3. RESOURCE USE

3.1 In spite of clear directives to ensure utmost economy and efficiency in expenditure in order to eke out the meagre resources, many local governments have not translated these directives into practice with the result that superfluous schemes still find place in local government plans resulting in avoidable waste.

3.2 While preparing plans the local governments have to be extremely sensitive about the cost of funds which they are using. Though the Plan funds are given as grant-in-aid to local governments it should be noted that about 80 % of the funds are borrowed and the cost of borrowing works out to around 11 % per annum. This implies that when investment decisions are taken sufficient care must be taken to ensure that, on the whole, there should be adequate returns to the economy over a period of time which would facilitate not only repayment of the loans but also generate enough resources for smooth maintenance of the assets and higher future investment. Local governments should be conscious of the cost of resources and their scarcity while taking any spending decision.

3.3 Government have accepted the recommendations of the Second Finance Commission and Local Governments would get enhanced grants for maintenance as well as for general purposes but the responsibilities transferred to local governments call for additional resource mobilization especially through the following channels.
(1) Implementation of plinth area based Property Tax.
(2) Launching of a special campaign to bring all potential assesses into the Profession Tax net.
(3) Prevent leakages in Entertainment Tax.
(4) Use the Service Tax to cost new services provided and recover partially or fully from the beneficiaries over a period of time.
(5) Enhance non-tax revenues through better assessment and enhancement based on Second Finance Commission recommendations.

3.4 The above mentioned sources are available only to Village Panchayats, Municipalities and Corporations. All local governments have recourse to the following methods of resource mobilization.
(1) Realization of user charges based on the capacity to pay.
(2) Entrusting operation and maintenance responsibilities to beneficiary groups.
(3) Mobilising contributions in cash, kind and labour from the benefited public.
(4) Facilitating community investment particularly from non-resident Keralites for local development purposes.
(5) Developing public-private partnership in creation of infrastructure.

3.5 In spite of several efforts the flow of credit to schemes formulated by local governments has been extremely poor. The local governments have to strive hard to link credit flow from banks and other financial institutions to increase their Plan investment for which the following suggestions are to be adhered to.
(1) Direct investment in the productive sectors like, irrigation, electrification, creation of appropriate infrastructure for transport and marketing, particularly to fill the gaps identified in the Potential-Linked Credit Plans prepared by NABARD.
(2) Now that the Community Development Society (CDS) system has matured, it has to be put to maximum advantage to channel flow of credit to Anti-Poverty programmes both for self-employment as well as for creation of family infrastructure like houses.
(3) Make BLBCs and DLBCs fully functional.
(4) Formulate innovative region specific economic development projects with the assistance of expert institutions on the lines of ‘Subhiksha’ prepared by IIM, Kozhikode for Perambra Block Panchayat.
(5) Formulate stand alone commercially viable projects in which the revenue stream can by itself meet the repayment requirements like markets, shopping complexes, Bus Stands etc.