Sixth State Finance Commission proposes Rs 50,000 crore for local bodies
BHUBANESWAR: The Sixth State Finance Commission has recommended transfer of Rs 50,000 crore to panchayati raj institutions and urban local bodies (ULBs) for the next five years from 2026 to 2031.
However, the government has decided to transfer an amount of Rs 45,607 crore during the period. The report of the Sixth State Finance Commission along with the action taken report was tabled in the Assembly on Friday before the presentation of the annual budget for 2026-27.
The Commission in its report has recommended transfer of Rs 32,975 crore and Rs 17,025 crore for rural bodies and urban local bodies (ULBs) respectively. The transfer to rural local bodies includes Rs 10,150 crore by way of devolution, Rs 11,550 crore from taxes, Rs 8,200 crore grants-in-aid, Rs 1,451 crore from performance incentive fund and Rs 1,624 crore from human resources development fund.
Similarly, the ULBs will get Rs 4,350 crore through devolution, Rs 6,700 crore from taxes, Rs 4,657 crore from grants-in-aid, Rs 622 crore from the performance incentive fund and Rs 696 crore from the human resources development fund.
The recommendation of the Commission under the Human Resources Development Fund by apportioning one per cent of the mining revenue has not been accepted by the government, the action taken report said. Besides, the government has given in-principle approval for the performance incentive fund. Budget provision will be made after the decision taken by the High-Level Monitoring Committee chaired by the chief secretary.
The Commission pegged the share of devolution as a share of overall transfers during its award period at 29 per cent. Accordingly, the total amount of transfers under devolution has been estimated at Rs 14,500 crore during 2026-31, compared to Rs 6,100 crore recommended in the Fifth State Finance Commission award period from 2020 to 2025.
The Commission also recommended devolution of funds for three-tier PRIs in the ratio of 65:25:10 respectively for gram panchayats, panchayat samities and zilla parishads. Besides, the Commission has recommended an assignment of 8.19 per cent out of the net proceeds of SGST to the local bodies to cover salary and establishment cost, sitting fee, honorarium, TA and DA expenses. However, the action taken report of the government said it has taken a decision to distribute funds in the ratio of 60:30:10.