Karnataka Ranks Last in Per Capita Urban Local Body Grants

A new report by the Janaagraha Centre for Citizenship and Democracy reveals that Karnataka currently ranks last among its peer states in per capita State Finance Commission (SFC) grants provided to urban local bodies. For the 2026-27 fiscal year, the state allocated only ₹2,244 per capita to urban residents, a figure significantly below the spending levels observed in neighboring states like Kerala, where the per capita grant is ₹6,251. This discrepancy highlights a growing concern over the financial health of the state's city and town governments.

The report notes that Karnataka's urban local bodies received only ₹4,972 crore in actual SFC grants for FY 2026-27 against a promised ₹34,052 crore. Janaagraha points to the state government's practice of classifying funds spent on major welfare programs, such as Anna Bhagya and Gruha Lakshmi, as devolved grants to local bodies. Furthermore, substantial amounts are diverted to parastatal agencies rather than elected civic bodies, effectively stripping town governments of their financial autonomy and severely impacting maintenance of basic civic infrastructure across smaller towns.

Untied grants, which are essential for independent infrastructure projects, have declined by 87% since 2011-12, reaching a low of ₹75 crore in the current fiscal year. With over two-thirds of the state's 327 urban local bodies currently functioning without elected councils, Janaagraha warns that this lack of democratic and fiscal decentralization threatens Karnataka's eligibility for future funding from the 16th Union Finance Commission. The report advocates for an immediate restoration of meaningful fiscal transfers to empower local governance and ensure sustained urban development across the state.