First Independent Review Mission for Backward Regions Grant Fund State Report
Allocation criteria – Vertical and Horizontal
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- Conditions for Access to Funds
- Flow of Funds
Allocation criteria – Vertical and HorizontalAccording to the BRGF Programme Guidelines, grants should be distributed to the districts using three criteria: An equal share (Rs 10 crore per district p.a.) and the remaining as: i) share of the population (50 % weight of the balance), and ii) size of the district (50 % of the balance). It should be noted that this does not reflect any backwardness criteria, contrary to the identification of the eligible 250 districts in the country and to the overall objectives of the BRGF. The state will then determine the normative formula for allocation of funds to the Panchayati Raj institutions (PRIs) and urban local bodies (ULB). According to the guidelines, the normative formula shall consider the share of each local government institution category within the district, the norms governing the inter-se share of each at Gram Panchayat (GP), Janpad Panchayat (JP) and Zila Panchayat (ZP) or ULB –Municipality/Town Panchayat. According to the central guidelines, the formula may include any index for backwardness and address priorities identified in the envisioning exercise and a reasonable percentage of the funds may be earmarked for performance incentives.6 In Madhya Pradesh funds are divided between rural and urban bodies using population figures. The state has not made an allocation criterion for the various tiers of PRIs – GP, JP and ZP. After the consolidation of District Plans, allocations are made to these 3 tiers based on the projects falling under the administrative and financial powers vested with each level, which are: GP, Rs 0-5 lakhs; JP, between 5-10 lakhs; and ZP, Rs.10 lakhs and above. The reason cited for not developing a criterion was the incentive for higher tiers to distort the sub-District Plans would increase. However, as will be seen under the Planning Section this means that there is no known budget envelope for the JPs and GPs when they start the planning process. The urban share is about 17%. Madhya Pradesh has not developed indicator of backwardness. Conditions for Access to FundsThe conditions for access to funds are clearly stated in the central BRGF guidelines, page 16. The conditions are applied by the State of Madhya Pradesh with exception that audit reports for the programme for last year in some districts are not sent prior to the release of funds related to the subsequent year’s allocation – GPs met, have not yet completed their audit for 2007/08 BRGF funding and the audit in most places is still ongoing or pending. The requirement on utilisation certificates submitted within one year from fund release is complied with as these are issued by the District Collectors. According to the State, there is a continuous follow-up on the districts which has not submitted their accountability. Flow of FundsMadhya Pradesh has adopted a fast track and unique system of fund transfer to the lowest level of PRI – the Gram Panchayat. The state government has opened about 13,660 accounts in various bank branches through the nodal bank, the Central Bank of India (CBI). Funds when received as per the approved plans and releases by MoPR are transferred using the Rapid Telegraphic Transfer of Funds (RTTF) directly to the PRI accounts at the GP, JP and ZP. This has been an outstanding and very successful experiment in Madhya Pradesh. The Chief Executive Officers at Janpad have organized meetings of GP Sarpanch to apprise them about transfer of money through RTTF. It is noted that out of the allocation to PRIs 60 percent of the funds are directly transferred to the GP accounts, 12 percent are transferred to JP level accounts and 28 percent are transferred to ZP accounts. So far the system is functioning smoothly. The state has plans to put up a management information system and Quality Control mechanisms in place taking help from the very successful RSVY implementation programme. Transfer to Urban Sector The urban allocation of the grants is transferred though the district offices of the Urban Administration and Development Department who in turn release the funds to the urban bodies by demand drafts. In the Malajkand municipality (Balaghat District) it was found that the BRGF bank account was jointly operated by the Chief Municipal Officer and the local DUDA Officer which is not in conformity with the municipal financial rules requiring municipal President to be a signatory. Information The evidence from the field shows a lack of sufficient information about the releases of funds, amounts of funds available and status for utilization and release. Funds are not seen as predictable, due to a combination of i) delays in all processes, ii) the existing system of installments with minimum levels of utilization prior to subsequent releases (the guideline rules about 60 % and 75 %), iii) and changes in procedures due to elections - and other reasons. Timing of Releases The fund flow has been delayed. The first release for 2006/07 of Rs 28.96 crores was released in March 2007. The first release for 2007/08 (Rs.373.32 crore) was only received in December 2007 after approval of the Perspective Plans by the High Powered Committee between September-November 2007. As such the funds could only start being spent from early 2008. Due to reasons such as delayed submission of utilization certificates the release of sanctioned funds for 2008/09 (Rs.247.46 crore) was made in December 2008 and January 2009. Release of funds for 2009/10 is delayed although the annual plans are finalized the High Powered Committee meeting has yet to be called - which was tentatively scheduled in mid July 2009. Part of the unspent funds are not lapsing but will be included in the subsequent installment when conditions for spending are complied with such as the minimum conditions for grant access and the demand to spent at least 75 percent of the previous installment. However, at the central level, the overall allocation for the BRGF is sometimes reduced due to lack of sufficient spending, and thereby impacts the funds available for each PRI in the subsequent year. Table 5 gives the position of funds released for financial year 2007/08. Table 5: Financial year 2007-08 Funds released against 75% UC (Development and Capacity Building) – Rs. Lakhs
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