On the fifth of August, the West Bengal panchayat department quietly withdrew a circular it had issued only days earlier. The standard operating procedure had set the villages a time-bound drive to collect more tax from their own residents, with a schedule for pursuing defaulters; press reports read it as an instruction to raise about Rs 1,200 from every rural household, and the political reaction was sharp enough that the department disowned the figure as “completely false” and took the document back.

The retreat is more telling than the circular. Behind it stands a number the state cannot escape: some Rs 2,521 crore in performance grants it hopes to draw from the Sixteenth Finance Commission in the closing years of the award, money that will be released only if its gram panchayats can show a steep rise in what they raise themselves. A poor state was reaching into poor villages because a national formula had made the reach compulsory ~ and then flinched. That formula deserves to be read twice before anyone calls it reform.

A gram panchayat that cannot demonstrate own-source revenue of at least Rs 1,200 per household in a year ~ a sum smaller than a single urban water bill ~ now stands to lose its share of a devolution pool the Commission has enlarged by 84 per cent, to Rs 4.35 lakh crore for the award period from 2026-27 to 2030-31. Of that pool, Rs 87,048 crore, a full fifth, is a performance grant gated behind exactly this test. The most generous rural devolution the panchayats have ever been offered arrives with a lock, and the key has been cut for a door most of them do not possess.

The lock would be fair if the capacity to open it existed. It does not, and the reason is structural rather than moral. The Reserve Bank of India’s 2024 study of panchayat finances found that own revenue ~ local taxes and fees together with non-tax receipts ~ supplies barely 4.4 per cent of what panchayats take in; almost everything else arrives as grants. The Ministry of Panchayati Raj’s own Expert Committee on own-source revenue put the national figure at Rs 59 raised per person over the five years to 2021-22 ~ and that average conceals the whole argument.

Goa’s panchayats raised Rs 1,635 a head; eleven states and Union territories, Bihar among them, have not so much as framed the rules under which a panchayat may tax at all. A single national floor laid across a range that runs from nothing........

© The Statesman