Small grant but a big opportunity for local bodies: Daily Current Affairs

GS-2: Issues Relating to Development and Management of Social Sector/Services relating to Health

GS-3: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment

Key phrases: 15th Finance Commission, 73rd and 74th Amendment Acts

Why in news:

  • Recently the Department of Expenditure, the Ministry of Finance released 8,453.92 crores to 19 States, as a health grant to rural and urban local bodies (ULBs).
  • This allocation has been made as part of the health grant of ₹70,051 crores which is to be released over five years, from FY 2021-22 to FY 2025-26, as recommended by the Fifteenth Finance Commission.


Small grant, but a big opportunity for local bodies:

  • A small grant: The allocation for FY 2021-22 would be 2.3% of the total health expenditure both public and private spending together of ₹5,66,644 crores in India and 5.7% of the annual government health expenditure (Union and State combined) of nearly ₹2,31,104 crores (both figures for 2017-18)
  • This grant is equal to 18.5% of the budget allocation of the Union Department of Health and Family Welfare for FY 2021-22 and around 55% of the second COVID-19 emergency response package announced in July 2021.
  • A big opportunity: Though the allocation is a small grant, it is the single most significant health allocation in this financial year with the potential to have a far greater impact on health services in India in the years ahead.

The history of health care grants and healthcare expenditures:

  • The 73rd and 74th Amendments were given the responsibilities of delivering the primary care and public health services.
  • The rural local bodies also started receiving funds from the ongoing national programmes.
  • However, the urban health services were not channelled through State Health Department and the ULB’s, the reasons included lack of resource crunch or lack of clarity on responsibilities related to health services.
  • In 2005, the launch of the National Rural Health Mission (NRHM) to bolster the primary health-care system in India partly ameliorated the impact of RLBs not spending on health.
  • The National Urban Health Mission (NUHM) was launched eight years later and with annual financial allocation which never crossed ₹1,000 crores (or around 3% of budgetary allocation for the NRHM or ₹25 per urban resident against ₹4,297 per person per year health spending in India).
  • In 2017-18, 25 years after the Constitutional Amendments, the ULBs and RLBs in India were contributing 1.3% and 1% of the annual total health expenditure in India.
  • In urban settings, most local bodies were spending from less than 1% to around 3% of their annual budget on health, almost always lower than what ULBs spend on the installation and repair of streetlights.

Some obstacles in healthcare services in local bodies:

  • Urban India, with just half of the rural population, has just a sixth of primary health centres in comparison to rural area
  • Urban primary health-care services are weaker than what is available in rural India.
  • Regular outbreaks of dengue and chikungunya and the struggle people have had to undergo to seek COVID-19 consultation and testing services in two waves of the novel coronavirus pandemic
  • The low priority given to and the insufficient funding for health is further compounded by the lack of coordination between a multitude of agencies which are responsible for different types of health services.

It is in this backdrop that the Fifteenth Finance Commission health grant — the urban share is nearly five-fold that of the annual budget for the NUHM and rural allocation is one-and-a-half-fold that of the total health spending by RLBs in India — is an unprecedented opportunity to fulfil the mandate provided under the two Constitutional Amendments, in 1992.

Steps to be taken to overcome these problems:

  • The grant should be used as an opportunity to sensitise key stakeholders in local bodies, including the elected representatives, on the role and responsibilities in the delivery of primary care and public health services.
  • Awareness of citizens about the responsibilities of local bodies in health-care services should be raised. Such an approach can work as an empowering tool to enable accountability in the system.
  • Civil society organisations need to play a greater role in raising awareness about the role of LBs in health, and possibly in developing local dashboards as a mechanism of accountability to track the progress made in health initiatives.
  • The Fifteenth Finance Commission health grants should not be treated as a ‘replacement’ for health spending by the local bodies, which should alongside increase their own health spending regularly to make a meaningful impact.
  • Mechanisms for better coordination among multiple agencies working in rural and urban areas should be institutionalised.
  • Time-bound and coordinated action plans with measurable indicators and road maps need to be developed.
  • Local bodies remain ‘health greenfield’ areas. The young administrators in charge of such RLBs and ULBs and the motivated councillors and Panchayati raj institution members need to grab this opportunity to develop innovative health models.
  • Before the novel coronavirus pandemic started, a number of State governments and cities had planned to open various types of community clinics in rural and urban areas. But this was derailed. The funding should be used to revive all these proposals.

15th Finance Commission

  • Article 280 of Indian constitution- President of India is required to constitute a finance commission at an interval of 5 years or earlier.
  • Finance commission is a constitutional body that determines the method and formula for distributing the tax proceeds between the centre and the state.
  • The fifteenth finance commission was set up under the chairmanship of N K Singh for a period of five years from 2021-22 to 2025-26.
  • Horizontal devolution (allocation between states): - Revenue-sharing formula in the fifteenth finance commission:
  1. Population- 15%
  2. Area- 15%
  3. Forest and ecology- 10
  4. Income distance- 45%
  5. Demographic performance- 12.5%
  6. Tax effort- 2.5%

(Income distance is the distance of the Gross State Domestic Product (GSDP) of a particular state from the state with the highest GSDP)

  • Vertical devolution (devolution of taxes of union to states): it has recommended vertical revolution at 42% of the divisible pool (1% to union territories of Ladakh and Jammu and Kashmir).
  • Revenue deficit grants to state: It has recommended post-devolution revenue deficit grants amounting to about Rs. 3 trillion over the five-year period ending FY26. The number of states qualifying for the revenue deficit grants decreased from 17 in FY22.
  • Performance based incentives and grants to states- based on 4 themes- social sector (health and education), rural economy (agriculture and rural road maintenance), governance and administrative reforms (judiciary, statistics and aspirational districts and blocks) and power sector.
  • Grants to local bodies- performance based grants for incubation of new cities and health grants to local governments.

73rd Amendment Act:

  • The 73rd Amendment 1992 added a new Part IX to the constitution titled “The Panchayats” covering provisions from Article 243 to 243(O); and a new Eleventh Schedule covering 29 subjects within the functions of the Panchayats
  • This amendment implements the article 40 of the DPSP which says that “State shall take steps to organise village panchayats and endow them with such powers and authority as may be necessary to enable them to function as units of self-government”.

74th Amendment Act:

  • Constitution Seventy Fourth Amendment Act, 1992 has introduced a new Part IXA in the Constitution, which deals with Municipalities in an article 243 P to 243 ZG.
  • The 74th constitutional amendment act mandated the setting up and devolution of powers to Urban local bodies (ULBs) or city governments as the lowest unit of governance in cities and towns.
  • Three types of Municipalities - Nagar panchayat (transition from rural to urban), Municipal councils (small towns), Municipal Corporations (big cities)

Way forward

  • India’s health system needs more government funding for health. However, when it comes to local bodies, this has to be a blend of incremental financial allocations supplemented by elected representatives showing health leadership, multiple agencies coordinating with each other, increased citizen engagement in health, the setting up of accountability mechanisms and guiding the process under a multidisciplinary group of technical and health experts.
  • The Fifteenth Finance Commission health grant has the potential to create a health ecosystem which can serve as a much-awaited springboard to mainstream health in the work of rural and urban local bodies.

Source: The Hindu

Related Prelims question:

Q. With reference to local self-governance in India, consider the following constitutional provisions:

  1. Local Government is a State subject figuring in the Seventh Schedule of the Constitution of India.
  2. Article 243 G of the Indian Constitution enshrines the basic principle for devolution of power to the Local Bodies.

Which of the statements given above are correct?

(a) Both 1 and 2

(b) 1 only

(c) 2 only

(d) Neither 1 nor 2

Answer: (a)