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States to pay Bank rate of interest to ULBs for delayed transfer of grants

Central Government has asked the States to prevent diversion and misuse of 14th Finance Commission (FFC) Grants meant for Urban Local Bodies (ULBs) and ensure their utilization only for improving delivery of basic urban services like sanitation, water supply, solid and liquid waste management, storm water drains, maintenance of community assets, roads and footpaths, street lighting and burial and cremation grounds.

Following a review of utilization of FFC grants by Shri  M.Venkaiah Naidu, Minister of Urban Development and Housing & Urban Poverty Alleviation, the Ministry has issued guidelines in the matter for strict compliance by the States.

Shri Rajiv Gauba, Secretary (Urban Development), in his communication to the States/UTs has sought utilization reports in respect of FFC grants for the year 2015-16 by the end of next month. Shri Gauba has also urged the States/UTs to prepare annual plans for city-level utilization of FFC grants linked to improving basic urban infrastructure  till 2019-20.

Asking the States/UTs to ensure transfer of FFC grants to the ULBs within 15 days of receipt of the same from the Central Government, Shri Gauba said that Bank rate of interest shall be paid for any delays and the same shall be reflected in the utilization reports to be sent to the Ministry of Urban Development.

In a threefold increase over that of the 13th Finance Commission, the 14th Finance Commission awarded total grants of Rs.87,144 cr to Urban  Local Bodies as Basic Grant (80%) and Performance Grant (20%). While Basic Grant is given to all States/UTs, release of Performance Grant is linked to ULBs ensuring audit of accounts for the previous  two years, increase in revenues over the previous year and notification of Service Level Improvement Plans in respect of basic services.

States/UTs have been advised to use FFC grants to provide additional assistance to eligible beneficiaries over that of Central and State governments’ assistance wherever required  under Swachh Bharat Mission, towards ULB share for projects for water supply and solid and liquid waste management and for Operation & Maintenance of infrastructure assets in urban areas.

States/UTs have also been asked to ensure effective monitoring of utilization of FFC grants at the level of Chief Secretaries besides concurrent evaluation by third party.