By R.M.B Senanayake –
R.M.B Senanayake
Allocation of Funds to the Provincial Councils should be on rational objective criteria
I refer to the news item “Wiggy asks for more” referring to the request of the Northern Provincial Council for more funds. It is time to consider a rational basis f allocation of funds to the Provincial Councils of the country. There is danger otherwise that in funding Provincial Councils kissing will go by favor and there may be discrimination against the PCs which have members of the Opposition parties. In the case of the Northern and Eastern Province unless funds are allocated on a rational basis there could be allegations of discrimination on grounds of ethnicity and religion. When the Provincial Councils were established there was also set up a statutory body called the Finance Commission.
The Finance Commission is to consist of the following Members
(a) The Governor of the Central Bank of Sri Lanka;
(b) The Secretary to the Treasury; and
(c) Three other members to represent the three major communities each of whom shall be a person who has distinguished himself, or held high office, in the field of finance, law, administration, business or learning.
The Finance Commission is charged with the task of recommending to the Government the basis of allocation of funds to meet the needs of the Provinces. The 13th Amendment which established the Provincial Councils set up the Finance Commission to carry out the allocation of funds to the Provincial Councils.
The Commission is responsible for the allocation of funds to the Provincial Councils based on such plans and budgets reviewed and evaluated by the Commission. Under the 13th Amendment the Commission recommends to His Excellency the President annually the principals on which funds allocated for the Provincial Councils by the Central Government should be apportioned among the Provinces. The Finance Commission is also expected to monitor the activities of the Provincial Councils to ensure the optimization of the usage of such funds allocated so that planned benefits will accrue to the province and its people”.
“The Government shall, on the recommendation of and in consultation with, the Commission, allocate from the Annual Budget, such funds as are adequate for the purpose of meeting the needs of the Provinces.
It shall be the duty of the Commission to make recommendations to the President as to –
(a) The principles on which such funds as are granted annually by the Government for the use of Provinces, should be apportioned between the various Provinces; and
(b) Any other matter referred to the Commission by the President relating to Provincial finance.”
The Commission is required to follow certain guidelines in allocating funds to the Provinces. It is required to do with the objective achieving balanced regional development in the country, and shall accordingly take into account-
(a) The population of each Province;
(b) The per capita income of each Province
(c) The need progressively, to reduce social and economic disparities; and
(d) The need progressively, to reduce the difference between the per capita income of each Province and the highest per capita income among the Provinces.
The President shall cause every recommendation made by the Finance Commission under the Article to be laid before Parliament, and shall notify Parliament as to the action taken thereon.
No Court or Tribunal shall inquire in to, or pronounce on, or in any manner entertain, determine or rule upon, any question relating to the adequacy of such funds, or any recommendation made, or principle formulated by the Commission.
I wonder whether the Finance Commission is carrying out its functions. I went to the website of the Commission but could not download its pages.
If the Finance Commission is functioning should not table its reports in Parliament? There is a danger that if funds are not allocated by the Finance Commission according to the principles set out in the law then the Ministers of the Central Government would allocate funds arbitrarily to them and create a problem of discrimination.
Hitherto development was centralized and funds were deployed by the Central Government on projects that the central; government decided on. But with the setting up of Provincial Councils funds are required to be deployed by the PCs. If the central government and the provincial councils were both engaged in development expenditure at the provinces there could be duplication. So the allocation of funds to the Provincial Councils and the expenditure at the district and provincial level is best done through the Provincial Councils. Te central government should confine itself to national projects which have to be defined rigorously.
In this structure legislated for by Parliament it is difficult to envisage a role for allocating funds to Members of Parliament to be spent in their electorates. They are for one thing not recognized entities for expenditure since they are individuals elected to be legislators not members of the Executive branch of the State. How can Parliament hold these MPs accountable for the expenditure from such allocations? Won’t this give rise to conflicts of interest? How can their expenditure from these grants be audited? Does the Auditor General audit the expenditure of the funds allocated to the MPs? If not how can public funds be monitored? The practice of doling out public funds to Members of Parliament to spend in their electorates is not a practice in any democratic country. The MPs are elected to be legislators not members of the Executive to be entrusted with public funds. Are they bound by the Financial Regulations of the Government? If so how are they to be held accountable? Are their reports to Parliament on how they spend these allocations? This practice of allocating money to MPs to be spent in their electorates must be stopped. The Auditor General should be required to audit the accounts. The funds for development should be channeled through the established institutions; like the Provincial Councils and the Pradesiya Sabhas not MPs who are elected to be legislators. Let’s get back to sound financial practices as in other democracies
Sengodan. M / May 30, 2015
Under normal circumstances, yes, allocation of funds has to be on a rational basis. But that rationality should also take into consideration two real facts. One, the Northern Province is currently one of the worst developed provinces in the country and two, the Northern Province suffered most the brunt of the 30 year civil war. Taking these factors into consideration cannot be considered a special favour.
Otherwise how could we think of having reconciliation?
Sengodan. M
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Silva / May 30, 2015
We haven’t moved forward an inch in the last 40yrs.
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Rajapaksa / May 30, 2015
“Northern Province Chief Minister C V Wigneswaran, has accused the government of not “having the will” to help Tamils or minorities, The Hindu newspaper reported.
Pointing out that this had been the “characteristic” of what had been taking place in the country, Mr. Wigneswaran told an international tele-press conference on Thursday night that “the Central government in Sri Lanka will not do anything towards the minorities or the Tamils unless they are forced to do something.”
Colombo Gazette 30 May 2015
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Silva / May 30, 2015
Isn’t that too true?
eg LLRC was formed to quieten the IC and most of it remain unimplemented and even the website was taken down last year.
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Punitham / May 30, 2015
Parliamentarians, pl note:
”I wonder whether the Finance Commission is carrying out its functions. I went to the website of the Commission but could not download its pages.
If the Finance Commission is functioning should t not table its reports in Parliament? There is a danger that if funds are not allocated by the Finance Commission according to the principles set out in the law then the Ministers of the Central Government would allocate funds arbitrarily to them and create a problem of discrimination.”
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Davidson Panabokke / May 30, 2015
This is a good lesson on ”Professional Development” for many Provincial Councillors, esp those from the North.
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Punitham / May 30, 2015
I just went up to: http://www.fincom.gov.lk/web/ – last updated 23/04/2014.
I went up to: http://www.fincom.gov.lk/web/index.php?option=com_phocadownload&view=sections&Itemid=41&lang=en
i.There is only one annual report that was made in 2009. This cannot be downloaded- you get: ”Error while downloading file”
ii. you get the same response when you try to download
Circulars,
Guidelines,
Legal and Constitutional Mandates
iii. I stopped trying any more.
There have been a large number of parliamentarians opposed to 13A.
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Punitham / May 30, 2015
Tank you, Mr Snanayake:
” The practice of doling out public funds to Members of Parliament to spend in their electorates is not a practice in any democratic country. The MPs are elected to be legislators not members of the Executive to be entrusted with public funds. Are they bound by the Financial Regulations of the Government? If so how are they to be held accountable? Are their reports to Parliament on how they spend these allocations? This practice of allocating money to MPs to be spent in their electorates must be stopped.”
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Pacs / May 30, 2015
RMBS
Hope you don’t forget the policy and execution of the Policy as fa as north east is concerned. That is to divert all the funds meant for north east to the use of defence and security purposes. and not to draw any funds from other sources. I think it was a making of Hon Athulath muthali and followed thereafter. It will be interesting to know how the war was funded. It is rational for Wicki to ask more to revive Northeast. It is a right to ask for all the diverted funds back to the N_E with interest.
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Punitham / May 30, 2015
If the website of the Finance Commission is a reflection of its work according to the Constitution, a visit to the website will tell anybody that there are severe shortcomings on the part of the Commission.
The website seems to be a reflection of the objections to the 13A voiced in the parliament by a large number of parliamentarians in the last government.
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Punitham / May 30, 2015
This is a must-read for implementing Good Governance as all rational arguments given for the area under discussion can be transferred to any other area.
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mel / May 30, 2015
It is a case of more, more and ever more for this insatiable ghetto in the North. They want to suck the rest of the country dry. Just sit back and demand, demand and demand for privileges that the rest of the country can ill afford. This particular mountain goat will lead its followers off the cliff soon. Go on bleat louder dunderhead.
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Davidson Panabokke / May 30, 2015
What’s the fraction of govt investment in the last 67yrs go to Northern Province please?
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Citizen / May 30, 2015
C.V.Wigneswaran is only requesting for adequate funds for development purposes that is due to the Northern Province. I think Maithiri understands the reality of the situation. I am under the impression that CVW & Maithiri can bring reconciliation and this is the first step towards a confident building measure.
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Heretic / May 30, 2015
I have read many times that 87% of the NPC funding is used for salaries, maintenance of buildings and other fixed expenses. Many say that the remaining 17% has mostly not been used because of administrative problems. I believe that even our CM has admitted this.
Before asking for more funds the NPC should show that they have used the existing funds and especially what they have achieved with the funding.
The real question maybe is how much power the NPC has to decide on what the funds are used for. Can, for instance, the provincial minister for education decide what is done in the province with all the regulation etc that comes from the ministry of education in Colombo?
In addition to more funds the NPC of course demands devolution of power.
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Krishnananthan / May 31, 2015
RMB Senanayake,
I wish to bring to your attention a report prepared in the year 2001 that dealt exactly with similar issues raised by you.
I refer to the UNDP assignment given in the year 1998 to National Institute of Public Finance and Policy” – An Institute in New Delhi that advises the Finance Commission of India on Fiscal Devolution to report on Capacity Building for Fiscal Devolution in Sri Lanka.
After an exhaustive study for three to four years the Institute had submitted their report to the Finance Commission of Sri Lanka in the year 2001
In their report among many useful recommendations they had recommended to adopt, a need based performance Linked Normative Approach for financial allocation.
However like so many other reports, this report also was kept somewhere in the Finance Commission, still to be implemented even after14 years after the submission of this report.
The Finance commission continues to adopt the internationally discredited historical approach to assess the needs of the Provincial Councils in Sri Lanka.
Even in the allocation of Funds to the central ministries and departments this same historical approach is adopted.
For instance the budget for the financial year 2015 is prepared in the year 2014. The government takes into consideration the actual expenditure for the year 2013 because that was the latest actual expenditure available in mid 2014 and add 5-10% just to offset effects of inflation and produces the budget for the year 2015.
The budget preparation is so simple.
If you look at the allocation to the provincial Councils in Sri Lanka, the same method is adopted and irrespective of the actual need each provincial Council gets about Rs 20.0 Billion in the year 2015.
If this is the way the allocations are estimated, why you need a Finance Commission while anyone competent in basic arithmetic could do the job, sometimes better than it is being done for the last 25 years by the Finance Commission.
The 13 A in article 154 A specify balance regional development as the objective of financial allocation. When you allocate almost the same funds year after year, differences among the regions continue to persist and the difference between the Western Provincial Council and the other Provincial Councils continues to widen negating the economic rational for devolution.
Why you criticize Chief Minister Wiggy when he says that NPC needs much more than what they used to receive annually.When you consider all the destruction that had taken place during the 30 year conflict. YOU may need mote than three times for years.
If you assess the actual need of NPC the Chief Minister may be correct.
But while actually allocating the government should take into account apart from the need of the provincial council, the capacity of the particular Provincial Council and the availability of funds with the center during the particular year must also be considered.
In that event the allocations could be spread out.
RMB,I shall be glad to have your response.
Sri
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Punitham / June 1, 2015
Thank you for the info about year 2001.
I think you’ve misunderstood the author who wants needs-based allocation as you do.
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Dr Laksiri Fernando / June 1, 2015
The Northern Provincial Council Chief Minister’s request for more funds for the Council is completely reasonable even by the provisions of the 13th Amendment (1987). In addition, war destruction since then has to be taken into account. My attention was drawn to the debate quite late unfortunately due to some unavoidable circumstances.
Paragraph 3 of Article 154R says the following. “The Government shall, on recommendation of, and in consultation with, the Commission, allocate from the Annual Budget, such funds as are adequate for the purpose of meeting the needs of the Provinces.”
It is obviously not the same amounts that should be allocated to all provinces. The question is whether the NPC receives ‘such funds adequate for the purposes of meeting the needs of the Province.’ As Mr. Senanayake has quoted, there are 4 principles indicated in paragraph 5 of Article 154R. That is not the end of the story however. Salgado Report (1989) recommended a weightage system and although it was followed initially, by 2010 it was by and large abandoned. A study conducted late 2010 (on the World Bank sponsorship) found the allocations to be ad hoc and arbitrary. One reason for the situation was the lost independence of the Finance Commission. The study recommended a consolidation of allocation criteria and proposed to increase the weightage of per capita difference, for example, from 10 to 30 percent through which a PC like the NPC could have benefitted. But the report went into the dustbin. Let me quote one overall observation to highlight the need for increased allocations for all Provincial Councils in general.
“In 2010, central government transfers to provinces amounted to Rs. 107.03 billion which was only 13% of the total revenue of the central government in that year. In view of the importance of promoting regional development by allocating more resources for productive investment in the provinces, this proportion needs to be accelerated gradually to reach the level of at least 25%.”
Let me answer more specifically why particularly the Northern Province should have more or special allocations. I don’t have data at present for the war damages or requirements related to that. However, Northern Province had the lowest GDP share in 2010 and it had decreased from 4.4 percent to 3.4 between 1990 and 2010. Of course there are other provinces in a similar predicament of decrease (Central, North Western, Uva and Sabaragamuwa) however the conditions of the North has been quite alarming. Northern Province also had the lowest per capita income, just US $ 968 in 2008, when the country figure was $ 1,928. These are the figures I can submit off hand.
I hope that the NPC gets sufficient Block Grants to meet recurrent expenditure. The Chief Minister’s claim perhaps is in other areas of (matching or criteria based) capital expenditure or province specific development grants. I also hope that for these purposes, the NPC has submitted viable and feasible projects. If there is lethargy (political or bureaucratic) on the part of the NPC, that could be an easy excuse for the bureaucracy in Colombo to deny funds. This applies not only to NPC but to any PC in the country. My observation has been that many provincial councils have spent capital funds not for public utilities or needs but for palatial buildings for their comfort. I wish and hope the NPC is different.
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Punitham / June 1, 2015
Economic activities of the Army in the North contribute to GDPof NPC?
How do you get the real GDP contributed by the ordinary people in the North please?
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Heretic / June 1, 2015
Dr Laksiri Fernando,
Thank you for your comment.
“I also hope that for these purposes, the NPC has submitted viable and feasible projects.”
My impression is that submitting any kind of projects is one of the weaknesses of the NPC. I don’t know are other Provincial Councils any better.
“If there is lethargy (political or bureaucratic) on the part of the NPC, that could be an easy excuse for the bureaucracy in Colombo to deny funds.”
I agree. Thanks to Mahinda there are hundreds of recent graduates “hanging around” in their offices. Many others expect permanent government jobs because of the coming elections.
“This applies not only to NPC but to any PC in the country. My observation has been that many provincial councils have spent capital funds not for public utilities or needs but for palatial buildings for their comfort. I wish and hope the NPC is different.”
There are many new buildings here in the NP also but I believe that there was partly a real need to build them. My hope is that now that the buildings have been constructed the NPC starts to work with development. For that they need ideas and competent people not only funding.
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Punitham / June 2, 2015
CT translates some articles into Sinhala.
At least some articles must be translated into Tamil to benefit the public as well as the Provincial Councillors.
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Punitham / June 2, 2015
CT, please ask some of the well-informed commentators if they can translate at least some of the articles into Tamil.
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R.M.B Senanayake / April 27, 2016
I had not realized that Mr Krishnanathan expected a reply from me,
I am not aware that the funds earmarked for the North and East were diverted to the war. There are procedures to be followed in transferring or ‘diverting funds” from one purpose to another. War expenditure was as far as I am aware shown under the Ministry of Defense.
R.M.B Senanayake
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