Despite the autonomous status provided by the 73rd Amendment of the constitution, the rural local bodies in India have made little effort to develop their own resources, resulting in their heavy reliance on external funding, mainly from central and state grants. This has led to a supply-driven budgeting approach, poor financial management and poor development outcomes.

The Jal Jeevan Mission (JJM) serves as a model for improving self-reliance by emphasising community participation, local ownership and demand-driven decision-making for clean drinking water. JJM encourages households to take collective ownership and responsibility for operating and maintaining water supply systems. This approach helps ensure financial sustainability and better align expenditures with community needs.

Successful implementation of JJM will build the capability of rural local bodies in effective community needs assessment and their prioritisation, user charge determination and collection, promoting judicious spending and enhanced financial independence. Applying this approach to other activities of the local bodies can significantly improve public service delivery and community welfare, ensuring long-term sustainability and transforming the way rural local bodies are currently working.

The 73rd Amendment of the Constitution, enacted in 1993, decentralised power to village-level self-governance bodies by establishing the Panchayati Raj system across rural India. This step was aimed to improve public service delivery, making it need-based, accountable and transparent.

Local bodies are meant to use their autonomy to create demand-based budgets, where Gram Sabhas propose, estimate costs and prioritise projects to form a need-based budget. This process involves identifying revenue sources, setting prices for the services and estimating total revenue.

A significant part of the revenue is expected to be collected locally through taxes, user fees and revenue from charges on property and services to meet the expenses towards those priority proposals that cannot be met from state and central government grants. Any shortfall between costs is to be met through additional state and central government grants, if approved, or CSR funds, if available. However, the local bodies still heavily rely on central and state-sanctioned funds, indicating that hardly any work, however important, is carried out outside the state and central government-sponsored schemes like MGNREGA and Swachh Bharat Mission, and grants from the state finance commissions.

Rural bodies' own source of resources typically constitutes less than 10 per cent of their total funds. This includes revenues from taxes, fees and charges on property and services, along with other local sources like donations and CSR initiatives.

Rural local bodies’ dependence on central and state funds has led to a supply-driven approach – executing only sponsored programmes, without making any effort in proper budgeting exercise, which is crucial in any organisation and a lack of judicious use of funds in general. To give an example, in one of our field studies, we found that a Gram Panchayat constructed over time three different toilet buildings in a school, of which only one newly built toilet is functional, while the other two older toilets have been abandoned. Instead of renovating the existing toilets at a lower cost, the Gram Panchayat opted to build new ones, rendering the old facilities useless and ghostly in the school compound, and wasting land space for the schools.

There are plenty of such examples, and such carelessness stems from lack of financial discipline and appreciation for the proper use of money. If Gram Panchayats were to undergo the challenging process of raising revenue, such mismanagement would rarely happen.

Raising resources is critical for understanding the value of financial resources. Without this, Gram Panchayats may not fully grasp the importance of the funds they handle, which is essential for financial prudence and aligning expenditures with community needs. While using its own resources, organisation will prioritise projects and accurately estimate project costs, and find ways to minimise expenditures. Reviewing budget estimates then helps identify funding gaps that require additional support beyond central and state funds.

As it has been noted, local bodies have better information about community needs, leading to more targeted budgets and efficient resource use. Decentralised decision-making improves accountability as local officials are directly accountable to their constituents. This comparative analysis suggests that decentralisation’s success relies on local capacity and resources. For instance, Brazil’s decentralised health councils and participatory budgeting in Porto Alegre have improved health outcomes and governance transparency. Similarly, Indonesia’s decentralisation in education and healthcare has led to better service delivery, though results vary based on local governance quality.

JJM exemplifies the principles of decentralised governance by emphasising community participation, local ownership and demand-driven decision-making for clean drinking water. It encourages collective ownership among households, who agree to cover water charges, ensuring villagers take responsibility for operating and maintaining the water supply system. This approach shifts from a supply-driven model to one driven by community demand.

Effective financial management is crucial to keeping service costs low and affordable. This not only optimises fund allocation but also protects the community from financial instability, promoting long-term sustainability. JJM serves as a model of financial management and community participation, potentially conveying the importance of user charge collection and careful spending.

Applying these JJM operational approaches to other activities can enhance financial practices, ensuring resource management aligns with community needs. Therefore, successful implementation of JJM will build the capability of rural local bodies and will significantly improve public service delivery and community welfare, ensuring long-term sustainability and transforming the way rural local bodies are currently working.

Gopal Naik is the Jal Jeevan Mission Chair Professor at IIM Bangalore; Keerthana Krishnan is a research associate at IIMB. Views expressed are the author’s own and don’t necessarily reflect those of Down To Earth.

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