Paper: GS – II, Subject: Polity, Topic: Institutions, Issue: 16th Finance Commission on Urban Local Governments.
Context:
The 16th Finance Commission’s report, tabled on February 1st by Finance Minister Nirmala Sitharaman, outlines the framework for tax devolution between the Centre and the States.
Key Highlights:
- The 16th Finance Commission’s recommendations represent a significant increase in funding for Urban Local Governments, signaling a policy shift towards addressing the challenges of urbanization.
- The recommended allocation of ₹3.5 lakh crore to Urban Local Governments (ULGs) for the upcoming five years.
- The allocation of tied and untied grants provides ULGs with both targeted support for essential services and flexibility to address local priorities.
- The state-wise variations in allocation highlight the diverse needs and challenges faced by different regions.
- The component-wise breakdown of the allocations provides a clear picture of the priorities and objectives of the Finance Commission.
Increased Share for Urban Local Governments:
- The 16th Finance Commission has allocated 45% of local government grants to ULGs, a notable increase from the 36% share allocated by the 15th Finance Commission.
- This shift indicates a greater recognition of the specific needs and challenges faced by urban areas.
Significant Increase in Overall Allocation:
- The 15th Finance Commission allocated ₹1.5 lakh crore to ULGs for the period 2021-26.
- The 16th Finance Commission’s recommendation of ₹3.5 lakh crore represents a substantial increase of 230%.
- This tripling of funds underscores the government’s commitment to strengthening urban governance and infrastructure.]
Types of Grants:
State-wise Allocation Variations:
- The increase in allocation varies significantly across states. Kerala has received the highest increase, with an allocation more than 400% higher than the previous period.
- In contrast, Himachal Pradesh has experienced a near 50% decline in ULGs funds.
- This disparity may reflect differences in urbanization rates, existing infrastructure, and the specific needs of each state.
The increased funding and strategic allocation of grants are expected to empower ULGs to improve infrastructure, enhance services, and promote sustainable urban development, ultimately contributing to a better quality of life for urban residents.
Source: (The Hindu)
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