Karnataka Minister Questions Centre's Move to Withhold ₹2,186 Crore in Panchayat Grants

Rural Development and Panchayat Raj Minister Eshwar B. Khandre on Friday challenged the Centre's decision to hold back ₹2,186.20 crore in grants owed to Karnataka under the 15th Finance Commission, arguing that the State is being held to a standard not applied to several other States.

Responding to questions on the financial health of gram panchayats, Mr. Khandre traced the shortage of funds to what he described as a discriminatory approach towards Karnataka.

Under the Finance Commission's recommendations, the Centre releases gram panchayat grants to the State, which must pass them on to the panchayats within 10 days. Receipt details are to be uploaded on the e-Gram Swaraj portal, and failure to do so requires the amount to be paid with interest.

Portal gap cited

Mr. Khandre said Karnataka received ₹2,133.25 crore for gram panchayats in 2024-25, while receipts of ₹1,907 crore were reflected on the portal. The roughly ₹225 crore difference, he said, stemmed from technical issues, and the money had physically reached the gram panchayats, where works had already begun.

"Citing such a minor technical issue as a reason for withholding ₹2,186 crore is a grave injustice to Karnataka," he said.

Comparisons with other States

To press his case, the Minister pointed to releases made to other States. Uttarakhand, he said, received ₹470 crore for 2025-26 even though no receipts appeared on the portal. Gujarat received ₹2,619 crore against portal receipts of ₹2,104 crore, a gap of ₹515 crore, while Assam got ₹1,315 crore against receipts of ₹447 crore, a difference of ₹868 crore. Bihar received ₹4,109 crore against receipts of ₹1,775 crore, leaving a gap of ₹2,334 crore.

"Why is a condition that is not being applied to Assam, Bihar, Gujarat and Uttarakhand being applied only to Karnataka?" he asked.

Mr. Khandre alleged that the Centre was following a discriminatory policy and said the State had been denied funds due to it under the Finance Commission's recommendations.

Repeated representations

He said the State government had raised the matter with the Centre repeatedly. The Rural Development and Panchayat Raj Department wrote to the Centre on December 8, 2025, and on January 19, March 25, April 4 and April 17, 2026. Chief Minister Siddaramaiah also wrote to the Union Finance Minister and the concerned Minister on February 25, April 6 and July 16, while the Minister said he had written to Members of Parliament and met Union Ministers seeking the pending amount.

Mr. Khandre said the State was considering moving the Supreme Court over the issue. "At a time when the State is facing the impact of drought, withholding funds is inhumane," he said.