Report No. 38901-IN India Rural Governments and Service Delivery (In Three Volumes) Volume I: Executive Summary March 7, 2007 Sustainable Development Unit South Asia Region Document of the World Bank Table of Contents VOLUME I:EXECUTIVE SUMMARY INTRODUCTION 1 BUILDINGON THE CONTEXT .............................................................................................................. .................................................................................................................................. 2. 1. 1 3. UNBUNDLING SERVICES TOASSIGN RESPONSIBILITIES ....................................................................... 2 4. THEDEJUREs~TUAT~~WHAT THE LAW SAYS ................................................................................. N : 2 5. 5 6. THEREALITY ONTHE GROUND: KEY SERVICESAT THE LOCAL LEVEL................................................ THEASSIGNMENTOFFUNCTIONS, FUNCTIONARIESAND FUNDS: APPLYING THECONCEPTUAL FRAMEWORK ...................................................................................................................................... 7 7 TOWARDS BETTER RURAL SERVICES: RECOMMENDATIONS ................................................................ 9 ... 111 t v ExecutiveSummary 1. Introduction This study intends to assist the Government of India and state governments in definingthe role of Punchuyutsinthe delivery of key services to ruralpeople. Itproposes a framework for answenng this question and then applies the methodology to four key sectors: health, education, dnnlungwater and sanitation, and anti-poverty programs. Butthis is not a study about education, health or drinlungwater. It i s a study on what the vanous levels o f Panchayats could do in the delivery o f these services within the decentralized government structure created by the 1993 Amendment to the Constitution o f India. The study demonstrates the approach for a small number o f sectors that have been "devolved" to rural governments (Panchayats), but it i s immediately applicable to any other subject o f the 29 eligible for devolution. The study focuses on four states that cover a range of situations in India. The assignment o f responsibilities to local governments i s a state responsibility, that is, it i s up to the state to choose which o f the 29 subjects to devolve to which level, and states have followed different approaches. The four states, Kerala, Karnataka, West Bengal and Rajasthan have all showed commitment to devolution, but differ greatly incharactenstics and pace o freforms. 2. Buildingon the context Key services continue to fail the rural poor in India. While the government has pursued decentralization to address the failure of services, implementation of decentralization remains by far incomplete. Today in India service delivery oscillates between the centralized and the decentralized models. In this context, this study examines responsibilitieswithin the decentralized government structure in rural India. The dilemma of two models of delivery Though India made bold efforts to decentralize to local governments (e.g. amending the Constitution), the civil service bureaucracy was not dismantled or restructured. Thus the centralized and decentralized models continued to co-exist, with states oscillating between the two approaches. In most states the numerous problems o f the centralized model persist: centralized and canalized resources, centralized delivery mechanisms bound by rules; weak, tightly controlled information; accountability that flows only upward. As a result, the pattern o f systemic failure continues to emerge across sectors -- project designs lack beneficiary involvement; responses are geared to "need," as perceived by higher level bureaucrats, not to demand better services; and the pressure for cost-efficiency and actual delivery o f services i s laclung. More importantly, the continuing overwhelmingpresence o f the state sectoral machinery has not opened a space for local governments to emerge and grow The study framework Building a decentralized model requires addressing functions, funds and functionanes. Local governments must have clear functions; sufficient funds; and fmctionanes accountable to people as well as to higher levels o f government on whose behalf they deliver services. Among others, two key problems continue to affect service delivery inIndia: 0 The confused, overlapping and incomplete responsibilities o f different tiers o f government; and 1 Weak a n d or ineffective systems for the "contracting" o f semce providers to provlde these services. The study addressed the issue o f functions or expenditure assignments by aslung the question which level o f government should do what. To answer this question, the study first unbundled the four sectors into services and activities. These activlties have different charactenstics that could make them candidates for assignment to different levels. Unbundlingalso allows a better charactenzation o f who i s doing what and helps identify where key failures are happening. The second step was to interpret the implications o f legislation. This i s important, given the debate on whether existing legislation clearly mandates devolution, or i s broad enough to allow different forms o f service provision. The third step was addressing the question o f how services are actually being delivered. Two aspects o f service delivery were covered: the behavior o f agents engaged inservice delivery, including civil servants, politicians, and providers at different levels, to decide whether actions are consistent with legislation; and an ovemew o f service delivery outcomes from these sets o f behaviors. The fourth step was applymg the first pnnciples drawn from welfare theory, as well as the relationships o f accountability, to provide some guidance about who should provide which services. The fifth step was summarizing the findings and analyses to make recommendations on the roles o f the center, states, districts, blocks and villages inthe provlsionofkey semces. 3. Unbundlingservices to assignresponsibilities Unbundlingservices into activities helps assigning responsibilities to different levels. Most services require a number of activities that do not necessarily need to be performed by the same level of government. This study unbundledkey sectors -education, health, rural water and sanitation, and employment programs - into services and activities. This i s cntical, since a sector such as health or education entail a large number o f services or activities (e.g. immunization, repainng schools) that potentially are candidates for assignment to different levels. Education i s a sector, and within it, primary education i s a service. The service consists o f activities specific to it - in the case o f primary education, activlties include the construction and repair of schools, books, curnculum, and teachers who attend classes and evaluate. A large number o f activities are needed to deliver the services discussed inthis report. However the study finds that for most sectors, activlties can be aggregated into five main categones: policy and standards; planning; asset creation; operation; and monitonng and evaluation. These unbundled constituent functions or activities are mutually exclusive and logically chosen on the basis o f technical recommendations. They are also down to a level that enables those incharge to produce a determined output or product. 4. The dejure situation: what the law says The 73rd Amendment set in motion the process of institutionalizing Panchayat Raj Institutions (PRIs) in the Indian governance structure. But actual practice of its provisions has varied across states because of the non-mandatory nature of functional devolution, and has resulted in a fuzzy assignment of responsibilities over activities. 2 The readings of provisions of the ConstitutionalAmendment Mandatory vs. non-mandatory- Legal specialists have interpreted the Amendment in different ways. The mandatory reading o f the Amendment's relevant articles argues for the autonomous function o f PRIs. The non-mandatory reading however, endorsed by the commission reviewing the Constitution, empowers state governments to decide on the role o f PRIsinrural development. Concurrence: The absence o f the word "exclusive" in Article 2436 makes it clear that state governments have exclusive powers over the schemes and matters specified, while panchayats only have denvative powers. Relationship with other legislation: In the absence o f exclusive powers to the panchayat, there can be no conflict between the panchayat and a parallel body exercising the same powers. Panchayat functions are also governed by state/ central legislations. The readings translated intopractice Non-mandatory nature: State governments have taken full advantage o f this "non-mandatory" nature o f the Act: the role panchayats can be expected to play in semce delivery i s entirely dependent on the regime that controls the state government. As a result, the devolution o f powers has remained weak in most states. Devolution also vanes widely across states. Some, such as Karnataka and West Bengal, have chosen to devolve all 29 funcbons to PRIs, indicating their attempts at mowng PRIs towards self-government. Others, such as Rajasthan, have been relatively conservative intheir interpretation o f the role o f PFUs inrural development. Concurrencies inthe law. The concurrence o f powers is, inmany ways, enabling for panchayats, and ensure a more efficient delivery o f services. Schedule XI presents a range o f subjects that require a complex interaction o f institutions at different levels o f government so that all schemes/ functions and matters relatedto the subject are implemented efficiently Inpractice, however, this does not take place, and concurrence o f powers manifests itself as a problem inmost states. This i s because concurrence extends to the activity level (e.g. repainng schools) and results indifferent levels o f government doing exactly the same things, rather than exploring their relative advantages withinbroad services. Relationship with other lemslation: With the exception o f Kerala, which has chosen an enabling interpretation o f legislation, the problem o f contradictory legislation i s prevalent. The presence o f these contradictions and ambiguities in Articles 2436 and Article 243N has meant that in many cases, functions devolved topanchayats are also governed by state or central legislations. The analysis of practicefor functions, funds andfunctionaries Functions: In some states such as Rajasthan and West Bengal, Panchayat Acts have devolved broad functions to PRIs. This has led to the overlap o f functions, and ambiguities inthe specific role to be played by the different tiers. This in turn has meant that the state government has the power to assign and negate functions and powers to PRIs at its own discretion. Kerala and Karnataka present a different story, having systematically attempted to unbundled the broad subjects listed in Schedule XI, and devolves activities across government tiers usingthe pnnciple o f subsidianty 3 Funds: IfPRIs are to perform their assigned functions effectively, they must be fiscally capable and autonomous. Funds must follow functions. But the taxation powers at the GP level, and so the ability o f PRIs to achieve fiscal autonomy, is entirely dependent on the discretion o f the state. InRajasthan, for example, there is amismatchbetweenthe functional andfinancial capabilities of PRIs: all 29 functions have been devolved but the Panchayat Act grants the GP weak taxation powers. The innovative idea o f setting up state finance commissions has also had problems in implementation - including delays, the lack o f a common approach, and the non-mandatory nature o f the recommendations. The guidelines and fund flows o f the predominant central schemes, which in many sectors account for most expenditures, often ensure that the center has the last say on how services are to be delivered and that the administrative arm o f the state government contrnues to perform functions devolved to PRIs. Functionaries: If panchayats are to fulfill their role as agents o f development, they need the ability to participate inthe process as administrative functionaries. The 73rdAmendment does not explicitly address the issue o f panchayat functionanes, and the decision i s left entrrely to state governments. Currently, all administrative obligations o f panchayats are fulfilled through staff deputed by the state government. This raises two issues: the disjoint between the transfer o f functions and the transfer o f functionaries; and the lack o f administrative control at the PRIlevel- - PRIs have no authority over the deputed staff, including the authonty to hire, transfer or take disciplinary action. This undermines accountability, one o f the outcomes expected fkom decentralization. Implicationsfor key sectors Does the legalframework enablePRh? Ingeneral, the legal framework for institutionalizing PRIs (Constitutional Amendment and State Panchayat Acts) has not created an enabling environment for them. This conclusionneeds to be seen in the broader context o f a Federation. Prescribing the exact features o f decentralization would undermine to some extent the powers o f the states. Thus the Constitutional Amendment has enabled PRIs politically, but has given states the mandate to create an enabling environment for Panchayats in functional, fiscal and administrative matters. An analysis o f the legal fkamework highlightsthe followng: The devolution o f functions to PRIs 1s neither mandatory nor exclusive. Some states have devolved fewer functions, or devolved them in broad terms. The powers o f PRIs over these are considerably reduced, and there is an overlap o f functions across all tiers o f government. The 73rd Amendment cannot be interpreted to mandate that laws in contravention to Panchayat Acts should berepealed. This has ledto concurrencies wthinthe law Some states have moved comprehensively (Kerala) while others have done it only for specific sectors such as rural water and sanitation. Funds do not follow functions. Since state governments are not obliged to transfer funds to panchayats,the fiscal capabilities ofpanchayats are weak. Panchayats do not have administrative control over functionanes, and in most states, functionanes deputed to the panchayats continue to be accountable to their employer, the state government. Several major central schemes are implemented across the key sectors, and the de jure responsibilities for these schemes are determined by central guidelines rather than by Panchayat or Sectoral Acts. 4 5. The reality on the ground: key services at the local level Across sectors, the state line departments continue to play a predominant role in the delivery of public services even where these have been devolved to Panchayats. The ability of PRIsto influence outcomes is limited because of the unclear allocation of responsibilities, practices that do not follow the spirit of the law, the inadequate access to discretionary funds, the lack ofpowers over state-level functionaries, and inadequate localcapacity. The link between the legalframework and ground reality The study's survey o f the defacto status across the unbundled sectors reveals that in all four study states, the defacto is often incontradictionwiththe dejure. While the legal framework has not unequivocally defined a role for Panchayats in all states, it has done so in at least one state (e.g. Kerala) and some sectors (e.g. dnnkmgwater and sanitation). However, even inthese cases, the state machinery continues to dominate service delivery The state government plays a predominantrole inimplementing most o f the key functions in semce delivery, even where state legislation mandates devolution. The allocation o f responsibility to PRIs i s limited, and i s not supported by either financial or administrative powers. Across sectors, this means weaker relationships o f accountability, and semces that do not meet local expectations. Key findings: primary education Implementation: The state government plays the predominantrole inimplementingkey functions, with some exceptions such as education infrastructure in Kerala. InKerala, there is a vanation between the two parameters o f infrastructure activities and the teaching sector, with the latter being perceived as the responsibility o f the state - possibly because the teachers are essentially state government employees and the fomer the responsibility o f Panchayats. In West Bengal, where delivery i s through two parallel systems, the implementation o f the alternative para-teacher scheme Shzshu shihha karmasuchz (SSK) shows a stronger role for PRIs than in mainstream education policies and programs. In Karnataka, the state bureaucracy plays the key role in the implementation o f all actmties related to pnmary education. Quality. The analysis o f the defacto situation indicates that the current state o f basic education delivery in rural India i s far from effective in provtsion of the basic services, in attainment/ completion, and in learning achievement. Teacher absenteeism i s rampant. The combination o f being poor, rural and female produces particularly appalling attainment rates. Learning achievement i s equally dismal - across the states, about 80-95 percent o f children do not have adequate pnmary schooling competencies. An accountability-based analysis indicates that the critical missingaccountability relationship in pnmary education i s between clients (parents) and teachers (providers). A diagnostic o f this relationship using the five features o f accountability indicates the followng: 0 Financing: The lack o f adequate teacher compensation is not an issue since India's government schoolteachers are well paid incompanson with other developing countnes. 0 Perfoming: The evidence o f teacher absenteeism - among the highest in the world - and "non-teaching" shows that "performing" i s a bigproblem. 0 Informing: Parents have little infomation about participatory bodies such as Parent Teacher Committees and Village Education Committees, and do not take active partinthem. 0 Enforcing: This seems to be the weakest feature o f the accountability relationship as client parents have little power to reward good teachers and punishnon-performing ones. 5 Given these missing links, one question i s whether existing central reform schemes such as the Suwa shihsha abhzyan (SSA) does enough, particularly in addressing the issues o f compact (relationship between policy-makers and teachers) and weak client power. Key findings: health Four key findings emerge from an analysis o fthe health sector: The domination o f state civil servants in the public sector: The state i s responsible for most public health care prowsion, and certainly most decisions that involve expenditure allocations. Moreover, important functions are not specifically assigned to anyone. The study survey indicates that though they have little influence over it, GP members know about medical care; but they are not familiar with the importance o f disease prevention and health promotion. Thus these public responsibilities - probably best carned out locally - are not recognized by local governments to be theirs. Varying m e s / extent o f PRI involvement across the states: The way in which PRIs have functioned inthe context o f state policies varies across the states. Karnataka seems to be quite typical o f much o f the rest o f the country, while Rajasthan has made less progress than most. West Bengal has a somewhat clearer division o f responsibilities, and i s also attempting innovations such as granting GPs the authonty to buy services fiom the pnvate sector. This i s a good example o f "contracting up," inthis case to the private sector to serve several villages acting cooperatively to hire a qualified doctor. Kerala has certainly gone much further than any other state in decentralizing health semces. Several features may account for these results, including the size o f its GPs, and more important, the relatively direct accountability o f GP members to their constituency associated with some degree o f local autonomy and local taxation and fees. Key findings: ruralwater and sanitation The performance o f rural water supply and sanitation delivery in the study states has major weaknesses: 0 Semce provision i s generally undertaken at levels o f government higher than that specified by either legislationor government orders. 0 The PRIs are assigned many o f the functions, but most o f these are, in effect, performed by state functionanes. This i s exacerbated by the secondment o f state employees to the DP and BP 0 Though the functionanes o f state line agencies are often formally under the control o f the PRIs, they do not have effective control over these deputed functionanes. 0 There i s some confusion and overlap inthe role o f the GP vis-a-vis the User Groups inactual service delivery Key findings: employmentprograms As in the other sectors, the delivery o f employment programs i s also dominated by central and state agencies, and the role o f PRIs inplanning and implementation i s insignificant. The findings, specifically for the SGRY program, but applicable to other employment programs, indicate that implementationis markedby. 0 The predominance of line department officials in cntical aspects such as work identification and beneficiary selection; 6 0 The involvement o f multiple central/ state ministnes, causing delays inthe release o f grants, grains and food, and payments at the local level; 0 Modification o f wages at the local level; 0 All pervasive central guidelines, with the central government responsible for all key decisions, and the states often implementing programs that do not necessarily apply to their local conditions; and 0 The hmngo f contractors against the guidelines; The delivery o f employment programs i s hampered by several weaknesses inthe states, including works not reflecting local needs and pnonties; beneficiary lists not including many o f the poorest; weak relationships o f accountability; and top-down monitoring and evaluation. 6. The assignment of functions,functionariesandfunds: applyingthe conceptualframework How should functions, functionaries and finance for key services be assigned to the different tiers of government? And how should the relationship between these tiers and frontline service providers is addressed? In response to these questions, public finance criteria and accountability criteria were applied to the unbundled activities of key sectors. In general, services can be improved with decentralization if increased autonomy can be matched with greater accountability. Primary education: towardsa coherent deliverysystem 0 The state should be responsible for setting standards for learning achievement, monitonng performance, and disseminating information. 0 The distnct should be responsible for planning, coordinating asset creation, hinng, and providing technical andpedagogical support to teachers. 0 The operation o f the schools should be pushed to the lowest possible level with the greatest possible autonomy -inasset creation, finance, and the assignment o f teachers. 0 Teacher's performance should be overseenby parent's committees. Health: optimal allocation of responsibility with accountability The analysis o fhealth service delivery indicates that: 0 For both efficiency and equity reasons, the role o f government should be quite high in communicable disease control; 0 The large market failures o f communicable disease control and health insurance, as well as the problem o f public implementation capacity, make it clear that the first and foremost step i s to move public spending from curative to preventive services. But policies also have to address the handling o f the catastrophic costs o f hospitalization; 0 Population-based health services must be treated on a case-by-case basis, balancing the monitoring ability o f different governments against the considerations o f technical efficiency o f scale; and 0 Government needs to be responsible for all supply-driven activities and subsidize specific mandated activities such as immunization. Block grants, bigger than those given at present, can be managed by GPs for the health and well being o f their constituents. Higher tiers o f government can help GPs with monitoring and assessment if necessary And ifthe compliance o f local providers is indoubt, the direct involvement o f distnct or block personnel may be helpful. Water and sanitation: emphasizingquality through operation and maintenance The pnonty has to move from access to the operation and maintenance o f facilities, and the quality o f the service. Water: Public finance cntena suggest that the operation o f rural water facilities should be at the local level. This might mean at the level o f user group where habitahons are spread out. There are no economies o f scale in operating rural water facilities, and larger and more complex systems do not cany a financial advantage inrural India. There i s considerable heterogeneity of demand inhnlung water -- reinforcingthe needto decentralize decisions over the type o f design, location and operation to the lowest level. As economies o f scale occur at the levels o f policy and standards, monitoring and evaluation, and human resource development, these should be assigned to higher levels o f government. Access to drinkmg water i s a universal nght inIndia, and it can be accomplished through appropnate fiscal incentives from higher levels o f government. Sanitation: As inthe case o f water supply, the analysis indicates the need for the clear separation o f roles and an emphasis on operation and maintenance in sanitation. Inaddition, the pnonty has to be the creation o f sanitary behavior change inkeeping with a total concept o f sanitation. Toilet provision may have been optimal as a centralized, campaign-driven program, but this i s not +me for the delivery o f sanitary outcomes. Since sanitation activities are highly discretionary and transaction-intensive, the local level i s the preferred unit o f service provision. The sanitation challenge has also to be seen as more social than technical. This means creating behavior change such as towards "open defecation free" villages. Employmentprograms: strengtheningthe lowest level of government Ideally, a wage employment program has to ensure effective targeting; efficient and labor- intensive activity selection; provide for widespread information dissemination and local capacity building; and ensure well-functioning monitonng systems. There are economies o f scale inpolicy setting, planning and monitonng and evaluation, and externalities in asset creation. Unlike most central schemes, the policy design o f SGRY emphasizes the role o f PRIs in planning and implementation. But there i s a breakdown of accountability relationships - particularly in the critical lines of downward and external accountability -- inthe current institutional arrangements. The ideal institutional arrangements for the effective implementation o f SGRY would be a system inwhich the GP, inconsultation with the gram sabha, has complete authonty at every major step -beginningwith activlty selection andpnoritization, asset creation and operationalization, to monitoring and evaluation. This proposal holds even when technical skills are required. In such cases, the GP should be able to outsource these skills. The efficiency o f this system i s largely dependent on the effective functioning o f the gram sabha, and the capacity o f the GP and the gram sabha needs to be built, and compliance monitored. The central and state governments would have to set standards, articulate broad policy guidelines, develop slulls and monitor the program financially The DP and BP need to play a supervisory role and be responsible for holding the GP accountable. Such a setup would enhance voice, compact, client power, and inter- governmental relationships among policy-makers. General conclusions across sectors Insum, the analysis across sectors and statesindicates that: 0 A greater push towards decentralization in education would create opportunities for substantial cost reduction and quality improvement; 8 Concentrating public subsidy on preventive and promotive activities would help fulfill the public responsibilities o f disease prevention and healthpromotion; Providing access to quality rather than infrastructure would help an outcome-onented water and sanitation semce; and Cost efficiency in employment programs suggests activlty selection and asset creation be localized, while monitonng and evaluationremain with higher levels o f government. 7. Towardsbetter ruralservices: recommendations Taking decentralization as the goal, the study conclusions make a strong case for a general shift to giving the lowest level of government the responsibilities of asset creation and operation and maintenance, while involving it in the planning process through the gram sabha; giving the middletiers responsibility for human capital development; giving higher levels of government the responsibility of policy and standards; and moving away from rule-based CSS towards fiscal transfers through the state's consolidated fund, conditional on reforms. Study conclusions Across the key sectors, the assignment o f responsibilities inthe law mandates a role for PRIs, but inmost cases the law is sufficiently ambiguous to allow for decentralized and centralized modes o f semce delivery to co-exist. The defacto situation does not match the dejure situation. In some cases, where the states have clearly devolved responsibilities to the panchayats, the rule- based central schemes that dominate the sector are not necessarily inconsonance with state laws. The surveys and analysis o f the status quo revealed that all services are still largely being provided in a top-down manner through the state civil service, and that semces continue to fail the rural poor. Even where semces have unequivocally been devolved topanchayats, their ability to influence outcomes i s limited because o f the lack o f financial and administrative control. The various laws and guidelines in place have given nse to the coexistence o f different models o f public semce delivery, often with the involvement o f representatives or officials from the five tiers o f government. Insummarythe studyfindsthe following. Consistent with the decentralization to the states, the Constitutional Amendment gives the states the responsibility for creating the enabling environment for local governments. Other than on political aspects o f decentralization, such as holding o f elections, and presence o f Gram Sabhas and reserved seats, state governments have considerable scope on how to pursue decentralization. As a result, implementation o f decentralization varies across states. The Indian legal system allows concurrency and this is good. Ths is a positive feature because for complex sectors such as health and education, all tiers o f government needto be involved. But at the activity level there needs to be exclusive decision making given to a single tier. It i s not sufficient to attribute roles over broad functions such as pnmary education or dnnkmg water and sanitation. Decision-malung and expenditures in India take place at the level o f activity or subactivity (budget item) and responsibilities over these 9 activities (e.g. repainng schools, hinng teachers) need to be unequivocally assigned. With few exceptions this does not happeninIndia. Legislation defining roles in service delivery is spread over a large number of legal instruments that often contradict each other, but this is allowed in Indian law. Roles in service delivery, where prescribed (and this does not happen in all states or all sectors), are defined through State Punchuyut Acts, Central Sector Acts, State Sector Acts, State Government Orders and Central Guidelines in Centrally Sponsored Schemes. The large number o f ruling o f different tiers o f the judicial system up to the Supreme Court adds to this body o f jmsprudence. While these vanous pieces o f legislation contain contradictions, inthe absence o f "exclusivity o f powers o f Punchuyuts", overlaps in service provlsion are permitted in Indian law States would need to revise both Punchuyut and sector legislation and related Government Orders to bring consistency, and only Kerala has done so. Centrally Sponsored Schemes are highly distortionary to the institutional and organizational framework adopted by states in support of decentralization. Centrally Sponsored Schemes follow their own guidelines, often at crossroads with state legislation. And because a large amount o f fundingreaches the states through CSSs, the institutional arrangements prescribed inthem come to dominate the institutional picture. Most states have failed to support devolution of functionswith devolutionof funds. The legal framework i s weak in fiscal devolution. Although every state needs to set up State Finance Commissions, their recommendations are not mandatory and their capacity, inmostcases, as left alotto be desired. Thus statesvary widely interms offiscal powers and fiscal role given to Punchuyuts. 0 And no state has devolved responsibility over functionaries to the local level and together with lack of funds this handicaps the ability of Panchayats to deliver meaningful services even where legislation assigns to them the main role. The Conshtutional Amendment i s silent on the responsibility over fmctionanes and State Punchuyut Acts has also evaded this issue. Functionaries thus remain state officials, as they have been histoncally .Overall the study finds that practice on the ground is more centralized than what the legal framework prescribes. Even for states or sectors that have unambiguously decided to devolve activlties to the local level, practice lags behind the spint o f the law, with state government staff still in charge o f the most relevant decisions in service provision. Service delivery in rural areas has perverse and systematic problemsand outcomes are poor Education achievements are poor, particularly for girls in rural areas, and absenteeism among teachers i s high despite them being relatively well paid. Expenditures on preventive health are limited and the pnvate sector accounts for 80% o f expenditures on curative health, despite the network o f clinics and hospitals. Public health services are often regressive benefiting the rich more than the poor. Like for teachers, health workers are often absent from primary clinics. Drinkingwater quality i s poor and there i s little effort at operation and maintenance o f facilities. Sanitation outcomes lag far behind what would be desirable. Employment programs have failed to have an impact commensurate wth the volume o f expenditures. 10 The study identified five key sets of activities common across all the sectors. Although each sector and service require that a large number o f activities happen for the service to take place with the desired quality, these can be aggregated into five main categones o f activities. These are (i) andstandards,(ii) policy planning, (iii) creation, (iv) operation; and (v) monitonng and asset evaluation. Talung decentralization as the goal the study recommends that these be assigned in the followingmanner: e Givlngthe lowest level o f government --the gram panchayat -- theresponsibilities o f asset creation and operation and maintenance, while involvlng it m the planning process through the gram sabha; Givingthe middle tiers, such as the DP,responsibility for human capital development; e Givlnghigher levels o fgovernment the responsibility o fpolicy and standards andmonitonng o f outcomes; and Finally the study also recommends that in lieu of centrally sponsored schemes the center move towards incentive based transfers in the consolidated fund of the states. Centrally Sponsored Schemes that for their financial magnitude and ad-hoc implementation guidelines distort the institutional arrangements adopted by the states do not help decentralization, nor the emergence o f effective local government and a facilitating state apparatus. A better solution would be to channel central funds through the Consolidated Fund o f the States conditional on outcomes to be monitoredby the Centre. General recommendations Talung decentralization as the goal, the study conclusions make a strong case for a general shift to: Givlngthe lowest level o f government -- the gram panchayat -- the responsibilities o f asset creation and operation and maintenance, while involvlng it in the planning process through the gram sabha; Givingthe middle tiers, such as the DP, responsibility for human capital development; 0 Givinghigher levels o f government the responsibility o fpolicy and standards and monitoring o f outcomes; and Movlng away from rule-based CSS towards fiscal transfers through the state's consolidated fund, condibonal onreforms. Sector-specific recommendations Education: Both public finance and accountability critena make a strong case for givlng the GP the responsibility o f operating schools. Cumculum design, textbooks, the development o f learning matenal, and monitoring and evaluation should be the responsibility o f higher levels o f government. The center or the state should also make sure o f allocating budgets in consistency with the inequalitiesthey want to address. Health: The first pnority i s for most public money to go to preventive and promotive health services in general, and the control o f communicable diseases in particular. This i s a two-part process, consisting o f large-scale pest control at the appropriate level; and small-scale, transaction-intensive preventive and promotive activities, such as immunization and health education at the GP level. Technical support for local health educators, such as some teaching 11 matenals, could come from higher hers. But the workers themselves could be paid by, and be accountable to, local governments. Inthe case o f testing and similar support services, one option i s to let local governments contract up for the services o f technical specialists. In general, when services are subject to substantial economies o f scale, the higher levels o f government need to be involved. For example, the higher levels should set standards for health education activities. As far as government role in curative care i s concerned, the long-term option i s to pay its provlders for semces delivered. But in the short term, two models are possible - the Kerala model o f giving GPs substantial responsibilities for pnmary care operations, but with the modification o f administrative control to GPs; and the emerging West Bengal model o f GPs joining together to hire qualified doctors. If either o f these approaches i s adopted, funding needs to be shifted from the states to GPs through block grants. The monitoring o f outcomes and standard auditing practices will have to be at the higher levels o f government. Water and sanitation. Inplace o f the current emphasis on access to infrastructure - which has not yielded results - policy-makers have to be involved in defining the quality o f access parameters, and in providing an envlronment in which those parameters might be met. The top-down civil service approach to samtation has to change if the outcome-oriented approach i s to be adopted. Most activities should be carried out at the lowest level - the construction and operation o f sewage systems is, for example, clearly a matter for the village. The GP a n d or the users should be responsible for asset creation, and operation and maintenance; the BP for monitonng and evaluation; and the DP for human capital development. The state should be responsible for policy and planning. Finally, accountability critena suggest moving away from the central schemes predominant inthe sector. Emplownent programs: The study recommends a drastic revamping o f employment programs away from rule-based centrally sponsored schemes. All the major decisions should be delegated to the GP and gram sabha levels, and the District Rural Development Agencies (DRDAs) dismantled. Infact, across sectors, a shift i s recommended from central schemes to fiscal transfers through the state's consolidated fund. Transfers from the center should be untied, and conditional on a set o f reforms that have been agreed upon and that can be monitored. This set o f reforms includes the assigning o f responsibilities to the appropriate level. At the state and lower levels, GPs should be responsible for asset creation and operation and maintenance, the state for policy and standards, and the DP for planning and human resource development. Monitoring and evaluation should be placedat the block or distnct levels. 12