Govt failed to provide adequate financial support to gram panchayats: CAG

Bengaluru: The Comptroller and Auditor General (CAG) has said state authorities withheld vital financial support to gram panchayats (GPs), leading to significant losses in revenue for these local bodies and possibly hindering their ability to provide essential services to citizens.
The CAG report states key govt departments and agencies, including Karnataka Industrial Areas Development Board (KIADB), housing department, and privately-run entities like Electronics City Industrial Township Authority (ELCITA), failed to remit rightful taxes and funds to GPs.
The Karnataka Panchayat Raj (KPR) Act empowers GPs to collect property taxes from industries located within their jurisdiction. However, in a move that contravened the Act, the rural development and panchayat raj (RDPR) department, in March 2020, instructed KIADB to collect property taxes and pass it on to GPs.
As of March 31, 2022, KIADB had collected Rs 19.6 crore from 10,025 industrial units across 23 districts, but it did not transfer the funds to the GPs concerned. Furthermore, CAG's report reveals, KIADB issued 776 building licences instead of GPs, depriving them of Rs 9 crore in revenue.
Similarly, CAG pointed out that ELCITA, which is mandated to pass on 30% of property tax that is collected to GPs, had only remitted 25% over the past five years. The shortfall resulted in a loss of Rs 1.4 crore for the local bodies.
The housing department, which collects fees for issuing e-khatas, was also criticised for failing to deposit collected sums to GPs. CAG's report highlighted that of 6,068 GPs, many failed to collect even 50% of the annual demand, accumulating arrears of over Rs 1,000 crore.
In a written reply, RDPR department said it would ensure arrears collected by KIADB, ELCITA, and other departments would be transferred to GP accounts. The department also indicated that it would consider allowing panchayat raj institutions to levy and collect additional taxes, including betterment tax, development charges, and market fees, to boost finances of GPs.