Local bodies in Kerala hit by funds crunch

Local bodies in Kerala have been unable to take up crucial developmental and welfare activities due to funds crunch.

The Thiruvananthapuram District Planning Committee, which oversees the annual plan activities of all the local bodies in the district, earlier this week passed a resolution demanding the government to sanction the first instalment of development funds for the 2026-27 financial year as well as the final instalment for the previous year.

The sharp fall in the Plan fund allocations in the Revised Budget presented by the United Democratic Front (UDF) government is also of concern to local bodies.

According to Thiruvananthapuram district panchayat president V. Priyadarshini, the reduction in funds will negatively affect the completion of existing projects as well as the initiation of new development projects.

No new project

“We have been unable to initiate any project in the current financial year. Also, the final instalment of development funds for the previous financial year is pending. In the Revised Budget, there is a sharp drop of ₹18.83 crore in Plan fund allocations to the Thiruvananthapuram district panchayat. This is the case with most local bodies. In addition, ₹24 crore is yet to be transferred. We are forced to limit the spending to the most-urgent projects. The smooth functioning of the district panchayat has been affected as we had initiated several projects as per the previous Budgets, but the funds cuts now leave us in the lurch,” says Ms. Priyadarshini.

The Opposition Left Democratic Front (LDF) had last week raised the funds cuts to local bodies as an Adjournment Motion in the Assembly, saying that the local bodies are facing a serious crisis, unable to spend for their day-to-day affairs or for the developmental and welfare projects earlier planned for the year as the Revised Budget has not made allocations for Spillover projects for the previous year.

New directive

Though the State government issued a new directive on Monday (July 6, 2026) extending the deadline to submit the Annual Plan for 2026-27 by including the spillover projects from the previous year, some local bodies and District Planning Committees have raised a lack of clarity in the order. One of the issues is regarding the lack of guidelines on the utilisation of the 16th Finance Commission Grant as well as whether new projects can be taken up using the remaining amount of the 15th Finance Commission Grant.