Based on field research in the remote and tribal-dominated Kandhamal district in the eastern Indian state of Odisha during 2019-20, the study examines the extent to which Constitutionally-created rural self-governance institutions (village Panchayats) fulfilled their mandated healthcare functions. Primary data was collected from villagers, front-line public health officials, elected local government (Panchayat) members and party cadres through focus group discussions and interviews. Employing the Foucauldian governmentality framework, the analysis moves away from a depoliticized understanding of decentralized delivery of rural health. The study concludes that Panchayats’ contributions to rural health are influenced by politically motivated factors, which may not be compatible with considerations of democracy and efficiency. Panchayat performance in the study villages remained poor as the state allowed them only regulated freedom and did not create space for their autonomy to flourish. Rural health decentralization led to new forms of governmentality as Panchayats were instrumentally used to consolidate state power at the rural grassroots. Top-down management of political process in these areas makes local government mechanical outpost of the ruling party.