Thiruvananthapuram | Kerala Chief Minister V D Satheesan on Wednesday claimed that the 16th Finance Commission "incorrectly assessed" many "census towns" in panchayats as urban areas, thereby reducing funds available for rural area to Rs 300 crore.

Satheesan, at a press conference here, said that it has also created problems in distributing funds to the local bodies for planned expenditure.

The CM said that the Finance Commission has shown rural areas are less in Kerala by including many 'census towns' in urban areas.

A census town is a place treated as urban for census purposes, but is not officially governed as a municipality or municipal corporation.

This assessment has also caused a problem for many municipalities and corporations, he added.

"In this manner, the commission has reduced the allocation to rural areas to just Rs 300 crore. However, most of these census towns are in panchayats. As a result, there is no money, from central funds, to be given to such areas as the the allocations from the Centre come with conditions and stipulations," he said.

Satheesan said that the state government was working to resolve the issue by trying to convince the centre that the assessment by the commission was incorrect.

"We are trying to convince the Centre that the commission's assessment of rural and urban areas was wrong and are holding discussions with them on the issue." This has also affected the distribution of funds to the local bodies, he claimed.

He further said that the first installment from the plan expenditure will be soon given to the local bodies.

The CM claimed there was no delay in the same and asked the media to check when each installment was paid to the local bodies during the last two to three years.

He also rejected allegations of major reduction in planned expenditure.

Satheesan said that the last LDF government prepared a planned expenditure of Rs 35,000 crore based on certain expectations of funds from the Centre.

"However, there was a shortfall of Rs 20,000 crore in the central funds when we came to power. So, we had to reduce the planned expenditure by Rs 5,000 crore. At the same time, we retained the allocation for the SC/ST and fishing communities. We have mentioned this so many times in the assembly," he contended.