On the basis of the recommendations of the Twelfth Finance Commission (TFC), the Government of India have allotted a sum of Rs. 870 crores for the 5-year period from 2005-06 to 2009-10.

For 2007-08, this Government decided that the entire Twelfth Finance Commission Grant should be allocated only to Village Panchayats on the basis of population. The grants should be utilised by the Village Panchayats entirely for the operation and maintenance cost of water supply, street lighting and sanitation. On the basis of the recommendations of the Thirteenth Finance Commission status are eligible to draw two types of grant. 1. Basic Grant (from the year 2010 – 11), 2. General performance grant (from the year 2011-12). The Government of India have allocated a sum of Rs.143.55 crores as Basic grant (1st Installment) of 13th Finance Commission for 2010-11. The grant should be utilized by the Village Panchayats.