Chapter 5

Empowering Local Bodies

14th Finance Commission
• Provides grants to only gram panchayats in rural local bodies
• The other tiers at the district and the block levels were not provided
with the grants.
• In urban local bodies no distinction was made among the different
sizes of municipalities.
• The grants were distributed between the rural and the urban local
bodies in the ratio of 70 :30.
• Did not recommended grants to Excluded areas under the 5th and 6th
schedule of the Constitution and to the cantonment boards in urban
areas.
• The grant divided in 2 parts.
a) First basic grant(unconditional).
b) And a performance grant (conditional)
In the proportion of 90:10 for gram panchayat and 80:20 for
municipalities.
Recommendations of 15th Finance
Commission
• Grants to all tiers of the Panchayati raj to create durable community
assets and improve the functioning of Villages and blocks.
• Grants to 5th and 6th Schedule areas and cantonment Board.
• Tied Grants- Critical sectors of Sanitation and drinking water (in
addition to funds under CSS, Swacch Bharat and Jal Jeevan Mission.
• Share of Urban local bodies to be gradually increased to 40 percent
over the medium term.
• For 50 million + cities need special emphasis on meeting challenges of
bad ambient air quality, ground water depletion and sanitation.
Recommendations:-
1) Total size of the ground for local bodies in the 28th states shall be
₹90,000 crore.
This is equivalent to 4.3% of the divisible pool.
Earlier in 14th Finance Commission, 87,352 cr. was granted for the local
bodies.
• 2) The Inter-se distribution of grants for local bodies among the
states may be based on the population and area in the ratio of 90:10.
• Special Emphasis on areas with higher concentration of schedule,
Caste and schedule tribe populations.
3) The proportion of grants between rural and urban local bodies
recommended is in the ratio of 67.5: 32.5
 Rural local bodies grants
The recommended allocation for rural local bodies in 2020-21 is ₹60,750
crores comparable with 14th finance commission.
V) All tires in the Panchayats Village come blog and restrict will receive the
grants.
• The intercept distribution By the states will be on the basis of the
recommendations of the latest state Finance Commission.
• The grants will be in the following brands of 70 - 85% for village panchayats.
10 to 25% for block panchayats. And 5 to 15% for District Panchayat.
• In Goa Sikkim, Manipur, with the 2 tier system of only village and district
panchayats, the allocation will be in the bands of 70 to 85% and 15 to 30%
respectively.
• If State Finance Commission recommendations are not available, then
the inter se distribution within the Panchayati Raj tiers should be
decided by the state government within the bands indicated above.
6) The state should also make allotment of grants for both 5th and 6th
schedule falling within the state based on the population and area in
the ratio of 90:10.
7) The grants for local bodies and for the 5th and 6th schedule area shall
be distributed as basic and tied grants in the ratio of 50:50.
• The basic grants are untied and can be used by the local bodies for
location specific felt needs, except for salary or other establishment
expenditure.
• The tied grants are can be used for basic services of
a) Sanitation and maintenance of open-defecation free(odf)
b) Supply of drinking water harvesting and water recycling.
Urban Local Bodies Grants
8) The total grants recommended for urban local bodies for 2020-21
₹29,250 crore against ₹26,665 crore in 2019-2020.
• For 50 million plus urban cities (Excluding Delhi and Srinagar)
• All other cities for with less than one million population.
• Within the state the grant recommended across these 2 categories is
on the basis of the population.
• Show ₹9,229 crores for million plus cities and 20,021 crore for the
other cities.
Million- plus cities Distribution
• For the million plus cities urban agglomerations, the recommended
city wise distribution of grants for 2020-21 is on the population basis.
• The states should make allotment of grants on population basis for
the cantonment boards within their territories. urban local bodies
other than the million plus cities. The ground should be distributed to
each urban local body on the basis of accepted recommendations of
the latest state Finance Commission, suitably modified to
accommodate the cantonment boards.
• For the million plus cities, the MoEF&CC In consultation with the state
government will develop city wise and year wise targets on ambient
air quality based on Average concentration of PM 10 and pm 2.5.
• An amount of ₹4,400 crore in 2020-21 for the purpose of improving
ambient air quality will be released.
• This will be in installments. First installment (50%) may be used for air
quality improvement measures and rest 50%will be dispersed against
the stipulated performance based outcomes in terms of year on year
improvement in air quality.
• For million plus cities ₹4829 crore have been allocated for improving
conservation, supply and management of water and efficient solid
waste management.
Other than Million- Plus cities
• My location of ₹20,021 crores consisting of two equal parts- 50 percent basic
grants and 50 percent grants tied to:-
a) Drinking water, including rainwater harvesting and recycling.
b) Solid waste management.
This will be dispersed on the recommendations of the latest state Finance
Commission.
In case the state Finance Commission is not available for distribution within the
particular category, the allocation should be based on the population and area
in the ratio of 90 to 10.
The state should make allotment of grounds on population basis for the
cantonment boards within their territories.