GS2-Local Govt bodies and its administration Red "Fiscal Federalism vis-a-vis Centre, State and Urban Local governments (Municipal Corporations)

#1: Please differentiate b/w ""Essential/Obligatory"" functions v/s ""Discretionary"" functions and sources of revenue for fulfilling each.

#2: Specify whether Centre provides for some ""discretionary"" grants in addition to the statutory grants to Urban Govts as per Finance Commission?

#3: If yes for point#2 - whether these grants are directly given to the Urban self governments or reach them via State governments (like Devolution).

#4: Finally, whether they're more dependent on State or Central governments for their finances (with special reference to NCT of Delhi where 74th Amendment doesn't apply)?

Need to look at the 'legal framework' for the exact 'dues' within the legislations, it should be clear as to who has to give what.  it all boils down to the - central list; state list; concurrent list and  of course finance commission.

Local bodies are differentially empowered in different states.

But their sources of finance sir?                 

Direct source is of course the taxes and their sharing

Yes sir, but the tax revenues are meagre to sustain "essential" expenditures for MCs

Our third tier is not very strong, it is different in different areas depending on the necessity

Sir what is the mode of support from the centre? I would imagine they, inspite of their differing mandates in different state govt's legislations- would primarily rely on state govt for non-tax revenues? and not that much on Centre?

There is sometimes crises cross political regimes like local body may have ruling party of the centre but not the state.

As such the third tier can only spend from it s resources. Allocation of money to specific areas and items or projects is the 'core' job of governance. It will be based on criteria like the 'budgetary grant', the expenditure vis a vis targets, the availability of funds that can be relocated from different heads where expected expenditure did not happen etc. The avenues which are given to the third tier for raising revenue is minimal

Budget is a statement of plan there will be number crunching at all levels

Sir but certain grants from the centre are earmarked for local self govts too right?

Yes, center can do, state also can do

Sir, would they be subservient to whims of budgetary allocations too? I am talking about Statutory grants (as per Finance commission), not discretionary

Largely budgetary commitment will be honored (that is my understanding). Statutory grants will not be subservient to whims and fancies NO. That s why many haggle to get their items and funds declared in the budget.

Sir- these statutory grants reach the MCs directly or via devolution (i.e. via state govt's budget to MCs)?

Once told in the central budget it reaches directly

In that case, they shouldn't face much challenge, if same govt at 1st and 3rd tier sir?

Statutary grants - yes no difficulty should be there, but it is meager

There are three types of revenues for local bodies. 1)fund allotted by state finance commission. Like we have Central finance commission which deivides the tax shares between central and state governmnent. Like that this state finance commission shares the money for state and local government. this is a constitutional provision according article 243I      

Then there are exclusive sources for these local bodies mentioned in the constitution itself according to the 72nd and 73rd amendment through list of sources. and all those incomes are utilised exclusively by the local bodies.

Then when there are special projects being implemented, state government or central government can give special grants. though its discretionary and not mandatory provision.