RLB Grants Recommended by Sixteenth Finance Commission

Key Highlights:

• The Sixteenth Finance Commission (FC-16) recommended ₹4,35,236 Crore in grants for Rural Local Bodies (RLBs) for the 2026-31 award period.
• These grants are structured into Basic Grant and Performance Grant, with an 80:20 ratio.
• 50% of the Basic Grant is designated as Tied Grant for specific purposes, while the remainder and the entire Performance Grant are Untied Grants.
• Tied Grants are directed towards 'Sanitation and Solid Waste Management' and 'Water Management'.
• The Ministry of Panchayati Raj is actively promoting Panchayat Own Source Revenue (OSR) generation through various initiatives.
• Digital platforms like eGramSwaraj and AuditOnline enhance transparency and accountability in grant utilization and financial management.

Detailed Insights:

• The total grants recommended by FC-16 are for duly constituted Panchayati Raj Institutions (PRIs) across all 28 states.
• Untied Grants provide flexibility for RLBs to address location-specific needs under the twenty-nine subjects of the Eleventh Schedule of the Constitution.
• The Ministry of Panchayati Raj, in collaboration with IIM Ahmedabad, developed a training module on OSR under the Rashtriya Gram Swaraj Abhiyan (RGSA).
• The Atma Nirbhar Panchayat Special Award (ANPSA) was launched in 2025 to encourage Atmanirbharta through OSR augmentation by Panchayats.
• The SAMARTH Panchayat portal is a dedicated digital platform for generating and collecting tax and non-tax demands and tracking revenue.
• Model Own Source Revenue Rules have been formulated as an advisory framework for States/UTs to strengthen their OSR legal and institutional frameworks.
• The SVAMITVA Scheme, launched in April 2020, aims to boost property tax collection in rural areas, thereby enhancing OSR and financial self-sufficiency for RLBs.
• The eGramSwaraj web portal, launched in April 2020, integrates all financial functions of Panchayats from planning to payment.
• eGramSwaraj is integrated with the Public Financial Management System (PFMS) to facilitate real-time digital payments to vendors and service providers.
• The AuditOnline application, also launched in April 2020, enables online auditing of Panchayat accounts for transparent utilization of Central Finance Commission funds.

Key Concepts Involved:

• Sixteenth Finance Commission (FC-16): A constitutional body recommending financial resource distribution between the Union and states, and among states.
• Panchayati Raj Institutions (PRIs): Self-governing rural local bodies at the village, block, and district levels.
• Own Source Revenue (OSR): Funds generated by local bodies themselves through taxes, fees, and non-tax sources.
• Tied and Untied Grants: Tied grants are for specific purposes with restrictions, while untied grants offer flexibility for local needs.
• Eleventh Schedule of the Constitution: Lists 29 functional items within the purview of Panchayats, as per the 73rd Constitutional Amendment Act.