As the financial year draws to a close, the Union Government has made a significant push for rural India, releasing over ₹2,461 crore in Fifteenth Finance Commission (XV-FC) grants to Rural Local Bodies across eight states, directly strengthenichng the ability of gram panchayats, block panchayats and district panchayats to deliver basic services to millions of citizens.
The Union Ministry of Panchayati Raj on March 31, 2026, announced an overall update of FY2025-26, covering both tied and untied grants, along with withheld portions of earlier instalments, stating that they were now being cleared for states that have met the necessary eligibility conditions. The eight states receiving funds are Chhattisgarh, Gujarat, Madhya Pradesh, Punjab, Sikkim, Himachal Pradesh, Odisha and Tripura.
Madhya Pradesh walks away with the largest share of ₹945.16 crore, combining the second instalment of ₹943.27 crore and a withheld portion of ₹1.89 crore. It will cover 46 district panchayats, 300 block panchayats and 22,933 gram panchayats.
Gujarat follows with ₹763.90 crore, Punjab with ₹332.46 crore, and Chhattisgarh with ₹359.93 crore. Apart from the big guns, smaller grants have gone to Sikkim (₹10.15 crore), Odisha (₹35.09 crore), Himachal Pradesh (₹13.86 crore) and Tripura (₹68.51 lakh, tied and untied combined).
The grants work on a two-track model. Tied grants are earmarked for two specific purposes: sanitation and maintaining open defecation free (ODF) status, drinking water supply, rainwater harvesting, and water recycling. ODF status includes household waste management, treatment of human excreta and faecal sludge.
Untied grants, by contrast, give panchayats flexibility to spend on any of the 29 subjects listed in the Eleventh Schedule of the Constitution, barring salaries and establishment costs.
The grants flow through a two-ministry pipeline. First, the Ministry of Panchayati Raj and the Ministry of Jal Shakti recommend the releases, after which the Ministry of Finance disburses the funds to the states. Funds are released in two instalments per financial year, with portions withheld if states fail to meet eligibility thresholds. These are then disbursed once those thresholds are cleared, as was the case for all the states listed above except Punjab. The disbursements are expected to help panchayats in villages across these eight states plan the next fiscal year’s sanitation and water projects.