Grant in Aid for Rural Local Bodies

• 17 Jul 2020

Why in News

Recently, the Ministry of Finance has released a part of grants-in-aid of Rs. 15187.50 crore for around 2.63 lakh Rural Local Bodies (RLBs) of 28 States.

• This has been made on the recommendations of the Ministry of Panchayati Raj and the Department of Drinking Water and Sanitation, Ministry of Jal Shakti.
• This forms part of the Tied Grant as recommended by the 15^th Finance Commission (FC) for the Financial Year (FY) 2020-2021.

Key Points

• Recommendation of 15^th FC: It recommended the grant in aid of Rs. 60,750 crore for (FY 2020-21) the RLBs which is the highest ever allocation made by the Finance Commission in any single year.
• Allocation: It will be allocated in two parts, namely Basic Grant and Tied Grant in 50:50% mode.
  
  • Basic Grant: These grants are untied and can be used by RLBs for location-specific needs, except for salary or other establishment expenditure
    
    • Untied funds are utilised for the works of emergent nature which are normally not covered under the schemes decentralized at the district level.
  • Tied Grants: These are used for the basic services of:
    
    • Sanitation and maintenance of Open-Defecation Free (ODF) status.
    • Supply of drinking water, rain water harvesting and water recycling.
    • The RLBs shall, as far as possible, earmark one half of these 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.
• Distribution: The State Governments will be distributing the grants to all the tiers of of the Panchayati Raj -village, block and district including the traditional bodies of 5^th and 6^th Schedule areas based on the accepted recommendations of the latest State Finance Commission (SFC) and in conformity with the recommendations of the 15^th FC.
• Assistance: The Ministry of Panchayati Raj would support the states in effective utilization of the 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.
• Significance:
  
  • Fighting Covid 19: It would help RLBs in providing employment. E.g. migrant laborers who have returned to their native places owing to Covid-19 pandemic situation.
  • Delivery of Basic Services: Availability of this fund will boost RLBs effectiveness in delivery of basic services to the rural citizens.
  • Rural Infrastructure: It will augment the rural infrastructure in a constructive way e.g construction of roads, supply of water etc.

Finance Commission

• It is a constitutional body, that determines the method and formula for distributing the tax proceeds between the Centre and states and among the states as per the constitutional arrangement and present requirements.
• Under Article 280 of the Constitution, the President of India is required to constitute a Finance Commission at an interval of five years or earlier.
• The 1^st FC was set up in 1951 and there have been fifteen so far.
• The 15^th FC headed by N.K. Singh was constituted by the President of India on 27^th November 2017, against the backdrop of the abolition of the Planning Commission and the introduction of the Goods and Services Tax (GST).
• In November 2019, the Union Cabinet approved the 15^th FC to submit its first report for the first fiscal year 2020-21 and to extend its tenure to provide for the presentation of the final report covering Financial Years 2021-22 to 2025-26 by 30th October, 2020.

Source: PIB