Grant for
17. Grant to Panchayats for Developmental
Developmetal activities)
activities.
Grant to Panchayats for providing 314 A General (c) Other Expenditure
18.
environmental amenities for the poor Environmental amenities to the poor.
314 A General (c) Other Expenditure
Grant to Panchayats for Special Component
19. Environmental amenities to the poor
Programme
Special Component Plan.
314 A General (c) Other Expenditure
Grant under Special Component Scheme for
20. Environmental amenities to the poor
the Scheduled Tribes
Tribal Sub Plan.
Grant for Welfare of Scattered Scheduled 314 A General (c) Other Expenditure
21.
Tribes Dispersed Tribes.
277 G (c) Sports & Games Acquisition
Sports & Games Grant (for construction of
22. and Improvements Play grounds for
Play ground)
Sports and games.
278 (b) Promotion of Arts & Culture-
23. Open Air Theatre Grant
Grant in Aid for Open air Theatre in

67
 Rural Areas.

5.2. Basis, rate, general conditions for payment etc. of the grants are dealt with in the
ensuring paras.

A. STATUTORY GRANTS

1. DUTY ON TRANSFER OF PROPERTY

5.3. According to Section 71 of Kerala Panchayat Act, 1960 'Duty' at a rate not exceeding
4% in the form of a surcharge on the stamp duty imposed under the Kerala Stamp Act,
1959 shall be levied on certain transfers of property in the Panchayat areas. This duty is
levied by the Registration Department and the amount collected during each quarter is
transferred to Panchayats after making a deduction os 3% of proceeds as collection
charges by the Registration Department. Intimation regarding the amount payable to
Panchayats in each taluk will be sent by the Inspector General of Registration to the
Director of Panchayats within 2 months after the close of each quarter. The Director of
Panchayats will allot 75% of the collection from each taluk to the Panchayats in that
Taluk in proportion to the population of Panchayat according to the latest census figures.
The remaining 25 per cent of the collection will be distributed to the Panchayats in the
taluk in such proportion as may be fixed by the Director of Panchayats having regard to
area, available resources, and needs of development of the Panchayat and the cost of
Panchayat administration.

5.4. This grant is the biggest source of income for Panchayats. Total receipts under "Duty
on Transfer of Property" compare with the receipt under 'Building Tax' over the last five
years as follows:-

(Rs. in lakhs)

1979-80 1980-81 1981-82 1982-83 1983-84

1. Duty 75% 435.05 427.98 514.42 488.83 514.62
2. Duty 25% 113.65 101.74 137.42 132.85 136.89
Total Duty 548.70 529.72 651.84 621.68 651.51
2.Building Tax 311.77 317.29 356.21 401.33 608.92

5.5. Receipts of Panchayats by way of per capita distribution of 'Duty' (ie. duty under 75
per cent category) rose from Rs. 435.05 lakhs in 1979-80 to Rs. 514.62 lakhs in 1983-84.
Growth within the above 5 year period works out to 18% only. Similarly growth in the
case of discretionary grant made out of 25% duty is 20% only. The combined rate of
growth of two categories (75% + 25%) from 1979-80 to 1983-84 is nearly 19% which
indicate that the annual growth rate is below 5%. This shows that inspite of the abnormal
increase in the market value of lands and buildings the yield by way of Stamp duty id
comparatively less. The reason for this low rate of growth in receipt of Stamp Duty is
squarely attributable to the prevalance of under valuation of properties at a rampant scale.

68
Having realised the need for curbing this practice which is causing heavy loss to the State
exchequer, the Hon'ble Minister for Finance has announced in the Budget Speech, 1985-
86 that steps will be taken to fix fair value of properties on the basis of yield, location and
other factors. The revenue from this source is surely to go up with the introduction of the
new system of valuation of property under consideration of Government.

5.6. The receipts of Panchayats under 75% category of 'Duty' during 1983-84 are
maximum in Trichur District (Rs. 77.16 lakhs) followed by Quilon District (Rs. 59.31
lakhs) & Trivandrum District (55.93). District wise details of distribution of 'Duty' are
furnished in Table given below:

TABLE

Statement showing District-wise Distribution of duty on Transfer of Property for

the period from 1979-80 to 1983-84

(Rs. in lakhs)

Sl. Name of
No.of 1979-80 1980-81 1981-82
No. District
Panchayats
75% 25% Total 75% 25% Total 75% 25% Total
1 Trivandrum 84 51.98 12.25 64.23 58.68 12.69 71.37 59.74 16.49 76.23
2 Quilon 75 73.84 14.94 88.78 50.30 15.46 65.76 57.30 17.21 74.51
3 Pathanamthitta 55 .. .. .. 27.92 6.51 34.43 38.46 10.68 49.14
4 Alleppey 69 38.04 10.01 48.05 27.53 8.07 35.60 30.54 7.47 38.01
5 Kottayam 73 33.48 10.93 44.41 35.48 10.28 45.76 40.87 11.26 52.13
6 Idukki 51 22.06 5.11 27.17 24.38 2.15 26.53 20.01 2.49 22.50
7 Ernakulam 86 39.09 11.83 50.92 41.14 11.15 52.29 52.91 16.20 69.11
8 Trichur 98 46.88 13.68 60.56 52.15 11.87 64.02 58.09 15.50 73.59
9 Palghat 91 16.45 5.66 22.11 26.49 6.92 33.41 33.28 10.44 43.72
10 Malappuram 95 25.98 7.87 33.85 23.13 4.85 27.93 36.99 8.58 45.57
11 Kozhikode 77 40.87 9.66 50.53 24.65 4028 28.93 25.09 7.54 32.63
12 Wynad 25 .. .. .. 9.96 1.53 11.49 12.66 2.30 14.96
13 Cannanore 85 46.38 11.71 58.09 18.50 4.39 22.89 34.26 6.95 41.21
14 Kasaragode 37 .. .. .. 7.67 1.59 9.26 14.22 4.31 18.53
Total 1001 435.05 113.65 548.70 427.98 101.74 529.72 514.42 137.42 651.84

TABLE (Contd)

69
Statement showing District-wise Distribution of duty on Transfer of property for
the period from 1979-80 to 1983-84

1982-83 1983-84
Sl. No. Name of District No. of panchayats
75% 25% Total 75% 25% Total
1 Trivandrum 84 66.20 16.64 82.84 55.93 17.36 73.29
2 Quilon 75 53.96 16.12 70.08 59.31 16.75 76.06
3 Pathanamthitta 55 33.72 11.03 44.75 35.10 8.08 43.18
4 Alleppey 69 27.60 9.67 37.27 32.51 8.45 40.96
5 Kottayam 73 38.05 11.17 49.22 35.41 10.25 45.66
6 Idukki 51 16.21 1.78 17.99 12.05 1.17 13.22
7 Ernakulam 86 49.61 12.91 62.52 41.41 14.67 56.08
8 Trichur 98 55.03 17.22 72.25 77.16 16.71 93.87
9 Palghat 91 35.89 10.34 46.23 32.65 11.56 44.21
10 Malappuram 95 32.11 8.82 40.93 41.44 7.81 49.25
11 Kozhikode 77 29.58 5.78 35.36 27.92 7.98 35.90
12 Wynad 25 7.53 0.81 8.34 12.51 3.33 15.84
13 Cannanore 85 29.58 6.76 36.34 35.65 7.60 43.25
14 Kasargode 37 13.76 3.80 17.56 15.57 5.17 20.74
Total 1001 488.83 132.85 621.68 514.62 136.89 651.51

5.7. As already mentioned 97% of the collection from 'Duty on Transfer of Property" is
distributed to the local bodies, the balance 3% being credited to Government account
towards collection charges. According to the existing principle of distribution of the share
of 'Duty on Transfer of Property 75% of the duty collected from all the Panchayats in a
taluk is to be distributed among the Panchayats in that taluk itself on per capita basis. The
remaining 25% of the 'Duty' is also to be distributed among the Panchayats in that taluk
on a discretionary basis as mentioned under para 5.3.

5.8. During collection of evidence Ex- Presidents, Ex-Members of Panchayats and other
Publicmen have made a strong plea for changing the existing patern of distribution of
assigned revenues to Panchayats: their arguments may be summarised as follows:-

(a) There shall be no apportionment as 75% on population basis and 25% for
developmental purposes for Panchayats in the respective taluk itself.

(b) Entire receipts from each Panchayat towards Duty on Transfer of Property should be
made available to the concerned Panchayat instead of the existing system of pooling it
taluk-wise.

(c) Per capita distribution if 'Duty" to each Panchayat should be made from the total
collection in the Sate instead of the collection from each taluk as is being done at present.

70
5.9. In support of their views expressed at (a) above they have alleged that very often
political and other extraneous considerations play a vital role in the distribution of
discretionary share (25%) of the duty, depriving less influential Panchayats of their
legitimate share. It is true that exercise of powers on discretionary basis may sometimes
give room for complaints. But it is no advisable to give up a well-intentioned provision in
the Act stipulating weightage to under-developed Panchayats in sharing the State
revenue. The provision is meant to help the poor, under developed and needy Panchayats
which are also expected to come to the level of other developed Panchayats. The
Commission is therefore, in favour of the existing system of setting apart 25% of the
'Duty' for development of backward Panchayat by means of Special Grant.
Discrimination, if any, in the matter of distributiin of the 25% share, as alleged by the
representatives of Panchayats, can be set right by devising more fool proof methods
instead of sacrificing a well intentioned principle. To avoid such allegations we have
elsewhere in the report suggested a method for utilising the above 25% share as 'Special
Grant'.

5.10. The plea for assignment of the entire proceeds form a particular Panchayat to that
Panchayat itself runs counter to the principles upheld by our State Government in matters
relating to sharing of Central taxes among the States in India. The State Government have
been consistently arguing before all the past Finance Commissions that in the matter of
sharing of taxes weightage should be given to population and not to 'Collection'.

The relevant extract from the Memorandum submitted by our State Government to the
Eights Finance Commission is extracted below:

"The next question relates to the principles of inter so distribution amongst the State.
Traditionally, in the distribution of income tax shares among the States inter se a
weightage has been given to the contribution to income tax revenues from each State.
The other factor in the distribution formula has been population. In the criteria for
distribution recommended by the past seven Finance Commissions, contribution has been
assigned a weightage of either 10 per cent or 20 per cent. Four Commissions incuding the
last three Commissions recommended a weightage of 10 per cent to contribution and 90
per cent to the factor of population. We feel that in distributing a compulsorily sharable
tax like income tax in a country like India where there are wide inter-regional income
disparities, there is no question of any compensation or reimbursement principle coming
into play, as was observed by the First Finance Commission, though that Commission
ultimately gave a weightage of 10% to the factor of collection taken to represent
contribution. The other Finance Commissions supported the factor of collection on the
basis that industrially advanced State have to face many problems and responsibilities
connected with urbanisation and concentration of population in big cities and the
agricultural State could tax income from agriculture which comes within the purview of
the State. These arguments do not have much of weight in as much as industrially
advanced states also derive many revenue benefits by way of larger collections from
State taxes like Sales Tax, Stamp Duties, Entertainment Tax, Motor Vehicle Tax etc. The
State Government are strongly of the view that "Collection" should be not a factor in the
distribution of Income Tax. If a common formula for Income Tax and Excise duties is not

71
found acceptable for any reason, we would suggest as a second best solution that the
share of States in the divisible pool of Income Tax be wholly distributed on the basis of
population".

5.11. The present practice of taluk-wise distribution of the 'Duty' is therefore against the
stand taken by the State Government in the matter of sharing of central taxes among the
States. While furnishing replies to the questionnaire from the Sarkaria Commission on
Central State Relations, our State Government have stated that the principle of "inter-
state distribution should be such that advanced States are not left with large surpluses".
Under the existing practice of distribution of the 'Duty' on the basis of taluk-wise
collection, certain Panchayats located in high income areas are benefited too much while
other Panchayats in low income areas are getting only small allocations for no fault of
them. This uneven distribution of 'Duty' has created grave imbalances between
Panchayats in the matter of sharing of State revenue. For example in Trivandrum and
Quilon Districts where the total number of Panchayats in each of the above 2 districts is
less than the number in Palghat, Malappuram and Cannanore districts the above two
districts (Trivandrum & Quilon) have got almost double the share than the three malabar
districts mentioned above during the three year period from 1981-82 to 1983-84 vide
details furnished belws:

Total share under Duty received

Total No. of Percentage to total
District from 1981-82 to 1983-84 (Rs. in
Panchayats proceeds distributed
lakhs)
Trivandrum 84 232.36 12.07%
Quilon 75 220.65 11.46%
Palghat 91 134.16 6.97%
Malappuram 95 135.75 7.05%
Cannanore 85 120.80 6.27%

In a district itself there is uneven distribution. For example during 1981-82 Panchayats in
Nedumangad Taluk in Trivandrum District have got only Rs. 16 lakhs while the
Panchayats in Trivandrum Taluk got around Rs. 30 lakhs. This disparity is more in
evidence in northern districts of the State.

5.12. As a matter of fact Duty on Transfer of Property is an income of the State

Government which is assigned to the local bodies to argument their resource position.
The local bodies in the State do not have any effort in the levy and collection of this item
of tax. Therefore this tax levied by the State should be assigned to the local bodies on
sound and national principles of equitable distribution. The objective of an equitable
distribution of Government revenue among the Panchayats could be best achieved only
by distributing the total collection of the State on population basis of the Panchayats after
setting apart the portion (ie. 25%) meant for uplifting backward Panchayats.

5.13. The Commission would therefore recommend that out of the total proceeds under
'Duty on Transfer of Property' made available to Panchayats from the Registration

72
Department 75% should be distributed to all Panchayats on population basis instead of
taluk-wise distribution. This grant may be paid rounding it to the nearest hundred
ignoring amounts below Rs. 50. Relevant provision in the Act and Rule may be amended
suitably for this purpose. The procedure recommended besides simplyfying the existing
system will ensure equitable distribution and timely disbursement of grants and tereby
ease the financial burden of Panchayats in providing civic amenities to the public.

5.14. According to our estimate on the basis of the receipts assumed in the Revenue
Budget 1985-86, 75% of the share of Duty on Transfer of property would come to around
rupees five crores. In that case a Panchayat having a population of 10000 will get a
minimum share of Rs.25000 per annum on the basis of per capita distribution suggested
by us . This will be an assured income. Incidentally it is pointed out that there are only 30
Panchayats in the State having population less than 10000. The remaining 971 Panchayat
are also likely to get share ranging from Rs. 25000 to Rs. 2 lakhs depending on 'Duty'
collected by the Government. The magnitude of services and providing amenities by
Panchayats is related to the size of the population. The new system of distribution of
assigned revenue on population basis suggested by us would certainly benefit many of
the bigger Panchayats which are not getting adequate share of assigned revenue from
Government to meet obligatory functions due to the fact that tax collection in a taluk is
very low on account of its backwardness. Ass regards balance 25% we have suggested to
distribute it as 'Special Grant' vide paras 5.23 and 5.64.

2. BASIC TAX GRANT

5.15. This is a grant to the Panchyats in lieu of basic Tax collected by the Revenue
Department under the provisions of Kerala Land Tax Act, 1961. By Section 67 of Kerala
Panchayat Act, 1960 Government are required to pay annually to each Panchyat in the
State a grant equal to three fourths of the amount of Basic Tax collected by the
Government in the last preceding year from the Panchayat area. The Government is also
required to pay to the Panchayats a grant, the aggregate of which is equal to the balance
of the Basic Tax collected by the Government in the last preceding year from all lands in
the State in such proportion as may be decided by the Government having regard to the
area, population, available resources and the needs of development of the Panchayats and
the cost of administration. The amount of Basic Tax Grant available for distribution for a
year is the amount equal to the total collection of the Basic Tax in the preceding year less
3% of proceeds towards collection charges to be credited to the account of the Revenue
Department.

5.16. In 1962, the Kerala High Court had struck down, Kerala Land Tax Act, 1961 being
unconstitutional. Later the above Act was got included in the Ninth Schedule to the
Constitution and this made levy of Baisc Tax legally valid. Basic Tax grant Rules for the
Panchayats came onto force from 1-1-1978 only. Basic Tax was levied data uniform rate
of 2 paise percent ie. Rs.4.94 per hectare per annum throughout the State till 31-3-1983.
From the financial year 1983-84 onwards, as against the then existing rate of Rs. 4.94 per
hectare, Basic Tax was enhanced to Rs. 20 per hectare per annum in the case of holdings
of one hectare and above however in the case of land the annual income from which is

73
below Rs. 100 per hectare, Basic Tax has been fixed as one fifth of that amount. There is
no minimum or maximum rate. Further, unlike other States no surcharge on Basic Tax is
being levied in our State.

5.17. Though the Panchayats were entitled to Basic Tax Grant from 1-1-1978, grant for
the respective years could not be paid to the Panchayats by the Director of Panchayts for
want of details from the District Collectors regarding Panchayat-wise actual collection of
Basic Tax by the Revenue Department, in each taluk. According to information gathered
from the directorate of Panchayats, above grant could be paid to 511 Panchayats only as
indicated below till the end of 1983-84.

No.of Panchayats to Period for Amount paid till

Name of District which grant was which grant 31-3-1984 (Rs. in
paid was paid lakhs)
Quilon (including Panchayats
1-1-1978 to 31-
1. since added to Patanamthitta 104
3-1981
District)
1-1-1978 to 31-
2. Eranakulam 86
3-1981
1-1-1978 to 31-
3. Palghat 89
3-1981
Rs.146.77 lakhs
1-1-1978 to 31-
4. Wynad 17
3-1981
1-1-1978 to 31-
5. Malappuram 93
3-1979
Cannanore (including
1-1-1978 to 31-
6. Panchayats since transferred 122
3-1982
to Kasargode District)
Total 511 Rs.146.77

5.18. 4 90 number of Panchayats did not receive grant till the above period. Even in the
case of above 511 Panchayats, arrears, for the remaining period were also pending
disbursement as at the end of 1983-84. Non-availability of details of Panchayat-wise
collection of Basic Tax from the District Collections had effected timely disbursement of
Basic Tax Grant due to Panchayats. Besides, restriction in withdrawal of money from the
treasury as a part of economy measures enforced by the Government during 1983-84 had
also resulted in the non-payment of grant.

5.19. As a remedy to avoid delay in disbursement of grant for the Basic Tax collected
during previous year, organisations of employees of Panchayats had suggested during
evidence collection, for entrustment of work of collection of Basic Tax to the respective
Panchayats instead of the Revenue Department. The estimate Committee (1982-84) in
their Ninth Report of 1984 had also recommened for transfer of above work to
Panchayats vide para 28 of Ninth Report of Estimate Committee (1982-84) of the

74
Seventh Kerala Legislative Assembly. But the Commission is not inclined to agree with
the above suggestions due to the following reasons.

(1) It will not be possible for the Revenue Department to transfer the land records
available with them to Panchayats as those records will be required by the Revenue
Department for various purposes as part of their statutory functions and duties.

(2) Preparation of duplicate records for the purpose of collection of Basic Tax, though not
impossible, is a tedious and time consuming job.

(3) Entrustment of collection work to Panchayat will definitely necessitate appointment

of additional staff to cope with the volume of work resulting in additional expenditure to
Panchayats many of which are not having adequate funds even to maintain existing
services satisfactorily.

5.20. Information gathered by the Commission shows that all States in India with the
exception of one State viz. Gujarat are collecting Basic Tax (Land Revenue) directly. The
Commission would therefore suggest that the existing system of levy of Basic Tax by the
Revenue Department may continue. The delay in disbursement of grant should however
be eliminated by devising suitable methods.

5.21. As already pointed out 75% of Basic Tax collected from each Panchayat in the
preceding year has to be assigned to the concerned Panchayat and the remaining 25% as
Special Grant to the Panchayats in the State with due regard to need of development etc.
Many Panchayats in the State are not co-terminus with villages. Certain Panchayats have
jurisdiction over more than one village and in some cases parts of a village will be in
more than one Panchayat. This involves administrative difficulties on the part of Revenue
Officials in preparing Panchayat-wise statement of collection of Basic Tax because they
are having only village-wise accounts, whereas the Department of Panchayats need
Panchayat area-wise collection statement to enable them to distribute the 75% of the
Basic Tax to the concerned Panchayat on collection basis. The preparation of Panchayat-
wise statement of collection by the personnel of Revenue Department was one of the
causes that have contributed to the delay and resultant non-payment of dues pertaining to
the period from 1-1-1978 onwards. Simplification of the existing procedure for
distribution of basic Tax Grant will eliminate the bottlenecks. Accordingly, the
Commission would suggest that the present practice of preparing Panchayat-wise
accounts of collection and distributing the amount to the respective Panchayats on
collection basis should be dispensed with. Instead, out of total amount payable (ie. total
collection of basic tax in the State less collection charges) 75% should be distributed on
per capita basis to all Panchayats in the State for the very same reason mentioned in the
case of distribution of 75% 'Duty on Transfer of Property'. This grant may be paid to the
nearest hundred rupees ignoring amount below Rs. 50. Provision under Section 67 (1) of
Kerala Panchayat Act, 1960 may be suitably amended. Balance 25% may be distributed
as 'Special Grant' for development of poor Panchayat as suggested under para 5.64.

75
Distribution of 25% of the Assigned Revenue viz. Duty on Transfer of Property and
Basic Tax

5.22. We have already pointed out that according to provision in the Act, 25% each of the
receipts under 'Duty on Transfer' and 'Basic Tax' should be set apart for sanctioning
'Special to Panchayats to meet their developmental needs.

5.23. The Commission would suggest that the amount payable under 25% may be
initially transfer cerdited to a P.D. Account viz, 'Panchayat Special Grant Fund' from
which adequate amounts may be released to Panchayats for their developmental needs as
and when need arises. Our specific recommendation on the utilisation of the amount
under the above found are made in the ensuing para relating to Special Grant vide para
No. 5.64.

3. VEHICLE TAX COMPENSATION

5.24. This grant is being sanctioned to the Panchayats under Section 19 of Kerala Motor
Vehicle Taxation Act 1976. Above section reads as follows:-

"From the proceeds of the tax collected under this Act every year there shall be paid to
each local authority such compensations as may be fixed by Government in accordance
with such principles as may be prescribed".

5.25. Principle laid down for payment of compensation to local authorities under Rule 11
of K.M.V. Taxation Rules 1976, is as follows:-

" The expenses for collecting the tax and the cost incurred by the Government in
exercising their administrative functions in regard to the control of motor vehicles, shall
be deducted from the tax collected for the year and the balance divided between the
Government and local authorities based on recommendations of a Committee to be
appointed, by the Government for the purpose. The decision of the Government on the
recommendation of the Committee appointed by the Government under the above Rule,
for fixing the amount of Vehicle Tax Compensation payable to the local bodies for the
five year period from 1-4-1978 to 31-3-1983 had recommended to Government for
payment of 10% of net vehicle tax collected by the Government to the bodies in
proportion to length of roads maintained by each local body and the nature (type) of such
roads. Though Government issued orders on 21-5-1984 for payment of share of tax on
the above basis with arrears from 1-4-1978 to 31-3-1983, arrears amounting to Rs. 127.34
lakhs were not paid to the Panchayats till the end of 1984-85. For payment of
compensation (grant) for five year period from 1-4-1983, Government have already
appointed a Committee headed by Transport Commissioner and the report of the
Committee is pending finalisation. As regards compensation due for the year 1983-84
Government had ordered to pay ad hoc compensation amounting to Rs. 33.36 lakhs in
G.O. No. 624/84/ transport (C) department dated 28-9-1984. This amount was also not
disbursed till 31-3-1985 due to ban on treasury payments ordered by Government as a
part of economy measures. Thus an amount of Rs. 160.70 lakhs towards arrears of

76
Vehicles Tax Compensation sanctioned by the Government for the period upto 31-3-1984
is outstanding payments to Panchayats as on 31-3-1985.

5.26. Vehicle Tax Compensation is a statutory item of grant which shall due to the
Panchayats every year on the basis of vehicles tax collection in the preceding year. But
this is not being made available to the Panchayats during the year in which it is due for
one reason or other. Most of the Panchayats in the State are badly in need of resources to
carry out their on-going road development programme as well as maintenance of
motorable roads. Delayed receipt of grant will invariably affect the above activities of the
Panchayats. Moreover lapse of time will lead to escalation of cost of estimates and upset
the programmes of Panchayats originally planned for road maintenance. In the result the
grants received will become to inadequate for the purpose for which it is meant.

5.27. The Commission would therefore recommend to Government to evolve a system of

payment by which above grant pertaining to preceding year is paid to the Panchayats
during next financial year itself. V.T.C. may be disbursed at 90% of old rate for a year
pending finalisation of the recommendation of the Committee appointed for determining
the share payable to local bodies for the five-year period. This 90% may be disbursed to
the panchayats during every year in July. If there is any difficulty in releasing the amount
in lump, Government may consider the disbursement in two instalments, one in July and
the other in January every year. Such an arrangement will enable the Panchayats to draw
up estimates and execute the works in time and avoid rush of expenditure at the fag end
of the financial year.

B. NON STATUTORY GRANTS

1. SPECIAL GRANTS

5.28. This grant is sanctioned for the following purposes.

(i) Construction and extension of Panchayat office building.

(ii) Construction of hospital buildings for providing additional wards to hospitals etc.

(iii) Rural Water Supply Contribution.

(iv) Construction of school buildings.

(v) Satisfying court decrees.

(vi) Construction of bridges including foot bridges and civil works.

(vii) Conduct of Ferry Services.

(viii) Acquisition of land for development schemes like Market, play grounds, Park,
waiting shed, Balawadies, Community Hall, Library building etc.

77
(ix) Providing drainage facilities.

(x) Acquisition of land for burial grounds.

(xi) Construction of new roads and for giving local contribution for such works.

(xii) Flood relief works.

In G.O. (Rt) No. 677/80/LA & SWD dated 11-3-1980 Government have laid down
following norms for sanctioning the Special Grant to Panchayats:

(i) Backwardness of the area in development activities.

(ii) Financial position of Panchayats.

(iii) The maximum special grant that will be granted to a Panchayat in a particular year
for all or any purpose shall not exceed Rs. 25000

(iv) A Panchayat may not be considered for sanctioning the grant for more than 3
purposes in an year.

(v) Panchayats which have not received any special grant during the last 5 years may be
given preference.

5.29. During the last 3 years special grant had been sanctioned to the Panchayats as
follows:-

Year No. of Panchayats to which grant was sanctioned Amount (Rs. in lakhs)
1982-83 323 52.00
1983-84 445 48.00
1984-85 406 62.41

5.30. The subject committee on Local Administration had recommended for payment of
special Grant to all the Panchayats at 25000 per annum. To implement the above
recommendation, a provision of Rs. 250.25 lakhs per annum will be required. But the
provision made in the Budget (1985-86) for all the first 8 items (including Special Grant)
mentioned under non statutory grant (vide para 5.1) is Rs. 160 lakhs only. Hence due to
paucity of funds Panchayats Department could not implement the above recommendation
so far.

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2. BUILDING GRANT

5.31. This is granted for construction of building to those Panchayats which do not have
own office building and also for the purpose of extension of office building. Maximum
amount of grant has been restricted to Rs. 15000 at a time. There is no for granting it for
more than one occasion. Further, Panchayats can avail grant for the same purpose under
the 'Special Grant Rules' also. Assistance given on this account during the last 3 years is
as follows:-

Year No. of Panchayat Amount (Rs. in lakhs)

1982-83 54 8.10
1983-84 75 9.00
1984-85 73 8.20

As at the end of 1984-85. there are Panchayats in the which do not have own office
building.

3. ESTABLISHMENT GRANT

5.32. This is paid to 1st, 2nd and 3rd Grade Panchayats as follows:-

I & II Grade Panchayats To meet establishment cost in excess of 40%

of normal income.

III Grade Panchayats To meet the establishment charge in excess

of 25% of their normal income.

Of the amount due to each Panchayat, 75% is initially paid by the Director of Panchayats.
Balance 25% will be paid later Audit of accounts. Annual requirement on this account
would come to around Rs. 60 lakhs.

4. ESTABLISHMENT GRANT AS PER AUDIT REPORT

5.33. Increase in D.A. sanctioned to Government employees automatically applies to the

employees of the local bodies also. But Government are not paying any assistance to the
Panchayats for the increase made after 1-7-1973. For the increase in D.A. sanctioned
prior to 1-7-1973, arrears of grant is being paid to the Panchayats after Audit by the
Examiner of Local Fund Accounts. Similarly balance 25% of Establishment grant
mentioned under item 3 above is also paid after receipt of Audit Report. Annual
expenditure for payment of this grant would come to nearly Rs. 2 lakhs.

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5. INITIAL GRANT

5.34. This grant is being sanctioned to the newly constituted Panchayats to meet heir
initial preliminary expenses. Normally an amount of Rs. 10000 is sanctioned to each
newly constituted Panchayats.

6. BLOCK GRANT

5.35. This grant is being paid to all 3rd grade Panchayats irrespective of their annual
income and also to those 2nd grade Panchayats who are having minus fund balance, at the
following rates

Grade Rate

Grade III Panchayats Rs. 10000 per annum

Grade II Panchayats Rs. 5,000 per annum

Special Grade and I Grade Panchayats are not eligible for he above grant. Annual
requirement is arround Rs. 10. lakhs.

7. ADHOC GRANT

5.36. This is being sanctioned to financially poor Panchayats to meet unforeseen

expenditure. No grant in this account was paid during 1983-84 and 1984-85.

8. MATCHING GRANT TO MEET PAY AND ALLOWANCES OF

CONSERVANCY STAFF TRANSFERRED FROM PUBLIC HEALTH

5.37. Expenditure incurred by the Panchayats under the above account is being
reimbursed by the Government in the form of grant. Expenditure would come to around
Rs. 3.25 lakhs annually.

9. FERRYMEN GRANT

5.38. Expenditure incurred by the Panchyats towards pay and allowances of Ferrymen
transferred from the P.W. Department to the Panchayats is being reimbursed by the
Government by means of above grant. Annual expenditure on this account would come to
around Rs. 1.10 lakhs.

10. MATCHING GRANT FOR MAINTENANCE OF WATER SUPPLY SCHEME

5.39. This grant is being paid to meet maintenance cost of water supply schemes in
Panchayat area maintained by the P.H.E.D. (now Kerala Water and Waste Water
Authority). Amount of grant is restricted to expenditure in excess of 121/2% of normal
income of the Panchayat. For want of adequate funds in the Budget this grant is not being

80
paid to all the eligible Panchayats. In recent times, more water supply schemes have been
commissioned. According to requirement assessed by the Panchayat Department, a sum
of Rs. 15 lakhs will be required annually for payment of above grant as against Rs. 10
lakhs provided in the Budget 1985-86.

11. GRANT FOR THE CONSTRUCTION AND MAINTENANCE BURIAL AND

BURNING GROUNDS

5.40. No rate has been fixed for payments of this grant. This grant is being sanctioned
according to availability of funds. During the five year period from 1979-80 to 1983-84
budget provision for each year was Rs. 0.75 lakhs and this amount had been fully paid to
the Panchayats. Under Seven point Programme 132 burning and burial grounds have
been newly constructed during Sixth Five Year Plan period, making the total No. of
public burning/burial grounds to 267 as at the end of 1984-85. For payment of
maintenance grant to above 267 public burning/burial grounds at least an amount of Rs.
12 lakhs will be required annually. It is also noticed that Panchayats are getting grant for
acquisition of land and construction of burning/burial grounds under 2 other grant-in-aid
schemes also viz. "Special Grant" and "Seven Point Programme Grant" mentioned
against Sl. Nos. 1 and 17 respectively under Non-Statutory Grants (vide para 5.1).

12. GRANT FOR CONSTRUCTION OF DRAINS AND LATRINES

5.41. No specific rate had been fixed for the payment of this grant. This grant is being
sanctioned based on requirements of Panchayats and subject to availability of funds in the
Budget. During the last 5 years provision made in the budget was Rs. One lakhs for each
year and this amount had been fully paid to the Panchayats though requirements were
much above.

13. MINOR IRRIGATION GRANT

5.42. This grant is being sanctioned for maintenance of Minor Irrigation wporks under
the control of Panchayat on the basis of the benefited area. The rate fixed is Rs. 10 per
acre of benefited area vide G.O. (MS) 302/80/AD dated 8-8-1980 from Agriculture (M.I)
Department. But since Government did not provide funds to the extent required on the
basis of above rate grant could be paid only at the rate of Rs. 6 per acre during 1982-83
and at Rs. 3 per acre during 1983-84. Total benefited area in the Panchayat for which
grant has to be paid is about six lakhs acres according to details made available by the
Panchayats Department. On that basis annual requirement is Rs. 60 lakhs. But
Government have provided only a sum of Rs. 31.25 lakhs in the Budget 1985-86 for the
above purpose.

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14. VILLAGE ROAD MAINTENANCE GRANT

5.43. This grant is being sanctioned to the Panchayats for maintenance of village roads
under the control of Panchayats. Roads for which vehicle tax compensation are paid will
not be reckoned for this grant. Rates of grant with effect from 1-4-1982 (fixed in G.O.
(Rt) 52/83/LA & SWD dated 5-1-1983) are as follows:

1. Metalled and black topped roads Rs. 1200 per K.m.

2. Gravelled road Rs. 900 per K.m.

3. Earthern road Rs. 750 per K.m.

But for want of sufficient funds in the Budget, grant at the above rates has not been
sanctioned to the Panchayats so far. During 1982-83 no grant could be paid to Panchayats
due to economy measures enforced by the Government. However an amount of Rs.
120.20 lakhs had been transfer credited to the account of P.H.E.D. towards arrears of
water supply maintenance charges. During 1983-84 also, an amount of Rs. 26.06 lakhs
was transfer credited to the account of the P.H.E.D. Provision made in the Budget during
1982-83, 1983-84 was Rs. 450 lakhs each. But this year only a reduced provision of Rs.
270 lakhs has been made. As per cost estimated by the Panchayat Department an amount
of Rs. 605 lakhs will be required annually for payment of V.R.M. Grant at the prescribed
rates to the Panchayats.

15. GRANT FOR MAINTENANCE OF RAILWAY LEVEL CROSSING

5.44. 50% of expenditure incurred by the Panchayats is reimbursed as grant to

Panchayats. During the last 5 year, there was a provision of Rs. 2 lakhs for each year and
this was found enough to meet the expenditure.

16. GRANT FOR LIGHTING OF PUBLIC ROADS

5.45. This grant is sanctioned to the Panchayats whose expenditure on account of lighting
the roads and public places exceeds 15% of the annual income of the Panchayat. For want
of adequate funds in the Budget this grant could not be sanctioned to all the Panchayats
which were entitled to above grant. Due to enhancement of electricity tariff with effect
from 1-9-1982 expenditure on street lighting has shot up. Annual Budget provision
during the last 3 years from 1982-83 was to the order of Rs. 1.50 lakhs only as against
estimated requirement of Rs. 5 lakhs. Provision made in the Budget, 1985-86 is Rs 2
lakhs only.

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17. GRANTS TO PANCHAYATS FOR DEVELOPMENTAL ACTIVITIES

(SEVEN POINT PROGRAMMES)

5.46. This grant is being sanctioned from 1980-81 onwards for implementation of
following developmental activities of Seven Point Programme under Plan Schemes.

1. Communication.

2. Irrigation.

3. Construction of Community Hall.

4. Construction of Public Burial/Burning grounds

5. Construction of Mini Stadium.

(Of the 7 items under seven Point Programme one item viz. Opening of Pre-primary
Residential School is not being implemented in the Panchayats for want of resources.
Other item viz. comprehensive scheme for providing environmental amenities to the dealt
with separately).

5.47. The Maximum grant which can be sanctioned for each of he five programme has
been fixed as follows:-

1. Communication Rs. 1.00 lakhs

2. Irrigation Rs. 0.50 lakhs

3. Community Hall Rs. 3.00 lakhs

4. Burial/Burning Ground Rs. 0.75 lakhs

5. Minimum Stadium Rs. 0.75 lakhs.

5.48. Above grant was subject to the condition that in respect of item Nos. 1 to 3, the
Special Grade and First Grade Panchayats whould meet 50% of cost from their own
funds and 2nd Grade Panchayats, and 3 rd Grade Panchayats should meet 25% of he cost.
For item Nos. 4 and 5, no such contribution has been made compulsory. These
programmes were intended to be implemented in all the Panchayats within the 5 year
period of Sixth Plan. But due to paucity of funds and non-availability of materials like
cement etc., programme could not be completed within above period. Amount spent by
Government towards grant to Panchayat for the above 5 items during Sixth Plan period
was as follows:

(Rs. in lakhs)

83
Year Budget provision Grant paid
1980-81 1000.00 1007.50
1981-82 100.00 98.74
1982-83 100.00 93.19
1983-84 100.00 71.62
1984-85 100.00 98.75
Total 1400.00 1369.80

This has been included as a continuing scheme under Seventh Five Year Plan. For 1985-
86 a sum of Rs. 80 lakhs has been provided in the Budget.

18 to 21. COMPREHENSIVE SCHEME FOR PROVIDING ENVIRONMENT

AMENITIES

5.49. This is one of the schemes under Seven Point Programme. Grants disbursed under
this programme are known as-

1. Grant for implementation of Environmental amenities for the poor.

2. Grant for implementation of Environmental amenities for Special Component Plan.

3. Grant for implementation of Environmental amenities for Scheduled Tribes.

4. Grant for implementation of Environmental amenities for scattered Scheduled Tribes.

Grant under this scheme is to carry out the following four activities.

(i) Construction of approach roads to Harijan Colonies

(ii) Electrification of houses of weaker sections and construction of approach roads to

colonies.

(iii) Water supply to the Colonies by digging of wells in the Colonies

(iv) Supply of E.S.P. type Slabs to the poor people, construction of latrines in the
colonies etc.

5.50. Above scheme was first introduced during 1980-81. Nearly an amount of Rs. 1
crore was spent under this scheme during 1980-81 by Rs.10000 to each Panchayat.
During the years from 1981-82 to 1983-84 grand amounting to Rs. 50 to 55 lakhs have
been paid each year. During 1985-86 only amount of Rs. 10 lakhs is provided in the
Budget. The grant received by the Panchayats was spent mainly for electrification of
houses, providing E.S.P. type lartrines, extension of water supply etc., to houses under

84
One Lakh Housing Scheme and to colonies of Harijans and Tribals. The State
Government have taken up it as a continuing scheme in the Seventh Five Year Plan.

22. SPORTS AND GAMES GRANT FOR PLAY GROUNDS

5.51. Under this Scheme a sum of Rs. 1.50 lakhs is being disbursed every year to
Panchayats. The amount is too inadequate to construct new play grounds and therefore
the amount is being utilised by the Panchayats for repairs and maintenance of the existing
play grounds.

23. OPEN AIR THEATRE GRANT

5.52. Every year a sum of Rs. 1 lakhs is being disbursed to the Panchayats. This amount
is distribution to 10 Panchayats to 10 Panchayats only in a year in the State as the
provision made in the State Budget is only to that extent.

5.53. During evidence collection it has been pointed out by representatives of Panchayats
that a major part of civic amenities programme included among the functions of the
Panchyats could not be undertaken by them because of inadequate resources. They have
vehemently argued that, after having entrusted with a long list of statutory functions and
duties by Government, it should be the moral responsibility of the State Government to
provide adequate resources to enable the Panchayats to discharge those functions. Role of
Panchayats in rural development requires no elucidation. In fact some of the functions
like providing protected water supply (drinking water) providing metalled roads, street
lighting etc., are part of the responsibility of Government in a welfare state and
entrustment of these functions to Panchayats without providing adequate resources for
carrying it, is quite meaningless. This is all the more important when the areas of revenue
earnings (Self raised income) of Panchayats are limited unlike Municipalities and
Municipal Corporations. The Panchayats have, therefore, to depend largely on
assistance/grants from State Government in carrying out their obligatory functions. This
is not a feature peculiar to the Panchayats in Kerala alone but a phenomenon perceivable
in almost all States in India. Grants from State Governments are therefore a major source
of income to the Panchayats in our country to carry out its functions. These recurring
grants are given by the State Government for general purposes and specific purposes.
General purpose grants are meant for discharging their normal functions without
attaching any conditions whereas specific purpose grants are earmarked to specific
purposes such as road maintenance, water supply etc., to those local bodies which are
actually rendering such services. in addition to above grants, non-recurring grants are also
provided by the Government for meeting initial capital expenditure for water supply,
providing street lights, construction of new roads etc., in order to bring the backward
Panchayats to satisfactory levels and also to upgrade the standards of services.

5.54. In Kerala, Grants for the above purposes are made available to Panchayats under
different terminology such as Special grant, Block Grant, Initial Grant, Matching Grant,
M.I. Grant V.R.M. Grant etc., numbering about 26 as mentioned earlier in Para I, Chapter
V. It is found that the long list of grants provides for assistance to same purpose under

85
different description eg. for construction of office building grants are provided under
'Special Grant' and 'Building Grant'. Similarly grants are available for burial and burning
grounds under 'Grant for the Construction of Burial and Burning Grounds', 'Special
Grant' and 'Grant for Developmental activities'. The multiplicity of grants makes the
administration of these grants more cumbersome resulting in administrative
inconvenience in accounting. A rationalisation of the existing classification of grants with
a view to make it more purposeful based on broad principles on this subject evolved by
various study teams at national level is found to be essential.

5.55. Various Commissions and Committees appointed by the Government of India to

enquire into local body finances have emphasised the need for providing adequate
assistance to local bodies for discharging the obligatory and executive functions, besides
providing grants for maintaining certain services at prescribed level of efficiency. The
Taxation Enquiry Commission (1953-54) headed by dr. John Mathai had recommended a
system of grant-in-aid based on the following principles.

(i) There should be a basic general purpose grant for each local body so that with this
grant and its own resources the local body will have fairly adequate finance for
discharging its obligatory and executive functions.

(ii) In addition to above, there should be a specific grant (annual and other) which will be
for particular items and services. These should be conditional on (a) the particular service
being maintained at a prescribed level of efficiency and (b) the local body exploiting its
own resources to the extent to the extent indicated by Government from time to time.

5.56. The Taxation Enquiry Committee appointed by the Government of Kerala with Sri.
M.J.R. Thavaraj as Chairman and Shri C Achutha Menon, Shri R. Sankar etc., as
members had recommended to provide grants to local bodies for the following also in
addition to General Purpose Grant.

(a) Matching grants as an inducement to maximise collection of tax.

(b) Capital grants for development purposes.

5.57. Keeping in mind the various categories of grants to local bodies based on General
principles suggested by the Central and State Commissions, the Commission
recommends that the existing items of grants disbursed under 26 descriptions to
Panchayats may be regrouped and brought under five categories as explained below:-

1. General Purpose Grant (Recurring)

2. Specific Purpose Grant (Recurring) (ie. Maintenance grants for specific services for
which specific norms have been laid down by the Government)

3. Special Grant (Non Recurring)

86
4. Grant for Developmental Programmes (Non Recurring)

5. Incentive Grant.

The character of each grant and the purposes for which it should be sanctioned are
explained below:-

(1) GENERAL PURPOSE GRANT (RECURRING)

5.58. This grant is recommended on the basis of the general principles suggested by the
Taxation Enquiry Commission (1953-54) headed by Dr. John Mathai and reiterated by
other Commissions including Kerala Taxation enquiry Committee (1969). Intention of
this grant is that with this grant together with the resources, Panchayat will be able to
discharge the obligatory executive functions in a satisfactory level. Though the Taxation
Enquiry Commission had recommended a General Purpose Grant, they have not
suggested any specific norms on which payments have to be made.

5.59. Quantum of assistance to be provided to be Panchayats for discharging obligatory

functions may vary from Panchayat to Panchayat depending on the area, populations, size
and location (coastal, forest, tribal etc.) In fact it is practically difficult to determine the
level of needs and services relating to the existing levels of development attained by each
Panchayat and classify them into various groups for purpose of financial assistance. In
the absence of any specific norms for assessing the extent of requirements for providing
general purpose grants we can go only by a principle that can be applied uniformly to
Panchayats having common characteristics. Since the local people in a

Panchayat are the beneficiaries of the services rendered by the Panchayat there is every
justification in concluding that the financial requirement of the services will laregely
depend on their number and the income derived from them by way of taxes etc. In such a
situation it will be quite reasonable to link the payment of General Purpose Grant with
the population of each Panchayat. Such a system has been favoured by the Committee on
Panchayat Raj Institution (1978) headed by Sri. Asoka Metha. Our neighbouring States of
Andhra and Karnataka are paying per capita grants to Panchayats. In our State
Municipalities and Corporations are already receiving per capita grant at the rates shown
below:

Rates of grant with effect from 1-4-1982

1. Corporations and Municipalities Grade I Rs. 2 per capita

2. Municipalities Grade II Rs. 2.50 per capia

3. Municipalities III Rs. 3 per capita

5.60. During collection of evidence there was strong plea from all quarters to provide for
per capita grant to Panchayats at the rates ranging from Rs. 202 to 10. Therefore

87
considering all the above aspects we recommend a per capita grant which may be termed
as "General Purpose Grant" at the rate of Rs. 2 per head based on latest census figure
subject to a minimum of Rs. 10000 to each Panchayat except Special Grade Panchayats.
In the case of newly formed Panchayats per capita grant at the rate of Rs. 3 per head of
population may be paid subject to above ceiling for a period of two years to enable them
to meet the initial expenses. Special Grade Panchayats are already having a highter per
capita income than Panchayats under other grades. Moreover, we are suggesting
elsewhere revised norms for reclassification of Pancahayats based on income. Hence we
are not recommending General purpose Grant on per capita basis to Special Grade
Panchayats. For puropose of calculation of per capita grant due to each, the amount may
be rounded off to the nearest hundred rupees ignoring amount below Rs. 50 With the
introduction of general purpose grant on per capita basis, payment of other grants like
establishment Grant Establishment grant as per audit report, Block grant, Grant for burial
and burning ground etc. may be dispensed with.

2. SPECIFIC PURPOSE GRANT (RECURRING)

5.61. This must be a recurring grant meant to meet cost of maintenance certain amenities
provided by Panchayats. Grant for Maintenance of Village Roads, Minor Irrigation Grant,
Matching Grant for maintenance of Water Supply Schemes, Grant for Lighting of Public
Road, Grant for maintenance of Railway Level Crossings, Grant to meet the Pay and
Allowances of Conservancy staff transferred from the Public Health and Ferry men
transferred from the P.W.D. etc. for which specific norms for Maintenance Grant have
been prescribed by Government may be brought under this category.

5.62. The Commission has found that the Government are not paying Maintenance
Grants to Panchayats at the rates approved by Govenment. In the case of Village Road
Maintenance Grant, rate fixed with effect from 1-4-1982 as per G.O. (Rt.) 52/83/LA &
SWD. dated 5-1-1983 are as follows:-

1. Metalled and black topped roads Rs. 1200 per Km.

2. Gravelled Roads Rs. 900 per Km.

3. Earthern Roads Rs. 750 per Km.

Though the above rates were fixed with effect from 1-4-1982 Government have not sp far
paid grant at the above rates. Payment is still made at the rates prior to 1-4-1982.
Similarly in the case of Minor Irrigation grant it is being paid only at the rate of Rs. 3 per
acre of benefited area as against Rs. 10 fixed by Government. So is the case with grants
for lighting, water supply etc. for which also specific rates of grant have been prescribed
by Government. This has led to deterioration in the standards of maintenance of existing
services and amenities.

5.63. The requirement assessed by the Panchayat Department based on the approved
norms would come to rupees 687 lakhs as follows:-

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(Rs. in lakhs)

V.R.M. Grants 605.00

Minor Irrigation Grant 60.00
Grant for street lighting 5.00
Grant for maintenance of Water Supply 15.00
Grant for maintenance of Railway level crossing Road 2.00
687.00

For the above items of grants Government had provided Rs. 480 lakhs each during 1982-
83 and 1983-84 and Rs. 485 lakhs during 1984-85. The norms and the rates are fixed by
Govenment nearly 3 to 5 years ago and even at this rate the grants are not provided in the
Budget and distributed for one reason or other. Unless grants at the rates which are
prescribed by Government after due consideration of the requirements are made available
to the Panchayats they will not be able to maintain services and provides amentities at
satisfacrory standards, Now there is ever increasing cost of materials and maintenance
and the rate has doubled by this time. The Commission would therefore recommend to
provide at least a sum of Rs. 687 lakhs (ie. the amount worked out at the rate fixed by the
Government about 3 to 5 years back) in the next year's budget (1986-87) and to allow a
progressive increase by 5% every year threafter. In the case of water supply and street
lighting Commission is however, making separate recommendations vide Chapter VII.

3. SPECIAL GRANT (NON RECURRING)

5.64. We have suggested in para No. 5.23 dealing with Assigned Revenue (Statutory
Grant) that 25% of the 'Duty on Transfer of Property' collected in a year and 25% of the
'Basic Tax' (Land revenue) collected in the preceding year shall be transfer credited to a
P.D. Account viz. Panchayat Special Grant Fund. the amount accumulate in a year shall
be disbursed to backward Panchayats in the form of Special Grant to meet capital cost in
respect of the following items.

(i) Providing protected water supply

(ii) Street Lighting.

(iii) Construction of (Office buildings, Schools dispensaries and hospital wards, libraries
etc.),

(iv) Construction and extension of roads and bridges (Link roads to connect main roads,
conversion of earthern roads (having sufficient width for plying motors) into
metalled/black topped roads.)

(v) Construction of public latrines and bathrooms,

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(vi) Construction including land acquisition charges of public markets, public slaughter
houses, waiting sheds, parks, play grounds, burial and burning grounds,

(vii) Works relating to Flood relief and natural calamities.

Besides Special Grant may be sanctioned by the Director of Panchayats for tackling
special problems, if any, of Panchayat. Maximum amount that can be granted to a
Panchayat to one or all items together in a year may be enhanced from the existing limit
of Rs. 25000 to Rs. 50000. Powers of the Director of Panchayats in this regard may be
enhanced to Rs.50000. In deserving cases grant may be sanctioned upto Rs. one lakh with
Government sanction. While sanctioning grants under 'Special Grants' priority should be
given for providing essential civic amenities viz. water supply, street lighting, link roads
(including conversion of roads) construction of office building, burial and burning
grounds. Other items may be considered only if funds are available after providing grants
for the items mentioned above.

5.65. The above recommendation does not involve any financial commitment on the part
of Government as the expenditure is proposed to be met from the 'Panchayat Special
Grant Fund' which is created from the 25% of the proceeds from 'Duty on Transfer of
Property' and 'Basic tax grant' paying to Panchayats.

5.66. From the revenue assumed by the state Government for 'Duty on Transfer of
Property' and 'Land Tax' in the Budget 1985-86 we estimate that an amount not less than
250 lakhs will be available every year under 'Panchayat special Grant Fund'. With this
amount the State Government will be able to provide special grant to 500 Panchayats at
the rate of Rs. 50000 in a year. As time passes, the 'Special Grant' provided to the
Panchayat will reduce the inequlities in providing essential amenities and services for
want of resources.

4. GRANT FOR DEVELOPMENTAL PURPOSES

5.67. From 1980 onwards Government are implementing a development Scheme by

name 'Seven Point Programme' to improve the standards of Administration of Panchayat
by providing certain essential amenities like construction of
Kalyanamandapam/Community Hall in the Panchayats which do not have it, construction
of new roads in order to increase the length of roads of each Panchayat, Minor Irrigation
works, opening and maintenance of burial and burning grounds, construction of Mini
Stadium, providing drinking water and street light in areas inhabited by socially and
economically backward section of society, construction of approach roads to Harijan
colonies and providing latrines in the above colonies. Though some of the items referred
to above will also come under the purview of 'Special. Grants', the schemes are intended
to achieve self sufficiency to Panchayats by providing basic essential needs on a time
bound programme. The Commission would therefore recommend to continue payment of
grant for the above developmental programmes by providing a sum of rupees 100 lakhs
annually in the Plan Budget so that 100 Panchayats may be identified every year and a
sum of Rs. one lakhs sanctioned to each under this scheme.

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5. INCENTIVE GRANT

5.68. The system of providing incentive grant to encourage the Panchayats to boost boots
up their tax income by levying and collecting it to the maximum extent in a year is
prevalent in State like Tamil Nadu, Andra Gujarat etc. This has been favoured by several
Commissions including Kerala Taxation Enquiry Commission (1969) and Committee on
Panchayat Raj Institutions (1978) headed by Shri Asoka Mehta.

5.69. The Commission has noticed that there is laxity in assessment and collection of
building tax and service tax in a considerable number of Panchayats, resulting in loss of
tax revenue to the Panchayats. In order to avoid such laxity and to encourage the
Panchayats to maximise their tax collection we recommend incentive grant as follows:-

(1) Special Grade Panchayats 5% of the total collection in the preceding year under
Building Tax (and) Service tax taken together.

(2) I, II & III Grade Panchayats 10% of the total collection in the preceding year under
Building Tax taken together.

5.70. The grant may be paid rounding amount to the nearest hundred by ignoring rupees
below fifty. The maximum incentive grant payable may however be limited to Rs. 20000
in a year. The financial commitment on this account will come to Rs.50 lakhs
approximately.

Financial Commitment

5.71. The total annual financial commitment on account of the recommendations made by
the Commission relating to grants mentioned under preparas would come to Rs. 1017
lakhs as follows:-

(i) General Purpose grant (per capita grant) Rs. 180 lakhs
Specific purpose Grant (ie. Maintenance
(ii) Rs. 687 lakhs
grant for specific item)
No Commitment being assignment of
(iii) Special Grant
revenues by Government.
(iv) Grant for Developmental activities Rs. 100 lakhs
(v) Incentive Grant Rs. 50 lakhs
Total Rs. 1017 lakhs

The above commitment compares with the provision made by Government in the State
Budget during the year 1982-83, 1983-84 and 1984-85 for payment of grants as shown
below:

(Rs. in lakhs)

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 1982- 1983- 1984- Head of Account in
Purpose of Grant
83 84 85 the Budget
314-A(c) Other
1. Assistance to Panchayats 125.00 150.00 150.00
Expenditure
Grants to Panchayats for Development
314-A(c) Other
2. Activities (Environmental amenities to poor 161.00 146.0 146.00
Expenditure
etc.)
3. Grant for Water Supply 6.75 6.75 6.75 314C(a)
4. Grant for Minor Irrigation 20.00 20.00 25.00 314C(b)
5. Grant for Maintenance of Village Roads 452.00 452.00 452.00 314 C(c)
6. Grant for Street Lighting 1.50 1.50 1.50 314 C(e)
Total 766.25 776.25 781.25

5.72. Against Budget provision of Rs. 781 lakhs made during 1984-85, provision required
for payment of grants as per our recommendation would come to Rs. 1017 lakhs as
mentioned under para 5.71. Of this, Incentive Grant of Rs. 50 lakhs will alone be an
additional commitment. General Purpose Grant does not involve any additional
commitment as this grant is in lieu of other items of grants such as Block Grant,
Establishment Grant etc. Further we have already pointed out in para 5.63 that the
provision required for payment of 'Specific Purpose Grant' on the basis of norms
prescribed by the Government towards maintenance of certain services by the Panchayats
would come to Rs. 687 lakhs as against Rs. 485 lakhs provided in the Budget 1984-85.
This increase of Rs. 202 lakhs thereunder, plus Incentive Grant contributes mainly to the
increase from Rs. 781 lakhs in 1984-85 to Rs. 1017 lakhs in future.

CHAPTER VI NEW MEASURES FOR AUGMENTING THE

RESOURCES OF PANCHAYATS

6.1. While Panchayats in the State are having an enlarged sphere of obligatory activities
in recent times there has not been any significant improvement in their resource position
to discharge the responsibilities. By and large, our Panchayats are still dependent on the
conventional sources of income which do not indicate any encouraging trend for growth.
The scope of further budgetary devolution from the State Government is also limited due
to resources constaraints. The above limitations in mobilising additional resources should
not however, be permitted to act as an impediment in providing basic civic amenities to
the rural public. The Commission has therefore attempted to identify fresh areas that
would appreciably augment the revenues of Panchayats. The ensuing paras contain our

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recommendations on new measures intended to raise additional resources to Pancahayats.
This is in addition to our recommendations contained in Chapter III and IV for changes in
rates of Building Tax, Entertainment Tax, Show Tax, etc. and also enhancement of
Licence Fees and other fees levied by the Panchayats, with a view to raising more
resources to match their expenses.

1. SURCHARGE ON LAND REVENUE

6.2. One of the most important factor which made land cess an unpopular levy is that the
cess was to be collected at the rate of one sixteenth per cent of the capital value of land.
As already indicated in para 3.7 and 3.8 in the Chapter relating to Building Tax,
assessment of capital value for the purpose of levy of tax always a controversial subject.
In the absence of a radical improvement in the methods and machinery of assessment, the
criticism that assessment of capital value of lend for the purpose of levy of land cess was
done arbitrarily and without regard to the returns from the land is not altogether out of
place.

6.3. Land cess as an important source of tax revenue to the bodies has been recognised in
our country long ago. The Taxation Enquiry Commission (1953-54) has pointed out that
land cess as it existed in those days was in the nature of a surcharge on land revenue and
was usually collected by the State Government along with land revenue and credited to
the local boards. In the former Travancore- Cochin state, Panchayats, were allowed to
levy land cess at one and a half paise for every 4 cents of land. West Bengal which has
been levying land cess on the basis of annual Rental value of the land has since made it a
levy on then basis of land revenue. According to information available with us 15 states
in India are at present levying land cess in varying degrees along with land revenue and
crediting it to local bodies. In Tamil Nadu a local cess at the rate of 45 paise on every
rupee of land revenue payable to State Government is being levied by Government and
distributed to Village Panchayats at the rate of 20 paise per capita and the balance to the
Panchayat Union. In Andra Pradesh too land cess/local cess is levied at rates varying
from 18 paise to 25 paise rupee of land revenue and apportioned among Gram
Panchayats, Pancahayat Samithis and Zilla Parishads. There is a proposal in andra
Pradesh to enhance the cess to 50 paise per rupee of land revenue. In Karnataka too land
cess is levied on the basisi of land revenue. Thus it may be seen that levy of a surcharge
on land revenue termed as Land Cess is being adopted in our neighbouring States for
raising resources of local bodies. It appears that the levy of surcharge on land revenue as
prevalent in other States would be a source of revenue for Panchayats in our State.

6.4. Land cess as it originally existed, was intended 'to be an item for raising substantial
resources to the Panchayats. The income from land cess has dwindled when it was made
an optional tax subsequently and the receipts from it is becoming negligible compared to
other optional taxes. There for the Commission feels the need for a compulsory tax that
will fatch an assured income to Panchayats to compensate the loss of income consequent
on making land cess an optional tax. The Commission therefore recommends a levy of
'Surcharge on Land Revenue' at the rate of 50 paise per one rupee of Land Revenue. this
tax may be collected by the Revenue Department along with the Land Revenue (Basic

93
Tax) and distributed among Panchayats by adopting the same principle of distribution of
Basic Tax suggested in para 5.21. According to revenue under Land Tax estimated by
Government in the Revenue Budget 1985-86 Basic Tax Grant will be around Rs. 350
lakhs in a yar. Therefore the additional yield on account of the above measure will be Rs.
175 lakhs, ie. 50% of Rs. 350 lakhs.

2. ENHANCEMENT OF THE RATE OF DUTY ON TRANSFER OF PROPERTY

6.5. The rate at which Surcharge 'Duty' is levied as per section 71 (b) of Kerala Panchayat
Act is 4%. Our neighbouring states viz. Tamil Nadu and Andra Pradesh are levying it at
the rate of 5%. In our State also the rate may be fixed as 5%. This enhancement will
straight away bring in additional income of Rs. 1.75 crore which is 1/4 of the receipts
assumed for Panchayats at the existing rate under Duty on Transfer of Property in the
Budget Estimate for 1985-86.

3. TAX ON SALE OF LAND

6.6. During the course of collection of evidence a suggestion has come up from
representatives of Panchayats that it is desirable to levy a tax at the rate of Rs. 5 or 10 for
each cent of land transferred by sale or otherwise at the time of registration of documents
by the Registration Department and transfer the entire amount to Panchayat Department
along with Duty on Transfer of Property for being distributed among Panchayats. Large
number f land transactions by sale or otherwise are going on in our State every year.
Levy of a tax as suggested above is likely to yeild sizable income to Panchayats. We
recommend to Government to consider levy of 'Tax on Sale Transfer of Land' at the rate
of Rs. 5 per each cent of land by the Registration Department, and to distribute the
proceeds to the Panchayats adopting the same principle of distribution of proceeds from
Duty on Transfer of Property. Though the exact volume of land transaction is not readily
available with the Commission to quantify the yield, it is estimated that minimum 5 acres
(ie 500 cents) of land transactions are likely to take place in each Panchayat every year
and on that basis additional income for 1001 Panchayats on account of this new measure
has been assessed at Rs.25 lakhs per annum.

4. TAX ON ADVERTISEMENT

6.7. Municipal Corporation and Municipalities in the State are levying tax on
advertisement other than advertisements published in News Papers. cine-wall posterns,
cut outs, displayed by manufacturing firms and dealers for publicity on road sides,
buildings etc. by errecting structures or hoardings for otherwise (cinema slides etc.) are
the main items on which advertisement tax is levied by the Municipalities as per Section
126 of Kerala Municipalities Act. Panchayats can also levy such tax in respect of
advertisements of similar categories exhibited in Panchayat areas and thereby they
comobilise additional resources if the relevant rules are made applicable to Pancahayats
also. There is scope for collecting sizable income by way of advertisement tax as cinema
wall posters provide an excellent potential. This tax will in no way affect common man
but only those who want to earn more by means of publicity. An exhibitor who spends

94
huge amount for publicity will not mind to pay a small amount by way of tax to
Panchayats.

As per section 142 of the Kerala Panchayat Act, 1960 "The Government may whether at
the request of the Panchayat or otherwise by notification in the Gazette declare that any
of the provisions of the law relating the Municipalities in force for the time being or of
any rules made there under shall be extended to and be in force in a Panchayat area or
any specified place there in. The provision so notified shall be construed with such
alterations not affecting the substance as may be necessary or proper for the purpose of
adopting them to the Panchayat area or specified place therin".

6.8. By virtue of the above provision many Panchayats have extended the Municipal
Building regulations in their respective Panchayat areas. In the same manner the
provisions relating to "Tax on Advertisement" ie. Section 126, 127, 128, 129, 130 and
131 etc. of Kerala Municipalities Act along with Notification regarding the rates of
advertisement tax can be extended to all Panchayats in the State. The Commission
therefore recommends that Government may issue necessary Notification conferring
Powers ti Panchayats forlevy of Advertisement Tax by invoking powers under Section
142 of K.P Act, 1960. The rates shall be those prevailing in III Grade Municipalities. By
a moderate assumption of an average receipt of Rs.1000 per annum to each Panchayat,
the total annual receipts will be around Rs. 10 lakhs.

5. EXTENSION OF MUNICIPAL BUILDING RULES TO ALL SPECIAL

GRADE PANCHAYATS IN THE STATE

6.9. Government have already extended Kerala Municipal Building Rules to certain
Panchayats of the State by virtue of powers with them under Section 142 of the Kerala
Panchayat Act, 1960. According to these rules prior permission of the local authority is
required for construction, re-construction, extension etc. of Buildings for which fee as
prescribed under the rules have to be levied. The Panchayats, where Municipal Building
Rules are in force, are deriving income from this source, Other Panchayas, where the
rules are not extended, are not getting any income from this source though it is a good
source of income. The commission therefore recommends to extended the relevant
provision of the Kerala Municipal Building Rules to all Special Grade Panchayats in the
State.

6. PERMISSION FOR CONSTRUCTION OF BUILDING IN PANCHAYATS

6.10. In para 6.9 the Commission has recommended to extend the Kerala Municipal
Building Rules to all the Special Grade Panchayats in the State. This would mean that
other Panchayats coming under I, II and, III grades will have no regulations governing
construction of buildings and other construction activities. the Building Rules will
become automatically applicable to a Panchayat as and when it is upgraded to Special
Grade.

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6.11. The Commission, however, is of the view that there must be some kind of checks in
the field of construction activities in Panchayats other than Special grade. According to
the existing practice Bill Collectors are to bring the fact of new constructions in
Panchayat area to the notice of the Executive Authority fro purpose of assessment of
building tax. Experience has shown that in majority cases the above practice is not
scrupulously observed. Delay in noticing new constructions invariably leads to delay in
assessment of Building Tax and consequent loss of revenue to the Panchayats from
building tax. There are other aspects too justifying the need for devising a method by
which the Panchayats are kept informed in advance about any construction activities in
their Jurisdiction. Particulars of residence of a citizen are now required for various
purposes like getting a new ration card, passport, inclusion of name in the voters list,
Water Supply and electricity connections identification of beneficiaries under Rural
Development Programmes etc.

6.12. The Commission, therefore, recommends to introduce a system of granting

permission for new constructions in the Panchayats where the Municipal Building
regulations have not been extended. For this, Commission consider that is would be
better to have a system of granting permission from Panchayats for new
construction/extension by which the Panchayat will come to know about the intention of
the parties for construction of buildings in the Panchayat area and thereby they can check
after a specified period for which permission is valid, unless it is got renewed by the
owner, whether building has been completed and occupied and due for inclusion in the
tax assessment register. Accordingly Commission would recommend the following
procedure to be observed in the case of new buildings/extension of buildings in
Panchayats other than those where Municipal Building Rules are already in force.

(i) The owner who intends to construct new building or to make alteration to existing
building shall obtain prior permission from the Panchayat.

(ii) For obtaining permission from Panchayat, the Owner shall be required to submit an
application in plain paper with a rough sketch of building indicating his name and
address, location including survey No., Pancahayat ward No. etc. where the building is
proposed to be constructed, specifying also total plinth/floor area.

(iii) A fee Rs. 10 may also be realised along with each application in order to cover the
expenses connected with the issue of permit.

(iv) 'Permission may be issued by the ' Executive Officer within thirty days of receipt of
applications as required under section 109(3) of the Kerala Panchayat Act, 1960, after
making necessary entries in a register which may be required to be maintained for the
purpose of receipt and disposal of applications, receipt of fee levied for the permission
granted etc.

(v) Validity of permit may be fixed as one year. After the expiry of the period building
may be assessed for the Building tax (unless it is got renewed) after necessary
verification.

96
(vi) If the construction of the building is not completed within the period of validity of
permit owners shall be required to get the permit renewed for a further period of one year
for which a fee of Rs. Five may be levied by the Panchayat.

6.13. Necessary enabling provisions may be incorporated in the relevant Act and Rules.

7. INCOME FROM PORAMBOKE LANDS

6.14. According to Sections 62 and 82 of the Kerala Panchayat Act. 1960, all poramboke
lands, water course, public land adjacent thereto, etc. are vested with the Panchayats.
Accordingly the right of collection of usufructs except forest produce, use of porambokes
etc. is exercised by the Panchayats. It is pointed out that the Panchayats do not get the full
benefit of income because the Panchayats have not been furnished with area-wise details
of poramboke lands by the Revenue Department with the result that the benefits from
usufructs in most Panchayats go to encroachers. In the absence of full details of the
extent, survey number and other demarcation details the Panchayats are not in a position
to proceed against encroachers. The Commission therefore recommends to Government
to issue appropriate orders to the Land Revenue Department for supplying necessary
details of poramboke lands, land adjacent to water courses etc. to the concerned
Panchayats. Panchayats may utilise road side poramboke lands for planting seedlings
supplied by the Forest Department under the Social Forestry Scheme. Since there is
demand for timber and firewood it would be an additional source of income to
Pancahayats in future. Bunks may be constructed and installed on roadside porambokes
wherever there is scope for it. Tight of use of the bunks owned by the Panchayats may be
sold in auction for reasonable periods. This is likely to add to the non-tax income of
Panchayats with a small investment.

8. INCREASE IN THE SHARE OF VEHICLE TAX DUE TO LOCAL BODIES

6.15. Increase in vehicular traffic in rural areas in recent times has completed the local
bodies to provide more and more motorable roads. Besides, the cost of maintenance of
roads has increased enormously due to increase in cost of materials. Therefore the present
allocation of 10 per cent of net Vehicle Tax being the share of local bodies for
maintenance of motorable roads is quite inadequate. The Commission would therefore
suggest that at least 20% of proceeds of Vehicle Tax (Net) collected in the preceding year
should be allocated for maintenanced of roads of local bodiies. Further, the present
practice of determining share due to the respective local bodies once in five years may be
changed to once in three years as five year is too long a gap. The share due to Panchayats
on the basis of allocation at 10% is Rs. 67.34 lakhs per annum on the basis of vehicle tax
receipts from 1978-79 to 1982-83. If allocation is made at the rate of 20% additional
yield will be more than the above amount since annual net receipts of Vehicle Tax after
1982-83 was more than the receipts during the years prior to 1983-84. The additional
yield per annum can therefore be safely placed at Rs.70 lakhs.

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6.16. Additional yield on account of other measures suggested under Chapters III and IV
is as follows:-

1. BUILDING TAX

6.17. Total number of households in the Panchayats as per 1981 census is 36.31 lakhs.
According to our recommendations in Chapter III, minimum Building Tax for a house in
Panchayat will be around Rs. 20 per annum. There may be houses which will be
exempted from the purview of Building Tax, being huts or houses whose annual rental
value is less than Rs.240 as per our recommendation. But the tax exemption in those
cases will be off-set by tax income at a higher rate in the case of buildings with higher
rental value. On an average we may estimate Building tax at Rs. 25 per Building per
annum. Therefore annual receipts from 36.31 lacks of houses in the Panchayats will be
not less than Rs. 9.08 crores as against Rs. 6.08 crores now collected. Additional yield,
accordingly, will be around Rs. 3 crores annually. In terms of per capita, total receipts
from Building tax will be Rs. 4.50 per annum. We have assumed only the barest
minimum additional yield.

6.18. Ratio of number of households and population in the Panchayats as per 1981 census
is 1:5. Therefore in a Panchayats with a population of 10000 the minimum number of
houses will be nearly 2000 on the above basis and the receipts from Building Tax will not
be less than Rs. 45000 per annum as per our assumption on the basis of Rs. 4.50 per head.

2. SERVICE TAX

6.19. In para No. 3.72 under Chapter No. III, we have recommended to levy 'Service Tax'
compulsorily from Building Tax Building Tax payers for 'water supply' and 'Street
lighting' at 1% of rental value of building for each of the above services. Panchayats are
having either 'water supply' or 'street lighting' or both services. Assuming that there is
only one service for which 'Service Tax' is to be levied compulsorily by the Panchayats,
we can reasonably estimate one eighth of receipts under Building Tax as income from
'Service Tax'. On that basis we can expect the additional income to the order of Rs. 110
lakhs or say 100 lakhs annually. This will not be on highter side because actual income
under 'Building Tax' is likely to be more than what we have assumed, due to
enhancement of minimum and maximum rates of levy of Building Tax. Per capita
additional yield from 'Service Tax' will be 50 paise per annum.

3. PROFESSION TAX

6.20. Total population in the Panachayats in Kerala is 217 lakhs. 10% among them may
be treated as earning members (either engaged in business/trades or employed in
institutions). The minimum Profession Tax which the Commission has recommended is
Rs.10 per half year i.e. Rs.20 per annum. If so, Profession Tax that can be collected from
21.70 lakhs persons (ie 10% 217 lakhs population) at above minimum rate will be Rs.434
lakhs per annum. However we are assuming it as Rs 400 lakhs only forl giving allowance
to omission of employees in assessment shortfall in collection etc. Among the assesses

98
there will be persons who will have to pay Profession Tax above the minimum rate ie at
Rs 15, Rs 20, Rs 25 etc, per half year. Minimum 25 % increse over the income of Rs. 400
lakhs estimated at the lowest rate, can be assumed on that account. Adding this 25 %
increase, income from Profession Tax can be reasonably estimated at Rs. 500 lakhs per
annum as against Rs.300 lakhs now being collected. Per capita income form Profession
Tax will be nearly Rs. 2.50 per annum.

4. VEHICLE TAX

6.21 Income from Vehicle Tax on an average is Rs.7 lakhs annually. We have
recommended 2 to 5 fold increase in rates. However increase in total receipts is
anticipated by 300% only. Accordingly additional income will be Rs. 20 lakhs per annum
under this item.

5. ENTERTAINMENT TAX, ADDITIONAL ENTERTAINMENT TAX AND

SHOW TAX

6.22. Total receipts at present by way of Entertainment tax, Additional Entertainment Tax
and Show Tax in the case of 300 theatres in different Panchayats is below Rs. 18000 per
annum. (A minimum Rs. 18000 would have been fetched had the gross daily collection
been Rs. 200 in a theatre). With the implementation of our recommendations, minimum
receipts of the above Panchayats from a theatre running 2 shows daily through out the
year and matinee shows on Sundays (Additional shows on festival days are ignored for
the sake of calculation) will enhance to Rs. 33000 per annum giving an additional income
of Rs. 15000 as worked out below.

Income per day Rs.

11. Income from Entertainment Tax and Additional Entertainment 70.00
Tax for 2 shows @ Rs. 35 per show
22. Show Tax for 2 shows =Rs. 10+Rs. 5 15.00
Total income per day = 85.00
Annual Income
11. Total income for a year at Rs. 85 per day 85X365=31025.00
22. Income from Matinee shows on 52 Sundays in a year @ Rs. 40
(i.e. Rs. 35 towards Entertainment Tax & Additional
Entertainment Tax & and Rs. 5 towards Show Tax). 2080.00
Total 33105.00

Rs. 33,000 (rounded)

6.23. Thus total increase in receipts in respect of 300 theatres will be around Rs. 45 lkhs
(ie. Rs. 15000 X 300). Besides, we anticipate 25% increase in receipts from
Entertainment Tax if tax is levied at a fixed percentage of gross seating capacity from all
theatres. This will come to Rw. 75 lakhs per annum.

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6. FEES FOR LICENCE, PERMISSIONS ETC.

6.24. Annual income under this at Present is around Rs. 64 lakhs. As a result of our
recommendation for fixing minimum fee for Licence/ Permission etc. at Rs. 10 for a year
and to enhance all existing rates by 100% minimum, an additional income of Rs.75 lakhs
per annum can ve reasonably anticipated However we have assumed it as Rs. 50 lakhs
only.

6.25. Total additional minimum yield at a glace will be as follows:-

Rs. in crores

1. Surcharge on Land revenue 1.75

2. Enhancement rate of 'Duty on Transfer of Property' from 4% to 5% 1.75
3. Additional receipt on account of enhancement of share of allocation of V.T.C. 0.70
from 10% to 20% of Net proceeds of Vehicle Tax
4 Building Tax 3.00
5 Service Tax 1.00
6. Profession Tax 2.00
7. Entertainment Tax 1.20
8. Vehicle Tax 0.20
9. Advertisement Tax 0.10
10. Tax on Sale/Transfer of land 0.25
11. Fees for Licence & Permission 0.50
12. Fees for construction of Building, extension of Municipal Building Rules to the 0.05
Special Grade Pancahayats, etc.
Grand Total 12.50

CHAPTER VII EXPENDITURE

7.1. Following are the major items for which Panchayaths in Kerala are spending their
resources.

(i) Establishment charges

(Salaries and allowances, Pensionary contributions of its Officers and servants and the
Travelling allowances, sitting fees to the president and Members, Office Expenses such
as Telephone charges, current charges and Other Miscellaneous expenses connected with
Office Management,)

100
(ii) Public Works

(Maintenance, repairs and extension of rural roads, bridges, culverts, parks and gardens
etc.)

(iii) Water Supply and Drainage

(Expenditure on installation, maintenance etc. of Water Supply Schemes.)

(iv) Street lights

(Expenditure connected with providing street lights, its maintenance etc. including
current charges).

The table below shows the growth of expenditure under above items for a period of 10
years from 1974-75 to 1983-84 and percentage of expenditure in relation to total self
raised income.

TABLE

(Rs. in lakhs)

Items of Expenditure 1974-75 1980-81 1981-82 1982-83 1983-84

(1) (2) (3) (4) (5) (6)
Total Self raised Income (Tax & Non (513.62) (1143.67) (1321.39) (1424.83) (1771.36)
Tax)
11. Establishment (Percentage to self 271.38 765.01 910.81 1117.44 1143.77
raised income) (53%) (67%) (69%) (78%) (65%)
22. Public Works 159.39 495.84 707.62 767.40 738.35
(31%) (43%) (54%) (54%) (42%)
(Percentage to self raised income)
33. Water Supply and Drainage 27.05 29.29 42.27 52.03 74.04
(5%) (3%) (3%) (4%) (4%)
(Percentage to self raised income)
44. Street Lighting 83.30 131.55 165.71 228.11 340.80
(16%) (12%) (13%) (16%) (19%)
(Percentage to self raised income)

1. ESTABLISHMENT CHARGES

7.2. Above table indicates that out of total 'self raised income' of the Panchayats about
65% to 78% is being spent every year from 1980-81 to 1983-84 towards establishment
cost. (Salaries of staff, Travel expenses, Office expenses etc.) If Individual Panchayats
are taken, sizable income in majority cases has been swallowed by establishment cost and
only very little is left over out of self raised income for rendering essential basic

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amenities to the tax payers Another perturbing factor which the Commission has noticed
is that during 1983-84, 358 Panchayats, that is more than one third of Panchayats in the
State have not only spent entire 'self raised income' for meeting establishment cost but
encroached at an over whelming degree upon the grants receive from the Government
leaving almost nothing worth while for undertaking developmental activities. The
percentage of expenditure of Panchayats of establishment in relation to 'self raised
income' during 1983-84 is as follows:-

1. No. of Panchayats where establishment cost is 100% and above of self raised 358
income
2. No of Panchayats where Establishment cost is 75% and above but below 100% of 231
self raised income
3. No. of Panchayats where Establishment cost is 50% and above but below 75% of 275
self raised income
4. No. of Panchayats where Establishment expenditure is below 50% 137
Total 1001

Vattavada Panchayat in Idukki district is incurring the highest percentage (424) of

establishment expenditure compared to its self raised income Next comes Ayancheri
Panchayat in Kozhikode District (395%) followed by Naranamoozhi Panchayat in
Pathanamthitta district (324%) and Rajakumari Panchayat in Idukki District (313%). The
lowest expenditure on Establishment charges noticed is Eloor in Ernakulam District
(10%)which is having the highest self raised income in the State. Table showing the
number of Panchayats in each district under different ranges of percentage of
establishment charges in relation to their self raised income is furnished below:-

TABLE

Statement showing number of Panchayats under different ranges of percentage of

Establishment charges in relation to self Raised Income of Each during 1983-84

Expend-
Total Expenditure Expenditure
iture from Expenditure
No. of from 75% and from 50% and
Name of District 100% and below 50% of
Panc- above but below above but below
above of income
hayats 100% of income 75% of income
income
1.Trivandrum 84 43 12 23 6
2.Quilon 75 16 26 18 15
3.Pathanamthitta 55 16 14 19 6
4.Alleppey 69 27 21 16 5
5.Kottayam 73 24 19 18 12
6.Idukki 51 27 11 8 5
7.Ernakulam 86 19 28 21 18
8.Trichur 98 20 21 39 18

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9.Palghat 91 39 20 22 10
10.Malappuram 95 50 19 19 7
11.Kozhikode 77 34 8 25 10
12.Wynad 25 5 3 10 7
13.Cannanore 85 22 23 26 14
14.Kasargode 37 16 6 11 4
Total 1001 358 231 275 137

Total No. of Panchayats which have spent 50% and above of Income=864

7.3 The above position is in comparison with the 'Self raised income' of Panchayats
whereas a slightly different will emerge if the cost of establishment is compared with the
total receipts of Panchayats under "Self raised income" and 'Assigned revenues' from
Government (ie. Statutory Grants viz. Duty 75%, Basic Tax Grant and Vehicle Tax
Compensation). Table below gives the number of Panchayats under different income.
group (computed on the basis of Self raised income + assigned revenue) and percentage
of establishment cost of panchayats under each income group in relation to the income
from the above two sources.

TABLE

Position of income (Self Raised Income plus Assigned Revenue) and Establishment
cost during 1983-84

Number of Panchayats where Establishment cost is

No.of
Panchayats unde Below 50% and 75% and 100% and
Income group 50% of above but above but above of
each income
group total below 75% of below 100% total
income total income of total income income
Upto Rs. 50,000 8 8

Above 124 1 17 51 55
Rs.50,000 and
upto Rs. one
lakh
Above Rs. one 226 11 125 78 12
lakhs and upto
Rs. 1.50 lakhs
Above Rs. 1.50 163 39 110 11 3
lakhs and upto
Rs. 2 lakhs
Above Rs. 2 255 148 101 5 1
lakhs and upto
Rs 3 lakhs

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Above Rs. 3 148 207 16 1 1
lakhs and upto
Rs. 5 lakhs
Above Rs 5 77
lakhs

Total 1001 406 369 146 80

It may be seen from the above table that there are 80 Panchayats which have nothing left
under total income after meeting establishment cost. The number of Panchayats spending
50 and above of their total income towards Establishment cost is 595 as per above table.

7.4. The staff pattern sanctioned by Government G.O. Ms. No 85/82/ LA & SWD dated
30-4-1982 to different grades of Panchayats is as follows:-

III Grade Panchayats

Head Clerk .. 1
Panchayat Assistant Grade II .. 1
Bill Collector .. 1
Junior Bill Collector .. 1
Midwife .. 1
Part time Liberarian .. 1
Part time Sweeper .. 1
Part time Scavenger .. 1
Tractor Driver .. 1
Part time Pound Keeper 1

II Grade Panchayats

Head Clerk .. 1
Panchayat Assistant Grade II .. 2
Bill Collector .. 1
Junior Bill Collector .. 1
Peon .. 1
Midwife .. 1
Librarian .. 1
Part time Sweeper .. 1
Part time Scavenger .. 1
Tractor Driver .. 1
Part time Pound Keeper .. 1

I Grade Panchayats

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Head Clerk .. 1
Panchayat Assistant Grade I .. 1
Panchayat Assistant Grade II .. 2
Bill Collector .. 3
Peon .. 2
Midwife .. 1
Work Superintendent/Overseer Grade III .. 1
Librarian .. 1
Part time Sweeper .. 3
Part time Scavenger .. 2
Tractor Driver .. 1
Part time Pound Keeper .. 1

Special Grade Panchayats

Manager .. 1
Head Clerk .. 1
Panchayat Assistant Grade II .. 3
Bill Collector .. 4
Peons .. 2
Overseer Grade II .. 1
Work Superitendent/Overseer Grade III .. 1
Midwife .. 1
Sanitary Inspector .. 1
Librarian .. 1
Full time/ Part time Sweeper .. 6
Part time Scavenger .. 2
Tractor Driver .. 1
Part time Pound Keeper .. 1

7.5. Increase in salary of staff due to revision of pay scales from 1-7-1978 and periodical
revision of D.A. are stated to be main factors for increase in the establishment cost.
Besides due to lack of financial control expenditure under T.A., purchase of stationery
articles, printing of forms and registers, telephone charges etc., have made heavy inroads
into the finances of Panchayats. During evidence collection and also at the time of case
study of few panchayats, certain representatives (Non Officials) had expressed their
concern over the ever growing financial burden of the panchayats towards payment of
"salaries" (including leave salary and pension contribution) of employees of Panchayats.
In order to economise establishment cost they had suggested that Panchayats require full
complement staff as per approved staff pattern. They had pointed out that the post of
Head Clerk in addition to Manager is superflous in Special Grade Panchayats. According
to them either one of them is sufficient to supervise office work, Some of the Panchayats,

105
after having become Special Grade, are placed in an embarassing situation in which they
find there is practically nothing left from thier own resources to provide even minimum
amenities and services to the local people. Hence some of them even went to the extent of
requesting for downgrading of their Special grade Panchayats to First Grade. Another
demand is that the State Government should subsidise the Establishment charges atleast
by 50%.

7.6. Since Government have approved the staff pattern for different Grades of Panchayats
and since revision of Pay and Allowances of State Government Employees ordered from
time to time are applicable to employees of local bodies also mutalis mutandis there is
not much scope for reduction of expenditure under salaries of staff. Despite, in the case
of Panchayats whose total establishment cost exceeds 75% of total income (self raised
income+statutory grants reckoned for purpose of grouping of Panchayats) Commission
considers that in future there must be some sort of restriction in appointment against
sanctioned posts in those Panchayats without adequate resources.Besides, it will be
possible to make a drastic reduction in expenditure in respect of other areas viz. Purchase
of stationery articles, printing of forms and registers, tour T.A., telephone expenses, petty
purchases etc. Therefore, with a view to exercise a certain degree of economy in the
matter of other items which form part of the establishment cost, the Commission would
make the following recommendations.

(1) STD facilities for telephones wherever available should be barred.

(2) There should be annual ceiling on expenditure under T.A.

(3) The recurring expenditure under establishment charges, other than on "Salaries of
Staff", 'Leave salary and Pension Contribution' and 'Sitting fees' should be limited as
follows:-

(i) 2nd and 3rd Grade Not to exceed 15% of income that will be reckoned for
Panchayats the purpose of grouping of Panchayats.
(ii) Special Grade and Ist Not to exceed 10% of income as stated above.
Grade Panchayats

Non-recurring expenditure like purchase of vehicle, furniture on scale prescribed for

staff, purchase of Typewriter Deposit to P & T Department for telephone connection,
election expenses, printing of forms for quinquennial revision of tax may be excluded
from the above ceiling of expenditure.

7.7. As regards demands for 50% subsidy on establishment cost, the Commission is of
the view that the Administrative expenses being a routine expenditure for normal running
of a local body, it should be met from its own resources plus whatever is made available
to it by State by way of "General Purpose Grant." 'Incentive Grant' and Assigned
Revenues' for discharge of normal duties and functions of those Bodies.

106
2. PUBLIC WORKS

7.8. Next to establishment cost, expenditure on public works consumes the largest share
of income of Panchayats in the State. Bulk of the expenditure is incurred for maintenance
of earthern roads, culverts and bridges. The length of earthern roads furnished by the
Panchayats in the annexure to the detailed questionnaire issued by the Commission is so
elusive that the sum total of the distance of all such earthern roads in all Panchayats in the
State may be a staggering figure and hence no attempt is made to quantity the
requirements for its maintenance on the basis of distance. The term "earthern road" is too
elastically used by Panchayats in their road registers that the description is equally
applicable to a "foot path" hardly having width less than one metre and a 'pucca earthern
road' with sufficient width.

7.9. The Panchayats in the State have been spending for public works during the period
between 1980-81 to 1983-84 on an average 43 to 54% of their self raised income. The
expenditure incurred by the Panchayats towards 'Public Wroks' during the years 1981-
82,1982-83,1983-84 was to the order of rupees seven to seven and a half crores. The total
receipts of panchayats from VTC and VRM grant together was Rs. 479.40 lakhs during
1983-84 against an expenditure of Rs. 738.35 lakhs under 'Public Works'. Further, if we
compare the expenditure under 'Public Works' with total receipts from 'Building Tax'
during 1983-84 which was Rs.608.92 lakhs it can be seen that the Panchayats in the State
are spending for road maintenance more than the receipts from 'Building Tax' by one to
one and a half crores of rupees annually.

7.10. During collection of evidence and in the replies furnished to the general
questionnaire the representatives of the public were very much critical about the poor
standard of village roads in Panchayats. They have pointed out that in spite of the fact
that each Panchayat is spending a sizable portion of its income towards maintenance of
earthern roads no tangible results could be perceived as vast majority of earthern roads
are unable to withstand the vagaries of the two seasonal rains occurring in the State in
June and November. Very often, they allege, the very same earthern roads are repaired
every year only to be washed off in the fury of the ensuing monsoon. Repairs and
maintenance of earthern roads are therefore found in practice to be an exercise in futility,
it not an annual ritual, with no benefits to the public for whom it is meant. The public
opinion was strongly in favour of changing the present practice of spending enormous
amounts on maintenance of earthern roads. Instead, they have wanted conversion of the
existing earthern roads into metalled roads and metalled roads into black topped roads.

7.11. The Commission has found that there is substance in the opinion expressed by the
Public as stated above. While there is need for maintaining earthern roads, wherever there
is absolutely no scope for converting it to the next higher type, the unbridled freedom of
Panchayats in utilising funds for public works has, over the years led to a situation in
which the conversion process has been assigned a low priority if not totally neglected.
The case study of certain Panchayats has revealed that there is no improvement in
upgradation of the standards of roads. Anchal , a Special Grade Panchayat, in Quailon
District, is having only earthern roads and the total length comes to 96 kilometres.

107
Though this Panchayat has spent around Rs. 1.75 lakhs during the period between 1980-
81 to 1983-84 for maintenance of roads nothing is done to convert even a small length of
earthern road into metalled one. Ezhukone another Special Grade Panchayat which is
having an rea of 17 Sq. K.m, only is reported to be maintaining 1373400 k.m of earthern
roads. This Panchayat had spent an amount of Rs. 4.42 lakh for road maintenance during
the three years from 1981-82 to 1983-84 as per information made available to the
Commission by the Executive Officers. This Panchayat is not having any metalled or
black topped road. Despite, a sum of Rs. 8000 is seen disbursed to this Panchayat as
V.T.C. Similary Kadakkal Panchayat (Special Grade) which is also maintaining only
earthern roads length of which comes to 313 k.m. had spent Rs. 3.43 lakhs for
maintenance of earthern roads during the above three years. Not even one k.m. of
earthern roads has been converted into metalled road despite spending lakhs of rupees in
the name of maintenance of roads. This Panchayat, which does not have any metalled
road, has also managed to get V.T.C around Rs.2200 during each of the above three
years. This phenomenon is discernible in a large number of Panchayats in varying
degrees.

7.12. In order to avoid the wasteful expenditure on maintenance and repairs of earthern
roads, the Commission would recommend the following procedures for utilisation of
funds by Panchayats in the matter of Public Works.

(i) Vehicle Tax Compensation should be utilised exclusively for maintenance and
widening of motorable roads and also for widening and conversion of metalled roads into
blacktopped road. It should not be utilised for maintenance of earthern roads.

(ii) 80% of the V.R.M.Grant shouuld be set apart for conversion of carthern roads into
metalled roads or metalled roads into blacktopped roads and for maintenance of the
above roads and only 20% need be spent for maintenance of earthern roads.

(iii) 20% of the earthern/gravelled roads (excluding foot path) should be converted into
the next higher type road every year by utilising V.T.C and V.R.M Grants.

7.13. The Commission is of the view that, if under a phased programme 20% of the
earthern roads is converted every year into metalled roads, the entire length of earthern
roads excluding foot path of all Panchayats in the State can be converted into
metalled/black topped roads over a period of five years.

3. WATER SUPPLY

7.14. Protected drinking water is the most important civic need to be provided by the
local bodies. Over the years of Planned development, Kerala could provide safe drinking
water to 42% of rural population till the end of 1983-84. Supply of protected water to
rural population has been recognised as one of the prime responsiblities of the State.
Accordingly the Kerala Water & Water Authority (KW & WWA) which is in charge of
Water Supply Scheme from 1-4-1984 has drawn up a massive programme to make
protected water available to the entire rural population by 1991. Water Supply Schemes

108
in rural areas are implemented under State Sector and central Sector. State sector schemes
are implemented with the assistance from L.I.C. The scheme under Central sector is
known as Accelerated Rural water Supply Scheme (ARWSS) and it is fully assisted by
Government of India. During Sixth Plan period (1980-85) the expenditure on Rural
Water Supply Schemes was to the order of Rs.105.29 crores as shown below.

(Rs. in crores)

State Sector Central Sector

Year
(L.I.C aided) (ARWSS)
1980-81 3.34 3.23
1981-82 5.20 5.76
1982-83 8079 6.96
1983-84 30.53 17.29
1984-85 9.17 15.02
Total 57.03 48.26

7.15. According to the K.W. & W.W.A 1948 rural water supply schemes are now in
operation. There are 547 on going schemes of which 471 are expected to be commisioned
during 1985 86. The proposed outlay during the 7th Plan (1985-90) is Rs. 124 crores. The
actual plan outlay is yet to be finalised. The anuual plan 1985-86 envisages an outlay of
Rs. 8.50 crores for rural water supply schemes in the State Sector and Rs. 20 crores in the
Central Sector. The K.W. & W.W.A. (erstwhile P.H.E.D) has proposed a number of
schemes for implementation with bilateral and World Bank assistantce as part of a
massive programme of Government for providing safe drinking water to the entire rural
population by 1991.

7.16. For the first time, the Wold Bank has approved a water Supply projecy for Kerala
which commences this year. The outlay envisaged for the Project is Rs. 97 crores, the
major part of which is intended for rural water supply schemes. Work on the following
schemes will commence this year.

Estimate
Population to
cost
benefited by year
World Bank Projects
(Rs. In
1990 (in lakhs)
lakhs)
(1) (2) (3)
1. Quilon W.S.(Aug.) Scheme to serve Quilon town 2009.10 3.12
and six Panchayats
2. Kottayam W.S.(Aug.) Scheme to serve four 673.90 1.46
panchayats adjecent to Kottayam town

109
3. R.W.S.S. to Greater Cochin Development area intended to serve the 3100.70 3.43
Panchayats in the GCDA
4. W.S.S.to Vilappil Panchayat 132.10 0.24
5. C.R.W.S.S. to Chitara & adjoining Panchayats ( 4 Panchayats) 578.70 1.11
6. C.R.W.S.S to Adoor & adjoiniing Panchayats (6 Panchayaats) 757.00 1.41
7. C.R.W.S.S in Vadavucode Puthen Cruz 382.00 0.77
7633.50 11.54

Besides the World Bank assistance, Netherlands and Denmark Governments have also
agreed to assist to take up some new Rural Water Supply Schemes. Two Schemes with
the assistance of Netherlands Government which are under implementation, are Vakkom-
Anjengo Comprehensive. Water Supply Scheme in Trivandrum Division and
Comprehensive Water Supply Scheme in Nattika Firka in Trichur Division. The
following new Schemes are also proposed to be taken up by the K.W. & W.W.A during
1985-86.

New Schems (Rs. in lakhs)

C.R.W.S.S to Kundara & adjoinging Panchayats, (7 Panchayats) 718.00
C.R.W.S.S to Koipuram Panchayat 92.00
C.R.W.S.S to Mala & adjoining Panchayats (6 Panchayats) 341.00
Water Supply Scheme to Thrikkunnapuzha 14.00
K.W.S.S.To Cheriyanand 72.00
C.R.W.S.S to Cheakode & adjoining Panchayats (10 Panchayats) 450.00
C.R.W.S.S TO Kolancherry & adjoining Panchayats (8 Panchayats) 500.00
C.R.W.S.S to Edappal & adjoining Panchayats ( 5 Panchayats) 50.00
2237.00

7.17. We hope that the target of providing safe drinking water to entire Rural Population,
keeping with the objectives of International Drinking Water Supply and Sanitation
Decade, will be achieved by the year 1991 and thereby Panchayats will be relieved of
their burden of providing one of the most essential amenities of civic life.

Financial liability of Panchayats in respect of Capital cost of Rural Water Supply

Scheme

7.18. The main source of financing Rural Water Supply Schemes in the State Sector is
loan from the Life Insuarance Corporation of India. The practice till 1-4-1984 was for
Life Insuarance Corporance Corporation to give loans to the Kerala State Rural
Development Board for meeting 50% the amount required for implementing the Schemes
approved by them, the remaining 50% being borne by the State Government. Liability of
the beneficiary Panchayats in this transaction is limited to 25% of the capital cost of the
Schemes repayable, in 25 equal annual instalments. The amounts have to be paid to the
Kerala State Rural Development Board by the Panchayats from its resources, With
formation of K.W. & W.W.A. all assets, rights, liabilities and obligations of the Kerala

110
State Rural Development Board relating to execution of Water Supply Scheme in
Panchayat areas have become the assets, rights, liabilities and obligations of the K.W. &
W.W.A. from 1-4-1984 vide section 16(c) of the K.W. & W.W.A. Ordinance. The arrears
as well as future instalments have therefore to be paid to the K.W. & W.W.A being a
legal liability as pre agreements executed by the Panchayatas with K.S.R.D.B. However
the position would change materially from 1-4-1987. From that date according to sec. 18
of the K.W. & W.W.A. Ordinance all the water supply schemes vested in the Panchayats
will stand transferred to the Authority (unless of course Government extends the date of
transfer). Since ownership of the Water Supply Systems will no longer vest with
Panchayats from 1-4-1987, the procedure for meeting 25 % of the cost of Water Supply
Schemes could be deemed to have lapsed from that date and it will not be necessary for
the Panchayats to meet the share of the cost accruing from 1-4-1987.

7.19. Since the ownership of the Rural Water Supply Schemes will stand transferred to
K.W. & W.W.A with effect from 1-4-1987 as per Ordinance mentioned in pre para the
Panchayats are surely to raise a claim for refund of amount invested by them towarrds
25% of the capital cost of the Scheme. This being the position, a question may naturally
arise as to whether Panchayats need pay the outstanding arrears as well as future
installments that will accure till 31-3-1987. This being a question of policy the
Commmission leaves the matter to Government for taking appropriate decision regarding
the outstanding liability of Panchayats in respect of the capital cost of Water Supply
Schemes.

Liability of Panchayats for Maintenance of Rural Water Supply Schemes

7.20. The completed rural piped water supplies are operated and maintained by the
P.H.E.D. (now K.W. &.W.W.A) on behalf of the Panchayat which is obliged to
compensate K.W. & .W.W.A. for all its expenditure for operation and maintenance. Part
of theses expenses are met by domestic consumers by way of water charge. The
remaining part of maintenance and operation charges are billed to the Panchayats as
charges for water supplied to the Panchayats through street taps. Liability of Panchayats
in this regard is however limited to a maximum of 12.5% of its revenue. Expenditure in
excess of the above limit is compensated by Government by means of Water Supply
Maintenance Grant to Panchayat wide g.o mS. 260/67 DD dated 7-9-1967. However in
actual practice this grant is being paid only subject to availability of funds in the budget.
Hence most of the Panchayats which are incurring expenditure in excess of 12.5 % of
revenue are not receiving above grant. The maintenance charges demanded by the
Executive Engineers of concerned Divisions of the K.W. & W.W.A. are stated to be:

(1) Cost of staff exclusively engaged in the operation and maintenance of Water Supply
Schemes.

(2) Electricity Charges.

(3) Cost of water treatment and

111
(4) Other expeditures.

7.21. There are huge arreas under maintenance charges outstanding payment to P.H.E.D
by the Panchayats. The reason for non-payment of maintenance charges put up by the
Panchayats is that the maintence charges demanded by the P.H.E.D inflated figures and
that the details of the claims asked for the Panchayats are not furnished to them by the
P.H.ED. On verifying records of certain panchayats it has been noticed that the P.H.ED.
'demand ' towards maintenance charges is for a lump sum and ne split up details showing
how the amount is arrived at have been furnished. Panchayat has its own reasons to call
for such details of claims as are deemed necessary to satisfy Audit. On the other hand
P.H.E.D. views this as a tactics to evade or postpone payment by calling for details.
Whoever be at fault, it is true that arrears have become too large and in many cases
beyond the capacity of Panchayats to pay. As the arrears relate to the past several years it
will be a difficult task now to the P.H.E.D. to prepare detailed claims with split up
details. Moreover the PHED has been converted in autonomous body viz. Kerala Water
and Waste Water Authority and hence collection and preparation of old data after
searching old records has now become a difficult job for them. Prior of the formation
K.W. & W.W.A., Government had adjusted arrears maintenance charges to the P.H.E.D
by transfer crediting grant-in-aid due to Panchayats. According to P.H.E.D. arrears on
maintenance charges would come to around Rs. 7.35 crores as on 31-3-1984. Whether
adjustments against Grant-in-aid made by Government have been accounted for under the
above arrears requires cross checking. Lapse of time has indeed rended verification of
past accounts very difficult. At any rate, the amount in dispute cannot be more than fifty
per cent of the amount claimed by the P.H.ED. The Practical Solution for clearance of
arrears of maintenance charges seems to be to write off 50% of the dues outstanding
payment to the P.H.E.D. (now K.W.. & W.W.A) relating to the period upto 31-3-1984.
Balance 50% may be paid to the K.W. & W.W.A., sharing the liability by Government
and Panchayat on a 50 : 50 basis.

7.22. In respect of claims from 1-4-1984 onwards the K.W. & W.W.A should be required
to furnish to the Panchayats the claim in detail covering the relevant items mentioned in
para No. 7.20 and Panchayts need honouronly those claims having split-up details.

Maintenance liablility after 1-4-1987

7.23. According to the Ordinance constituting the Kerala Water and Waste Water
Authority all the water supply schemes including pumping stations, distribution lines
owned by the Panchayats will stand transferred to the Authority with effect from 1-4-
1987 vide section 18 of the Ordinance. Since ownership of Water Supply Schemes will
no longer vest with Panchayat from 1-4-1987 the responsibility for maintenance of Water
Supply Installation after the above date will not be with the Panchayats but with the K.W
& W.W . Authority. The Panchayats need pay only the water charges for street taps from
1-4-1987 onwards. A question will however arise then as to the share of expenditure to be
borne by the Panchayats in respect of Street taps provided in Panchayat area.

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7.24. One method is that the K.W. & W.W. A will supply water to the Panchayats on a
bulk basis and be paid for 85 per cent of the water supplied allowing the remaining 15 per
cent for wastage etc. This bulk support will include water consumed form street taps as
well as from domestic connections. The Panchayats will be at liberty to collect water
charge at such rates as are fixed by them. This method will necessitate appointment to
additional staff in the Panchayat exclusively to attend to the work like method reading,
preparation and serving of water bills etc. The additional expenditure on this account will
add to the mounting establishment charges Panchayats. Often the expenditure may be
disproportionate to the receipts by way of water charges. Moreover such a system is
likely to result in each panchayat fixing its own water charges proportionate to the
expenditure incurred by each and in many cases it will give rise to an inequitous system
in which rates of water charges may vary from Panchayat to Panchayat. In their
enthusiasm to keep the consumers in good humour some Panchayat may even go to the
extent of subsidising water charges from the revenue Panchayats. The K.W. & W. W.A.
which is having a technical organisational set-up will be able to undertake the work of
meter reading and collection of water charges more effectively and expeditiously.
Moreover the Ordinance constituting the K.W. & W.W. Authority responsibility for hour
connection, its servicing, maintenance etc., will rest with the Authority. Since the above
functions are clearly defined and vested with a statutory authority it will not be proper for
another body, not equipped for the purpose, to interfere with it. The Commission is
therefore of the view that collection of Water charges from domestic consumers in
Panchayat areas should be undertaken by the K.W. & W.W.A itself for the sake of
ensuring uniformity in water charges and other attending factors.

7.25. The more national way will be to collect charges for water supplied through the
street taps in the Panchayat area from the concerned Panchayats by the K.W. & W.W.A
at a fixed rate for each tap if it is not practicable to keep separate meters for measuring
the water supplied through street taps. During informal discussion, the Finance Manager
of K.W. & W.W.A. has favoured above idea and suggested to pay water charges
assuming quantity of water supplied through one tap per day as 2400 litres (ie, at the rate
of 5 litres of water per minute for 8 hours in a day). This is fairly a reasonable norm. On
the above basis fixed charge per tap per annum at the existing rate of Re. one per 1000
litres of water would come to Rs. 876 or say Rs. 875 (ie. 5 X 60 X 8 X 365)./1000.

7.26. Commission therefore recommends to pay water charges at above rate per tap. In
case K.W. & W.W.A enhances rate, Panchayats will have to pay water charges at
enhanced rates for quantity of water computed in the manner indicated under para 7.25.

Grant for Maintenance of Water Supply

7.27. For water supply installations provided by the P.H.E.D., Govrnment are paying
grant in respect of those Panchayats whose annual expenditure on maintenance of water
supply installations is in excess of 12.5% of their normal annual income vide G.O. MS.
260/67/DD dated 7-9-1967. Since responsibility for maintenance of water supply
installations in future will be vested with the K.W. & W.W.A. and since Panchayats need
pay only water charges at fixed rate on street taps, above norm for payment of grant

113
requires revision on the basis of future financial commitment of Panchayats for providing
drinking water to public.

7.28. The average number of households in Kerala is one for every 5 persons. The norm
recommended to be adopted for providing a street tap is one for every 200 persons. It is
assumed that about 20% of population in a Panchayat will be covered by house
connection. If so, for a Panchayat with a population of 10,000, minimum 40 street taps
will have to be provided by the Panchayat for use of 8,000 population, the remaining
persons being domestic consumers. According to the present rate of water charges per tap
per annum as per calculation shown under para 7.25, would come to Rs. 875.
Accordingly total maintenance cost for 40 street taps would come to Rs. 35,000 per
annum. This means that Panchayat will have to incur a per capital expenditure of Rs. 3.50
towards charges for drinking water. Commitment will further go up in case of K.W. &
W.W.A revises the rate.

7.29. As per our assumption, by devolution of budgetory resources (Duty and Basic Tax)
of the State Government and General Purpose and Incentive Grants, per capita receipt of
Panchayats will be Rs. 7.50. Of this, Rs 3.50 will have to be spent by the Panchayat for
water supply. With the balance available together with the resources by their own efforts
which we have estimated on an average of Rs. 9 to 10 per head, they have to meet
expenditure on a variety of inevitable items like establishment electricity, sanitation,
maintenance of essential services for which no specific grant will be available from
Government. In such a context there is every justification for financing part of the
expenditure incurred by Panchayats towards water charges payable to K.W. & W.W.A.
as supply of protected drinking water to the rural population is one of the most important
social obligations of the State. Inclusion of this as an item in the new 20 Point
Programme itself highlights the paramount importance accorded to this basis amenity.

7.30. There was demand from representatives of Panchayats to subsidise the expenditure
incurred for water supply by Panchayats. Having considered the various aspects of this
problem the Commission is convinced of the need for subsidising 50% of the cost of
water charges. Accordingly Commission recommends that 50% of the actual cost of
water charges per tap paid during a year to the K.W. & W.W.A or Rs. 500 per tap per
annum whichever is less may be reimbursed by the Government as specific Purpose
Grant. This grant should, however, be limited to the number required for 80% of the
population ie. at the rate of one tap for every 200 population (non-domestic consumers).
The total financial commitment would come to around Rs. 7 crores per annum at the rate
of Rs. 3.50 per head for nearly 2 crores of rural population. The commitment to the above
extent will however, arise only if all the Panchayats provide street taps at the scale of one
tap for every 200 population (non-domestic consumers) as explained earlier. This will be
possible only after 1991 when all the Panchayats are expected to be covered by rural
water supply scheme under the "Decade Programine". At present only 42% of the rural
population has been covered by drinking water supply schemes. Therefore immediate
commitment of Panchayats will be to the Order of Rs. 3 crores of which the Government
commitment will be only Rs. 1.50 crore ie. 50% of Rs. 3 crores. In para No. 5.63 under
Chapter V dealing with Specific Purpose Grant we have recommended to provide a sum

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of Rs. 15 lakhs to pay annual grant to Panchayats for maintenance of water supply
schemes. On switching over to payment of grant at 50% of the cost of water charges per
tap, existing system of payment of grant may be dispensed with.

4. STREET LIGHT

7.31. Eventhough providing street lights is one of the mandatory functions of Panchayats
in our State it is by and large dependent on the resource position of each Panchayat.
Details gathered by the Commission show that as on 1-4-1985, 12 Panchayats have not
been provided with street lights in their areas. However, the 'Economic Review 1984'
brought out by the Kerala State Planning Board States thus, "All the villages in the State
have already been brought under electrification. However certain karas in certain villages
remain unelectrified. In 1983-84, 22 such karas were electrified". It is true that as a result
of the intensive rural electrification scheme electricity has reached all villages in Kerala.
But to the rural population of several Panchayats in the State the benefits of
electrification has not reached them in the sense that street lighting is still a far cry to
many Panchayats. The resource constraints of many Panchayats act as a serious handicapt
providing street lights. Even those Panchayats which have already provided street
lighting on a moderate scale find themselves badly crippled by the steep increase in
electricity charges imposed by the K.S.E.B. from 1982. Table below indicates the
increase in expenditure towards street lighting during the period from 1979-80 to 1983-
84.

TABLE

(Rs. in lakhs)

Increase in expenditure from Precentage of increase from

Year Expenditure
1979-80 1979-80
1979- 111.39 .. ..
80
1980- 131.55 20.16 18%
81
1981- 165.71 54.32 49%
82
1982- 228.11 116.72 105%
83
1983- 340.80 229.41 206%
84

During collection of evidence the Commission has found that the public and functionaries
of Panchayats were highly critical of the policy pursued by the K.S.E.B in the manner in
which electricity charges are levied for street lighting. One of the common complaints
received by the Commission is that the Panchayats are obliged to pay electricity charges
for several street lights which are not burning.

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7.32. The K.S.E.B levies electricity charges for street lights on the basis of burning hours
and this procedure is precisely the bone of contention between the Panchayats and the
K.S.E.B. This method will certainly work well so long as all the street lights in the
Panchayat area are burning uniformly for the prescribed hours. In the absence of a
method or machinery to check the number of street lights not burning, the procedure of
calculating electricity charges on the basis of burning hours will operate against the
interest of the Panchayats. All the Panchayats in the State have therefore been unanimous
in their demand to the Commission that consumption of electricity by street lights should
be metered. The Commission has found that the system of metering of consumption of
electricity by street lights is adopted in certain other States in India. The Commission
would therefore recommend to Government to advise the K.S.E.B. to introduce the
system of metering. This will eliminate once and for all the element of arbitrariness in
levying electricity charges for street lights.

7.33. As already pointed out, electricity bill for street lighting drains away a sizable part
of the revenue of Panchayats in the State. During collection of evidence the
representatives of Panchayats have, therefore, strongly pleaded for substantial assistance
from Government for meeting the expenses for street lighting. At any rate they wanted
Government to bear the electricity charges for street lights provided in roads owned by
the P.W.D.

7.34. Annual expenditure of Panchayats towards current charges on the basis of details
made available by the Panchayats totals to over Rs. 3 crores. We have recommended in
para 3.72 under Chapter III that service charges at 1% of the annual rental value should
be compulsorily levied by the Panchayats which have provided street lights. Nearly one
crore rupees is likely to be collected by the Panchayats on this account, if our
recommendation is implemented. The remaining Rs. 2 crores will have to be met by the
Panchayats from their other sources. According to the existing norm expenditure on street
lighting in excess of 15% of the normal income of the Panchayats will be met by
Government in the form of grant. The Commission considers that the existing quantum of
assistance is quite inadequate in view of the steep hike in tariff. As the Panchayats are
discharging a very important social obligation, the Commission recommends that one
third of the expenditure on street lighting may be met by the Government on the basis of
current charges for eight hours burning a day. For the present, commitment on the part of
Government would come to Rs. 1 crore.

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 CHAPTER VIII FINANCIAL VIABILITY AND NORMS FOR
REGROUPING OF PANCHAYATS

8.1. In April 1985 Government have referred to the Commission following two additional
items.

(i) Study on uneconomic Panchayats which are not able to meet even the establishment
expenditure, let alone, other developmental activities and suggestions for making them
viable or for amalgamating with other viable. Panchayats.

(ii) Examination of the existing norms regarding the Panchayat and suggestion, if any, for
their regrouping in consonence with the financial capacity of the Panchayats.

1. VIABLE PANCHAYATS

8.2. The question of "viability" criteria of Panchayats has come up for serious
consideration of certain committees on Panchayat Raj affairs. The Asoka Mehta
Committee on Panchayat Raj Institution (1978) has observed that smaller Panchayats will
not be able to provide services and amenities at satisfactory levels and Panchayats formed
on "area-cum population" basis will be more viable units of local administration and
favoured Panchayats with a population to the order of 10,000 to 15,000 . In Karnataka
where the population of a Panchayat was 1000 to 1500, Mandal Panchayats for every
10,000 to 15,000 people encompassing 7 to 10 existing Gram Panchayats have been
formed recently. The Government of Andhra Pradesh where also the size of Panchayats is
more or less the same as in Karnataka, has initiated steps to form Mandal Panchayats.
The concept of Mandal Panchayat is in recognition of the fact that only larger Panchayats
can function as viable units capable of mobilising adequate resources from local people
for discharging obligatory functions. Panchayats with smaller population will not be able
to raise adequate resources for discharging their functions effectively due to the fact that
the size of the Panchayat is too small to extract resources to the extent necessary. But
compared to the Panchayats in our neighbouring States the Panchayats in our States are
bigger in size and population out of 100, Panchayats there are only 30 Panchayats in our
State having population less than 10,000. In future it would be better to have Panchayats
co-terminus with revenue villages wherever possible and to insist minimum population of
10,000. As the measures suggested by the Commission are likely to improve the financial
capacity of the existing 'Problem Panchayat's the Commission is not inclined to interfere
with the basis on which the existing Panchayats are formed. In our view if our
recommendations are implemented a Panchayat with a population of 10,000 is likely to
fetch an income around Rs. 1.65 lakh annually as indicated below.

(i) Building Tax Rs. 45,000

(Assumed at Rs. 4.50 per head vide para 6.18 in Chapter VI)
(ii) Service Tax (Assumed at 50 paise vide para 6.19 in Chapter VI) Rs. 5,000
(iii) Incentive Grant at 10% of total of (i) and (ii) above (vide para 5.69 in Rs. 5,000
Chapter V)

117
(iv) Profession Tax Rs. 25,000

(Assumed at Rs. 2.50 per head vide para 6.20 in chapter VI)
(v) General Purpose Grant Rs. 20,000

(Per capita Grant at Rs. 2 vide para 5.60 in Chapter V)

(vi) 75% Duty on per capita basis (Rs. 2.50 per head vide para 5.14 in Rs. 25,000
Chapter V)
(vii) Additional income on account of change of rate on Duty on Transfer of Rs. 6250
Property by one per cent (1/4 of item VI)
(viii) Basic Tax Grant including surcharge on Land Revenue Rs. 20,000

(Assumed at Rs. 2 per head vide para 5.21 in Chapter V and para 6.4 in
Chapter VI)
(ix) Vehicle tax, fees for construction of building, licence fee, tax on sale of Rs. 10000
lands, advertisement tax etc.
(x) Miscellaneous Income Rs. 3,750
Total Rs. 1,65,000

8.3. Income from Entertainment Tax, Remunerative enterprises, Market etc., will be in
addition to the receipts from the above sources. Further we had recommended a sum of
Rs. 50,000 as Special Grants to poor Panchayat to meet expenditure of a capital nature.
Besides, grant to the extent of Rs. One lakh per annum to the needy Panchayats to carry
out developments activities under "Plan" programme will be available to them. Over and
above, the Panchayats which are providing certain amenities and services will be entitled
to 'Specific Purpose Grant' as per norms laid down by the Government for maintenance
of such specific services. With the above resources at their disposal consequent on the
implementation of our recommendations we are confident that all the 'Problem
Panchayats' in the State will be able to turn the corner in the near future.

(ii) GROUPING OF PANCHAYATS

8.4. Regrouping of Panchayats is done one in three years based on the average income of
each Panchayat for the previous three years. Last grouping was ordered by Government
in G.O. (MS) No. 52/83/LA & SWD dated 10-5-1983 on the basis of average income for
the years 1979-80, 1980-81 and 1981-82 and accordingly the following is the basis of
existing classification of Panchayats.
(i) Special Panchayats having an average income of more than Rs. 1,75,000.
Grade
(ii) I Grade Panchayats having an average income of more than Rs. 1,00,000 and
upto Rs. 1,75,000.
(iii) II Grade Panchayats having an average income of more than Rs. 50,000 and upto

Rs. 1,00,000.
(iv) III Grade Panchayats having an average income of Rs.50,000 and below.

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8.5. We have pointed out in Para No. 7.2 under Chapter VII dealing with establishment
expenses of Panchayat that out of the existing 1001. Panchayats, 864 Panchayats have
spent during 1983-84 more than 50% of their 'self raised income' towards establishment
charges (Salary of staff, T.A. sitting fee of members, office expenses etc.). Of them
expenditure of 358 Panchayats has exceeded their self raised income and encroached
upon grants from Government which is generally intended for providing civic amenities
at satisfactory level. Consequently these Panchayats are not in a position to render
services or provide amenities worth mentioning as grants received are often diverted for
meeting establishment expenses.

8.6. Average cost of establishment based on the figures relating to 1983 -84 as furnished
by the Executive Officers is as follows:-

Rs.

III Grade Panchayats 65,000

II Grade Panchayats 90,000
I Grade Panchayats 1,45,000
Special Grade Panchayats Above 2,00,000

Average cost on the basis of sancioned strength plus office expenses, T.A. etc., will be
still higher. But in most Panchayats all the sanctioned posts are not filled up either as they
cannot afford it or there is no immediate necessity for it. These posts include Midwife,
Sanitary Inspector' Work Superintendent, Overseer, Tractor Driver etc. Hence average
cost on the basis of sanctioned strength will not reflect the true picture. Resenable
approach will be to arrive at the present cost of establishment on the basis of 1983-84
figures plus 5% growth in expenditure for each of the years 1984-85 and 1985-86 and a
10% increase to accommodate the impact of the present Pay and D.A. revisions etc. Thus
allowing a 20% growth over the figures for 1983-84 the average expenditure that can be
assumed for 1985-86 under establishment charges would be as follows:-

Average establish -ment

Add 20% of
Establishment cost expenditure arrived at for
Establishment cost of
during 1983-84
1983-84
1984-85
III Grade 0.65 0.13 0.78
Panchayats
II Grade 0.90 0.18 1.08
Panchayats
I Grade 1.45 0.29 1.74
Panchayats
Special Grade 2.00 0.40 2.40
Panchayats

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8.7. Assuming that a minimum amount equal to one-third of cost of establishment should
be available for meeting the expenditure towards providing essential civic amenities like
street lighting, water supply, sanitation etc., the reasonable level of income for the
purpose of classification of Panchayats should be as follows:

Grade Income for grouping of Panchayats

Special Grade Panchayats Average income more than Rs. 3 lakhs.
I Grade Panchayats Average income more than Rs. 2 lakhs and upto Rs. 3 lakhs
II Grade Panchayats Average income more than Rs. 1 lakh and upto Rs. 2 lakhs.
III Grade Panchayats Panchayats having an average income upto Rs. 1 lakh.

8.8. In previous Para No. 8.2 dealing with viable Panchayats we have pointed out that
consequent on implementation of measures suggested by us, a Panchayat with a
population of 10,000 is likely to have an income around Rs. 1.65 lakhs per annum.
Therefore there will be no Panchayat with income below Rs. One lakh to classify it as 3rd
Grade. All the Panchayats with income upto Rs. 2 lakhs may therefore be included under
a single category namely II Grade Panchayats. As regards other Grades of Panchayats,
higher income can be expected consequent on our new measures.

8.9. Accordingly, Commission would recommend classification of Panchayats based on

average income as follows:-

Grade Income for Grouping of Panchayats

Special Grade Panchayats Average income more than Rs. 3 lakhs per annum
I Grade Panchayats Average income more than Rs. 2 lakhs and upto Rs. 3 lakhs.
II Grade Panchayats Average income upto Rs. 2 lakhs.

The Panchayats will be able to provide services and amenities at least on a moderate
scale only if the income level for each grade is fixed as suggested above.

8.10. For the purpose of computing total income for grouping of Panchayats the
following components of income alone need be taken into account:

(i) Self raised income

(ii) General Purpose Grant (New grant on per capita basis proposed)

(iii) Incentive Grant (New grant proposed)

(iv) 75% Duty on transfer of property (Assigned revenue)

(v) 75% of Basic Tax Grant (Assigned revenue)

(vi) New Taxes recommended to be levied and assigned to Panchayats.

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V.T.C. need not be reckoned for classification because it is meant for maintenance of
motorable village roads and as such it cannot be deemed as a resource of Panchayats for
meeting other items of expenditure. Even now V.T.C. is not being recknoned for the
purpose of grouping of Panchayts. Similarly Specific Purpose Grant and Special Grant
recommended by the Commission should not be taken into account for computing
income for the purpse of classification.

CHAPTER IX MISCELLANEOUS

1. LOANS TO PANCHAYATS

9.1. During collection of evidence there was demand for liberal loan assistance from
Government to Panchayats to carry out works relating to schemes for providing basic
amenities such as street lights, construction of markets, improving facilities in the
existing public markets, acquisition of private markets, construction of halting places for
buses etc. If Government are not in a position to advance loans due to resource
constraints, if any, they have suggested to permit panchayats to borrow money from
financial institutions like Banks and other similar agencies who are prepared to grant
loans. In support of their plea they have pointed out that certain Municipalities in the
State have been granted loans by Scheduled Banks for creation of remunerative assets.

9.2. Government are providing in their Budget a sum of Rs. 20 to 25 lakhs annually for
granting loans to Panchayats for creating remunerative assets to Panchayats. The Kerala
State Rural Development Board is also advancing loans to Panchayats for the same
purposes, but with a difference, that in their case the work is executed by the Rural
Development Board itself realising centage charges which is an additional burden to
Panchayats. In the case of Government loans, Panchayats are at liberty to carry out the
work through their own agencies under the supervision of Local Bodies Engineering
Wing.

9.3. Due to resource constraints Government may not be in a position to sanction large
amount to each Panchayat towards loan. There are many poor and needy Panchayats in
the State which require amounts in the range of rupees one to two lakhs with which they
can create remunerative assets without going in for Rural Development Board Schemes
which cast a relatively higher burden on them. The commission therefore recommends
that Government may set apart a sum of Rs. 50 lakhs in their Budget every year for
sanctioning loans to the Panchayats for schemes such as construction of mini markets,
improvement of facilities of existing markets, construction of halting place for buses etc.,
cost of which does not exceed Rs. 2 lakhs.

9.4. According to section 3 of the Kerala Local Authorities Loans Act, 1963, Panchayats
can borrow money from any person on the security of its funds with the previous sanction

121
of Government. Government have always been rejecting requests for such sanctions for
one reason or other. But there are certain Panchayats in the State capable of generating
adequate resources and large fund balance for repaying loan instalments.

9.5. The Commission therefore recommends to Government to consider the requests for
availing Institutional Finances, from those Panchayats those annual establishment cost
have not exceeded their self-raised income for the preceding three years.

2. ARREARS OF LOANS OUTSTANDING TO GOVERNMENT AS ON 31-3-1983

9.6. In the data questionnaire issued to the Executive Officers, the Commission have
asked to furnish details of arrears of loan outstanding payment to the State Government
as on 31-3-1983. Through it was clearly specified in the pro forma that it is the details of
arrears (amount fell due for repayment but not paid) that are outstanding payment are to
be furnished, it is found during compilation that the details furnished by majority of them
are total outstanding balance of loan which includes amounts which will become due for
repayment during periods after 31-3-1983. Therefore the required details of outstanding
arrears as on 31-3-1983 could not be sorted out from such figures. Further, it is a time-
consuming job to call for the actual figures again from 1001 Panchayats.

9.7. We have noticed that most of the Second and Third Grade Panchayats in their
existing financial position, are finding it difficult to repay Government loans and interest
thereon. There will be nothing left out of their meagre income after repaying the loan
instalments. Of course their financial position will improve consequent on the
implementation of our recommendations. Even though the magnitude of arrears of loan
and interest is not readily available with us due to reasons explained earlier, we would
recommend that the arrears of loan and interest accrued upto 31-3-1983 but outstanding
till 30-9-1985 may be converted into a loan repayable in ten annual instalments
commencing from 1986-87. This gesture need be shown only to Second and Third Grade
Panchayats.

3. PLAN PROGRAMME FOR RURAL DEVELOPMENT AND PANCHAYATS

9.8. From the very inception of the State of Kerala the Panchayats have been carrying out
the traditional pattern of funcitons and duties. Community Development Programmes are
being implemented through Community Development Blocks functioning under the
administrative, control of the Development Department. Though the rural public are
being benefited in many ways by various programmes of Rural Development under Five
Year Plan Schemes, the Panchayats in Kerala are not assigned any significant role in the
implementation/execution of above programmes.

9.9. During the time of collection of evidence representatives of Panchayats (former

Presidents and Members) were highly critical about the non-participation of Panchayats
in the implementation of certain Rural Development Programmes like N.R.E.P., I.R.D.P.,
etc., intended inter-alia for creation of durable assets for strengthening rural

122
infrastructure. They have complained that the local bodies which are more close to the
public than Government agencies are not consulted neither in the identification of

beneficiaries nor in deciding on the priority of rural works. The representatives have
stated that consultation with the elected representatives will go a long way in ensuring
people's participation in the implementation of Rural Development Programmes. Many of
our Panchayats have proved themselves capable of implementing similar schemes in the
panchayats with their own funds as well as with the assistance of Government for certain
assigned functions.

9.10. In Panchayats, there is a persistent demand for more link roads connecting main
roads. Interior rural areas have to be provided with new roads which may provide life
lines to create more infrastructure like markets, schools etc. Objective of National Rural
Employment Programme (N.R.E.P) is to provide and strengthen above rural
infrastructure. Similarly there is great demand for fuel and timber in the rural areas. To
meet the demand Social Forestry Programme has been taken up in Kerala under N.R.E.P.
The Commission is of the view that it will be more beneficial to the rural public and also
a source of encouragement to Panchayats if they are also associated with the above Rural
Development Programmes. Accordingly we would suggest that Panchayats are consulted
and associated with the implementation of the following programmes.

(i) Selection of eligible families for benefits under I.R.D.P.

(ii) Programmes of house building in Panchayat area for economically weaker sections
under N.R.E.P and R.L.E.G.P.

(iii) Social Forestry and Firewood Plantaion Programme including distribution of

seedlings in Panchayat area under N.R.E.P and R.L.E.G.P.

(iv) Construction of rural link roads, digging of field channels, land development, water
conservation works under N.R.E.P and R.L.E.G.P.

(v) Construction of drinking water wells, digging and deepening of village water tanks,
establishment of Balawadies, Minor Irrigation works, Community Centres etc., under
N.R.E.P.

(vi) Drought relief works under UNIGEF programmes.

4. DELEGATION OF FINANCIAL POWERS

9.11. Financial powers delegated to Panchayats are those which are enumerated under: (i)
Kerala Panchayats (Authorising of Expenditure) Rules, 1964; and (ii) Kerala Panchayats
(Plan and Etimates) Rules, 1963. Panchayats are entrusted with a long list of obligatory
and discretionary functions but without having adequate financial delegation for
discharing those functions by the elected bodies. The powers as it exist today with the
exception of one or two are those which have been delegated during 1963 and 1964

123
Although the horizon of rural development and the role of Panchayats in village
administration has widened considerably since then, there have not been any
corresponding enhancement in the delegation of financial powers to Panchayats to cope
with the present needs. For example, financial power of a Panchayat for incurring a
recurring expenditure under recognised contingencies is only Rs. 25 in a month. During
collection of evidence the representatives of Panchayats were highly critical of the
inadequacy of the existing financial powers of Panchayats and they have strongly argued
for enhancing the powers taking into account the erosion in money value since 1963-64
and the ever-widening social responsibilities of local bodies at the village level. They
have complained that the present level of delegation of powers rests more with
Government officials and less with the implementing institutions viz., the Panchayats.

9.12. At a time when there are exhortations from all quarters for delegation and
decentralisation of more powers to the bodies concerned with the
execution/implementation of programmes it does not seem appropriate to allow them to
continue functioning with the abridged financial powers. The Commission is of the view
that too much of concentration of financial powers with officials will have adverse effects
on the day to day functioning of the democratically elected bodies and therefore the
elected bodies should be vested with adequate financial powers to carry out smoothly the
obligatory and discretionary functions entrusted to them. The officials are expected to
exercise only a watch over the observance of rules and regulations laid down by the
Government in spending Panchayat funds with a view to check extravagance or
overspending. The Estimate Committee (1982-84) of the Kerala Legislature (in para No.
22 of their Ninth Report) had also recommended to enhance the powers for according
administrative sanction for works. Accordingly the Commission would suggest to take
appropriate action for revision of financial powers delegated under the 'Authorising of
Expenditure Rules 1964' and 'Plan and Estimate Rules 1963' for the various items
mentioned therein.

CHAPTER X SUMMING-UP

10.1. In the preceding chapters the Commission has tried to analyse the problems of
finances of Panchayats in our State with a view to find out ways and means to improve it
to the extent possible. 'Finance' has always been a problem for the majority of Panchayats
and to those striving with inadequate resources, the problem was more intense. One of the
important tasks before the Commission was therefore to devise measures that can make
economically backward Panchayats viable units of local self Government.

10.2. While dealing with the question of viability of Panchayats in chapter No VIII we
have pointed out that a Panchayat with a population of 10,000 will be able to raise
resources to the extent of Rs. 1.65 lakhs at the minimum by their own efforts and own

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efforts and by devolution of statutary grants on per capita basis. In this connection we
have to add that Panchayats can be made financially viable only if they raise a minimum
per capita income of Rs. 9 to 10 by their own efforts as follows:

(i) Building Tax Minimum of Rs.4.50

per capita.
(ii) Service Tax Minimum of Rs. 0.50
per capita.
(iii) Profession Tax Minimum of Rs. 2.50
per capita.
(iv) Vehicle Tax, Licence fees and income from markets and Minimum of Rs. 1.50 to
other Miscellaneous income
2.50 per capita
Total Per-capita levy by own effort Rs. 9 to 10

10.3. Share of Panchayats towards assigned revenue from Government (Duty on Transfer
of Property and Basic Tax), General Purpose Grant, Incentive Grant, etc., will be not less
than Rs.750 per capita, on the basis of our recommendation. Thus the total per capita
income of a panchayat from own efforts and statutory grants from Government will be
around Rs. 16.50 to 17.50 which means that a Grade II Panchayat with a population
10,000 will have a minimum income between Rs. 1.65 lakhs to 1.75 lakhs. It is to ensure
this minimum resources that the Commission has recommended in chapter VIII that a
population of 10,000 should be insisted while forming a Panchayat in future The resource
position will be still brighter to those Panchayats having at least one cinema theatre from
whch an amount not less than Rs. 33,000 per annum is likely to be collected towards
Entertainment Tax and Show first grade and above, since they are having income more
than Rs. 2 lakhs.

10.4. The above assumption regarding availability of minimum income will materilise
only if it is made obligatory on the part of Panchayats to collect by their own efforts
income not less than Rs. 9 to 10 per capita per annum in the manner indicated under para
2 above.

10.5. The mounting cost on establishment is another great strain on the resources of a
large number of Panchayats. Added to it is the expenses being incurred towards T.A.,
purchase of registers, Stationery items without any inventory control, telephone charges
etc. The Commission has recommended in Chapter VII that in future there must be some
sort of restriction in appointment of staff over and above the barest minimum against
sanctioned posts in those Panchayats which do not have the resource base to bear the
burden of excess staff even if such appointment is due to the application of the existing
staff pattern. We have also recommended a ceiling in expenditure on certain recurring
items of expenditure with a view to keep it within reasonable limits so as to have
adequate fund balance for providing minimum civic needs after meeting establishment
charges.

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10.6. In this context the Commission would like to bring to the notice of Government an
important aspect in regard to the mounting cost on establishment charges of Panchayats.
As already pointed out salary and other allowances of employees of Panchayats are paid
at Government rates and the impact of the present Pay revision is likely to increase the
burden of Panchayats considerably. Unless a sizable increce its made in the own resource
of the panchayats during ensuing years the establish cost of the panchayats is likely to
dream away almost the enter selfraised resources generated at the existing rate. In order
to avoid the panchayats the from heading towards such a contingency the Commission
would recommend the revision of rates of taxes including Entertainment Tax,
introduction of new taxation measures etc., at the earliest opportunity. Advance action
may be taken to fulfill statutory requirements if any, for bringing into effect the changes
proposed by the Commission in regard to rasing of resources of Panchayats.

10.7. We have recommended various measures for augmenting the resources of the
Panchayats. When these are implemented it would fetch an additional income at least to
the tuene of Rs. 12.50 crores per annum vide details in Chapter VI. Further, we have in
Chapter V recommended a sum of Rs. 50,000 each as 'Special Grant' to the poor
Panchayats to meet the expenditure of a capital nature. Besides, grant to the extent of Rs.
1 lakh each to the needy Panchayats (100 Panchayats every year) to carry out
developmental activities under Plan Programmes has been recommended. Apart from
above, Panchayats which have provided certain Services are entitled to 'Specific Purpose
Grant' for its maintenance as per approved norms.

10.8. The general complaint is that the Specific Purpose Grants are not sanctioned at
approved rates resulting in inadequate service. Commitment on the part of Government
for payment of Specific Purpose Grant at the existing norms has been shown under
Chapter V. The amount would come to Rs. 687 lakhs. This is not an additional
commitment since Government already stand committed to the above extent as per norms
approved by Government. We reiterate the need for payment of grant at the approved rate
every year. We have not recommended revision of norms for Specific purpose Grant
except in the case of water supply and street lighting as we are of view that payment of
Grant at the exising approved rates itself will relieve the Panchayats of their burden in
maintaining the services at a somewhat satisfactory level. We hope that Government will
make available the Specific Purpose Grant to the eligible Panchayats every year as per
the approved norms and that the grant will not be allowed to lapse as occured in the last 2
to 3 years due to resource constraints of State Government. In respect of wates supply
and street lighting we have recommended to change the exising normr for payment of
grant as follows:

Water 50% of the cost of water charges per street tap or Rs 500 per tap per annum
Supply whichever is less.
Street One third of the current charges for street lighting for eight hours burning a
lighting day.

10.9. As per item Nos. (ii) and (iii) of the terms of reference the Commission is required
to assess the cost of Services and amenities at satisfactory standards and also to assess the

126
gap between the existing resources and the cost of services/amenities at satisfactory
standards and also to assess the gap between the existing resources and the cost of
services/ amenities at satisfactory standards. As regareds- 'Sastisfactory standards' for
maintenance of the services and provision of amenities the Commission has made
extensive efforts to find out whether any standards have been prescribed for the purpose
by any State. Out enquiries with the National Institute of Rural Development, Hyderabad;
Indian Institute of Public Administration, New Delhi; Ministery of Rural Development in
our neighbouring States have revealed that no specific standards or norms have been
prescribed for rendering services or providing amenities by the Local bodies
(Panchayats). In fact it is practically difficult to determine the level of needs and services
relating to the existing levels of development attained by each Panchayat and classify
them into various groups for porpuse of financial assistance. In the absence of any
specific norms for assessing the extent of requirements for providing services we can go
only by aprinciple that can be applied uniformly to Panchayats having common
charaterstics. Since the local people in a Panchayat are the beneficiaries of the services
rendered by the Panchayats there is every justification in concluding that financial
requirements of the services will depend on their number and the income derived from
them by way of taxes etc. Needs and requirements will vary from Panchayat to
Panchayat. The larger the population the greater will be the needs for resources for
providing services and amenities. The idea behind our suggestions to link the payment of
statutory grants with populations, panchayats to have a minimum population of 10,000
generation of own income on an average of Rs.9 to 10 perperson, etc, is to make
available adequate resources at the disposal of Panchayats to provide basic civic
amenities to the local people, cost of which largely depends upon population. We have
already pointed out that in the ordinary courses, a panchayat in the lower grade with a
population of 10,000 will have resource to the extent of Rs. 1.65 to 1.75 lakhs excluding
Specific Purpose Grants and Special Grant, out of which nearly one lakhs has to be spent
towards establishment charges. With the balance available plus Special Grant and
Specific Purpose Grant, Vehicle Tax Compensation etc., The Panchayat will be able to
renter essential service like water supply street lighting, Sanitation, maintenance of roads,
burial and burnign grounds etc., at a near satisfactory level. Therefore gap in resources is
not likely to occur

10.10. We hope that the financial gains accruing out of our recommendations will help all
the Panchayats in the State to improve there resource base considerably making them
capable of rendering services and providing amenities to the rural public in a better way
than the existing levels. We are also confident that Panchayat which are at present
striving hard to make both ends meet will also be placed on an even keel if there are
earnest efforts from all concerned to generate the resources at the scales and standards
assumed by us. If there are Panchayats which find it difficult to survive even after
attempting all the fiscal exercises suggested by the Commission and which do no leave
any hope of being salvaged the commission has no other alternative but to suggest their
merging with the neighbouring Panchayat as the last resort.

10.11. The financial liability to the State exchequer consequent on out recommendation
will, for the present, be around Rs. 350 lakhs only as shown below:

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Rs.

(i) Incentive Grant 50 lakhs

(ii) Additional commitment due to change in the percentage of share of vehicle 70 lakhs
tax due to Panchayats
(iii) Specific Purpose Grant for Water Supply 150
lakhs
(iv) Street lighting 100
lakhs
Total 370
lakhs
Deduct- Maintenance grant for water supply an dstreet lighting as per 20 lakhs
existing norms
Net Commitment 350
lakhs

When Government incur an additional expenditure of Rs. 350 lakhs as indicated above
for supplementing the resources of Panchayats the percapita gain of a Panchayat on this
account is Rs. 1.75 only. We hope that our recommendations will be implemented as
early as possible as they do not cast any heavy financial burden to the Government.

10.12. A summery of important recommendations is furnished seperately.

1. Shri K. Avukanderkutty Naha, Chairman (Sd.)

2. Shri T.V. Swaminathan, Member (Sd.)
3. Shri S. Varadachary, Member (Sd.)
4. Shri S. Sundareshan, Member (Sd.)
5. Shri K George Mathew Member (Sd.)
6. Shri M. M Subbayyan, Member- Secretary (Sd.)

Trivandrum,

Dated 31st October, 1985

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SUMMARY OF RECOMMENDATIONS

CHAPTER III 1. BUILDING TAX

1. 3.9 24 The system of assessment of Building Tax on rental value basis as per
the existing provision may continue without any change.
2. 3.11 25-26 The work of tax revision be entrusted to Officers outside the
& Panchayat. An Officer of the Department of Panchayats not below the
rank of Taluk Panchayat Officer may be appointed as Tax Revision
3.12 Officer in charge of quinquennial assessment of Building Tax in all
Panchayats of a taluk. Before this appointment, advance action for
preparation of list of house, numbering etc., shall be taken by the
Executive Officers of the concerned Panchayats and completed within
three months. This Tax Revision Officer will complete the revision
work of all Panchayats in the taluk within 3 to 6 months in the
maximum. The Expenditure towards the salary of the Tax Revision
Officer will be apportioned among the Panchayats concerned in such
proportion as may be fixed by the Department of Panchayats. In
between the quinquennial revisions, Executive Officers may be
authorised assess Building Tax on new additions as per the existing
provisions with the approval of the Taluk Panchayat Officer who will
ensure that the assessement made by the Executive Officer is in
confirmity with the standards adopted by the Tax Revision Officer.
3 3.13 27 The maximum reduction that can be effected by the Panchayat on the
enhanced amount of Building Tax should be restricted to 20 % of the
enhancement (ie, 1/5th of the difference between the revised tax and the
existing tax) assessed by the Tax Revision Officer. The powers of
Deputy Director of Panchayats for reduction may be restricted to a
maximum of 33 and 1/3rd percent ie. 1/3rd of the quantum of
enhancement made by the Tax Revision Officer.
4. 3.18 30 Only those huts (as defined in sub-clause 14 of Section 2 of the Kerala
Panchayat Act) whose grose annual rental value is Rs. 240 and below
alone need be exempted from the purview of Building Tax. Section 72
of the Kerala Panchayat Act, 1960 should be exempted from the
purview of levy of Building Tax.
5. 3.22 33 Existing minimum and maximum rates of Building Tax may be revised
as follows:-

Grade minimum maximum

II & III Grade Panchayats 8% 12%

Grade I panchayats 8% 15%

Special Grade Panchayats 10% 15%

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2. PROFESSION TAX
6. 3.27 38 Though agriculture is a profession liable to be taxed under Profession
Tax majoirity of the Panchayats in the State are reluctant to levy it
from agriculturists. It is not necessary to add or modify existing rules
for levy of Profession Tax on Agricultural income. What is required is
enforcement of rules in their true spirit Government may issue suitable
instructions in this regard.
7. 3.30 41 Suitable provision for deduction of Profession Tax at source may be
incorporated in out Act, so that the present difficulties in collecting
Profession tax demanded may mitigated.
8. 3.33 44 No modification to the existing practice of assessment of Profession
Tax on "aggregate income" by Panchayat in the state in necessary.
9. 3.36 45 A uniform rate of 1/2 percent of aggregate income ie., 50 paise for 100
rupees of income per half year may be adopted as the basis. For the
sake of assessment and accounting it would be better to classify the
income slabs in multiples of Rs.1000 and tax levied at half per cent of
the minimum of the slab.
10 3.37 46 The exemption limit for the levy of Profession tax at present is Rs.
1,200 per half year. This may be further enhanced, so as to exempt
those whose half yearly income is below Rs. 2000. Revised table for
calculation of Profession Tax in respect of half yearly income from Rs.
2000and above is recommended. (vide Table below para 3.37)
11 3.40 48 In the case of a company or person transacting business Profession Tax
for each half year may be levied at the maximum rate of Rs. 125 if the
estimated annual turnover of business for that year is Rs. 5 lakhs and
above (turnover of previous year may be reckoned as basis). If the
estimated annual turnover is below Rs. 5 lakhs half yearly income may
be calculated at 5% of estimated annual turnover and tax levied for the
income so worked out for each half year at the rate recommended
under para 3.37.
12 3.41 49 In regard to certain categories of Profession, mentioned under para
3.41 Profession Tax may be levied at a flat rate as shown therein
instead of calculating income on the basis of estimated annual
turnover.
13 3.43 50 Government may move Government of India for amending Article 276
of the constitution to get the ceiling enhanced from Rs. 250 to Rs. 1000
per annum. In case, the ceiling is enhanced the revised table
recommended under para 3.37 may be modified in respect of income
slabs exceeding Rs. 25,000 by incorporating suitable slabs.
3. VEHICLE TAX
14 3.47 53 The Director of Panchayats will take appropriate action to ensure that
Panchayats do not show lack of interest and administrative indifference
in collecting obligatory items of taxes

130
15 3.48 54 Existing rules may be amended deleting the condition regarding the
minimum number of days for which the vehicle has to be kept or used
for the levy of vehicle has to be kept or used for the levy of vehicle tax.
License from any one of the Local bodies in Kerala is sufficient.
16 3.49 54 Cycles including cycle rickshaws/rickshaws may be exempted from the
purview of Vehicle Tax.
17 3.50 55 In order to compensate the loss on account of crosion in money value
and to bring the receipts at least on a par with administrative expenses
minimum rate of tax for each category of vehicles may be prescribed
as shown under para 3.50.
18 3.51 56 Fee of 24 paise for affixing number to the vehicles may be dispensed
with.
4. ENTERTAINMENT TAX
19 3.59 62 System of collection of Entertainment Tax on the basis of gross
collection with reference to the seating capacity may be introduced as
expeditiously as possible so as to prevent the erosion of revenue that is
legitimately due to the Panchayats.
20 3.61 62 Till the implementation of new system of levy of tax at a fixed
percentage of gross collection, minimum amount of tax shall be levied
as follows:-

(1) Minimum entertainment tax including additional entertainment tax

per show may be fixed as Rs. 35.

(2) In the case of theatres where at present rate of entertainment tax

and additional entertainment tax together is more than 35% minimum
tax per show shall be fixed at an amount equal to total rate (percentage)
of taxes (Entertainment Tax+Additional Entertainment Tax) i.e., Rs. 40
if total tax is 40% and Rs. 45 if it is 45% and so on.
21. 3.62 63 Entertainment Tax and Additional Entertainment Tax may be merged
and levied as a single item, by suitably refixing the rates, and
incorporating necessary amendments to the Act and Rules. This
combined Tax may be termed as 'Entertainment Tax'.
22 3.64 63 Minimum rate for single tax under Entertainment Tax may be fixed at
25% as against the prevailing rate of 24%.
5. SHOW TAX
23 3.67 65 The rate of Show Tax may be revised as follows:-
1. Cinematographic Exhibition Rs. 10 for one show and Rs. 5 for every
additional show on the same day.
2. Other shows Rs. 10 for a show
24 3.68 65 The Surcharge on Show Tax may be dispensed with as the revised
recommended are intended to include the income on account of
surcharge also.

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6. SERVICE TAX
25 3.71 68 Panchayats should invoke their power to levy Service Tax for services
like water supply, street lighting etc,, provided by them.
26 3.72 68 The Service Tax at a minimum rate of one per cent each shall be
compulsorily levied on 'street lighting' and 'Water supply' by
Panchayats whose annual expenditure for maintenance exceeds 10% of
the Building Tax under each, provided Building Tax together with
Service Tax should not exceed the maximum rate of Building Tax
recommended in para 3.22. This tax may be levied along with Building
Tax, showing it as a separate component in the Demand Notice.
Service Tax for the remaining items may continue to be optional taxes
as at present.
7. SURCHARGE ON BUILDING TAX
27 3.73 69 Already there is provision to levy Service Tax for some of the items
coming under 'Surcharge on Building Tax'. In para 3.72, compulsory
levy of Service Tax foe 'Water Supply' and 'Street Lighting" has been
proposed. In such a context the Government may decide whether there
is any need for retaining the provision for levy of surcharge on
Building Tax in the statute, especially when no Panchayat in the State,
is collecting it.
CHAPTER IV NON TAX REVENUE

(LICENCE FEES)
28 4.5 74 The rate of licence fee for the existing and new markets should be
fixed, in terms of area, location importance, scope for levy of fees,
extent of trading activities and all other attending factors. Minimum
two fold increase in the existing rate of license fees due to erosion in
money value since the introduction of the Act in 1962 is necessary.
The Department of Panchayats may examine the scope for enhancing
the rate still further, if deemed necessary.
29 4.6 74 As regards fees leviable from markets for various uses by licensees and
lessees, prescribed in the schedule under Rule 7 of Kerala Paanchayat
(Public and Private Markets) Rules. 1964, no revision is necessary as it
may inevitably lead to increase in prices of commodities sold through
these markets.
30 4.7 75 Panchayats may open more Public Markets and no new Private
markets be permitted in future. In areas where private markets are
existing, efforts should be made to eliminate it in a phased manner by
converting them into Public Markets.
31 4.8 75 Panchayats if any, collecting fees directly from public markets may be
advised to switch on to the practice of selling the right of collection of
fees by auction, at the earliest.

132
32 4.9 75 In order to avoid any possible mis-use of the provision in favour of the
owners of cart stands the system of levying fees based on area, after
fixing a minimum rate as in the case of private markets, may be
adopted.
33 4.12 76 There should be arrangements for the inspection of animals brought for
slaughtering regularly and random inspection of meats for sale in the
stalls periodically. Hygienic condition of slaughter houses should be
ensured by the Veterinary Surgeon of the Block by making suitable
arrangement. The Doctor may be given some additional remuneration
for the work. From the point of view of Public hygiene, private
slaughter houses should be discouraged and dispensed with in a phased
manner wherever they exist. Public slaughter houses may be
established in all Panchayats fulfilling hygienic conditions and the
right of collection of fees may be sold in auction.
34 4.13 77 The minimum rate for new licence for slaughter houses and for its
renewal may be enhanced to Rs. 100 per annum. The enhancement is
for those private slaughter houses which are allowed to be continued
by Panchayats in exceptional circumstances.
35 4.14 78 To prevent Panchayats from fixing rates at too low a rate for
Dangerous and Offensive Trades, it is advisable to have a minimum
rate for every item of license under Section 96 of Kerala Panchayat
Act.
36 4.16 79 The exisiting schedule under Dangerous and Offensive Trades which is
prepared long back may be revised by the Director of Panchayats
incorporating new items and deleting unnecessary items. A two fold
increase is absolutely justifiable in the case of exisiting rates for license
under section 97 of the Kerala Panchayat Act., 1960. A minimum and
maximum rate may also be prescribed for licences to be issued under
Section 96 of Kerala Panchayat Act, 1960. Minimum fees for grant or
renewal of a licence should be not less than Rs. 10 in both cases (i.e.,
Sections 96 and 97).
37 4.17 80 For every permission under Section 6 of the Kerals Cinemas
(Regulation) Act, 1958 granted or renewed under these rules, existing
rates may be enhanced as follows:-

1. Permanent theatres Rs. 100

2. Temporary theatres Rs. 50

38 4.18 80 The existing rates of fess, fines, etc., for all other items may be refixed
by making a two-fold increase to compensate the increase in the cost of
administrative services incurred in discharging duties connected with
the licensing work of Panchayats. For all items for which licences are
to be granted minimum rates should be prescribed and the minimum
rate for each licences valid for a year, should not be less than Rs. 10. In
future all kinds of licence fees, other fees, fines, etc., should be

133
 reviewed and revised once in five years.

39 4.25 86 The scheme of execution of remunerative enterprises should be

redesigned in such a way that, they should indeed be remunerative to
Panchayats. Government may take appropriate steps in the matter. The
K.S.R.D.B. may be provided with more powers and opportunities to
enlarge the scope for availing more powers and opportunities to
enlarge the scope for availing more and more institutional finances
with a view to providing adequate financial assistance to the needy
Panchayats to undertake remunerative enterprises.
CHAPTER V GRANTS
40 5013 96 Out of the total proceeds under 'Duty on Transfer of property; 755
should be distributed to all Panchayats on population basis. This grant
may paid rounding it to the nearest 100 ignoring the amount below Rs.
50. Relevant provision in the Act and rules may be amended suitably
for this purpose.
41 5.20 99 The existing system of levy of basic tax by the Revenue Department
may continue. The delay in disbursement of grant should however be
eliminated by devising suitable methods.
42 5.21 100 The present practice of preparing Panchayat-wise accounts of
collection and distributing the amount to the respective Panchayats on
collection basis should be dispensed with. Instead, out of the total
amount of basic tax payable 75% should be distributed on per capita
basis to all Panchayats. This grant may be paid to the nearest 100
ignoring the amount below Rs. 50. Balance 25% may be distributed as
'Special Grant" for development of poor Panchayats.
43 5.23 101 The amount payable under 25% of 'Duty" and 'Basic' TaxGrant' may be
initially transfer credited to a P.D. account viz., 'Panchayat Special
Grant Fund' from which adequate amount may be released to the
Panchayats for their developmental needs as and when need arises
44 5.27 102 Pending decision on the share payable to the local bodies, V.T.C. may
be disbursed at 90% of the old rate for a year, during every year in
& lump in July. If there is any difficulty in releasing the amount in lump,
Government may consider the disbursement in two instalments, one in
103 July and the other in January every year.
45 5.54 113 A rationalization of the existing classification of grants with a view to
make it more purposeful bases on broad principles evolved by various
study teams at national level is essential.

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46 5.57 114 The existing items of grant disbursed under 26 descriptions to
Panchayats may be regrouped and brought under 5 categories as shown
below:

1. General purpose Grant.

2. Specific Purpose Grant.
3. Special Grant.
4. Grant for Development Ptogrammes.
5. Incentive Grant.

47 5.60 115 A per capita Grant which may be termed as 'General Purpose Grant' at
the rate of Rs. 2 per head based on latest census figure subject to a
& minimum of Rs. 10,000 may be paid to each Panchayat except Special
Grade Panchayats. In the case of newly formed Panchayat per capita
116 Grant at the rate of /rs. 3 per head may be paid subject to the above
ceiling for a period of two years to meet initial expenses. With the
introduction of 'General Purpose Grant' on per capita basis payment of
other grants like Establishment Grant, Block Grant, Grant for burial
and burning grounds, etc., may be dispensed with
48. 5.61 116 Grants to the Panchayats which have provided certain services and
amenities, paid on the basis of specific norms laid down for its
maintenance may be brought under 'Specific Purpose Grant'.
49. 5.63 117 & A sum of Rs. 687 lakhs towards 'Specific Purpose Grant' worked out at
118 the norms fixed by Government may be provided in the next year's
budget (1986-87). Thereafter a progressive increase in provision by 5%
may be allowed every year.
50. 5.64 118 & The amount accumulated under P.D. Account viz., 'Panchayat Special
119 Grant Fund' recommended under para 5.23 may be disbursed to
backward Panchayats in the form of 'Special Grant' to meet capital cost
in respect of the items specified under para 5.64. Maximum amount
that can be granted to a Panchayat in a year may be enhanced to Rs.
50,000. Powers of Director of Panchayats in this regard may be
enhanced to Rs. 50,000. In deserving cases Grant may be sanctioned
upto Rs. 1 lakh with Government sanction. While sanctioning this
grant priority should be given for providing essential civic amenities
mentioned under para 5.64.
51. 5.67 120 Grant at the rate of Rs. 1 lakh each for 100 Panchayats in a year for
development programmes may be provided. For this, a sum of Rs. 100
lakhs may be provided in the Annual Plan Budget.
52. 5.69 120 In order to encourage the Panchayats and to maximise their tax
collection 'Incentive Grant' at the following rates may be paid to
Panchayats:-
1. Special Grade 5% of the total collection in the preceding
Panchayats year under Building Tax and Service Tax
taken together.

135
 2. I, II and III Grade 10% of the total collection in the preceding
Panchayats year under Building Tax and Service Tax
taken together.
53. 5.70 120 & Above grant may be paid rounding the amount to the nearest hundred
121 ignoring Rupees below fifty. Maximum 'Incentive Grant' may however
be limited to Rs. 20,000 in a year.
CHAPTER VI NEW MEASURES
54 6.4 125 A levy by name 'Surcharge on Land Revenue' at the rate of 50 paise
per one rupee of Land Revenue may be made by the Revenue
Department along with land Revenue (Basic Tax) and Distributed
among Panchayats by adopting the same principle of distribution of
Basic Tax suggested in para 5.21.
55 6.5 125 The rate of Surcharge on 'Duty on Transfer of property' may be
enhanced from 4% to 5%.
56 6.6 125 & Government may consider levy of a Tax on Sale or Transfer of Land at
126 the rate of Rs. 5 per cent of land. This may be collected by the
Registration Department and the proceeds distributed to the Panchayats
adopting the same principle of distribution of proceeds from ' Duty on
Transfer of Property.'
57 6.8 127 Government may issue necessary notification conferring powers to
Panchayats for levy of Advertisement Tax by invoking powers under
Section 142 of the Kerala Panchayat Act, 1960. The rates shall be
those prevailing in III Grade Municipalities.

58 6.9 127 Kerala Municipal Building Rules may be extended to all Special Grade
Panchayats in the State.
59 6.12 128 & A system of granting permission for new consctructions of buildings,
129 etc., may be introduced in Panchayats where the Municipal Building
Rules are not extended. A fee of Rs. 10 may also be realised along with
each application. Renewal fee shall be Rs.5 vide procedure suggested
under para 6.12.
60. 6.14 130 (I)Government may issue appropriate order to the Land Revenue
Department for supplying necessary details of poramboke lands, land
adjacent to water courses (river Poramoboke) etc., to the concerned
Panchayats.

(ii)Panchayats may utilise road side poramboke lands for planting

seedlings supplied by the Forest Department under the Social Forestry
Scheme. Bunks may be constructed and installed on roadside
porambokes wherever there is scope for it. Right of use of bunks
owned by Panchayats may be sold in auction for reasonable periods.

136
61 6.15 131 At least 20% of the net proceeds of Vehicle Tax collected in the
preceding year should be allocated for maintenance of roads of local
bodies. Further, the present practice of determining share due to the
respective local bodies once in five years may be changed to once in
three years as five year is too long a gap.
CHAPTERVII EXPENDITURE

62 7.6 141 In future there must be some sort of restriction in appointment against
sanctioned posts in those Panchayats whose total establishment cost
exceeds 75% of total income. (Self raised income plus statutory
grants).
63 7.6 142 The following measures may be a adopted for enforcing economy in
expenditure.

(i) S.T.D facilities for telephones wherever available should be barred.

(ii) There should be annual ceiling on expenditure under T.A

(iii) Establishment charges other than salaries, pension contribution,

sitting fee should be limited as follows:

(a) 2nd & 3rd Grade Panchayats. Not to exceed 15% of income reckoned
for grouping.

(b) Special Grade & I Grade Panchayats. Not to exceed 10 % of

income reckoned for grouping.
64 7.12 144-145 Vehicle Tax Compensation should be utilised exclusively for
maintenance and widening of motorable roads and also for widening
and convension of metalled roads into black topped roads and it should
not be utilised for maintenance of earthern roads.

(ii) 80% of the Village Road Maintenance Grant should be set apart
For conversion of earthern roads into metalled roads or metalled roads
into black topped roads and for maintenance of the above roads and
only 20% need be spent for maintenance of earthern roads.

(iii) 20% of the earthern/gravelled roads (excluding foot path) should

be converted into the next higher type road every year by utilising
V.T.G. and V.R.M. Grants.
65 7.19 149 The question whether the Panchayats need pay the outstanding arrears
well as future instalments that will accrue up to 31-3-1987 on account
of 25% of capital cost of the Rural Water Supply Scheme may be
decided by Government.

137
66 7.21 151 50% of the dues towards maintenance charges outstanding payment to
P.H.E.D. (Now K.W.&W.W.A) up to 31-3-1984 may be written off.
Balance 50 % may be paid sharing the liability by Government and the
Panchayats on 50:50 basis.
67 7.22 151 In respect of claims from 1-4-1984 onwards Panchayats need honour
only those claims having split-up details.

68 7.24 152 Collection of water charges from domestic consumers should be made
by K.W. & W.W.A for the sake of uniformity in water charges and
other attending factors.
69 7.26 153 Water charges may be paid at the rate of Rs. 875 per street tap. In case
K.W.&.W.W.A enhances rates Panchayats will have to pay water
charges at enhanced rates for quantity of water computed in the manner
indicated under para 7.25.
71. 7.30 155 On switching over to the system of payment of grant at 50% of the cost
water charges per tap, existing system of payment of grant may be
dispensed with.
72. 7.32 156 Government may advise K.S.EB. to introduce the system of metering
of consumption of electricity by street lights provided in Panchayat
areas.
73. 7.34 157 One third of the expenditure on street lighting may be met by the
Government on the basis of current charges for eight burning a day.
CHAPTER VIII FINANCICAIL VAIBILITY AND NORMS FOR REGROUPING
OF PANCHAYATS
74. 8.2 159 In future it would be better to have Panchayats conteminus with
revenue villages wherever possible and to insist on a minimum
population of 10,000
75. 8.2 159 As the measures suggested by the Commission are likely to improve
the financial capacity of the existing "problem Panchayats", the
Commission is not inclined to interfere with the basis on which the
existing Panchayats are formed.
76. 8.9 162 Panchayats may be classified based on average income as follows

Grade Average income per annum

Special Grade Panchayats More than Rs. 3 lakhs

I Grade Panchayats More than Rs. 2 lakhs and up

to Rs. 3 lakhs.

II Grade Panchayats Upto Rs. 2 lakhs.

138
77 8.10 163 For the purpose of computing total income for grouping of Panchayats,
the following components of income alone need be taken into account.

1. Self raised income.

2. General Purpose Grant.

3. Incentive Grant.

4. 75% Duty on Transfer of Property.

5. 75% of Basic Tax Grant.

6. New Taxes recommended to be levied and assigned to the Panchats

V.T.G. need not be reckoned as it is meant for a Specific purpose and

even now it is not being reckoned.
CHAPTER IX MISCELLANEOUS
78. 9.3 164-165 Government may set apart a sum of Rs. 50 lakhs in their Budget every
year for sanctioning loans to the Panchayats for schemes such as
construction of Mini Markets, Improvement of facilities of existing
markets, Construction of halting places for buses etc., cost of which
does not exceed Rs. 2 lakhs.
79. 9.5 165 Government may consider the requests for availing institutional
finances from those Panchayats whose annual establishment cost have
not exceeded their self raised income for the preceding three years.

80. 9.7 166 Arrears of loan and interest accrued up to 31-3-1983 but outstanding
payment till 30-9-1985 may be converted into a loan repayable in 10
annual instalments commencing from 1986-1987. This gesture need be
shown only to second and third Grade Panchayats.

81 9.10 167 Panchayats may be consulted and associated with the implementation
of Rural Development Programmes like I.R.DP., N.R.E.P etc.,
mentioned under para 9.10.
82 9.12 168,169 The elected bodies should be vested with adequate financial powers to
carry out smoothly the obligatory and discretionary functions entrusted
to them. Government may take appropriate action For revision of
Financial powers delegated under the "Authorising of Expenditure
Rules 1964" and plan and Estimates Rules, 1963.'
CHAPTER X SUMMINGUP
83. 10.4 171 It should be made obligatory on the part of Panchayats to collect by
their own efforts income not less than Rs. 9 to 10 per population per
annum in the manner indicated under para 10.2 for which Government
may take a firm stand.

139
84. 10.6 172 In order to avoid the establishment cost of Panchayats from
Swallowing the entire self raised income generated at the existing
rates, revision of rates of taxes including Entertainment Tax,
introduction of new taxation measures etc., suggested by the
Commission may be implemented at the earliest opportunity.
85. 10.8 173 Government should make available the 'Specific Purpose Grant' to the
eligible Panchayats every year as per the approved norms and the
Grant should not be allowed to lapse.

APPENDIX I

Government Order Constituting the Committee

G.O. (Ms) 149/83/LA & SWD Dated Trivandrum, 27th September, 1983

ORDER

The question of setting up a Panchayat Finance Commission in the State for improving
the financial position of the Panchayat has been under consideration of Government for
some time past.

2. After examining the question in all its aspects. Government are pleased to constitute
the Panchayat Finance Commission with the following persons as members:

(i) Shri K Avukadarkutty Naha, M.L.A. Chairman

(ii) Shri M. S. K Ramaswamy, Commissioner and Secretary (Local Member
Administration and Social Welfare Department
(iii) A representative from the Planning & Economic Affairs Department Member
(iv) The Director of Panchayats Member
(v) A representative from the Finance Department or of the Examiner of Local Member
Fund Accounts

3. The terms of reference to the Commission will be as follows:

(i) Assessment of the existing panchayat Services and the Amenities and their cost.
(ii) Assessment of the cost of Panchayat Services and the amenities at satisfactory
standards.
(iii) Assessment of the gap between the existing resources and the cost of services and
the Aminities at satisfactory standards.
(iv) Assessment of the degree of exploitation of the existing local taxes by the

140
 Panchayats and possibilites of improving them.
(v) Examination of the present Panchayat taxation stucture and suggestions for
augmenting the resources of Panchayat.
(vi) Examiniation of the possibilities for the raising of non tax revenues.
(vii) Suggestions for the baisis of Government grants (both statutory and non statutory)
to Panchayats.
(viii) Assessment of arrears due to Government from the Panchayats as on 31-3-1983 and
Suggestions on measures to be taken to clear these arrears and also ensure the
arrears do not accumulate in future.

4. A post of Secretary to the Panchayat Finance Commission is sanctioned in the cadre of

Joint Director of Panchayats (Rs. 1125-1725) Shr K Bhanuvikraman Nair, Deputy
Director of Panchayats is promoted provisionally under Rule 9 (a) (II) of the Kerala State
and Subordinate Service Rules and posted as the Secretary of the Commission.

5. The Commission will submit report to Goverment within 6 months.

By order of the Governor,

M.S.K. RAMASWAMY,

Commissioner and Secretary.

Additional terms of references

rd
G. O. (Ms) No. 89/85 LA&SWD Dated, Trivandrum, 23 April, 1985
ORDER

Government are pleased to order that following items will also be included in the terms
of reference of the Panchayat Finance Commission.

(i) Study on uneconomic Panchayats which are not able to meet even the establishment
expnditure, let alone, other Developmental activities and suggestions for making them
viable or for amalgamating with other viable Panchayats;

(ii) Examination of the existing norms regarding the Panchayat and suggestion, if any, for
their regrouping in consonance with the financial capacity of the Panchayats.

By order of the Governor,

V.R. PADMANABHAN,

Additional Secretary to Government

141
APPENDIX II

Authorisation to the Commission to call for information records from Departments,

Boards etc.

G. O. (Ms) No 324/84/LA&SWD Dated, Trivandrum, 22nd December, 1984

Read:- 1. Circular No. 1906/C2/84/LA&SWD dated 22-10-1984,

2. G.O.Ms. No.304/84/LA&SWD dated 21-11-1984.

In the Circular read as first paper above Government have requested the Secretaries to
Government, Heads of Departments, Chief Excutives of Public Sector Undertakings,
Boards, Corporations etc,. concerned with Panchayat Finance and the Panchayats to
furnish factual information and other docments as may be required by the Commission
from time to time. Government are now pleased to authorised the Commission:-

(i) to call for details of expenditure and receipts and such other information and records,
except those are confidential in nature which are deemed necessary for the conduct of
study and review of finances of local bodies from the Panchayats in the States, Heads of
Departments, Boards, Corporations etc;

(ii) to address the Secretaries to Government and Heads of Departments in other States to
collect information on various aspects of local body finances in those States;

(iii) to verify the accounts and registers of the local bodies in the State by the staff of the
Commission, whenever deemed necessary; and

(iv) to depute its staff to different places within and outside state to collect data for the
purpose of analysis/comparison and study of local body finances subject to the condition
that for deputing staff to outside the State the Commission will obtain prior sanction of
Government.

By order of the Governor,

V. R. PADMANABHAN,

Joint Secretary

142
APPENDIX III

Permission to the representatives of Service Organizations and Employees of

Panchayat Department etc., for presentation of memorandum and discussion with
Commission

G.O. (Ms.) 304/84/LA & SWD Dated, Trivandrum, 21 November, 1984

Read:-Note dated 17-3-1984 from the Chairman, Panchayar Finance Commission.

ORDER

In G.O. (Ms.) No 149/83 LA & SWD dated 27-9-1983, Government have appointed the
Panchayat Finance Commission for making recommendations to improve the financial
position of the Panchayats. The Commission is functionig with its Office at
Sasthamangalam, Trivandrum-10. In the Note read above the Chairman, Panchayat
Finance Commission has requested that permission may be granted to service
Organisations, Government employees/employees of Panchayat Department/the
Panchayat in the State to present memorandum and hold discussion with the Panchayat
Finance Commission.

Government are, therefore, pleased to grant permission to the representatives of Service

Organisations and individual Government Officers/employees of the Pnachayat
Department/the Panchayats in the State to present memorandum and hold discussion with
the Panchayat Finance Commission. Government also order that the representatives of
Service Organisations and individual Government Officers or Employees of Panchayat
who are invited for discussion by the Commission, will be treated as on duty on the
day/days on which the discussions are held and on the day/days actually needed for the to
and fro journeys. This benefit, will be limited to two representatives per Association. No
T.A./D.A will be admissible for the journeys performed for the purpose.

By order of the Governor,

V.R.PADMANABHAN,

Joint Secretary to Government.

143
APPENDIX IV

Duties and functions of Panchayats

(Extract of Sections 57 of the Kerala Panchayat Act 1960)

(1) Subject to the provisions of this Act and the rules made thereunder it shall be the duty
a Panchayat within the limits of its funds, to make reasonable provision of carrying out
the requirements of the Panchayat area in respect of the following matters namely:-

(a) the construction, repair and maintenance of all public roads in the Panchayat area
other than roads classifed as National Highways, State High ways, (or district roads) and
of all bridges, culverts, road-dams and cause-ways on such road;

(b) the lighting of public roads and public places;

(c) the construction of drains and the disposal of drainage water and sullage;

(d) the cleansing of streets, the removal of rubbish heaps, jungle growth and pickly-pear,
the filling in of disused wells, insanitary ponds, pools, ditches, pits or hollows, and other
improvements of the sanitary condition of the Panchayat area;

(e) the provision of public latrines and arrangements to cleanse latrines whether public or
private;

(f) the opening and maintenance of burial and burning grounds;

(g) the sinking and repairing of wells, the excavation, repair and maintenence of ponds or
tanks the construction and maintenance of water works for the supply of water for
washing and bathing and drinking purpose.

(h) preventive and remedial measures connected with any epidemic or with malaria;

(i) control of offensive and dangerous trades;

(j) construction and maintenance of petty irrigation works;

(k) control of cattle pounds;

(l) registration of births and deaths;

(m)maintenance of the Village Court, established for the Panchayat area, by providing
accommodation, necessary staff and funds for meeting contingent expenditure.

(2) Subject to the provisions of this Act and the rules made there under a Panchayat may
also, within the limit of its fund and wherever possible with Government aid, make

144
reasonable provision for carrying out the requirements of the Panchayat area in respect of
the following matters, namely:-

(i) Agriculture-

(a) the improvement of agricuture and establishment of model agriculture farms;

(b) the establishment of granaries;

(c) bringing under cultivation waste and fallow lands belonging to or vested in the
Panchayat;

(d) ensuring conservation of manurial resources, cultivation of green manure, preparing

compost and sale of manure;

(e) the establishment and maintenance of nurseries of improved seeds and seedlings;

(f) provision of implements, stores, insecticides etc.;

(g) the promotion of co-operative farming;

(h) the conducting of crop experiments, launching of crop protection schemes and crop
competitions;

(i) the construction, repair and maintenance of irrigation works field channels and
distribution of water;

(j) encouraging farmers' clubs and other association of agriculturists;

(k) assistance in the implementation of land reform scheme;

(l) execution of soil conservation schemes.

(ii) Animal Husbandry-

(a) Improvement of cattle and cattle breeding and the general care of livestock;

(b) the promotion of dairy farming;

(c) the maintenance of stud-bulls and stud-goats;

(d) the Promotion of Poultry farming and bee-keeping.

(e) conducting cattle and poultry shows.

(iii) Education and culture-

145
(a) the spreadm supervision and improvement of education;

(b) the establishment and maintenance of Children's parks, clubs and other places of
recreation for the welfare of women and youth;

(c) the promotion of art and culture including the establishment and maintenance of
theatres;

(d) the establishment, maintenance and encouragement of reading rooms and libraries;

(e) noon-feeding of school children;

(f) the establishment and maintenance of community listening sets, recreation centres and
centres for physical culture, sports and games;

(g) the erection of memorials for celebrities and historical personages;

(iv) Social Welfare-

(a) maternity and child welfare including the establishment and maintenance of
orphanages and foundlings' home;

(b) the relief of the old and the infirm and the physically handicapped and the sick;

(c) assistance to the residents when any natural calamity occurs;

(d) family planning;

(e) organising voluntary labour for community works for the development of the village;

(f) destitute homes and beggar homes

(v) Public health and sanitation-

(a) preservation and improvement of public health;

(b) supply of water;

(c) sanitation, conservancy and the prevention and abatement of nuisance and disposal of
carcasses of animals;

(d) the disposal of unclaimed corpse;

(e) the disposal of unclaimed cattle;

146
(f) the taking f measures to prevent the outbreak, spread and recurrence of any infectious
disease and vaccination;

(g) the reclaiming of unhealthy localities;

(h) providing medical relief;

(i) the inoculation of animals and birds;

(j) the disposal of stray and ownerless dogs;

(k) the establishment and maintenance of dispensaries and the payment of subsides to
rural medical practioners;

(l) control of fairs and festivals;

(m)maintenance of the purity of fish, meat and other food stuffs,

(vi) Public Works-

(a) the planting of trees along roads, in market places and other public places and their
maintenance and preservation;

(b) he construction, maintenance and control of bathing and washing ghats;

(c) he construction, maintenance of buildings for ware houses, stores, shops, purchasing
centres, etc;

(d) contstruction of maintenance of house under colonisation and settlement schemes;

(e) construction of maintenance of house under colonisation and settlement schemes;

(f) construction and maintenance of choultries and rest-houses;

(g) construction and maintenance of houses for Panchayat staff and other village
functionaries;

(h) the establishment and maintenance of works for the provision of employment,
particularly in times of scarcity;

(i) the extension of village sites and the regulation of buildings and housing schemes;

(j) the opening of and maintenance of public markets, slaughter houses, bus-stands,
landing places, halting places and ferries and also the licensing of such places opened and
maintained by private individuals and institutions; and

147
(vii) General-

(a) preparation of plans for the development of the panchayat area

(b) the promotion, improvement and encouragement of cottage and village industries;

(c) promotion of pisciculture;

(d) preservation of objects of archaelogical interest;

(e) the promotion of social and moral welfare of the inhabitants of the Panchayat area
including the promotion of prohibition, promotion of social equality, amelioration of the
condition of the backward classes, the eradication of corruption and the discouragement
of gambling, litigation and other anti-social activities;

(f) the encouragement of any of the services and activities mentioned in the foregoing
clauses of this section by the grant-in-aid or otherwise;

(g) any other measure of work which is likely to promote the health,

safety, education, comfort convenience or social or economic or cultural well being of the
inhabitants of the Panchayat area.

(3) The Government may by notification in the Gazette declare any of the duties or
functions falling within sub-section (2) to be obligatory duties or functions for such
Panchayat areas as they may decide.

APPENDIX V

Statement showing the Area, population Etc. of Panchayats in the State

Sl. Rear of Area in Sq. Population as per

Name of Panchayat Grade
No constituion km 1981 census
TRIVANDRUM DISTRICT
1 Aryancode I 1971 21.78 18973
2 Aryanad I 1971 104.92 23725
3 Aruvikkara I 1953 21.86 23645
4 Amboori I 1975 49.47 15897
5 Anad I 1976 24.15 23864
6 Anjengo I N.A. 3.36 15632
7 Andoordonam Spl 1953. 13.96 19984
8 Athiyanuur I N.A. 12.44 21035

148
9 Attipra Spl N.A. 16.03 27689
10 Azhoor Spl N.A. 12.46 24209
11 Balarampurm Spl N.A. 10.53 26917
12 Chemmaruthy I N.A. 17.54 23118
13 Chenkal Spl 1953 19.37 29038
14 Cherunniyoor I N.A. 10.87 15083
15 Chettivilakom Spl 1962 7.69 27118
16 Chirayinkil Spl 1951 10.87 28887
17 Edava Spl N.A. 9.14 24839
18 Elakamon I 1947 17.75 19222
19 Kadakampally I 1961 8.14 20594
20 Kadakkavoor Spl N.A. 10.39 23364
21 Kadinamkulam Spl 1953 17.68 33647
22 Kallara Spl 1961 39.48 21489
23 Kallikkad II 1961 106.27 10978
24 Kalliyoor Spl 1961 17.23 26923
25 Kanjiramkulam I 1953 10.36 15422
26 Karakulam Spl N.A. 25.01 32845
27 Karavaram I N.A. 22.07 22863
28 Karumkulam I N.A. 2.43 22412
29 Karode I 1961 15.67 24101
30 Kattakada Spl 1953 22.54 28768
31 Kazhakuttam Spl 1953 19.47 24895
32 Kizhuvilam Spl 1951 14.74 25569
33 Kilimanoor I N.A. 19.04 16734
34 Kollayil I N.A. 13.73 19124
35 Kottukal I 1961 12.16 25674
36 Kulathur I 1953 11.24 26816
37 Kunnathukal I 1953 26.85 30255
38 Kuttichal I 1968 19.74 15234
39 Madavoor I 1979 18.71 15809
40 Mangalapuram Spl 1961 21.66 27707
41 Manampoor I 1977 15.08 17880
42 Manikal I 1953 33.34 28054
43 Maranallor I N.A. 25.13 27790
44 Marukil I 1967 16.39 24146
45 Mudakkal I 1953 27.47 26145
46 Nagaroor I N.A. 23.30 21179
47 Nanniyode I 1961 38.85 23109
48 Navaikulam Spl 1960 28.23 29058

149
49 Nellanad Spl N.A. 18.46 18729
50 Nemom Spl 1961 12.18 33288
51 Ottasekharamangalam II N.A. 18.15 15462
52 Ottoor II 1977 9.47 11983
53 Panavoor II 1976 21.90 15624
54 Pallichal I 1945 21.70 31130
55 Pallikkal II 1979 16.18 13032
56 Pangode I 1977 23.31 24030
57 Parassala Spl 1948 20.02 40867
58 Pazhayakunnummel Spl N.A. 25.31 21487
59 Peringammala I 1961 217.95 27542
60 Perumkadavila I 1953 17.54 18495
61 Perumpazhuthur I 1953 18.91 29605
62 Poovar I 1969 7.34 18024
63 Poovachal Spl 1968 30.06 33272
64 Pothencode Spl 1953 20.85 20630
65 Pulimath Spl 1961 26.93 24096
66 Pullampara I 1977 25.90 19419
67 Sreekariyam Spl 1961 23.73 34551
68 Thirupuram I 1969 8.57 15429
69 Thiruvallam Spl 1962 13.60 30547
70 Tholicode II 1973 22.37 21783
71 Ulloor Spl 1961 16.67 38277
72 Uzhamalakkal I 1971 18.75 17255
73 Vakkom Spl 1953 5.36 15935
74 Vamanapuram I 1977 23.87 18419
75 Vattiyoorkavu Spl 1961 10.62 24249
76 Vellarada Spl 1951 31.60 30735
77 Vellanad I 1954 22.19 22361
78 Vembayam Spl N.A. 30.58 28052
79 Venganoor Spl 1962 10.12 25982
80 Vettoor Spl 1953 6.82 18366
81 Vilappil Spl 1979 19.42 22980
82 Vilavoorkal II 1979 12.02 18433
83 Vithura I 1973 131.59 22574
84 Vizhinjam Spl 1962 12.62 37298
QUILON DISTRICT
1 Adichanaloor Spl 1953 19.79 27480
2 Alappad I N.A. 7.38 22883
3 Alayamon Spl 1961 37.74 17002

150
4 Anchal Spl N.A. 24.45 24993
5 Arienkavu I 1969 196.84 15170
6 Chadayamangalam I 1977 19.04 18426
7 Chathannur Spl 1961 33.56 41191
8 Chavara Spl 1961 11.89 33388
9 Chithara Spl 1961 57.70 37930
10 Clappana I 1961 17.49 19003
11 Devikulangara I 1961 6.75 19903
12 East Kallada Spl N.A. 12.20 19730
13 Edamulakkal Spl N.A. 38.73 32244
14 Elamadu I 1962 30.02 21037
15 Eravipuram Spl 1964 9.87 46300
16 Ezhukone Spl 1953 17.24 20953
17 Ittiva Spl 1963 43.89 30112
18 Kadakkal Spl 1951 48.90 40539
19 Kalluvathukkal Spl 1951 36.57 35705
20 Karavalloor I 1962 23.64 19878
21 Karunagappally Spl 1963 18.65 39123
22 Kareepra Spl 1955 23.20 25109
23 Kilikollur Spl N.A. 11.21 50734
24 Kottamkara Spl 1961 25.31 53349
25 Kottarakkara Spl 1961 17.40 26678
26 Krishanapuram I 1961 10.96 22498
27 Kulakkada Spl 1961 29.18 27849
28 Kulasekharapuram Spl 1961 16.75 37435
29 Kulathupuzha Spl 1968 422.23 28069
30 Kundara Spl 1969 11.16 16982
31 Kunnathur Spl 1961 21.44 21038
32 Mayyanad Spl N.A 17.21 36696
33 Melila I 1961 18.52 19645
34 Munore-Island I N.A. 13.36 9938
35 Mylom I N.A. 27.49 27565
36 Mynagappally I 1953 19.70 32637
37 Nedumpana Spl 1964 28.06 36364
38 Neduvathur Spl 1961 22.70 24023
39 Neendakara I 1978 10.19 13623
40 Nilamel I 1977 22.02 12166
41 Oachira Spl 1961 12.86 23146
42 Pallickal I 1951 41.72 35392
43 Panmana Spl 1953 16.85 41096

151
44 Paravoor Spl 1952 16.19 35562
45 Pathanapuram Spl 1961 26.65 26286
46 Pavithreswaram I 1961 23.62 26970
47 Perayam Spl 1969 15.48 19946
48 Perinad Spl 1953 24.92 44829
49 Piravanthoor Spl 1961 129.85 30150
50 Poothakkulam I 1961 16.57 20696
51 Pooyappally Spl 1953 22.28 20280
52 Poruvazhi I 1953 19.35 22327
53 Pattazhy-Thekkekara I 1979 18.65 15025
54 Pattazhi-Vadakkekara II 1979 18.07 12931
55 Sasthamcotta Spl 1961 24.42 25502
56 Sooranad-South I 1961 17.17 18823
57 Sooranad-North I N.A. 22.67 23223
58 Sakthikulangara Spl N.A. 9.17 38559
59 Thalavoor I 1961 33.67 29021
60 Thazhava I N.A. 23.58 32976
61 Thekkumbhagom I 1953 20.26 13805
62 Thenmala Spl 1961 164.15 23502
63 Thevalakkara Spl N.A. 15.71 33414
64 Thodiyoor I 1953 20.61 35535
65 Thrikkadavoor Spl 1962 14.85 31236
66 Thrikkaruva Spl 1951 18.38 20788
67 Thrikkovilvattom Spl 1961 19.31 40108
68 Ummannur Spl 1963 34.43 29100
69 Vadakkevila Spl N.A. 8.55 43680
70 Velinallur Spl 1961 27.46 21548
71 Vettikkavala I 1961 36.23 30612
72 Veliyam Spl 1961 30.28 27115
73 Vilakudi Spl 1961 21.43 27335
74 West-Kallada I 1953 13.36 16692
75 Yeroor I N.A 42.99 29447
ALLEPPEY DISTRICT
1 Ala II 1951 10.65 12532
2 Ambalapuzha Spl N.A 24.17 39825
3 Arattupuzha I 1947 22.80 27252
4 Aroor Spl 1951 15.14 29002
5 Arookutty II 1979 11.10 14079
6 Aryad I 1961 5.91 21068
7 Bharanikkavu Spl N.A 23.47 32567

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8 Bhudhannoor I N.A 12.92 16417
9 Champakulam I 1969 22.97 17466
10 Chennam Pallippuram I N.A 25.53 23537
11 Chennithala- I 1947 22.26 26253
Thriperumthura
12 Cheppad I 1961 12.67 17641
13 Cheriyanad Spl 1951 14.24 19803
14 Cheruthana I 1950 14.25 11916
15 Chettikulangara Spl 1961 20.44 30800
16 Chingoli I 1961 7.24 13121
17 Chunakkara I N.A 17.32 20045
18 Edathua Spl 1961 22.29 22081
19 Ezhupunna Spl 1953 14.08 20237
20 Harippad Spl 1951 9.56 13770
21 Kainakari I N.A 36.45 20910
22 Kadakarappally I N.A 8.95 16322
23 Kandalloor I 1947 9.74 18118
24 Kanjikuzhi I 1961 16.62 21860
25 Karithikappally I 1961 8.73 16815
26 Karuvatta I 1951 17.69 19537
27 Kavalam I 1951 17.43 14240
28 Kodamthuruthu Spl 1963 10.81 16705
29 Kumarapuram I 1951 11.10 18946
30 Kuthiyathodu I 1963 9.80 19942
31 Mannar Spl N.A 17.55 26671
32 Mannancherry Spl N.A 37.50 35372
33 Mararikulam North I 1952 16.97 24358
34 Mararikulam South Spl 1960 18.63 39836
35 Mavelikkara Spl 1963 20.88 22985
Thamarakulam
36 Mavelikkara Thekkekara I N.A. 19.82 28158
37 Muhamma I 1952 26.76 20705
38 Mulakuzha I 1953 22.64 24627
39 Muttar II 1953 10.48 10472
40 Muthukulam I 1976 11.58 19144
41 Nedumudi I 1959 25.98 21707
42 Neelamperoor II N.A. 22.22 13101
43 Nooranad Spl 1961 21.28 22768
44 Panavally I 1968 19.55 23653
45 Pandanad I 1961 10.41 11700

153
46 Palamel Spl N.A. 25.60 26966
47 Pallippad I 1955 16.93 22409
48 Pathiyoor I 1961 16.28 27942
49 Pattanakkad Spl 1963 15.34 26627
50 Puliyoor I 1951 11.68 15220
51 Pulinkunnu Spl N.A. 31.53 23092
52 Punnapra Spl N.A. 19388 40422
53 Purakkad I N.A. 23.19 25851
54 Perumpalam III 1979 16.37 8614
55 Ramankari II N.A. 16317 13558
56 Shertallai South I 1953 18.34 30911
57 Thakazhy II 1961 28.01 18577
58 Thalavady I 1950 15.76 22528
59 Thaneermukkom Spl 1962 31.44 35648
60 Thazhekkara Spl N.A. 25.26 32729
61 Thiruvanvandoor I N.A. 10.09 14690
62 hirukkunnapuzha II N.A. 12.53 23111
63 Thuravoor I 1953 19.18 23621
64 Thycattussery I 1953 13.82 17669
65 Vayalar I N.A. 14.44 20698
66 Vallikunnam I 1955 21.36 25617
67 Veliyanad II N.A. 19.41 13356
68 Venmony I 1951 18.02 19969
69 Veeyapuram II 1955 14.02 12071
PATHANAMTHITTA DISTRICT
1 Adoor Spl 1953 20.42 24995
2 Anicad I 1954 19.04 13563
3 Aranmula Spl 1955 24.04 26591
4 Aruvappalam I 1953 277.70 20625
5 Ayiroor Spl 1949 25.76 21669
6 Chenneerkara I 1952 19.50 18919
7 Cherukole I 1983 15.61 12859
8 Chittar I 1971 25.90 15401
9 Elanthoor I 1962 15.09 13976
10 Enadimangalam I N.A. 30.77 18641
11 Eraviperoor Spl 1951 18.64 23588
12 Erathu I 1963 21.74 20884
13 Ezhamkulam I 1951 30.55 28400
14 Ezhumatoor I N.A. 27.89 17835
15 Kadampanad Spl N.A. 23.95 23103

154
16 Kadapra Spl 1951 14.74 20720
17 Kalanjoor Spl N.A. 66.01 31129
18 Kallooppara I N.A. 16.86 16983
19 Kaviyur I 1961 12.67 15111
20 Kodumon Spl N.A. 36.36 24977
21 Koippuram Spl N.A. 22.26 23589
22 Koni Spl 1951 41.44 25749
23 Kottanad II 1951 17.01 13561
24 Kottangal I 1957 23.08 16170
25 Kozhencherry Spl 1961 8.61 12460
26 Kulanada Spl N.A. 21.50 21948
27 Kunnamthanam I 1953 17.57 16943
28 Kuttappuzha Spl 1953 13.40 22550
29 Kuttur I 1953 12.16 17234
30 Mallappally Spl 1951 20.01 16514
31 Mallappuzhasserry II 1953 12.45 10925
32 Malayalappuzha Spl 1947 27.53 18114
33 Mezhuveli I 1953 14.36 13654
34 Mylapra I N.A. 10.38 9974
35 Naranganam I N.A. 20.42 16407
36 Naranamoozhi III 1983 20.00 15000
37 Nedumpuram I 1961 8.49 12341
38 Niranam I 1963 13.17 15066
39 Omallur Spl N.A. 14.54 15280
40 Pandalam Spl 1953 28.40 35591
41 Pandalam-Thekkekkara I N.A. 19.39 15679
42 Peringara Spl 1961 20.10 21771
43 Pramadam I N.A. 37.10 27901
44 Puramattom I 1951 14.66 14401
45 Ranni I 1947 15.64 13179
46 Ranni-Angadi Spl 1961 30.72 15150
47 Ranni-Pazhavangadi Spl 1961 65.43 21853
48 Ranni-Perinad Spl N.A. 103.60 30552
49 Seethathode I 1971 651.94 16739
50 Thannithodu I 1978 428.45 13805
51 Thottappuzhassery I 1953 14.46 14894
52 Thumpamon I 1953 7.84 7574
53 Vadasserikkara Spl 1961 59.57 21531
54 Vallicode Spl 1961 18.66 18766
55 Vechoochira I N.A. 51.80 27783

155
IDUKKI DISTRICT
1 Alakode II 1968 22.54 8519
2 Arakulam Spl N.A 194.25 21609
3 Ayyappancoil I 1977 42.80 10408
4 Bysonvalley II 1969 44.03 9457
5 Chinnakkanal I 1969 66.74 9884
6 Chakkuppallom I 1977 40.71 16616
7 Edavetty II 1968 18.43 9980
8 Elappara Spl 1962 83.63 25263
9 Erattayar I 1971 32.37 18765
10 Idukki-Kanjikuzhi II 1976 227.51 20673
11 Kamakshy II 1968 32.38 17855
12 Kanchiyar I 1977 64.65 21096
13 Kanthallor II 1964 116.29 8140
14 Karimannoor I 1961 33.33 18696
15 Karimkunnam II 1961 22.67 11408
16 Karunapuram Spl 1976 53.21 28134
17 Kattappana Spl 1961 52.77 28226
18 Kodikulam I 1976 18.92 12369
19 Kokkayar I 1973 55.91 11745
20 Konnathady Spl 1961 93.08 2835
21 Kudaythoor II 1961 27.64 11397
22 Kumaramangalam Spl 1951 20.05 11399
23 Kumily Spl 1953 816.72 34918
24 Kuttampuzha I 1969 543.07 18890
25 Mannamkandam Spl 1969 271.53 24814
26 Manakkad I 1961 19.85 11898
27 Marayoor II 1964 108.07 6970
28 Mariyapuram I 1973 28.33 9872
29 Munnar Spl 1961 556.87 78833
30 Muttom I 1961 25.44 9741
31 Nedumkandam Spl 1968 71.95 30366
32 Pallivasal I N.A. 62.40 14771
33 Pampadumpara I 1976 36.19 14818
34 Peermade Spl 1953 114.75 24161
35 Peruvanthanam I 1951 57.36 17389
36 Purapuzha II 1961 23.52 11112
37 Rajakkad I 1969 31.03 15792
38 Rajakumari I 1969 38.15 10695
39 Sanathanpara Spl 1972 78.71 11555

156
40 Senapathy II 1971 31.22 10616
41 Udumbanchola Spl N.A 80.14 11438
42 Udumbanoor I 1951 30.94 19241
43 Upputhara I N.A. 71.62 21248
44 Vandemettu Spl 1977 68.18 23347
45 Vandiperiyar Spl 1951 107.83 39865
46 Vannapuram I 1976 23.28 19214
47 Vathikudi I 1970 80.90 24004
48 Vattavada III 1954 67.81 3554
49 Vazhathope Spl 1969 171.69 7498
50 Vellathooval Spl 1961 48.12 23355
51 Velliamattom I 1961 29.65 16351
KOTTAYAM DISTRICT
1 Akalakkunnam I 1962 34.84 18778
2 Arpookara I 1954 24.37 19150
3 Athirampuzha Spl 1953 19.73 32416
4 Ayarkunnam Spl 1961 30.70 29282
5 Ayamanam Spl N.A. 34.35 29685
6 Bharananganam I 1953 27.04 15979
7 Chempu I 1953 18.42 17444
8 Chirakkadavu Spl 1951 38.81 30028
9 Elikulam I 1961 40.14 20684
10 Erattupetta Spl 1961 14.24 16505
11 Erumely Spl 1963 82.46 35945
12 Ettumanoor Spl 1953 28.27 36601
13 Kadanadu I 1961 40.19 17419
14 Kadaplamattom II 1971 12.98 12404
15 Kaduthuruthy Spl N.A. 33.73 29681
16 Kallara I 1961 27.48 12192
17 Kanakkari I 1965 23.23 19374
18 Kangazha Spl 1963 31.19 19626
19 Kanjirappally Spl 1961 52.47 36546
20 Karoor I 1951 36.84 19377
21 Karukachal Spl 1963 21.25 17721
22 Kidangoor I 1979 25.12 19268
23 Kooroppada I 1961 27.42 20003
24 Koottickal I 1973 33.82 15169
25 Kozhuvanal I 1948 21.13 12147
26 Kumarakam I N.A. 46.61 20807
27 Kumaranalloor Spl N.A. 14.06 35491

157
28 Kuravinlangad I N.A. 22.93 16333
29 Kuricy I 1961 16.22 25357
30 Madappally I 1952 24.02 26617
31 Manjoor Spl N.A. 28.98 27645
32 Manimala Spl N.A. 37.42 18890
33 Marangattupally I 1979 37.58 16664
34 Maravanthuruthu I 1953 15.69 19118
35 Mennachil I 1953 30.14 15965
36 Meenadom III 1982 12.16 13125
37 Melukavu II 1961 30.49 10559
38 Moonnilavu II 1969 33.41 8300
39 Mulakulam Spl 1968 28.73 21819
40 Mundakayam I 1961 82.67 43034
41 Mutholi II 1961 18.12 14036
42 Nattakom Spl 1971 25.79 36238
43 Neendoor I 1961 26.00 19419
44 Neezhoor II 1961 28.91 17126
45 Nedumkunnam Spl N.A. 25.32 19718
46 Paippadu I 1968 20.88 19672
47 Pallikkathode I 1961 22.46 13450
48 Pampady Spl N.A. 41.44 35714
49 Panachikkadu Spl 1954 22.74 31512
50 Parathode Spl 1967 53.53 21318
51 Poonjar II 1969 24.16 10091
52 Poonjar-Thekkekkara I 1969 60.86 18204
53 Puthuppally Spl 1951 22.40 25317
54 Ramapuram Spl 1961 54.54 27865
55 Teekoy I 1961 27.19 9182
56 Thalanadu II 1969 32.24 8182
57 Thalappalam II 1969 22.73 12709
58 Thalayolaparambu Spl 1947 20.63 19440
59 Thalayazham I 1962 22.40 18705
60 Thidanadu I 1961 37.19 17530
61 Thrikodithanam I 1968 13.31 23777
62 T.V. Puram I N.A. 17.03 17990
63 Thiruvarppu Spl N.A. 33.59 25161
64 Udayanapuram I N.A. 20.15 22306
65 Uzhavoor I 1972 25.09 15069
66 Vakathanam Spl 1953 26.48 28313
67 Vazhapally Spl 1955 21.73 29527

158
68 Vazhoor I 1963 24.61 19208
69 Vechoor I N.A. 29.13 14553
70 Veliyannoor II 1972 19.49 10989
71 Vellavoor I 1962 23.46 14582
72 Velloor Spl 1953 19.29 18485
73 Vijayapuram Spl 1961 29.69 42924
ERNAKULAM DISTRICT
1 Aikaranad I 1953 25.64 16244
2 Alengad Spl 1961 18.35 28944
3 Amballoor Spl 1961 22.59 19200
4 Arakuzha I N.A. 29.31 14627
5 Asamannoor I 1960 21.27 14589
6 Avoly II 1961 18.60 13757
7 Ayavana I N.A. 29.47 16161
8 Ayyampuzha I 1980 24.55 19284
9 Chellanam Spl 1962 17.60 29536
10 Chendamangalam Spl 1962 10.83 25893
11 Chengamanad I 1961 15.15 22080
12 Cheranalloor Spl 1961 10.59 18381
13 Chittattukara I 1961 9.46 22695
14 Choornikkara Spl 1969 11.01 23712
15 Chottanikkara Spl 1977 12.68 13783
16 Edakkattuvayal I 1961 26.27 15395
17 Edathala I 1972 15.98 22826
18 Edvanakkad I 1921 11.24 18707
19 Elamkunnapuzha Spl 1951 11.66 43911
20 Elanji I 1961 29.48 16030
21 Eloor Spl 1969 21.95 52528
22 Ezhikkara I 1962 15.08 15516
23 Kadamakudy Spl 1961 12.91 13696
24 Kadungallur Spl 1961 18.06 26602
25 Kalady Spl 1961 16.44 23181
26 Kalamassery Spl 1953 27 43767
27 Kalloorkad I 1961 24.40 12435
28 Kanjoor I N.A. 14.32 18056
29 Karukutty Spl 1961 33.55 25615
30 Karumalloor I 1951 21.05 26091
31 Kavalangad I N.A. 59.91 24084
32 Keerampara II 1963 28.74 11650
33 Keezhmad Spl 61 17.79 23470

159
34 Kizhakkambalam I N.A. 31.57 24521
35 Kothattukulam Spl 61 23.18 15057
36 Kottappady II N.A. 31.94 13987
37 Kottuvally I 61 21.00 30665
38 Koovappady Spl 53 43.97 46747
39 Kumbalam I N.A. 20.78 21678
40 Kumbalanghy Spl 51 15.77 22376
41 Kunnathunad I 53 26.86 22409
42 Kunnukara I 61 21.68 21053
43 Kuzhypilly I 1962 7.73 10775
44 Malayattoor Neeleswaram I N.A. 34.22 21163
45 Maneed II 1952 26.19 14432
46 Manjallur I 1951 23.86 12730
47 Manjapra I 1980 21.00 9857
48 Maradu Spl 1962 12.35 28749
49 Marady II 1967 21.37 12460
50 Mezhuvannur I 1951 49.11 25571
51 Mookkannur I 1961 13.02 12648
52 Mudakuzha II 1962 21.97 14280
53 Mulanthuruthy Spl N.A. 21.47 19761
54 Mulavukkad Spl N.A. 19.27 21397
55 narakkal Spl 1961 8.60 21672
56 Nayarambalam Spl N.A. 12.19 21726
57 Nedumbassery Spl 1961 23.14 23936
58 Nellikuzhy I 1953 27.61 24176
59 Paingottoor II 1961 23.50 13446
60 Paipra II 1961 32.18 27004
61 Palakuzha II 1963 22.65 12051
62 Pallarimangalam II 1978 15.82 9828
63 Pallippuram Spl 1961 16.48 37187
64 Pampakuda I 1953 29.61 15662
65 Parakkadavu I N.A. 24.66 25150
66 Pindimana I 1962 25.76 14025
67 Piravom Spl 1953 29.36 24048
68 Poothrika I N.A. 25.53 17208
69 Pothanicad II 1961 17.14 8878
70 Puthenvelikkara Spl 1962 16.99 21319
71 Ramamangalam I 1963 23.88 13680
72 Rayamangalam Spl 1951 36.77 27271
73 Sreemoolangaram I 1953 14.41 19087

160
74 Thirumarady I 1963 29.24 15596
75 Thiruvaniyoor I N.A. 21.91 19559
76 Thiruvankulam Spl N.A. 10.49 15517
77 Thrikkakara Spl 1962 27.46 38318
78 Thuravoor II 1969 12.33 15801
79 Udayamperoor Spl 1952 24.86 25717
80 Vadakkekara Spl 1953 11.44 29509
81 Vadavucode-Puthencruz Spl 1953 36.88 23653
82 Valakom II 1961 23.72 15493
83 Varapetty II N.A. 21.50 13385

...................

161