Utilisation of Fifteenth Finance Commission Tied Grants

Why in news

The Department of Drinking Water & Sanitation, Ministry of Jal Shakti, as the nodal department, is overseeing the implementation of the Fifteenth Finance Commission (FC-XV) tied grants. The article details the recommendations and utilisation criteria for these grants aimed at improving water and sanitation in rural local bodies (RLBs).

Exam relevance

GS2, GS1 · Governance, Polity, Economy · Prelims · Mains

Key facts

1. The Fifteenth Finance Commission (FC-XV) recommended Rs. 2.36 lakh crore to RLBs in 28 States for the period 2021-22 to 2025-26.
2. Out of the total recommended amount, 60% (Rs. 1.42 lakh crore) is designated as tied grant.
3. The tied grant is to be utilized equally for two components: (i) supply of drinking water, rainwater harvesting, and water recycling; and (ii) sanitation and maintenance of ODF status.
4. Each component receives Rs. 0.71 lakh crore.
5. The release of tied grants is contingent upon states fulfilling stipulated criteria in operational guidelines.
6. The Department of Drinking Water & Sanitation is the nodal department for implementation.
7. The Department of Expenditure releases funds to states, which then transfer them to RLBs/Excluded areas.

Prelims pointers

• The Fifteenth Finance Commission recommended Rs. 2.36 lakh crore for RLBs.
• 60% of the recommended amount is tied grant.
• Tied grants are to be used for drinking water, rainwater harvesting, water recycling, sanitation, and ODF status maintenance.
• The Department of Drinking Water & Sanitation, Ministry of Jal Shakti, is the nodal department.
• FC-XV submitted its reports in two phases: Interim (2020-21) and Final (2021-26).

Mains practice question

Critically examine the role of Finance Commission tied grants in strengthening rural local bodies and achieving national objectives in water and sanitation. Discuss the challenges and suggest measures for effective utilization.

Static linkage

The Fifteenth Finance Commission's recommendations are based on Article 280 of the Constitution of India, which mandates the establishment of a Finance Commission to make recommendations on the distribution of financial resources between the Union and the States, and among the States themselves. Tied grants for local bodies are a mechanism to ensure funds are utilized for specific, critical sectors like water and sanitation, aligning with national priorities.

Significance

The FC-XV tied grants represent a significant financial allocation towards improving basic services in rural areas. The specific earmarking for water and sanitation addresses critical public health and environmental concerns. The conditionality attached to the grants aims to ensure effective utilization and accountability, promoting better governance at the local level. This mechanism supports the decentralization of funds and functions, empowering RLBs to address local needs.