• The Union government released the 15th Finance Commission (XV FC) Untied Grants for Rural Local Bodies in three states as first instalment during the Financial Year 2025–26.

• Odisha has been allocated Rs 240.81 crore for 6,085 eligible Gram Panchayats and 63 eligible Block Panchayats.

• Tripura has been provided Rs 29.75 crore for 606 eligible Gram Panchayats, 35 eligible Block Panchayats, eight eligible Zilla Parishads along with all 587 Village Committees and 40 eligible Block Advisory Committees.

• Mizoram received Rs 14.27 crore for 827 eligible Village Councils as part of the 2023–24 grants. 

Untied grants and Tied grants

• The 15th Finance Commission was constituted on November 27, 2017 against the backdrop of the abolition of the Planning Commission (as also of the distinction between Plan and non-Plan expenditure) and the introduction of the Goods and Services Tax (GST), which has fundamentally redefined federal fiscal relations.

• In November 2020, the 15th Finance Commission, led by chairman N.K. Singh, submitted its report for the period 2021-22 to 2025-26 to the then President Ram Nath Kovind. 

• The 15th Finance Commission has recommended total grants for duly constituted local governments that add up to Rs 4,36,361 crore for the period 2021-26. The Commission has recommended basing the inter-se distribution of grants for local bodies among the states, on population and area in the ratio of 90:10.

• A sum of Rs 2,36,805 crore is earmarked for Rural Local Bodies, Rs 1,21,055 crore for Urban Local Bodies and Rs 70,051 crore for health grants through local governments. A total of Rs 8,000 crore is performance-based grants for incubation of new cities and Rs 450 crore is for shared municipal services.

• Out of the total grants earmarked for Panchayati Raj Institutions, 60 per cent is earmarked for national priorities like drinking water supply and rainwater harvesting and sanitation, while 40 per cent is untied and is to be utilised at the discretion of the Panchayati Raj Institutions for improving basic services.

• The Finance Commission Grants aim to make the Panchayati Raj Institutions and RLBs more capable, accountable, and self-reliant.

• In line with Article 243G of the Indian Constitution, these funds empower panchayats to manage essential services and infrastructure. 

• The Centre, through the Ministry of Panchayati Raj and the Ministry of Jal Shakti (Department of Drinking Water and Sanitation), recommends the release of 15th Finance Commission Grants to states for Rural Local Bodies, which are then released by the Ministry of Finance. 

• The allocated grants are released in two instalments in a financial year.

• Currently, the 15th Finance Commission (2021-26) Grants are provided to the Rural Local Bodies (RLBs) in all three tiers of panchayats and traditional bodies in 28 states.

• The 15th Finance Commission Grants have two components — Basic (Untied) Grants and Tied Grants. 

• The Basic (Untied) grants can be used for felt needs of basic facilities under the 29 subjects enshrined in the Eleventh Schedule of the Constitution of India, except for salaries and other establishment costs. 

• The Tied grants are to be utilised for basic facilities, specifically, for drinking water and sanitation. It also includes maintenance of open-defecation free (ODF) status and water management, rainwater harvesting, water recycling, and treatment of household waste.

Additional Read:

What is the Finance Commission?

On December 31, 2023, the government appointed former vice chairman of NITI Aayog Arvind Panagariya as the chairman of the 16th Finance Commission. The Commission will submit its report to the President by October 31, 2025. The report would be for five years commencing April 1, 2026.