The compensation stems from revenue losses incurred by urban local bodies following the nationwide implementation of GST on July 1, 2017, which abolished entry taxes, octroi, local body taxes, and other levies that municipalities previously collected under Entry 52 of List II of the Seventh Schedule of the Indian Constitution.

Of the total sanctioned amount, certain deductions were made before disbursement. A sum of ₹3.44 crore was recovered from 25 municipal corporations toward the operation and maintenance of High Capacity Suction and Jetting Machines with Water Recycling Facility — equipment being provided to urban local bodies for the health and safety of workers who clean underground drainage and sewage collection systems. Additionally, ₹49.96 crore was deducted for outstanding payments to EESL (Energy Efficiency Services Limited) for LED street lighting for 15 municipal corporations, with dues pending up to November 2025. After these deductions, the net amount actually disbursed stands at ₹5,532.28 crore.

The Additional Secretary of the Urban Development Department has been designated as the Drawing and Disbursing Officer, responsible for drawing the full amount from the Pay and Accounts Officer in Mumbai and transferring it immediately to the respective municipal corporations and the Directorate of Municipal Administration.

Here is the breakdown of funds allocated to each municipal corporation for April and May 2026:

Nagpur has received ₹318.63 crore. Chandrapur has been allotted ₹12.62 crore. Amravati gets ₹23.27 crore. Akola receives ₹18.34 crore. Chhatrapati Sambhajinagar (formerly Aurangabad) has been allocated ₹78.12 crore. Parbhani receives ₹1.75 crore. Latur gets ₹1.38 crore. Nanded-Waghala has been allocated ₹22.48 crore. Nashik receives ₹269.54 crore. Malegaon gets ₹44.46 crore. Dhule receives ₹28.28 crore. Jalgaon gets ₹31.74 crore. Ahilyanagar (formerly Ahmednagar) receives ₹25.24 crore. Pune has been allocated ₹485.05 crore. Pimpri-Chinchwad receives ₹457.54 crore. Kolhapur gets ₹35.78 crore. Solapur receives ₹57.52 crore. Sangli has been allotted ₹43.16 crore. Mira-Bhayandar receives ₹58.40 crore. Vasai-Virar gets ₹94.16 crore. Bhiwandi-Nizampur receives ₹68.02 crore. Ulhasnagar gets ₹51.48 crore. Kalyan-Dombivli receives ₹59.82 crore. Thane has been allocated ₹221.52 crore. Navi Mumbai receives ₹316.28 crore. Panvel gets ₹90.42 crore. Brihanmumbai Municipal Corporation (BMC) has received the largest share at ₹2,587.55 crore. Jalna receives ₹10.86 crore. Ichalkaranji gets ₹18.82 crore.

The expenditure is being charged under Demand No. F-4, Major Head 3604, Sub-Head 0998 of the 2026–27 budget.

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