Premum Pixels
Project Components

Component 1- Performance Grant (Rs 1097.56 cr) :
This component will phase in an annual, performance-based grant to all 978 GPs and 60 Municipalities in Kerala. The performance grant (PG) will be spent on creation and maintenance of capital assets used in service delivery by LSGIs. It will provide GPs and Municipalities with additional discretionary, untied funds for expanded local investment. The overall goal of the grant is to improve GP and municipal performance in local governance and public service delivery.

The GPs and Municipalities have to pass a resolution to participate in this project in order to be eligible for the funding under this component.

The Performance Grant will be introduced in two phases.
The total performance grant will amount to Rs 1097.56 crore for four years. Of this, Rs 821.56 crore will be IDA fund and Rs 276 crore will be State share. State share will be provided from second year onwards. The allocation of funds to individual Grama Panchayats and Municipalities will be based on the same criteria now being adopted in the case of State Finance Commission grants to PRIs. However, the performance grant will be fully additional to the annual SFC allocation for which the institutions are otherwise eligible. Performance Grant funds will not lapse at the end of the corresponding financial year and can be carried over and used in subsequent years.

During Phase I, all participating GPs and Municipalities which satisfy the following audit criteria will receive grant funding.

1. Audit certificate for 2008/09 issued to the GP/Municipality by the Local Fund Audit is not adverse or disclaimed ( €œClean € external audit certificate)
2. Local Fund audit for 2008/09 does not include following observations:-
3. The closing balance as taken in the Annual Financial Statements do not match with the closing balance as per the Cashbook
4 . The closing balance taken in the Annual Financial Statements do not match with the closing balance/ as per the Receipt Register or the Payments Register
5. Opening balance in the Cashbook does not match with the closing balance in the Cashbook of the previous year
6. Cashbook or the Receipt Register or the Payments Register is incomplete
From the third year onwards (Phase II), eligibility for Performance Grant will be based on an annual performance assessment of LSGs based on following aspects:-
i. Conditions regarding audit certification indicated above are satisfied.
ii. Budget for new Financial Year is approved by council, and a copy furnished to Government by end of March
iii. Minimum of 80% of performance grant funds spent for those LSGs which received the grant in the preceding year
iv. Physical assets funded from performance grant are verified
v. Preparation and distribution of a public report on the annual budget of LSGIs and the implementation of projects using plan funds have been carried out
vi. Compliance of Environmental Safeguards Management Framework guidelines (ESMF) in preparation an implementation of projects has to be ensured. The ESMF guidelines ensure that the projects undertaken under this grant comply with environment and social safeguard regulations like prevention of forceful acquisition of land, prevention of child labour, compliance with watershed protection regulations, coastal area protection regulations, and other related regulations.
vii. Rules regarding purchases and awarding of work contracts have been observed.
viii. Achieving a minimum grade in Performance Assessment.

Component 2- Capacity Building for local bodies (Rs 51.52 crore)

This component will provide capacity building inputs to institutionalize the existing systems and human resources of the following institutions envisioned for providing training to PRIs.

1. Kerala Institute of Local Administration (KILA)
2. State Institute of Rural Development (SIRD)
3. Information Kerala Mission (IKM)


1. Support will be provided for preparation of:

Public Report, Budget, Plan, FM, Asset Management, Public Works & Maintenance Manuals,
Statutory Auditing Manual,
Office Management Manual and ESMF DPR
Development of Training Modules and ToT for above manuals.

2. Strengthening the Help Desk €“ in the wake of the new areas like ESMF and revised procurement procedures.

SIRD: Support to develop the toolkits PRA, Social Audits

The Project will ensure availability of one engineer per Block to provide inter alia assistance to the LSGs within the Block. These engineers will provide technical assistance to individual GPs and Municipalities during preparation of DPRs ensuring ESMF compliances as per guidelines and supervision of works funded by Project. The project will meet the fund required to cover the related travel costs of engineers.

The project will provide support for hiring one accountant-cum-IT specialist in each Block through IKM on a temporary basis to enter legacy data. The project will provide support to the expansion of IKM capabilities to provide technical support (on-line and mentoring) to LSGs for the implementation of e-governance systems, and accounting systems.

Component 3- Enhancing State Monitoring of the local Government system (Rs 15.44 crore)

This component will provide support to strengthen the system of performance monitoring of LSGIs in Kerala. It has four sub-components:

Database of GPs and Municipalities information: Database of GP and municipal information. The project will establish a database of GP and municipal level information which will store basic information regarding GP and municipal profiles like population, vital statistics, livelihoods, employment, education, water and sanitation, budget expenditures and physical assets. The data will be collected from existing datasets such as 2001 and 2010 census, administrative records, state audits, and line department routine data. The database will be web-based and available to the general public. Decentralization Analysis Cell (DAC) will be responsible for operating and updating the system. DAC has been established at Gulati Institute of Finance and Taxation (GIFT).

LSG Service Delivery Survey: A survey will be carried out to gauge the basic services provided by LSGIs and the level of satisfaction of the citizens in this regard. The survey will also explore the awareness of LSGI planning and budget processes. The survey is supposed to be contracted to an external survey firm/s.

Project Evaluations: The project is planning two evaluations to evaluate the quality of the capacity building efforts (Component 2) and service delivery technical evaluation for the Performance Grant investments (Component 1). The latter will include an assessment of improved access to services as a result of the block grant investments; coverage/distribution of service provision; technical quality, operations and maintenance arrangements, cost effectiveness (value-for-money) and safeguards issues.

Decentralization Analysis Cell (DAC): The DAC will have the following functions: (i) collect, store, compile and report GP/Municipality level and service delivery data; (ii) carry out a policy advisory function providing independent analysis on the performance of the State €˜s intergovernmental fiscal system and service delivery system and provide ongoing policy advice to Government of Kerala and the SFC on local and intergovernmental fiscal and institutional issues.

Component 4- Project Management and Implementation- (Rs 31.28 crore)
This component will provide support to Project Management Unit (PMU) constituted for the purpose within LSGD which will be directly responsible for the day-to-day project management co-ordination and implementation.

Implementation arrangements
1. The LSGD has primary responsibility for project implementation and ensuring that the project development objectives are met. The department is supported by the PMU.
2. The PMU is headed by a Project Director assigned from the state government, reporting to the Principal Secretary, LSGD, and will be supported by a Deputy Project Director for this specific role.