COMMISSION ON REVENUE ALLOCATION
COMMISSION ON REVENUE ALLOCATION
Promoting an equitable society
REPORT ON STUDY TOUR TO INDIA
17TH DECEMBER 2012
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Outline
• Objectives
• Programme
• Lessons learned
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Study Tour Objectives
Sharing of revenues between central government and states in India
•Devolution structures for effective service delivery
•Revenue generation structures for devolved government
units;
•Public finance management structures for devolved
government;
•Revenue collection arrangements for both central and
devolved government units in India
•Revenue Sharing arrangements from national resource
sectors
•Other issues
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Structure of Multi-Government in India
States(28)
District Panchayat
Municipal
Corporation
Block Panchayat
Village Panchayat
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Municipality
3rd Level (added by 73rd and 74th
amendment)
Initial two-levels
Centre(Union)
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Lessons for Kenya from structure of government
 Need for 3rd-level of government because county governments
may not create equity at the county-level
• It took 43 years for them to introduce the 3rd tier through the
73rd and 74th amendment of the constitution
 Sharing resources equitably at the county-level should be one
dimension of the “fiscal responsibility” parameter
 Future marginalisation policies should use sub-county units in
developing criteria for identifying marginalised areas
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Structure of State Government in India
State Government In India
Executive
Legislature
(Bicameral/unic
ameral)
Governor (Ceremonial ,head
of state and presidential
appointee)
Chief Minister(Head of
government and elected by
legislators of leading political
party)
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Judiciary
High court
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Lessons for Kenya from structure of government
 India is a quasi –federal state just like Kenya-able to take
advantage of the virtues of unitary government (reduce centrestate conflict)-President appoints state governors
 Role of political parties: numerical power of the political parties
matter-In India Chief minister is elected by legislators of the
leading political party
 Control of police: all police are selected and trained centrally by
the union government. They can be posted anywhere in India.
When in state they are under the state government
 Civil service: Recruited centrally and can be transferred. When
in a state that state pays salaries. BUT pensions are centrally
administered by the union government
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Revenue Sharing in India
 Sharing of revenue is mainly done by the Union Finance
Commission (equivalent of CRA) which was formed in 1951
 The commission is appointed every 5 years
 The most recent is the 13th Finance Commission established in
2007 its recommendations for the period 2010-2015
 There are also State Finance Commissions (SFC) to make
recommendations within each state
 There is also a Planning Commission to spearhead national
planning and administer planned expenditures
 At the state level, there is the State Planning Board to assist the
state government in formulating a development plan based on a
scientific assessment of resources available to the state
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Lessons on Revenue Sharing for Kenya
 CRA should strive to build public confidence
 Need to create a maintenance fund/grant in future
CRA’s recommendations- to manage all maintenance
expenses for running the transferred institutions
 Importance of credible data and research in
recommendations
 Coordination of planning from counties to the national
level
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Lessons on Financial Management
 India’s financial management experience led to financial
indiscipline, high fiscal deficits etc.
o In 2003, India enacted the Financial Responsibility and Budget
management Act to institutionalise financial discipline and move
towards a balanced budget through targets.
o CRA could recommend similar targets e.g. fiscal deficit to county
GDP of say 3%-provide warning to CRA and other stakeholders
 Importance of ICT and need to move to “paperless operations”
o BUT think about management of e-waste
 Concurrent audits by different institutions
 Use of bill system as opposed to cheque system
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Lessons on Revenue Enhancement
 Clarity of taxation laws: Conflicting laws need to be
harmonised
 Data on tax handles is important: Need credible data
on properties such as the GIS-based property
database
 Tax administration at the county-level: Need to reduce
compliance and administrative costs, adequate human
resources and use of ICT
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Lessons on Management of Mineral Resources
 In India minor minerals are for states while major
minerals belong to the union government
 Inter-county conflict: Prepare for inter-county
conflicts regarding water, forests etc.
o Need dispute resolution mechanisms
 Minerals resources based in poor counties: Local
communities and counties should be compensated
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Lessons on Marginalisation
 Marginalised groups in India are the scheduled tribes and
scheduled castes (Dr Ambedkar)
 Should adopt a multi-pronged approach
 Provision of resources to bridge the developmental gapThe equalisation Fund
 Protective arrangements in terms of laws, commissions
 Affirmative action, which provide positive preferential
treatment in jobs, education and political positions
o There are special hostels for students from scheduled
tribes and scheduled castes
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THANK YOU
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CRA Delegation at the Taj Mahal on 2nd December 2012
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Part of the CRA Delegation in Discussion with Prof.Abhijit Sen, Member
of the Planning Commission of India, on 3rd December 2012
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CRA Delegation in discussion with Mr.Sumit Bose, Revenue Secretary,
Ministry of Finance, on 3rd December 2012
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CRA Vice Chair in discussion with H.E. Prof.Festus Kaberia, Kenya High
Commission in India on 4th December 2012
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CRA delegation in discussion with the Principal Secretary (Finance) of the
Kerala State Government on 6th December 2012
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Dr.Thomas Thoomkuzhy(GIFT), Com.Onyango, Vice Chair, Com.Prof.Munavu
outside the Vellanad Gram Panchayat (Kerala State) on 6th December 2012
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Vice Chair, Prof.Masai, Prof.Munavu and Dr.Sichei with a Kudumbashree
(women group) in Vellanad Panchayat (Kerala State) on 6th December 2012
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Chair lady of Attingal Municipality S.Kumar sandwitched between Prof.
Munavu and the Vice Chair outside the municipality offices, 7th December 2012
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Section of workers sorting cashew nuts at the CAPEX factory on 7th December
2012
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Dr.Narayan(Director GIFT), Mr.John(Member State Planning Board in Kerala),
Dr.Pinaki(NIPFP) and Vice chair at the last day meeting at the Gulati Institute of
Finance and Taxation on 8th December 2012
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Dr Bhimrao Ramji Ambedkar father of Indian Constitution came from one of the
untouchable tribes. Earned doctorate degree in economics and law
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