Guidelines issued for utilisation of municipal funds by ULBs

Vijayawada: The State government on Monday issued comprehensive guidelines on utilisation of municipal funds by Urban Local Bodies (ULBs) for maintenance, expenditure and capital expenditure to ensure efficient financial management and service delivery across all ULBs across the State.

The ULBs will gain full financial control with focus on public health, sanitation, water supply, infrastructure, as per the orders issued by the Department of Municipal Administration and Urban development (MA&UD). The guidelines stated that at least 40 percent of net municipal funds should be spent on improving slum infrastructure and livelihoods. The new policy framework comes into effect from April 1, 2025 and marks a significant shift by transferring full control of municipal funds to the respective ULBs.

The decision aligns with the State’s long-term development blueprint, Swarna Andhra@2047, and the national vision of Viksit Bharat@2047, under which Andhra Pradesh aims to achieve over 15 percent annual GSDP growth.

Recognising ULBs as growth hubs, the government aims to enhance their role in ensuring last-mile urban service delivery, said S Suresh Kumar, Principal Secretary, MA&UD Department. The guidelines have made clear distinction between maintenance and capital spending.

The GO outlines detailed heads of expenditure under two broad categories.

Maintenance expenditure includes recurring costs such as wages for sanitation and water supply workers, vehicle repairs, power bills, procurement of disinfectants, and regular upkeep of municipal infrastructure like roads, drains, streetlights, community toilets, and parks.

The capital expenditure covers infrastructure development including new roads and drains, water pipelines, sewerage treatment plants, dumping yards, composting units, procurement of vehicles and fogging machines, installation of smart streetlights, and construction of public assets like office buildings, community halls, and burial grounds.

Municipalities have also been directed to ensure 100 percent door-to-door waste collection, eradication of vector-borne diseases, and full compliance with the Prohibition of Employment as Manual Scavengers and their Rehabilitation Act, 2013.

The guidelines clearly stated fixed capital spending targets for All Urban Local Bodies. Municipal corporations must allocate minimum 30 percent for capital expenditure from its revenue receipts.

Selection & Special Grade Municipalities must spend 28 percent on capital expenditure from its revenue receipts.

Grade - I & II Municipalities must spend 25 percent on capital expenditure from its revenue receipts.

Grade – III & Nagara Panchayats must spend 20 percent on capital expenditure from its revenue receipts.

According to guidelines, fixed capital spending targets were issued to ensure sustainable financial management & stability of the ULBs as well as to deliver enhanced & effective services to citizens, ULBs shall allocate their own revenues for both maintenance and capital expenditures.

Accordingly, the following minimum percentage for capital expenditure basing on the grade of ULBs is recommended.

Additionally, as per Public Health Act, 1939, every ULB must earmark at least 30 percent of its non-grant income for advancing public health and medical relief.

In respect to Capital Expenditure, the Order reiterated the already issued orders vide GO Ms No 157 MA, dated 8-4-1986 that ULBs shall allocate its reserve funds to capital works.

Allocation for the works will be, 20 percent allocation has to be made for water supply, 13 percent for drainage, 19 percent for roads, seven percent for street lighting, 10 percent for recreation facilities and 17 percent for markets, buildings, community halls and toilets.

At least 40 percent of net municipal funds be spent on improving slum infrastructure and livelihoods.

The guidelines said 17.1 percent of the total Annual Plan Outlay be allocated for SCs and 5.33 percent for STs. Developmental expenditure must earmark 15 percent for SCs, 7.5 percent for STs, and 5 percent for women and children’s welfare.

Apart from Municipal own funds, ULBs also get grants from the Central government, Finance Commissions, GOI Schemes, and from State government.