Component 1: Block Grant to GPs under the ISGP Project

Perspective

The expectation of people for delivery of services from the PRIs has been increased over the years. The roles and functions of PRIs have equally enhanced. In this backdrop, the Government of West Bengal has developed and approved a vision document called ‘The Roadmap. The Roadmap spells out the evolution of PRIs as an increasingly autonomous system of local government with expanded service-delivery, governance functions and the powers and resources to deliver these in a locally accountable manner.

Within the overall PRI structure, Gram Panchayats has the key institutional functions to deliver for the development of local infrastructure and services. GPs currently account for about 69 percent of total PRI expenditures.


Key Challenges

Funding needs and fiscal framework : PRIs, and specifically GPS, run with the lack of sufficient funding to execute their service delivery functions. In particular, the funding that they require is that of a discretionary nature which they can use to fund service delivery and infrastructure investments in line with local demand. Approximately 74% of their current funding is consumed by fixed expenditures or devoted to centrally sponsored, earmarked programmes over which they have little control. The PRI fiscal challenge has two inter-related dimensions:

a) To provide GPs with funding of a quantum and character which will to allow them to plan predictably and deliver reliably on their functional mandates in line with local needs.

b) To strengthen the PRI fiscal framework in the State by introducing a more rational allocation system.

Objective:

The main objective is to provide GPs with significant additional untied resources to establish the foundation for strengthening their institutional capacity. In turn this will allow them to improve their performance in local public service delivery.


Relevance of Block Grant

The ISGP Project Development Objective is to develop institutionally strengthening GPs. Within this broad objective and in the context of the key challenges, the Block Grant is meant for providing GPs with significant additional untied resources to establish the foundation for strengthening their institutional capacity. This, in turn, will allow them to improve their performance in local public service delivery.


Brief on Block Grant

One of the key components of the ISGP Project is the Block Grant. The Grant to GPs is comprised of two sub-components:

a) The Block Grants : This sub-component supports an annual, performance based Block Grant to the 1000 GPs participating in the project for the expenditure on local public goods and services. GPs will be required to meet minimum conditions initially to receive an allocation, and thereafter achieve a progressively higher set of performance targets.

b) State-funded Untied Grants: The project will be partly financed by the Government of West Bengal to the extent of 15% of the total project cost. The total counterpart financing of equivalent of US$ 35 million will be in the form of annual State Finance Commission (SFC) untied grant releases to Gram Panchayats by the Government of West Bengal in one or more installments each year. These funds will be budgeted by GoWB and allocated and disbursed to GPs using existing GoWB arrangements.


Implementation Arrangements - Universe and Selection
Block Grants to Gram Panchayats (US$ 162.4 million - from IDA)
The Progress

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