The 15th Finance Commission (FFC) has allocated ₹4,766 crore to rural and urban local bodies in the State from the central pool of funds in the financial year 2020-21, which is way lower than the allocation made to local bodies in the State’s annual budgets.

The Centre’s allocation constitutes 5.29% of the total amount (₹90,000 crore) allocated to 28 States across the country. Interestingly, rural local bodies have been allocated ₹3,217crore and urban local bodies ₹1,549 crore in the State in the financial year 2020-21. The FFC has allocated funds to rural and urban local bodies in the ratio of 67.5:32.5.

Experts say that the amount allocated does not take into account the fact that 38.6% of the State’s population lives in urban areas (7th most urbanised State) and the demand for basic facilities is growing every day.

According to ICRA, a rating agency, the State budget allocated ₹6,000.76 crore in 2015-16, ₹5,600.86 crore in 2016-17, ₹6,400.9 crore in 2017-18, ₹5900.12 crore in 2018-19, and ₹6800.56 crore in 2019-20 budgets for rural and urban local bodies. All these allocations were much higher than the Centre’s own allocation.

Focus on poorer States

In its interim report for 2020-21, the FFC has focussed on improving infrastructural facilities in poorer States with low per capita income and high population. The country’s biggest BJP-ruled State Uttar Pradesh has received the highest share (16.05%) amounting to ₹14,447 crore followed by Maharashtra – ₹8,633 crore (9.59%) and Bihar – ₹7,434 crore (8.26%).

Across all States, the FFC has allocated ₹60,750 crore for rural local bodies and ₹29,250 crore for urban local bodies. The total size of the grant for rural and urban local bodies in 28 States would be ₹90,000 crore and this is equivalent to 4.31% of the divisible pool estimated by the commission for 2020-21 against ₹87,352 crore (3.54%) of the divisible pool for 2019-20.

Karnataka has more than 275 urban local bodies and 5,659 gram panchayats. The FFC has given focus to critical sectors of sanitation and drinking water in rural and urban local bodies.

To ensure quick disbursal of funds released by the Centre, the FFC has recommended that the States should transfer grants-in-aid to local bodies within 10 working days of receipt from the Union government. Any delay beyond 10 working days will require the State governments to release the same with interest as per the effective rate of interest on market borrowings/State Development Loans (SDLs) for the previous year.

While 50% grants to rural local bodies are untied, the remaining 50% would be tied as grants for sanitation and water supply, which are identified national priorities. For rural local bodies, no conditions have been prescribed for getting the grants in 2020-21. However, from 2021-22 onwards, the entry level conditions for rural local bodies getting these grants is timely submission of audited accounts, the FFC said.