The states in India seem reluctant to empower urban local bodies both functionally as well as financially. Comment.

GS 2
Indian Polity
2023
10 Marks

The 74th Constitutional Amendment Act (1992) provided constitutional status to Urban Local Bodies (ULBs) and aimed to promote democratic decentralization. Despite this, states remain reluctant to devolve adequate functional and financial powers to ULBs, hampering urban governance.

Reluctance in Functional Empowerment

  1. Incomplete Devolution of the 18 Functions (12th Schedule): Many states have not fully devolved all functions such as urban planning, water supply, solid waste management, etc.

    Example: Urban planning and town planning often remain with parastatal bodies like Development Authorities (e.g., DDA in Delhi), not municipalities.

  2. Control over Staff and Services: ULBs often lack control over personnel, who are recruited and controlled by state governments.

    Example: In Uttar Pradesh and Bihar, municipal commissioners are often IAS officers accountable primarily to state government, not local bodies.

  3. Parallel Bodies Diluting Authority: Creation of state-run urban development authorities, smart city SPVs, and metropolitan planning committees weakens ULBs’ autonomy.

  4. Retention of Core Urban Planning Functions by State Agencies: Key functions like urban land use, building approval, and zoning continue to be exercised by state-level development authorities.

    Example: In Bangalore, the Bangalore Development Authority (BDA) oversees urban planning, while the BBMP (municipal body) has limited say.

  5. Weak Metropolitan Governance Structures: Metropolitan Planning Committees (MPCs), mandated by Article 243ZE, are either non-functional or not constituted in major cities.

    Example: The Mumbai MPC exists in name but lacks operational teeth.

  6. Political Resistance to Decentralization: State-level politicians are often reluctant to cede powers to local elected representatives.

    Example: In West Bengal, the state government’s tight administrative control over Kolkata Municipal Corporation has led to limited functional autonomy.

  7. Fragmented Institutional Jurisdictions: Multiple agencies within the same city create overlapping roles, leading to weak coordination and diluted authority of ULBs.

    Example: In Delhi, three municipal bodies (MCDs), NDMC, and Cantonment Board operate along with central bodies like DDA and PWD, causing functional fragmentation.

Reluctance in Financial Empowerment

  1. Dependence on State and Central Transfers: ULBs rely heavily on external funding, making them vulnerable to delays and political discretion.

    Example: According to the 15th Finance Commission, nearly 60–80% of municipal revenue in smaller towns comes from state/central grants.

  2. Poor Revenue Mobilization by ULBs: Most ULBs fail to fully exploit their potential to raise own-source revenue (OSR) from taxes and fees.

    Example: Municipal revenue in India is only about 1% of GDP, while in countries like South Africa and Brazil it is over 6% of GDP.

  3. Irregular and Weak Implementation of State Finance Commissions (SFCs): Article 243I mandates that SFCs be constituted every 5 years, but this is rarely followed strictly.

    Example: As per a RBI Report (2022), less than 50% of states have implemented the recommendations of the latest SFCs.

  4. Cumbersome Grant Mechanisms: Grants from the Union (e.g., Finance Commission grants, CSS) are often conditional, limiting the autonomy of ULBs in allocating resources.

    Example: In Smart Cities Mission, many ULBs have complained of stringent fund utilization norms and complex monitoring structures.

  5. Poor Financial Management Capacity: ULBs often lack qualified accountants, financial planners, or digital systems for transparent budgeting and auditing.

    Example: In many municipalities of North-Eastern states and smaller towns, annual financial statements are delayed or absent, violating statutory norms.

  6. Under-utilization of Municipal Bonds: Despite being a viable source of long-term infrastructure finance, municipal bonds are underutilized due to poor creditworthiness and lack of market confidence.

    Example: As per SEBI (2022), only ~12 ULBs have issued bonds since 2017, with Ahmedabad, Pune, and Hyderabad leading the way.

Way Forward

  1. Constitutional and Legislative Reforms:

    • Mandatory implementation of SFC recommendations: States must be made accountable through legislative oversight and periodic reviews by Parliament or a constitutional body.

    Example: Kerala has implemented most SFC recommendations on time — resulting in higher devolution to ULBs.

    • Mandatory implementation of SFC recommendations: Introduce Municipal Cadre: Establish an All India Municipal Services to provide trained, professional urban administrators as recommended by the Second ARC.
  2. Fiscal Empowerment and Autonomy:

    • Enhancing Own Source Revenue (OSR): Adopt GIS-based property tax mapping, ensure regular revision of property values.

    Example: Pune and Indore increased property tax collection by 40–50% using technology.

    • Ease access to Municipal Bonds: Provide credit ratings and partial credit guarantees by the state.

    Example: Ahmedabad was the first to issue municipal bonds in 1998; Pune (2017) raised ₹200 crore through bonds for Smart City work.

  3. Functional Empowerment:

    • Clear delineation of subjects: States must clearly devolve the 18 functions under the 12th Schedule to ULBs without overlap.

    • Autonomous Urban Planning Bodies: Cities should have independent metropolitan planning committees (MPCs) as mandated under Article 243ZE.

  4. Capacity Building:

    • Dedicated Municipal Training Institutes for urban governance, finance, and planning.

    Example: YASHADA in Maharashtra or AIILSG in Gujarat can be scaled up for pan-India capacity building.

    • Promote e-Governance platforms for real-time budgeting, grievance redressal, and project monitoring.

    Example: Chandigarh and Surat have successful e-governance dashboards for citizen interface and internal audits.

  5. Participatory Governance: Strengthen Ward Committees and Area Sabhas for decentralized planning and community ownership.

    Example: Kerala’s People’s Plan Campaign empowered Gram Sabhas and urban ward committees in participatory budgeting.

  6. Performance-Linked Grants: Link devolution of Finance Commission grants to performance indicators like Audit compliance, Infrastructure execution efficiency...

    Example: 15th Finance Commission recommended performance-linked grants based on sanitation and air quality compliance.

While India urbanizes rapidly, the failure to empower ULBs functionally and financially has led to inefficient urban management. Strengthening local governance is no longer an option but a necessity for sustainable urban development and democratic deepening.

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