Local Government Organization and Finance: Urban India
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Other states with high percentages include Haryana (69.7 percent), Orissa (50.6 percent), West Bengal (65.0 percent), Rajasthan (63.2 percent), and Uttar Pradesh (60 percent). Bihar stands with only 43 percent because of unpaid salaries. No norms exist for the division of expenditure between (a) salaries and wages and (b) operations and maintenance; therefore, it is not possible to ascertain whether these proportions are excessive. Expenditure on salaries and wages in several states exceeds what the municipalities collect by way of taxes, levies, duties, and so forth. These states are unable to recover even the cost of salaries and wages, let alone maintain services. Inability to recover even the cost of salaries and wages from taxes and rates and charges is one of the key failings of municipalities in India. This problem exists in the states of Himachal Pradesh, Madhya Pradesh, Rajasthan, Uttaranchal, Uttar Pradesh, West Bengal, Manipur, and Tripura. Municipalities in such states depend on the state government to meet the cost of salaries and wages, as seen in table 5.12. An important consideration in assessing the performance of municipalities is the revenue surplus after accounting for salary and wage costs. The higher the surplus is, the greater are the flexibility and discretion in municipalities for operating and maintaining services. Salary and wage costs average 54 to 55 percent of total municipal expenditure. However, several states are able to post a higher surplus and are evidently able to use these surpluses for operation and maintenance of services. T A B L E 5 . 1 2 Cost of Salaries and Wages Exceeds Own-Source Revenue Income, 2001/02
State
Cost of salaries and wages (Rs per capita)
Himachal Pradesh Madhya Pradesh Manipur Rajasthan Tripura Uttaranchal Uttar Pradesh West Bengal Average of sample states
477.14 343.89 62.10 246.92 313.52 254.91 165.11 317.70 312.58
Own-source revenue income (Rs per capita)
Percentage by which salary and wage cost exceeds own-source revenue income
335.55 188.67 41.55 80.68 58.93 113.67 79.54 215.77 482.14
42.2 82.3 49.4 206.0 432.0 124.3 107.6 47.2 –64.8
Source: Mathur and Thakur 2004. Note: Sample states refers to those states whose data are contained in the table.
