Own-source income incentive scheme for low-population panchayats in U.P.

Hindustan Times

3 days ago

Small-population village panchayats in Uttar Pradesh will now receive government assistance equal to five times the revenue they generate on their own under a new incentive scheme aimed at strengthening financially weak rural bodies.
The 'Own Resource Income-Based Panchayat Compensation and Incentive Scheme,' notified by the government, targets 12,087 gram panchayats with populations up to 1,500. These include 252 panchayats with fewer than 1,000 residents and 11,835 with populations between 1,001 and 1,500 as per the 2011 Census.
Additional chief secretary, panchayati raj, Anil Kumar issued a GO (government order) introducing the scheme here early this week. The scheme is aimed at addressing the long-standing funding gap that hampers the functioning of smaller panchayats, which often struggle to meet routine expenses such as sanitation, drinking water, electricity, and maintenance of community assets. Population-based fund allocation leaves these panchayats with little support despite their critical role in grassroots governance.
Many of these smaller panchayats, the GO points out, face a financial crunch due to increasing responsibilities at the village level. With the expansion of rural development activities and establishment of panchayat secretariats, they are now required to meet recurring expenses such as salaries of pradhans, panchayat assistants/accountants-cum-data entry operators, caretakers as well as pay electricity bills, like for stray cow shelters and panchayat secretariats etc.
However, limited fund allocation based on population often falls short of meeting these obligations by small local rural bodies. Eligible panchayats under the new incentive-based scheme will be compensated based on verified own-source revenue (OSR) collected in the previous financial year from local resources like market stalls, ponds, waste collection, community halls, common service centres and other assets listed under Section 37 of the UP Panchayat Raj Act, 1947. They can collect revenue from local sources such as taxes, fees, fines and rents. District magistrates will certify these earnings.
Funds under the scheme will be routed through the State Finance Commission and can only be used for approved development activities — not for honorariums or salaries. A dedicated digital portal will be developed to monitor panchayat income and disbursal, with 0.05% of the scheme's allocation set aside for its upkeep.
As per the 2011 Census, out of over 57,,691 gram panchayats in the state, nearly 25% have populations below 1,500. These panchayats often get disproportionately lower funds compared to larger panchayats due to the 90:10 allocation ratio based on total and Scheduled Caste/Tribe populations respectively.
The scheme will not only reward such panchayats but also promote transparency and accountability by mandating proper documentation of income sources through the OSMARO portal. Panchayats will have to upload records of income from markets, tourism-related receipts, community hall rentals, and other services.
District-level committees led by the district magistrate will assess the eligibility of panchayats and recommend the amount of incentive to be awarded. The incentive could go up to five times the panchayat's own income deposited in the designated account.
The GO mandates that all incentive amounts be used strictly as per the guidelines set by the state and central governments. 'Despite having functional secretariats and sanitation infrastructure, most gram panchayats lack mobility and operational resources. This scheme marks a shift towards rewarding self-reliance and incentivising rural bodies to build their own financial base,' a senior panchayati raj official said.
The initiative, he pointed out, was in line with the spirit of the 73rd Constitutional Amendment, which sought to empower panchayati raj institutions and decentralise development planning to the grassroots.