Bhubaneswar, February 28, 2026 – In a significant boost to urban development, Odisha is witnessing enhanced financial support for its cities through the 6th State Finance Commission (SFC) and the 16th Finance Commission (FC), aligning with the state’s ambitious Viksit Odisha vision launched last year, which positions urbanisation as a key economic driver.
The 6th SFC has markedly increased the urban share in overall local government transfers from 33.4% to 35%, while the 16th FC has elevated it to a historic 45% from around 36% previously. In absolute terms, SFC transfers to ULGs have surged 150% to INR 17,114 crore from INR 6,872 crore under the 5th SFC.
The 16th FC allocations to ULGs rise 13% to INR 5,078 crore from INR 4,498 crore under the 15th FC.
A standout feature is the sharp rise in untied funds, offering ULGs greater flexibility. Under the 6th SFC, untied funds’ share climbs to 29% from 22%, with untied allocations to ULGs increasing 2.8 times to INR 4,350 crore.
The 16th FC pushes this further, with roughly 60% of grants (about INR 3,046 crore out of INR 5,078 crore) untied, compared to 21% previously, including 50% of basic grants and all performance grants available for local priorities.
“Two key shifts emerge—an increasing recognition of growing urban demands through higher urban shares, and greater untied transfers empowering ULGs”Prabhat Kumar, Director, Public Finance Management at Janaagraha said on it’s implications.
“The 6th SFC’s Human Resource Development fund addresses staffing gaps, while Odisha’s reforms like revamping the SUJOG e-governance platform and notifying a Rural-Urban Transition Policy position it well for 16th FC grants, including Urbanisation Premium.” he stated.
Both commissions advocate institutional reforms. The 6th SFC recommends a 5-year shelf of projects with citizen participation, sector-wise DPR templates, procurement timelines, ULG-wise allocation disclosures within three months, monitoring via the Samikshya platform, and establishing a dedicated Urban Commission inspired by Kerala’s model.
The state’s FY 2026-27 budget of INR 3.1 lakh crore allocates INR 10,727 crore to urban development—an 8% increase over the previous year’s BE—growing at 11% CAGR since FY 2019-20, though it remains 3.5% of the total budget.
State schemes dominate, at 2.3 times Centrally Sponsored Schemes, underscoring strong state ownership. Key initiatives include Mukhyamantri Sahari Vikas Yojana (INR 1,161 crore), SUJALA (INR 820 crore), and new focuses like New City Development under Samruddha Sahar (INR 50 crore) targeting regions like Bhubaneswar-Cuttack-Puri-Paradeep.
Janaagraha’s extensive engagement with both commissions—submitting blueprints, collaborating on data via CityFinance.in, and organising events—has influenced reforms emphasising fiscal sustainability, efficiency, and accountability.
With substantially higher and more flexible funds flowing to ULGs, the emphasis now shifts to building absorptive capacity through robust project pipelines, detailed reports, training, and digital systems to translate allocations into improved infrastructure and services.
This urban fiscal empowerment could accelerate Odisha’s journey toward sustainable, inclusive growth, provided cities effectively utilise the enhanced autonomy and resources.