This paper talks about financial autonomy of the local governments, such as panchayats. A mechanism is suggested by which panchayats can come in direct contact with the private taxpayers and other funding agencies. This scheme is important once we seriously take account of a corruptible system of collection and redistribution. The so-called 'decentralisation' process, which makes panchayats dependent on central and state hierarchies, is bound to be inefficient. This calls for decentralisation of financial power.