Denied central funds, panchayats across Karnataka face financial crisis

Bengaluru: Village panchayats across Karnataka step into the New Year with a crisis as none have received any money from the Centre under the 15th Finance Commission this fiscal, leaving them “struggling to take up development works”, documents show. 

The 6,000-odd panchayats are due to receive over Rs 2,100 crore in the current fiscal in tax money devolved back to the state under the 15th Finance Commission. Most panchayats depend on this money. 

The state should have received Rs 1,092 crore in the first installment, which has not come. 

“Karnataka being a forerunner in rural decentralisation, panchayats today are struggling to take up development works due to lack of funds,”
Rural Development & Panchayat Raj (RDPR) Minister Priyank Kharge has stated in a letter to his Union government counterpart Rajiv Ranjan Singh. 

Authorities are baffled by the inordinate delay in fund release given that Karnataka has met all prerequisites, including submission of gram panchayat development plans.

Even Kerala, Tamil Nadu and West Bengal, which keep clashing with the Union government -- like Karnataka -- over federal matters, have received grants.

The delay has “stalled development works across gram panchayats in the state”, Panchayat Raj secretary Randeep D stated in a missive to Union Secretary Vivek Bharadwaj.

What’s worse, the term of elected village panchayat members ends in January. Funds are not released without elected bodies in place. Since 2022, district and taluk panchayats are not receiving the 15th Finance Commission grants as elections have not been held.

Besides the delay in fund release, over 800 village panchayats are facing “multiple technical issues” making them “unable to initiate payments” for the past one month, according to RDPR Secretary Sameer Shukla’s letter to the Union panchayat raj ministry seeking resolution.

These panchayats had their accounts for the 15th Finance Commission grants in the Karnataka Vikas Grameen Bank (KVGB) and Pragathi Krishna Grameen Bank (PKGB). Both banks were recently merged with the Karnataka Grameen Bank.

Panchayats had to update and map the new IFSC codes with the Public Financial Management System (PFMS) and the e-Gram Swaraj portal. But this has led to glitches.

“Right now, many gram panchayats have no money left,” one RDPR official aware of the situation said. “Some panchayats have no money for water supply, too.”