New municipalities costs Rs 3K crore to state government

The creation of new municipalities has cost the state government nearly Rs 3,000 crore. Recently, the government merged 230 major gram panchayats to form new municipalities or include them in existing municipalities.  The Centre stopped the 14th Finance Commission grants to these panchayats following their merger with urban local bodies. There were 68 municipalities in the state.  The government created another 68 municipalities in the state by passing an Act in the legislature in March 2018.

The new municipalities came into effect from August 2. The delay was on account of the 5-year tenure of gram panchayats, which was to end on August 1.

The 14th Finance Commission releases grants to panchayats based on population. There is still two years to go for the tenure of the 14th Finance Commission to end. The Commission is supposed to release Rs 1,209 crore for 2018-19 and Rs 1,628 crore for 2019-20. However, the 230 panchayats that were merged to form municipalities became ineligible to claim grants from the Commission.

Official sources in the Panchayat Raj and Rural Development revealed that on an average each gram panchayat will lose over Rs 20 lakh in grants from the Centre. With the state government not releasing any funds to gram panchayats for development activities for the past few years, the grants coming from the Centre became the only source of revenue for them. Now, with the Centre too stopping the grants, the development activities and sanitation work in panchayats are feared to come to a standstill.

The government, however, claimed that it would compensate such panchayats by sanctioning funds from the municipal administration department. The ground reality remains that the municipalities are already facing a severe fund crunch and not in a position to cater to the needs of more panchayats which have been merged with them.

Minister for PR & RD Jupally Krishna Rao said though gram panchayats may lose Central grants, the state government was contemplating the grant of special funds to develop such panchayats on their own. “The government is reviewing the financial condition of each municipality to assess whether they can support the development activities in gram panchayats which are merged into them. If not, the government will allot special funds. Urbanization of villages will result in more development, which will compensate these losses in the long run,” Rao added.