Panchayats’ Revenue Generation Remains Low; Gujarat, Kerala Lead in OSR Collection

GG News Bureau
New Delhi, 16th Nov. Despite efforts to enhance financial autonomy, India’s panchayats have struggled to generate substantial Own Source Revenue (OSR), with an average tax collection of just ₹59 per capita between 2017 and 2022, according to data from the Ministry of Panchayati Raj. Over the five-year period, panchayats raised a total of ₹5,118.98 crore, averaging ₹2.27 lakh per panchayat.

State-wise Performance
Gujarat topped the charts, collecting ₹829.75 crore as OSR, followed by Kerala (₹802.95 crore) and Andhra Pradesh (₹791.93 crore). In terms of per capita OSR, Goa led with ₹1,635 per person, while Puducherry followed with ₹757 per person.

Challenges in Revenue Generation
Several states and Union territories, including Bihar, Uttar Pradesh, and Arunachal Pradesh, lack formal OSR rules, restricting panchayats from levying taxes and fees. Administrative hurdles and limited willingness among elected representatives further impede local revenue generation.

Government Initiatives and Solutions
At a recent conclave involving the 16th Finance Commission and other stakeholders, discussions focused on empowering panchayats to boost OSR. Strategies like leveraging SVAMITVA data for property tax assessments, matching grants, and revenue-sharing from local mining and GST have been proposed.

The 15th Finance Commission has allocated ₹2.36 lakh crore to rural bodies for 2021-2026, with 60% tied to specific projects like water supply and sanitation and 40% as untied grants. The government aims to strengthen panchayat identities as local governments through enhanced tax-based OSR mechanisms.

While panchayats continue to rely heavily on grants, a shift towards better revenue-generation practices could help achieve long-term sustainability and support grassroots development.