Subject: Indian Polity

Answer:

Despite constitutional mandates under the 74th Amendment Act, 1992, urban local bodies (ULBs) continue to face significant functional and financial constraints due to states' reluctance to devolve genuine autonomy, hampering effective urban governance.

Functional Constraints Faced by ULBs

• Limited Devolution of Functions: States have not effectively transferred all 18 functions listed in the 12th Schedule to ULBs, retaining control over crucial areas like urban planning and economic development.

• Weak Decision-Making Authority: ULBs often require state government approval for routine decisions, undermining their autonomy in areas like personnel management and project implementation.

• Parallel Institutions: Creation of state-controlled bodies like Development Authorities and Special Purpose Vehicles under schemes like AMRUT dilute ULBs' functional domain.

Financial Challenges

• Limited Revenue Sources: ULBs heavily depend on state transfers, with restricted authority to generate own revenue through taxes and user charges.

• Poor Property Tax Collection: India's property tax collection stands at mere 0.2% of GDP compared to the OECD average of 1.1%, highlighting the weak financial position of ULBs.

• Conditional Funding: State governments often attach conditions to fund transfers, limiting ULBs' discretion in resource allocation.

Reasons for States' Reluctance

• Political Control: States prefer maintaining control over urban affairs to preserve their political influence and patronage networks.

• Administrative Inertia: Bureaucratic resistance to decentralization and lack of capacity building initiatives for ULB officials.

• Resource Competition: States view empowered ULBs as potential competitors for limited financial resources.

Way Forward

• Mandatory Devolution: Implementation of activity mapping for clear division of functions between state and ULBs.

• Financial Empowerment: Strengthening ULBs' revenue generation capacity through modern property tax systems and user charges.

• Capacity Building: Regular training programs for ULB officials under initiatives like AMRUT 2.0 and Smart Cities Mission.

The true spirit of urban decentralization remains unrealized due to states' reluctance to empower ULBs. Success stories like Kolkata Municipal Corporation and Pune Municipal Corporation demonstrate that empowered ULBs can effectively deliver urban services and drive local development. Implementation of State Finance Commission recommendations and adoption of the "3F" principle - Functions, Functionaries, and Funds can strengthen urban local governance.