Kerala defers 7th Fin Commission proposal of ₹100 crore environment fund for local bodies

The state government has deferred the proposal of the seventh finance commission to create a Local Government Environment Fund (LGEF) of ₹100 crore meant for local governments vulnerable to natural hazards. The first report of the seventh commission tabled in the assembly on Thursday recommended creating an LGEF of ₹100 crore, which would be replenished every year until 2030-31.

The commission has proposed that the fund may be managed by the principal director of the local self-government department under the guidance of the State Level Coordination Committee. The local self-government department can involve local governments, the Department of Environment, SDMA and other related agencies in designing appropriate intervention strategies.

The local bodies receiving funds on account of environmental vulnerability may be encouraged to use such resources for implementing jointly conceived, funded and designed projects, the commission said in the report.

The government has, however, remarked in the action taken report that the proposal may be deferred and reviewed in the alteration budget 2026-27, if required. K N Harilal, Chairman of the seventh finance commission, said that the fund was mooted to enhance the technical capacity of the local governments.

"Funds are disbursed to local bodies based on the weightage of environmental vulnerability. Often, these funds are not utilised effectively due to a lack of expertise. Environment-oriented initiatives are seldom taken up," said Harilal. He added that the government may consider the proposal later.

During the Wayanad landslide, three villages in Meppadi gram panchayat were severely affected. Rehabilitation of people living in several panchayats, which are prone to sea erosion and other kinds of natural disasters, has been a major challenge for the state government.

According to the finance commission, the local governments may not be in a position to develop appropriate resilience programmes. The initiative should come from higher tiers of government, which possess the capability to help the local governments to take up the required programmes. The State Disaster Management Authority (SDMA), which is endowed with domain knowledge as well as financial resources, may be involved to play a lead role, the commission recommended.

An official said that while a separate working group for disaster management and risk-based planning are done by local bodies, there are challenges in the implementation of practical measures in disaster-resilience and climate change-resistant measures at the local body level. "This necessitates maintaining a fund which will enhance their capabilities to counter climate change," the official said.