Budget Balancing and Work Selection in Gonihalli GP
Gonihalli Gram Panchayat is preparing its 2025-26 budget. Expected receipts are: own revenue (property tax, water charges, licence fees) Rs 18.6 lakh; 15th Finance Commission untied grant Rs 24.4 lakh; tied grant Rs 16.0 lakh; State Finance Commission grant Rs 9.0 lakh. Committed expenditure already approved is: water supply operation and maintenance Rs 6.5 lakh; solid waste management Rs 3.1 lakh; street-light electricity Rs 4.2 lakh; GP establishment Rs 7.4 lakh; repayment of a bank loan taken for a tractor Rs 2.0 lakh; and works already sanctioned by the previous Gram Sabha Rs 21.0 lakh. The tied grant may be used only for drinking water and sanitation. Six new proposals are pending: SC colony drain Rs 4.7 lakh; LED street-light replacement Rs 3.6 lakh; farm pond Rs 5.4 lakh; school toilet repair Rs 1.8 lakh; water pipeline extension to Ward 6 Rs 6.2 lakh; and a new GP office building Rs 12.0 lakh. The Gram Sabha has resolved that the SC colony drain is mandatory, and the health inspector reports that the school toilet is unusable.
1. Compute the available tied-grant balance and the free pool of untied, own-source and State Finance Commission funds. State which head must finance the Ward 6 pipeline.
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Tied grant: Rs 16.0 lakh, usable only for water and sanitation. Eligible committed items are water supply O&M Rs 6.5 lakh and solid waste management Rs 3.1 lakh = Rs 9.6 lakh. Balance = 16.0 - 9.6 = Rs 6.4 lakh. The Ward 6 pipeline (Rs 6.2 lakh) is an eligible water work and must be charged to this balance, leaving Rs 0.2 lakh. It must not be loaded on to untied funds while tied money lies unspent - that is the commonest budget error in GP plans and is questioned in audit.
Free pool: own revenue 18.6 + untied 24.4 + State Finance Commission 9.0 = Rs 52.0 lakh. Committed against it: street-light electricity 4.2 + establishment 7.4 + loan repayment 2.0 + previously sanctioned works 21.0 = Rs 34.6 lakh. Free pool = 52.0 - 34.6 = Rs 17.4 lakh.
A caution to record: the Rs 21.0 lakh of previously sanctioned works should be checked for whether contracts are already concluded; a commitment is not free money merely because it was sanctioned last year.
2. Using the free pool of Rs 17.4 lakh, select the works to be funded and show the arithmetic. What happens to the GP office building proposal?
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The SC colony drain is mandatory: Rs 4.7 lakh. Remaining = 17.4 - 4.7 = Rs 12.7 lakh.
Eligible pending works from the free pool (the pipeline being met from the tied grant):
- LED street-light replacement: Rs 3.6 lakh
- Farm pond: Rs 5.4 lakh
- School toilet repair: Rs 1.8 lakh
- GP office building: Rs 12.0 lakh
Take the three civic works: 3.6 + 5.4 + 1.8 = Rs 10.8 lakh, which is within Rs 12.7 lakh. Total allocation = 4.7 + 10.8 = Rs 15.5 lakh, leaving a reserve of 17.4 - 15.5 = Rs 1.9 lakh, about 2.8 per cent of receipts - thin but defensible for contingencies such as a pump failure.
GP office building: Rs 12.0 lakh would consume the entire remaining pool (12.0 of 12.7) and leave nothing for the farm pond, LED lights or the unusable school toilet. The opportunity cost is therefore three service works for one administrative building. The proposal should be deferred to the next year, or funded from a separate tied source such as a finance commission building grant or the district-level pool, and not from the general free pool. The school toilet ranks first on health grounds.
3. Compute the share of receipts going to operation and maintenance. If receipts fall 8 per cent, how should the plan be revised?
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O&M share: water 6.5 + solid waste 3.1 + street-light electricity 4.2 = Rs 13.8 lakh. Total receipts = 18.6 + 24.4 + 16.0 + 9.0 = Rs 68.0 lakh. Share = 13.8/68.0 = 20.3 per cent - reasonable, since O&M of assets already created is a first charge and cannot be deferred without destroying the asset.
8 per cent shortfall: receipts fall to 68.0 x 0.92 = Rs 62.56 lakh, a loss of Rs 5.44 lakh. If the shock falls on own revenue and the untied grant, the free pool falls from 17.4 to 17.4 - 5.44 = Rs 11.96 lakh.
Revised selection: fund the mandatory SC drain (4.7) and the farm pond (5.4) = Rs 10.1 lakh, leaving Rs 1.86 lakh. The LED replacement (3.6) and the toilet repair (1.8) become unaffordable together; the school toilet should be retained and the LED deferred, or the toilet met from the sanitation component of the tied grant, which is permissible. The GP office building is dropped altogether. The lesson to minute: protect statutory and O&M commitments first, protect health-related works second, and treat asset-creation proposals as residual claimants.