Why in the News?

• The Union Government has released the Fifteenth Finance Commission (XV FC) Grants for Rural Local Bodies in Punjab, Uttarakhand, and Chhattisgarh during the Financial Year 2024–25.
• These grants strengthen grassroots democracy by supporting Panchayati Raj Institutions (PRIs) and Rural Local Bodies (RLBs).

Key Points:

XV FC Grants:

=> The government has released the 1st installment of Untied Grants for FY 2024–25, amounting to Rs. 93.9643 crore for Uttarakhand.

=> The government has released the 1st installment of Untied Grants amounting to Rs 225.1707 crore for Rural Local Bodies in Punjab.

=> The government has disbursed the 2nd installment of Untied Grants for FY 2024–25 amounting to Rs 237.1393 crore for Chhattisgarh.

Process of Grant Allocation:

=> The Ministry of Panchayati Raj and the Ministry of Jal Shakti (Department of Drinking Water and Sanitation) recommend XV FC Grants for Rural Local Bodies.

=> The Ministry of Finance releases these grants in two installments per financial year.

Utilization of XV FC Grants:

• Untied Grants:
  • PRIs and RLBs can utilize these grants for location-specific felt needs under the 29 subjects listed in the Eleventh Schedule of the Constitution. These funds cannot be used for salaries and establishment costs.
• Tied Grants:
  • These funds must be used for basic services, including: Sanitation and maintenance of Open Defecation-Free (ODF) status, including waste management and fecal sludge treatment. Drinking water supply, rainwater harvesting, and water recycling.

Finance Commission:

• It is a constitutional body that determines the method and formula for distributing the tax proceeds between the Centre and states and among the states as per the constitutional arrangement and present requirements.
• Under Article 280 of the Constitution, the President of India is required to constitute a Finance Commission at an interval of five years or earlier.
• The 1st FC was set up in 1951 and there have been fifteen so far.
• The 15th FC headed by N.K. Singh was constituted by the President of India on 27th November 2017, against the backdrop of the abolition of the Planning Commission and the introduction of the Goods and Services Tax (GST).
• In November 2019, the Union Cabinet approved the 15th FC to submit its first report for the first fiscal year 2020-21 and to extend its tenure to provide for the presentation of the final report covering Financial Years 2021-22 to 2025-26 by 30th October 2020.