“Devolution of funds between PRIs (Panchayati Raj Institutions) and ULBs (Urban Local Bodies) is based on criterion such as density of population, size of population, percentage of population below poverty line and with weightage assigned to each criterion. Based on the criteria, devolution of funds is to be distributed between PRIs and ULBs in the ratio of 75:25”, the report by the Fifth State Finance Commission noted.
To accord priority to the development needs and to take care of cost disadvantage of the scheduled areas, the Commission has devolved additional 25 per cent of funds in favour of Gram Panchayats (GPs) situated in scheduled areas. The overall devolution to all 6798 GPs is Rs 3202.4 crore.
The Commission has recommended Rs 619.75 crore, Rs 650 crore and Rs 255.50 crore for Municipal Corporations, Municipalities and Notified Area Councils (NACs) respectively out of total devolution to ULBs amounting to Rs 1525.25 crore. Since entry tax, advertisement tax and entertainment tax have been subsumed under GST (Goods & Services) Tax, the Commission has recommended 7.46 per cent of the State GST revenue be assigned to local bodies in lieu of the three taxes.
Further, the Commission has recommended that 8.03 per cent of the net proceeds of Motor Vehicle Tax be assigned to PRIs and ULBs for maintenance and improvement of road infrastructure.
For meeting drinking water needs, the finance panel has recommended Rs 1000 crore with special emphasis on water stressed pockets. The amount includes Rs 250 crore for installation of solar energy based tube well system with overhead tank. In order to tackle the problem of water supply in water stressed ULBs and to overcome the problem of fluoride and iron as well as replacement of damaged pipes, an amount of Rs 500 crore has been recommended.