Finance Ministry releases grants to Rural Local Bodies

January 28, 2021

The Department of Expenditure of Ministry of Finance has recently released Rs 12,351 crore to 18 States in order to provide grants to the Rural Local Bodies.

Highlights

  • The amount is the 2nd instalment of basic grants released in the current financial year.
  • The grant has been released after the states provided the Utilisation Certificate for the first instalment.
  • The States will now transfer the grants to the Rural Local Bodies within 10 working days of receipt from the Central Government.
  • Till date, Grant of Rs 45,738 crore has been released to Rural Local bodies in 2020-21.

Why this grant has been released?

  • The grant was released on the recommendation of the Ministry of Panchayati Raj and in accordance with the recommendation of the 15th Finance Commission.
  • It will be used to create the community assets and improve the financial viability of the Rural Local Bodies.
  • It will further enable the pooling of resources across blocks and villages in the states.

Local bodies (LBs)

LBs are institutions of the local self-governance. It looks after the administration of an area or small community like villages, towns, or cities. The Local bodies in India are classified into two categories:

  1. Rural Local bodies (RLBs)- RLBs are constituted for local planning, development and administration in the rural areas. These are called Panchayats.
  2. Urban Local Bodies (ULBs)- ULBs are constituted for local planning, development and administration in the urban areas. These are also called as Municipalities.

Grants to Rural Local Bodies

As per the recommendations of the 15th Finance Commission, there are two types of grants for the Rural Local Bodies:

  1. Basic Grants– Such grants can be used by the Rural local bodies for the location-specific needs. However, such grants cannot be used for the salary or any other establishment expenditure.
  2. Tied Grants– Such grants are used by the Rural Local Bodies to maintain the Open Defecation Free Status and sanitation, supply of clean drinking water, rainwater harvesting and water cycling.
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