Paucity of funds for financial commitments like salary disbursement affect Urban Local Bodies (ULB) in Tamil Nadu that are largely dependent on fiscal transfers, which constituted around 40 per cent of their total revenue during the period 2015-16 to 2019-20. There was a shortfall of ₹1,306.89 crore in fiscal transfers during the period under review vis-a-vis the recommendations of the State Finance Commission (SFC).
For the period 2015-20, as against the SFC grant of ₹20,580.59 crore, the State government devolved ₹19,273.70 crore resulting in short release of grant of ₹1,306.89 crore.
The ULBs are dependent on the SFC grants for disbursement of salaries to their employees. Due to the delay, salary disbursements in 43 ULBs were delayed even upto one month in 2019-20. This indicates that ULBs suffered from paucity of funds for mandatory financial commitments, said the Report of the Comptroller and Auditor General of India for the year ended March 31, 2020 and Performance Audit on Implementation of 74th Constitutional Amendment Act.
There was a cumulative arrears of ₹395.11 crore pertaining to earlier periods (the earliest year being 1997-98) which was released in two instalments during the years 2018-19 and 2019-20 - after a gap of nearly 20 years. Due to the short/delayed release, the ULBs were denied their rightful share in real time (diminished value of money) for utilisation of the same for needy services to the public.
The State government in September 2021 replied that the devolution funds are spent for administrative and contingency expenditure, the delay in release would not hamper providing of services.
The reply is not tenable since the funds were utilised predominantly for the expense like administrative and contingency, the delayed release of funds caused financial burden to the ULBs, the report said.
The report observed that non-revision of property tax since 2013, the loss of revenue suffered by the ULBs amounted to ₹2,598.20 crore for five years from 2013-18. This loss of revenue would continue for the subsequent years also as the Audit observed that during the year 2019-20, the ULBs lost additional revenue of ₹678.31 crore despite increase in the number of assessments.
Despite the acceptance of the recommendation of the 5th SFC, the government did not revise the property tax quinquennially. The autonomy of the local body for generation of its own source of revenue was compromised. The decreased revenue will continue to affect the ULBs till the committee submits its recommendations, the report said.
With elections to ULBs just concluded, officials say things could improve significantly in the coming years.