Tamil Nadu tightens civic spending rules amid fund crunch in Chennai
The Tamil Nadu government has tightened financial controls over urban local bodies, making government approval mandatory for projects worth over Rs 10 crore and barring
The Tamil Nadu government has tightened financial controls over urban local bodies, making government approval mandatory for projects worth over Rs 10 crore and barring officials from splitting large works into smaller packages to bypass the requirement. The fresh directive by the Municipal Administration and Water Supply (MAWS) Department comes after the Greater Chennai Corporation (GCC) reported a severe financial crunch, with nearly Rs 2,000 crore in pending bills and a fiscal deficit of Rs 1,970 crore as of March 2026. Read Full Story The move follows the state government's finding that civic officials had, in some instances, taken up projects without the required approval, including by splitting large infrastructure works into smaller packages to keep them below the threshold for mandatory government clearance. "All projects exceeding Rs 10 crore require mandatory Tamil Nadu government approval. Officials have been artificially splitting them into multiple projects to keep the value below Rs 10 crore and execute them using the local body's funds.
We will put an end to this practice," senior MAWS Department officials told India Today. SALARIES, PENSIONS TO GET PRIORITY The directive also lays down a clear order of financial priorities for urban local bodies before they sanction new projects. Civic bodies have been instructed to first meet essential financial commitments, including salaries, pensions and provident fund contributions, before allocating money for fresh works. The move is aimed at preventing corporations and other urban local bodies from committing funds to new infrastructure projects when they do not have sufficient resources to meet existing liabilities. The fresh directive replaces guidelines issued in 2021 under the previous DMK government and modifies the financial approval limits governing projects undertaken by urban local bodies. FUND CRUNCH IN CHENNAI The tighter controls come against the backdrop of mounting financial stress at the Greater Chennai Corporation. Several civic officials recently told India Today that the GCC had accumulated nearly Rs 2,000 crore in pending bills and recorded an overall fiscal deficit of Rs 1,970 crore by the end of March 2026.
Officials estimate that another Rs 1,500 crore in liabilities could accrue during 2026-27, potentially taking the Corporation's pending commitments to around Rs 3,500 crore. A senior GCC official had acknowledged the extent of the problem, saying, "Because of the major financial crunch, the overall deficit has surged to Rs 1,970 crore by the end of March 2026. Nearly Rs 2,000 crore bills are pending in the GCC as of today." The Corporation attributed the crunch primarily to spending on civic infrastructure, recurring maintenance commitments and big-ticket projects undertaken using its own funds. "The fund crunch is mainly due to works undertaken in civic infrastructure, maintenance commitments and taking up big-ticket projects using our own funds," the GCC said in a financial note shared with India Today. FUND CRUNCH SPARKS POLITICAL PROTEST The financial strain has also taken a political turn, with DMK councillors staging a protest over the alleged withholding of funds meant for ward-level development works.
The BriefWire