The Sixth Maharashtra Finance Commission, led by Dr. Nitin Kareer, proposed raising the annual devolution of the State’s Own Tax Revenue to local bodies to 27.3%, up from the current 26.3%. This allocation will be divided with 55% going to Urban Local Bodies and 45% to Rural Local Bodies, including specific portions for performance grants and rural-urban transition management. The Commission’s report for the five-year period starting April 1, 2026, emphasized the need for financial decentralization and structural reform.
The report highlighted regional imbalances, financial gaps, and a reliance on state grants within Maharashtra’s local bodies. Maharashtra, a key contributor to India’s economy, saw significant growth in its Gross State Domestic Product to Rs 45,31,518 crore in 2024-25, representing 14% of the country’s GDP. Despite revenue growth, the state shifted from a surplus to a deficit, with rising debt and committed expenditures projected to increase.
Zilla Parishads and Panchayat Samitis heavily rely on grants, with limited revenue generation capacity, while Gram Panchayats exhibit stronger fiscal health through property tax collections. The Finance Commission recommended various structural interventions to address financial gaps, including reverting Profession Tax collection to local bodies and streamlining fund flows for efficiency. It also proposed transitioning Urban Local Bodies to a Capital Value-based property tax system and enacting a fiscal responsibility act for local bodies.
