Telangana local bodies face Rs 5,000 crore funding crisis

Telangana’s rural and urban local bodies are facing a severe funding crisis with over Rs 5,000 crore in pending dues, including Central grants and State matching funds, triggering a prolonged cash crunch and delaying civic infrastructure and development works.

Hyderabad: Telangana is grappling with a deepening local body funding crisis, with over Rs 5,000 crore in pending dues, including Rs 1,090 crore in unpaid Central grants and nearly Rs 2,979 crore in unreleased State matching funds for the rural local bodies. Around Rs 1,200 crore is yet to be released to the urban local bodies, exposing serious fiscal and administrative lapses.

Under the 15th Finance Commission, the Centre released Rs 1,900.45 crore out of the allocated Rs 2,991 crore for 2024-25 and 2025-26, leaving Rs 1,090.55 crore pending. However, the Congress government in Telangana drew flak for releasing only Rs 1,011.85 crore out of its committed Rs 3,991 crore as matching grants during the same period.

---

The situation is compounded by an additional Rs 1,800 crore in matching grants pending from second quarter (June-August) of 2023-24, which were not released following the Assembly elections. Rural local bodies, including Zilla Parishads, Mandal Praja Parishads and gram panchayats, have been faced a prolonged cash crunch since mid-2023, with dues amounting to more than Rs 4,800 crore.

Despite the mandatory 50:50 funding ratio between the Centre and the State, the Congress government has failed to meet its share consistently. The State grants should be equal or higher than the Central grants. But over the past five years, while the Finance Commission released Rs 7,957 crore, the State contributed only Rs 6,052 crore, of which the current government’s share stands at a mere Rs 1,011 crore.

Urban local bodies were similarly affected, with around Rs 1,200 crore pending over the past two years. Zilla Parishads and Mandal Praja Parishads have also remained largely defunct amid funding shortages and the absence of elected bodies.

Due to arrears, the then sarpanches and village secretaries were forced to spend money from their pockets for routine expenditure. Them along with the contractors, have been demanding the government for release of funds and clearance of bills, but to no avail. Contractors are reportedly awaiting payments of nearly Rs 5,000 crore, further stalling infrastructure and civic projects across the State.

Official sources indicated that even the limited funds released were largely diverted towards salaries and clearing pending bills, rather than development works. They attributed the pending grants from the Central government to non-release of the State’s matching grants and submission of utilisation certificates for funds released earlier.

The Congress government’s failure to secure full Central dues while also not releasing its own committed share has intensified concerns over governance and fiscal priorities.