Improve fiscal governance for service delivery

<b>Rajesh Tandon</b>, President, Society for Participatory Research in Asia (PRIA) stresses upon the need for improved and better implementation of policies and Centrally-sponsored schemes in the Union Budget 2012.

OneWorld South Asia

In an exclusive opinion piece, Rajesh Tandon, President, Society for Participatory Research in Asia (PRIA) has appealed to the Union Government for improved and better implementation of policies and Centrally-sponsored schemes in its Budget 2012. He focuses on high inflation that is reducing the nutritional intake of the poor; improving the infrastructure of small and medium sized towns and cities; and problems faced by NGOs after amendments were made to Section 2(15) of the IT Act, 1961.

Persistently high inflation during the past year has caused severe hardships to many households which are living below or close to the poverty line. This issue was discussed in consultations last year. The pattern of food production is shifting in a manner that high nutrition, low cost food supply is stagnating or declining. The likely fall of production of pulses will further increase the risk of malnutrition in poor households. During the year, milk prices have increased nearly 50 per cent, further resulting in lower consumption of nutritional foods by poor households.

In my presentations during the pre-Budget consultations in 2010 and 2011, I had argued for the use of the Budget to send clear signals for improved and better targeted implementation of various policies and Centrally-sponsored schemes. Two aspects need urgent attention; first, improved planning for the delivery of services and programmes by keeping focus on results and outcomes. The linkage between investment and expenditure on the one hand, and results, outcomes and goal-achievement, on the other, remains fuzzy, if not missing completely.

One specific manner in which this can be improved is to target rapid capacity augmentation of three tiers of panchayats. While resources for doing so are being made available on a regular basis by the Finance Commissions and the budgetary provisions, the productive expenditure on this score is lagging way behind.

District Planning Committees (DPCs) have been mandated by the Constitution of India to develop integrated plans in a bottom-up and participatory manner; yet, in most states, DPCs lack human and financial resources to undertake such a planning process. The Finance Minister can make specific provisions for adequate empowerment and capacity-augmentation of DPCs in this Budget.
Another approach to improved targeting of service provision for the various Centrally-sponsored schemes is to mandate social audits in all such programmes and schemes. This will promote bottom-up accountability to the beneficiaries. In order to make such social audits effective, it is essential that separately earmarked funds are made available for conduct of social audit in a manner somewhat independent of the machinery that is responsible for the delivery of the programmes.

The recently-released census report on urbanisation reinforces some of the arguments I have made in my submissions to pre-Budget consultation in the two previous years. There is a significant increase in the urban population and habitats in the country during the past decade. Most of the new habitats are small and medium sized towns and cities. Our urban development programmes have mostly focused upon improving the infrastructure of metros and capital cities under such schemes as JNNURM.

It is imperative that the Hon’ble Finance Minister sends clear signals in this Budget that greater investment in small and medium-sized towns and cities is essential to sustain inclusive growth and development. Such towns and cities lack basic infrastructure for water, sanitation, transportation, etc; they also have extremely weak institutional and human capacities in their municipalities; their internal resource mobilisation is negligible. Taking cognizance of the new census data, and its wide-scale implications for inclusive growth in the coming decade, this Budget can send a clear message that improvement in the quality of life in small and medium towns is urgently required.

During her inaugural address to the new Parliament in June 2009, the Hon’ble President of India announced that the government would work towards slum-free cities and towns. Rajiv Awas Yojana (RAY) has been tentatively launched to provide for secure land rights and basic housing for the urban poor. As implementation of RAY has progressed in the past two years (and we have been involved in it in several states), two issues have emerged that may completely undermine achievement of its purpose. First, most state governments are unwilling and/or unable to make 50 per cent of the matching contributions required of them. The situation is worse in northern and eastern states.
Second, the scheme requires urban poor households to borrow money for building their houses. Institutional mechanisms for access to such credit on easy terms do not exist on an adequate scale. Formalities related to documentation are still so severe that the poor get frustrated. As a result, the poor are disinterested in borrowing; and the ‘uptake’ on the scheme is very slow.

The mechanisms for ensuring security of land tenure to the urban poor continue to remain problematic; land titles held by different public agencies of different tiers of government continue to evade any kind of coherent and time-bound response to this basic requirement for housing the urban poor in the country. How can the Hon’ble Finance Minister send signals to speed this up during the coming year?
During the past year, especially after the Africa visit of the Hon’ble Prime Minister, there was considerable public discussion on the possibility of setting up of India Aid Agency, for supporting development efforts in other developing countries. As the Indian Government’s public investment abroad is increasing, it may be a very good initiative to create such a professional agency. The experiences of other countries, especially the Scandinavian countries, Brazil, New Zealand, etc may be of value to learn from in this regard.

Most importantly, several dozen Indian NGOs now have considerable professional expertise in implementing development projects internationally. Their knowledge can be harnessed in developing practical projects and partnerships on the ground in Africa, Asia and Latin America. In the memos submitted by several NGOs during the two previous pre-Budget consultations, issues related to an enabling regulatory environment for the effective functioning of NGOs were presented. Today, the entire NGO community is facing a serious problem of notices and penalties imposed by the Income Tax authorities for demarcation of their income as commercial and/or business income. This crisis is a direct consequence of the specific amendments made to Section 2(15) of the IT Act, 1961.

During the past six months, Income Tax officers dealing with NGOs have been sending notices and raising tax demands for all those activities which do not fall in the narrow definition of ‘relief to the poor, education and medical relief’.

Thus, all NGOs working towards nutrition, child protection, release of bonded labour or payment of minimum wages are facing these notices. Likewise, all NGOs working towards women’s empowerment, women’s health, women’s legal aid, violence against women are facing Income Tax demands.

All NGOs working with state governments to build capacities of Panchayati Raj institutions or undertaking social audits under MNREGS, or working with municipalities and RAY and urban poverty alleviation are facing the wrath of tax authorities.

All NGOs which receive assignments and projects from state governments or district administrations now have to face Income Tax authorities.

It appears that there are instructions from CBDT to raise such tax revenues. Hon’ble Finance Minister, this matter had been brought to your attention over the past two years by several delegations, petitions and appeals. There were assurances given inside the Parliament too, that these provisions would not affect genuine NGOs doing such development work which is part of the national development plans.
Since we met you last year in January, the experiences of hundreds of genuine, long-standing and government-recognised NGOs has been extremely painful; the threats to cancel 12A registrations of these organisations on the grounds of changes made in the definition of charitable purposes are severe and extremely prejudicial to a positive and encouraging environment for the effective functioning of development NGOs in the country.

You must act now to stop this by amending such detrimental provisions in this Budget itself, Hon’ble Finance Minister; otherwise, most of the NGOs would not even qualify to be invited to next year’s pre-Budget consultations.