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The Centre is preparing a Model Own Source Revenue (OSR) Rules Framework to help states strengthen the financial independence of Panchayati Raj Institutions (PRIs) and improve local revenue mobilisation. The proposal was announced during a national workshop on implementing the Sixteenth Finance Commission's recommendations, which allocate INR 4.35 lakh crore to Rural Local Bodies between 2026-27 and 2030-31. Alongside enhanced fiscal devolution, the government has urged states to improve preparedness for performance-based grants, adopt digital governance platforms and build financially resilient panchayats capable of delivering more effective grassroots governance.
The Union government is preparing a Model Own Source Revenue (OSR) Rules Framework aimed at strengthening the financial autonomy of Panchayati Raj Institutions (PRIs), as part of a broader effort to improve fiscal decentralisation and enhance the capacity of rural local bodies across the country. The proposed framework is intended to assist states in developing robust mechanisms for local revenue generation while reducing dependence on external financial assistance.
The announcement was made during the National Workshop of State Panchayati Raj Ministers organised by the Ministry of Panchayati Raj in New Delhi. Convened to discuss the implementation of the Sixteenth Finance Commission's recommendations for the 2026-27 to 2030-31 period, the workshop brought together ministers from 18 states, while other states and Union Territories were represented by senior officials from Panchayati Raj and Rural Development departments. The deliberations focused on ensuring the effective utilisation of grants, strengthening institutional preparedness and improving financial governance at the grassroots level.
Addressing the workshop, Union Minister for Panchayati Raj Rajiv Ranjan Singh described financially empowered panchayats as the foundation of a developed India and called upon states to strengthen their own source revenue systems. He said the ministry's proposed model framework would provide guidance for states seeking to improve revenue mobilisation and unlock the benefits of performance-linked grants recommended by the Finance Commission. The minister also urged states to align their administrative systems with the operational guidelines issued for Rural Local Body grants to maximise the impact of public spending.
The Sixteenth Finance Commission has recommended a total devolution of INR 4.35 lakh crore to Rural Local Bodies over five years, representing an increase of nearly 84% compared with the comparable allocation under the Fifteenth Finance Commission. The recommended allocation includes Basic Grants worth INR 3.48 lakh crore, equally divided between tied and untied grants, alongside Performance Grants of INR 87,048 crore aimed at encouraging better governance, financial discipline and stronger revenue generation by Panchayati Raj Institutions.
The ministry is also seeking to strengthen financial administration through greater adoption of digital governance platforms. It has encouraged states to accelerate onboarding to the SAMARTH Panchayat Portal, which has been developed to improve financial management, transparency and accountability. The platform will work alongside existing digital initiatives, including eGramSwaraj, AuditOnline, the Public Financial Management System (PFMS) interface and the integration of SVAMITVA property data to support planning, accounting, auditing and own source revenue generation.
During the workshop, states also recommended greater flexibility in implementing Finance Commission guidelines, particularly in geographically challenging, tribal and disaster-prone regions. They sought measures to simplify compliance requirements, strengthen digital integration between central and state systems, improve asset maintenance and expand capacity-building initiatives. The Centre indicated that these suggestions would be examined while finalising implementation measures, with the broader objective of creating financially self-reliant, transparent and accountable Panchayati Raj Institutions capable of delivering more effective rural governance.
Source- PIB
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