Grants payments to urban local bodies

Overview

The finance commission in India is a constitutionally mandated body to recommend the devolution of taxes between Union and state governments and recommend grants-in-aid, usually for five-year periods. Between 2021-26, the FC recommended Rs. 1,21,055 crore to urban local bodies across the country, with significant amounts tied to performance-linked conditions for the local bodies.

15th FC grants form a significantly large number of transactions, both in value as well as in volume. Despite the enormity of transactions, there are various challenges in the process. It requires significant manual intervention from State and ULB officials for submitting and verifying compliances, as well as calculating the final amount due, with authorities exercising discretion in payment decisions. This results in delays in the grant transfers between stakeholders and a lack of real-time visibility into the claim, payment process, and fund flow.