16th Finance Commission Proposes Over ₹27,000 Crore for Tamil Nadu Urban Local Bodies

The 16th Finance Commission of India has recommended more than ₹27,000 crore under three major grant categories for urban local bodies across Tamil Nadu for the period spanning 2026 to 2031. The recommendations also include a special infrastructure component and a one-time urbanisation premium for the state.

The details were outlined in the Municipal Administration and Water Supply department policy note for this financial year, which was presented on Monday by Minister A Rajmohan on behalf of Chief Minister C Joseph Vijay, who heads the department.

According to the policy note, the commission has recommended a basic grant of ₹20,054 crore. The release of this primary basic grant allocation is scheduled to commence from the financial year 2026-27.

In addition to the basic grant, the commission has earmarked ₹2,507.50 crore as an urban local body performance grant and another ₹2,507.50 crore as a state performance grant. Both of these performance-linked grants are set to be released starting from the financial year 2027-28. The disbursal of these funds will be subject to the urban local bodies and the state government meeting prescribed entry-level benchmarks and performance conditions.

Under the special infrastructure component, both Coimbatore and Madurai municipal corporations have been made eligible to take up major development projects worth up to ₹3,500 crore each.

Funding for these municipal corporation infrastructure projects will be shared between the central and state tiers. The central government will provide 60 percent of the total project cost, while the remaining 40 percent will be contributed jointly by the Tamil Nadu state government and the respective urban local bodies.