16th Finance Commission recommends one-time grant to urban local bodies for merging peri-urban villages

The 16th Finance Commission has proposed granting a one-time sum to urban local bodies with populations exceeding 100,000, designated as an urbanization premium, to facilitate the integration of surrounding villages. To qualify for this grant, local bodies must demonstrate a 5% or higher increase in revenue compared to the preceding year.

Furthermore, they must disclose audited figures from past financial years. If only certain urban local bodies within a state meet these criteria, the allocated grant will be distributed proportionally. Prior to receiving the state performance component of the grant, states must have allocated at least 20% of the recommended amount to local bodies during the previous fiscal year.

Notably, none of the cities in Kerala have been included in the list of urban growth centers selected for a dedicated infrastructure grant aimed at comprehensive wastewater management. Urban local bodies are mandated to create a comprehensive city action plan incorporating local needs to be eligible for these grants. Additionally, they must utilize no more than 20% of the untied grant for road construction or maintenance purposes.

Before receiving the first instalment, local bodies must ensure they do not hold any unspent funds from allocations under the 15th Finance Commission. Finally, to be considered for subsequent instalments, local bodies must utilize at least 50% of the previous allocation. The 16th Finance Commission's focus for the period from 2026-27 to 2030-31 is primarily on promoting cleanliness, solid waste processing, and water management.