Finance Ministry releases Grants-in-aid of Rs.15187.50 crore to Rural Bodies

Jul 16: Upon the recommendations of Ministry of Panchayati Raj and Department of Drinking Water and Sanitation, Ministry of Jal Shakti, an amount of Rs.15187.50 crore, as grants-in-aid, in respect of 2.63 lakh Rural Local Bodies (RLBs) spread in 28 States of the country has been released by the Ministry of Finance on 15th July 2020. This grants-in-aid forms part of the Tied Grant as recommended by Fifteenth Finance Commission (XV-FC) for the period FY 2020-21 and is to be used by RLBs to facilitate taking up of various developmental work concerning supply of drinking water, rain water harvesting, water recycling, sanitation and maintenance of ODF status, which are national priorities.

Giving this information, Union Minister of Agriculture & Farmers’ Welfare, Rural Development & Panchayati Raj, Shri Narendra Singh Tomar said that the release of this fund to the RLBs signifies the most appropriate timing when the RLBs are fighting the challenges posed by the COVID-19 pandemic situation. Availability of this fund with the RLBs will boost their effectiveness in delivery of basic services to the rural citizens and would also empower them in providing gainful employment to migrant laborers who have returned to their native places owing to Covid-19 pandemic situation as well as in augmenting rural infrastructure in a constructive way.

Giving further details, Shri Tomar said that upon the recommendations of Ministry of Panchayati Raj, an amount of Rs.15187.50 crore, as grants-in-aid, in respect of 2.63 lakh Rural Local Bodies (RLBs) spread in 28 States of the country had been released by the Ministry of Finance on 17th June 2020. This grants-in-aid was part of the Untied Grant as recommended by Fifteenth Finance Commission (XV-FC) for the period FY 2020-21, to be used by RLBs for the location-specific felt needs.

The Fifteenth Finance Commission (XV FC) submitted its interim report for the period FY 2020-21 and the Government of India accepted its recommendations in respect of the Local Bodies. The Commission has worked out the total size of the grant to be Rs.60,750 crore for the period FY 2020-21 for the Rural Local Bodies (RLBs) which is the highest ever allocation made by the Finance Commission in any single year.

The Commission has recommended Grants-in-aid to all tiers of the Panchayati Raj including the Traditional Bodies of Fifth and Sixth Schedule areas, in 28 States, in two parts, namely, (i) a Basic Grant and (ii) a Tied Grant. Fifty percent of the grant will be Basic Grant and fifty percent will be the Tied Grant. The basic grants are untied and can be used by RLBs for location-specific felt needs, except for salary or other establishment expenditure. The Tied Grants are to be used for the basic services of (a) sanitation and maintenance of open-defecation free (ODF) status and (b) supply of drinking water, rain water harvesting and water recycling. The RLBs shall, as far as possible, earmark one half of these Tied Grants each to these two critical services.  However, if any RLB has fully saturated the needs of one category it can utilize the funds for the other category.

The State Governments will be distributing the XV FC Grants to all the tiers of panchayats – village, block and district and the traditional bodies of Fifth and Sixth Schedule areas based on the accepted recommendations of the latest State Finance Commission (SFC) and in conformity of the following bands recommended by XV FC.

  • 70-85 % for village/gram panchayats
  • 10-25 % for block/intermediate panchayats
  • 5-15 % for district/zilla panchayats
  • In states having two-tier system with only village and district panchayats, the distribution will be in the bands of 70-85 % for village/gram panchayats and 15-30% for district/zilla panchayats

The intra-tier distribution among the relevant entities in a tier across the State (including Fifth and Sixth Schedule areas) will be on the basis of population and area in the ratio of 90:10 or as per the accepted recommendations of the latest SFC.

The Ministry of Panchayati Raj would actively support the States in effective utilization of the XV FC Grants by providing Web/IT enabled platforms for planning, monitoring, accounting / auditing of the works and funds flow at the level of each of the RLBs.