Component 1

Component 1- Performance Grant (Rs 1097.56 cr)

This component will phase in an annual, performance-based grant to all GPs and Municipalities in Kerala. The Performance grant (PG) will be spent on creation and maintenance of capital assets used in service delivery by LSGIs. It will provide GPs and Municipalities with additional discretionary, untied funds for expanded local investment. The overall goal of the grant is to improve GP and municipal performance in local governance and public service delivery.

The Performance Grant will be introduced in two phases. 

The total performance grant will amount to Rs 1097.56 crore for four years. Of this, Rs 821.56 crore will be IDA fund and Rs 276 crore will be State share. State share will be provided from second year onwards. The allocation of funds to individual Grama Panchayats and Municipalities will be based on the same criteria now being adopted in the case of State Finance Commission grants to PRIs. However, the performance grant will be fully additional to the annual SFC allocation for which the institutions are otherwise eligible. Performance Grant funds will not lapse at the end of the corresponding financial year and can be carried over and used in subsequent years.


During Phase I, all participating GPs and Municipalities which satisfy the following audit criteria will receive grant funding.

1. Audit certificate for 2008/09 issued to the GP/Municipality by the Local Fund Audit is not adverse or disclaimed   (Clean external           audit certificate).

2. Local Fund audit for 2008/09 does not include following observations.

3. The closing balance as taken in the Annual Financial Statements do not match with the closing balance as per the Cashbook.

4. The closing balance taken in the Annual Financial Statements do not match with the closing balance/ as per the Receipt Register or      the Payments Register

5. Opening balance in the Cashbook does not match with the closing balance in the Cashbook of the previous year.

6. Cashbook or the Receipt Register or the Payments Register is incomplete.

From the third year onwards (Phase II), eligibility for Performance Grant will be based on an annual performance assessment of LSGs based on following aspects:-

(i)           Conditions regarding audit certification indicated above are satisfied.

(ii)          Budget for new Financial Year is approved by council, and a copy furnished to Government by end of March

(iii)         Minimum of 80% of performance grant funds spent for those LSGs which received the grant in the preceding year

(iv)         Physical assets funded from performance grant are verified.

(v)          Preparation and distribution of a public report on the annual budget of LSGIs and the implementation of project using plan funds have been carried out.

(vi)         Compliance of Environmental Safeguards Management Framework guidelines (ESMF) in preparation an implementation of projects has to be ensured. The ESMF guidelines ensure that the projects undertaken under this grant comply with environment and social  safeguard regulations like prevention of forceful acquisition of land, prevention of child labour, compliance with watershed protection regulations, coastal area protection regulations, and other related regulations.

(vii)        Rules regarding purchases and awarding of work contracts have been observed.

(viii)       Achieving a minimum grade in Performance Assessment.