Empowering Gram Panchayats in 14th Finance Commission

The 14th Finance Commission: Decks Cleared for Empowering Gram Panchayats With a focus on the development of villages, National Democratic …

Posted on Feb 26, 2018 13:55 IST in General Studies.

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The 14th Finance Commission:


Decks Cleared for
Empowering Gram Panchayats


With a focus on the development of villages, National Democratic Alliance (NDA) government has taken such an initiative that will not only transform panchayats but also herald a new era of prosperity in the villages. Now, there is a direct allotment of central grants to panchayats. Gram panchayats through gram sabha are mandated to formulate planning for all development works including basic infrastructure.
On the recommendation of the 14th Finance Commission (FFC), funds earmarked are disbursed to village panchayats. Based on FFC’s recommendation, there is the target of granting more than Rs. two lakh crore (Rs. 200292.20 crore) in 2015-20 to develop panchayats.
The amount is three times more than the 13th Finance Commission’s recommendation. There is a standard procedure to allot gran ts to panchayats. FFC has worked out the total size of the grant that constitutes an assistance of Rs. 488 per capita per annum at an aggregated level. Gram panchayats will utilize this grant for meeting basic necessities as well as technical and administrative needs.
Panchayats have rights to mobilize resources as per their needs and spend them accordingly. The FFC has fixed this grant only for panchayats. Now, in gram panchayat level, per capita availability of fund for five years is Rs. 2440 and on an average, each panchayat will receive Rs. 17 lakh per year (Rs. 85 lakh in five years). Each panchayat will spent this amount on sanitation, drinking water, maintenance of community assets, garbage management, drain, roads, footpath, street-light, burial and cremation ground and other basic services. Panchayats need to have localized planning to ensure that these amenities reach to everyone including those from the weaker sections.
As per State Finance Commission (SFC), gram panchayat can spend 10% of the grant on maintenance, accounting and administrative expenses. The share of each gram panchayat as specified above is envisaged to be distributed across the entities using 2011 population with a weight of 90 per cent and area with a weight of 10 per cent. Central government will release the allotted grant to State governments and the latter will deposit the amount on each panchayat’s account within 15 days of the release. States delaying this will have to pay at bank’s interest rate. Thanks to this system, village panchayats of 26 States will no more depend on State governments for financial resources. In this way, while the 14th Finance Commission showed the path for panchayats, Central government displayed its intent to walk the talk and proceed on this path. Pachayats’ rights have already been included in the Constitution through 73rd Amendment Act, 1992 and for this, Section 280(3) was added. However, credit goes to the present government at the Centre to implement the 14th Finance Commission recommendations, arming the panchayats with this actual rights. Earlier, this fund was allotted to district, block and village panchayat, but, now, as per the 14th Finance Commission’s recommendation, the amount goes to gram panchayats only.


Ministry of Panchayati Raj has an online system to stop the misuse of funds from the grant alloted to village panchayats and local bodies. An app has been developed to make it easily accessible. Following the Finance Ministry’s guidelines, a high-powered committee was constituted on State level for the smooth implementation of the work. On regular intervals, suggestions are sent about the utilization of these grants. The central government also shares information with States about the preference for various schemes. Union Panchayati Raj ministry has advised every panchayat to facilitate the availability of dustbin and give priority to cleanliness campaign. It is of the view that with implementation of the 14th Finance Commission’ recommendation, panchayats are being empowered like co-operative federalism with the States.

Eligibility for disbursal of performance grants to gram panchayats as recommended by the Fourteenth Finance Commission.
1. Gram panchayats will have to fulfill the eligibility criteria. These are as follows:



2. Gram panchayats, which have fulfilled the four criteria, will be assessed by score system as given below:



3. Disbursal of performance grants to gram panchayats:



4. As per para-3, disbursal of the remaining undistributed amount will proceed to those panchayats which scored 50 or more while keeping in view the average benchmark and total benchmark.

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