Synopsis
In light of the upcoming discussions with the 16th Finance Commission, Madhya Pradesh aims to improve funding for local bodies and enhance accounting practices based on recommendations from the CAG. Key discussions revolve around fiscal health, standardization, and integration of financial systems.Key Takeaways
- Madhya Pradesh seeks enhanced funding for local bodies.
- 16th Finance Commission to discuss CAG recommendations.
- Focus on standardizing accounting practices.
- Integration of financial management systems is crucial.
- Challenges in asset management and operational costs persist.
Bhopal, March 5 (NationPress) Despite slim prospects, Madhya Pradesh holds ambitions for enhanced funding, particularly for its struggling local bodies. Anticipated improvements in the accounting systems are likely as the visiting 16th Finance Commission is expected to pay heed to certain recommendations made by the renowned accounting body, the Comptroller and Auditor General of India (CAG).
A meeting took place between the visiting 16th Finance Commission, chaired by Arvind Panagariya, and K. Sanjay Murthy, the head of the CAG, where various challenges and solutions concerning state and union finances and audits were discussed.
Furthermore, the Finance Commission and its members engaged with the state's Chief Minister, Mohan Yadav. The CAG underscored the significance of this meeting in assessing the financial landscape at both central and state levels. The primary focus of discussions between these two pivotal entities revolved around the fiscal health of local bodies, public sector enterprises, and state finances.
The CAG advocated for the standardization of accounting practices across all governmental levels, including local bodies, which are in dire need of an integrated financial management system for processing payments and fund transfers from the state to urban and rural local bodies. This would help streamline accounting practices.
Highlighting the challenges and financial constraints, a well-informed government official elaborated to IANS that funds are streamed through the Public Financial Management System (PFMS), integrated with the eGramswaraj platform.
However, state grants are directed through the Comprehensive Financial Management System (CFMS), which lacks a connection to eGramswaraj. The state's own revenue sources are neither routed nor recorded through PFMS or CFMS, leading local bodies to often issue cheques manually. This lack of integration undermines transparency and accountability.
Moreover, discrepancies have been noted between accounts generated on eGramswaraj and those kept manually. Madhya Pradesh, which is home to 23,000 Gram Panchayats spread across 313 blocks, with 70 percent of its population residing in rural areas, continues to prioritize service delivery, especially in tribal regions, despite inadequate local resource collection. Escalating living standards and the demand for improved services have increased pressures on local governance.
The state has encountered challenges in asset management and covering operational and maintenance costs, often depending on state assistance. As a prompt measure, it was suggested that the accounts of local bodies be synchronized with those of central and state governments in the top 100 cities.
The Central government has been advocating the development of capital assets in rural areas through initiatives like the Swachh Bharat Mission (SBM) and Jal Jeevan Mission (JJM). The operation and maintenance (O&M) of these assets, devolved to Rural Local Bodies (RLBs), is vital for sustaining service quality. Acknowledging the significance of water and sanitation issues, the 15th Finance Commission allocated 60 percent of its grants for these purposes. These funds are disbursed to local bodies after proper verification, with overall utilization deemed satisfactory.
However, certain northeastern states are experiencing delays in issuing Grant Transfer Certificates, an issue currently being addressed.
As per a well-placed government insider, states frequently request that cess and surcharge be included in tax devolution, a possibility that seems unlikely following the dissolution of the Planning Commission.
The state's finances are also in need of a significant boost in devolution, heavily relying on the state-central relationship.
During the meeting in Bhopal on Wednesday, the CAG highlighted the financial strains and challenges obstructing the enhancement of human development indices, particularly in economically disadvantaged areas. Further discussions between the two entities encompassed budget management targets for states, fiscal responsibility, and the necessity for regular reporting of Off-Budget Borrowings.
The CAG observed that for improved fiscal performance, states should concentrate on areas such as stamp duty, registration fees, and state excise collections, which present considerable potential.
Discussions also revolved around the requirement for regular updates and the application of modern technology to minimize revenue leakages, enhance transparency, and improve data accuracy.
The expansion of the Goods and Services Tax (GST) framework, enhanced GST administration, and increasing transparency were also key points of discussion.
The CAG put forth several reforms aimed at broadening the tax base, which include incorporating unregistered goods and service providers into the GST system via automated data collection and improving taxpayer verification processes.
