The decision was taken at today's cabinet meeting, officials said.
The fee will not be levied on gram panchayats, zila parishads, panchayat samitis, municipal councils, cantonment boards and nagar panchayats.
The local bodies are levied a fee for giving approval of non-irrigation water reservation from irrigation projects.
Officials said the fee was waived as the smaller local bodies were not financially strong.
In another decision, in order to encourage more specialist doctors in the medical health department, the cabinet has approved the proposal to provide six additional increments to post-graduate degree holders and three additional increments for post-graduate diploma holders in grade A of medical and health service.
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The government has also decided to stand guarantee for procurement of agriculture products through NAFED (National Agriculture Cooperative Marketing Federation of India), so that farmers get their dues on time.
In 2013-14, procurement of agriculture products like moong, tur, chana among others, through Minimum Support Price, was Rs 216 crore.
The guarantee of Rs 50 crore will be provided for a period of six months, officials said, adding, earlier the government had provided a guarantee of Rs 200 crore to NAFED for procurement of fertilisers.