Centre releases over ₹1,500 cr in 15th Finance Commission grants to boost rural governance across six states

New Delhi: The Union government has released over ₹1,500 crore as Fifteenth Finance Commission grants for FY26 to strengthen grassroots governance across six states—Telangana, Rajasthan, Maharashtra, Uttarakhand, Mizoram and Meghalaya—the panchayati raj ministry said in statement on Tuesday.

The move aims to enable need-based rural development and improve basic services at the local level, it said.

The 15th Finance Commission covered a five-year period from FY22 to FY26 that is ending on 31 March. The current releases are part of this final year, the due instalments within the award period. The commission's total award amount for rural local bodies was ₹4.36 trillion.

Fund releases are state-specific and tranche-based, depending on submission of utilization certificates, meeting performance conditions and fulfilling eligibility criteria.

The latest tranche of funds, routed through the panchayati raj and the jal shakti ministries, and disbursed by the finance ministry, comprise tied and untied grants for panchayati raj institutions (PRIs) and rural local bodies.

Tied grants are funds that must be used for specific essential services, such as sanitation, maintenance of open defecation free (ODF) status, waste management, and drinking water supply, including rainwater harvesting and recycling.

Untied grants allow local bodies to address location-specific development needs across the 29 subjects listed in the Constitution’s Eleventh Schedule, barring salaries and establishment costs.

These funds are released in two installments annually and are meant to enhance the financial autonomy of local governments.

Maharashtra saw one of the more complex disbursements, with the Centre releasing ₹109.06 crore each as withheld portions of the first and second installments of tied grants for FY26, benefiting additional district and block panchayats. The state also received ₹116.97 crore and ₹329.21 crore as pending tied grants for FY25, along with ₹72.70 crore each as withheld untied grants for 2025–26.

Among the hilly states, Uttarakhand has received ₹91.31 crore as the second installment of untied grants for FY26, covering all 13 district panchayats, 95 block panchayats and 7,784 eligible gram panchayats. It has also got an additional ₹1.84 crore from previously withheld funds, benefiting 216 more gram panchayats.

Meghalaya received ₹27 crore as untied grants and ₹22.20 crore as tied grants, covering autonomous district councils and village councils, it said.

A portion of grants is at times withheld due to non-compliance with conditions, such as delay in submitting audited accounts or utilization certificates, not meeting sector-specific conditions (such as water/sanitation targets for tied grants), etc. The funds are released once the conditions are met.

As per experts, these cumulative releases extend support to thousands of gram panchayats and local bodies and the latest release comes amid the Centre’s push to strengthen decentralized governance by ensuring predictable and performance-linked fiscal transfers to local bodies.

“With rural infrastructure and basic services increasingly seen as critical to inclusive growth, timely fund flows under the Finance Commission framework are expected to play a key role in improving service delivery and accountability at the grassroots level,” said Ashish Kumar Singh, president of Citizen Forum, a civil rights group in Bihar.

India has over 2.5 lakh rural local bodies, including around 2.6 lakh gram panchayats, along with thousands of block and district panchayats forming the three-tier panchayati raj system.