73rd CONSTITUTIONAL AMENDMENT ACT, 1992: PANCHAYATI RAJ-II

Powers, Functions, And Finances Of Panchayat

The powers, functions, and finances of Panchayats encompass the range of tasks they are entrusted with, such as administration, infrastructure development, social welfare, and economic activities, as well as the mechanisms for funding and budget management. These aspects are typically determined and regulated by the State Legislature to ensure effective local governance and community development.

• By State Legislature: Powers, functions and finances of Panchayat are determined by State Legislature.
  • The state legislature may endow the Panchayats with such powers and authority as may be necessary to enable them to function as institutions of self-government.
• 11th Schedule: 29 matters that can be transferred to the panchayat. 
• Preparation of plans and implementation of plans for economic development and social justice.
• Finances: The state legislature may 
  • Authorize a panchayat to levy, collect and appropriate taxes, duties, tolls and fees; 
  • Assign to a panchayat taxes, duties, tolls and fees levied and collected by the state government; 
  • Provide for making grants-in-aid to the panchayats from the consolidated fund of the state; and 
  • Provide for constitution of funds for crediting all moneys of the panchayats.

Compulsory Provisions

• Organization of Gram Sabha: in a village or group of villages.
• Establishment of Panchayats: At the village, intermediate and district levels.
• Direct Elections: To all seats in panchayats at the village, intermediate and district levels.
• Indirect Elections: to the post of chairperson of panchayats at the intermediate and district levels.
• Minimum Age: 21 years is the minimum age for contesting elections to panchayats.
• Reservation: Of one-third of seats for women in panchayats at all three levels. Reservation of seats for SCs and STs in panchayats at all three levels.
• Tenure: Fixing tenure of five years for panchayats at all levels and holding fresh elections within six months in the event of supersession of any panchayat.
• Election Commission: Establishment of a State Election Commission for conducting elections to the panchayats.
• State Finance Commission: To review (after every five years) the financial position of Panchayats. 

Voluntary Provisions

• Endowing the Gram Sabha with powers and functions at the village level.
• Determining the manner of the election of the chairperson of the village panchayat.
• Giving representation to the chairpersons of the village panchayats in the intermediate panchayats or, in the case of a state not having intermediate panchayats, in the district panchayats.
• Giving representation to the chairpersons of the intermediate panchayats in the district panchayats. 
• Giving representation to members of the Parliament (both the Houses) and the state legislature (both the Houses) in the panchayats falling within their constituencies.
• Providing reservation of seats for backward classes in panchayats at any level.
• Granting powers and authority to the panchayats to make them autonomous bodies.
• Devolution of powers and responsibilities upon panchayats to prepare plans for economic development and social justice; and to perform some or all of the 29 functions listed in the Eleventh Schedule of the Constitution.
• Granting financial powers to the panchayats – taxes, duties, tolls and fees.
• Assigning to a panchayat the taxes, duties, tolls and fees levied and collected by the state government.
• Grants-in-aid to the panchayats from the consolidated fund of the state.
• Constitution of funds for crediting all money of the panchayats.

State Finance Commission (Article 243 I)

• The governor of a state shall, after every five years, constitute a finance commission to review the financial position of the panchayats. It shall make the following recommendations to the governor:
  • The distribution between the state and the panchayats of the net proceeds of the taxes, duties, tolls and fees levied by the state and allocation of shares amongst the panchayats at all levels.
  • The determination of taxes, duties, tolls and fees that may be assigned to the panchayats.
  • The grants-in-aid to the panchayats from the consolidated fund of the state. 
• Composition + Qualification: Determined by state legislature.
• The governor shall place the recommendations of the commission, along with the action taken report, before the state legislature.
• The Central Finance Commission can recommend measures to augment the consolidated fund of the state and supplement the resources of the panchayat in the state.

Other Provisions

• Article 243 N: Continuance of Existing Laws and Panchayats: To be in force until the expiry of one year from the commencement of this act. 
• Article 243 J: Audit and Accounts: Determined by the state legislature. 
• Article 243 L: Application to UT: It applies to the Union territories. However, the President may direct that they apply to a Union territory, subject to such exceptions and modifications as he/she may specify.
• Article 243 M: Certain areas are exempted, Nagaland, Mizoram, Meghalaya and others ( hill areas of Manipur for which district councils exist and Darjeeling district of West Bengal for which Darjeeling Gorkha Hill Council exists).
  • Parliament may extend the provisions of this Part to the scheduled areas and tribal areas subject to such exceptions and modifications as it may specify.
  • Based on this provision, Parliament enacted the “Provisions of the Panchayats (Extension to the Scheduled Areas) Act,” 1996, commonly known as the PESA Act or the Extension Act.

Source of Revenue for Panchayati Raj Institutions (According to 2nd ARC)

• Article 280: Grants from the Union Government are based on the recommendations of the Central Finance Commission 
• Article 243 I: Devolution from the State Government based on the recommendations of the State Finance Commission as per.
• Loans/grants from the State Government.
• Programme-specific Allocation: Under Centrally Sponsored Schemes and Additional Central Assistance.
• Internal Resource Generation (tax and non-tax).

Committees Related to Panchayati Raj (After Constitutionalisation)

Conclusion

• The powers, functions, and finances of Panchayats play a crucial role in local governance and community development. These aspects are determined by the State Legislature, which empowers Panchayats to fulfill their responsibilities effectively. 
• From administrative duties to financial management and infrastructure development, Panchayats are vital institutions that ensure grassroots democracy and facilitate socio-economic progress at the local level.