Exploring Panchayat Revenue Sources

Understanding Panchayat Revenues in India

1. How do Panchayats get their revenues?

Panchayats receive funds from three main sources:

• Grants from the Union and State Governments – Including Finance Commission allocations and scheme-based funds.
• Assigned revenues from the State – Such as a share in stamp duty or royalty on minerals.
• Own Source Revenue (OSR) – Income from local taxes, fees, rents, and user charges.

Example: A Panchayat may receive a central grant for sanitation, state-assigned royalty from a local stone quarry, and its own income from property tax.

2. What is Own Source Revenue (OSR) for Panchayats?

OSR refers to the locally generated income collected directly by the Panchayat from sources such as property tax, market fees, building permits, or community hall rentals.

Example: A Panchayat collecting parking fees during a weekly market.

3. Why is OSR important for Panchayat fiscal autonomy?

OSR provides Panchayats with the flexibility to respond quickly to local issues without depending entirely on state or central funds.

Example: Using OSR to repair a bridge damaged by floods instead of waiting for state assistance.

4. How does Tamil Nadu lead in OSR mobilisation?

Tamil Nadu consistently tops India’s devolution index for OSR, with property tax contributing over one-third of Panchayat revenues.

Example: Fixed minimum tax rates ensure that every household contributes at least ₹1,000 annually to local governance.

5. What is Gujarat’s three-tier Panchayat revenue model?

Gujarat has implemented a digitized system across district, taluka, and Gram Panchayat levels, enhancing transparency and revenue efficiency.

Example: Land tax paid by a farmer is instantly recorded in an online registry, reducing disputes and improving accountability.

6. How can Panchayats monetise common property?

Panchayats can generate steady income by leasing ponds, community halls, or unused land for productive use.

Example: Leasing a village pond to a women’s self-help group for fish farming.

7. What are the main roadblocks to OSR growth?

• Outdated asset and property records
• Weak enforcement of local taxes and fees
• Limited administrative and technical capacity
• Over-dependence on government grants

Example: Shops in a Panchayat market not paying rent due to missing tenancy agreements.

8. How can the ‘One Panchayat, One Product’ (OPOP) model help?

The OPOP model promotes economic self-reliance by encouraging each Panchayat to focus on a unique local product for trade and revenue generation.

Example: A Panchayat in Assam branding and marketing locally grown organic tea.

9. What is the role of GIS-based asset mapping?

GIS mapping allows Panchayats to digitally identify, record, and monitor all their assets, helping in better planning and revenue mobilisation.

Example: Discovering unused land suitable for leasing to a solar energy project.

10. Why is fiscal autonomy a democratic imperative?

Empowered Panchayats can respond faster to local needs, building public trust and strengthening grassroots democracy.

Example: Organizing a health camp during a disease outbreak using locally raised revenue.

“The strength of democracy lies not only in the ballot box, but in the village council that turns promises into action.”