Recently, the Comptroller and Auditor General of India (CAG) has flagged a concerning gap of 42% between the resources and expenditure of urban local bodies (ULBs) across 18 states. The CAG report has also highlighted that the Urban bodies generate only 32% of their revenue independently, with the rest coming from state and Union government transfers. In this article we will further delve into the challenges faced by Urban local bodies in India. Urban Local Bodies In India
What is the constitutional mandate and structure of Urban Local Bodies in India?
74th Amendment Act,1992 forms the basis of Urban Local Bodies in India. 74th Amendment Act added Part IX -A to the constitution, which consists of provisions from Articles 243-P to 243-ZG. It also added 12th Schedule to the Constitution. It contains 18 functional items of Municipalities.
Structure of Urban Local Bodies in India- The Urban Local Government in India consists of eight types of Urban local bodies.
| Municipal Corporation | Mahanagar Palikas/Municipal Corporation for areas with a population of more than one million. Municipal corporations are usually found in big cities such as Bangalore, Delhi, Mumbai, Kolkata, etc. |
| Municipality | Nagar Palikas/Municipal council/Municipal committee/Municipal board for areas with less than a million people. The smaller cities tend to have the provision of municipalities. |
| Notified Area Committee | Notified area committees are set up for the fast-developing towns and the towns lacking the basic amenities. All the members of the notified area committee are nominated by the state government. |
| Town Area Committee | The town area committee is found in the small towns. It has minimal authority such as street lighting, drainage roads, and conservancy. |
| Cantonment Board | It is usually set up for a civilian population living in the cantonment area. It is created and run by the central government. |
| Township | Township is another form of urban government to provide basic facilities to the staff and workers living in the colonies established near the plant. It has no elected members and is merely an extension of the bureaucratic structure. |
| Port Trust | Port trusts are established in the port areas such as Mumbai, Chennai, Kolkata, etc. It manages and takes care of the port. It also provides basic civic amenities to the people living in that area. |
| Special Purpose Agency | These agencies undertake the designated activities or specific functions belonging to the municipal corporations or municipalities. |
What is the significance of Urban Local Bodies in India?
1. Urban Planning and Development- Urban local bodies play a crucial role in land-use planning, infrastructure development, and implementing policies that promote sustainable urban growth. For ex- Municipal Corporations prepare master plans to guide the development of cities.
2. Service Delivery- ULBs are responsible for providing essential services to urban residents like water supply, sanitation, solid waste management, street lighting, and public health services.
3. Disaster and Pandemic Management- ULBs are involved in developing and implementing plans to mitigate the impact of natural disasters and other emergencies at the local Level. For Ex- BMC at the frontline during COVID-19 outbreak management and Mumbai Floods.
4. Empowerment of Women and Marginalized Groups- Reservations for women and marginalized groups in local bodies, as mandated by the 73rd and 74th Constitution Amendment Acts, have led to their increased participation in the decision-making processes.
5. Community Participation- The urban local bodies is reflective of Gandhiji’s dream of ‘Poorna Swaraj‘ through ‘Oceanic circle of power‘ and ‘democratic decentralisation‘. For ex- Mechanisms such as ward committees and public consultations help the residents to actively engage in local governance.
What are the Challenges faced by Urban Local Bodies In India?
Funding Challenges
1. Dependence on Central and State Transfers- According to the RBI Report on Municipal Finances 2022, Urban Local Bodies are dependent on state and central transfers for around 35% of their revenue. Further, the top-down transfers to the ULBs from the state and central Govt. as a percentage of GDP is extremely less in comparison with other countries.
2. Reduced Revenue raising avenues in Post-GST mechanism- ULBs have bore the burnt in the Post-GST era with the subsumption of major sources of its revenue like sales tax, octroi (in states like Maharashtra) and local entertainment taxes in the GST structure. For Ex- Loss of around ₹7,000 crore, or 35% of its total revenue to Municipal Corporation of Greater Mumbai (MCGM) with the subsumption of Octroi taxes in GST regime. Also, the increase in cess and surcharges by the Central Govt, which need not be devolved, has impacted the ULBs finances.
3. Incapacity in raising direct finances from the assigned taxes- The ES 2018 has pointed out the failure of Urban Local Bodies in realising the full potential of property tax, which is the exclusive domain of Urban local bodies. For Ex- A/c to Peterson Institute of International Economics, China’s ULBs raise 20-22% of finance from property taxes while Indian ULBs raise only 10-11% from property taxes.
4. Narrow taxation powers- ULBs in India do not have wide taxation powers as compared to other developed nations. For ex- China (ULBs major component comes from selling land use rights), Denmark (Local personal Income Tax), US (City governments can impose wide-ranging taxes).
5. Lack of timely Constitution of State Finance Commission- States in India have failed in timely constitution of the state finance commissions. Further, according to RBI report, there has been a shortfall of 15% in the 15th FC recommended grants to ULBs due to attached conditionalities.
Functional Challenges
1. Parastatal agencies- Various parastatal agencies created by the State government deny the local bodies their functional autonomy. For Ex- Creation of Urban development authorities (for building infrastructure), public corporations (water, electricity, transportation services etc).
2. Improper Devolution of Functions- The power to devolve functions to local governments rests with the State Government. Most States have not devolved adequate functions to local government bodies.
3. Lack of constitution of District Planning Committee- The 74th amendment requires a District Planning Committee to be set up in each district, for the consolidation and integration of development plans prepared by the panchayats and urban local bodies. According to a study by the India Development Review, District Planning Committees are non-functional in 9 states. Further, in states where DPCs have been created, DPCs have failed to prepare integrated plans in 15 states.
Functionaries Challenges
1. Delays in conduction of Elections to ULBs- There have been delays in conduction of elections to the urban local bodies by the state Govt, as no constitutional provisions for ensuring elections to ULBs. For Ex- BBMP, the municipal corporation of Bangalore, has been without an elected body since late 2020. There have been regular delays in conduction of MCD, Chennai and Mumbai Municipal Corporations.
2. Criminalisation of the ULBs- There has been increasing criminalisation of ULBs as large number of corporators having criminal and corrupt backgrounds getting selected to the corporations and councils.
3. Corporator Pati- The real aim of political empowerment of women in urban areas has been thwarted by the emergence of Corporator pati/Mayor Pati syndrome.
4. Bureaucratic control- Many cash rich corporations are controlled by the municipal commissioners appointed by the state governments and with the Mayor just being a ceremonial head.
5. Lack of Staff- There is huge shortage of skilled staff in the Urban local bodies to carry out the designated functions entrusted to them. About 35% of posts in India’s municipal corporations are vacant (as of 2022).
Functionality Challenge
1. Ensuring Planned Urbanisation- The municipal corporations have failed in comprehensively planning the holistic urban development. These have resulted in growth of unchecked slums, traffic congestion and colonies without proper facilities such as schools, parks and hospitals.
2. Corruption- The Corruption scandals, like MCD corruption in contract award, have severely hampered the effective functionality of these bodies. Only 11 of the 35 States/Union Territories have enacted the Public Disclosure Law that mandates publishing of key civic data.
3. Lack of coordination- Poor coordination among centre, state, and various departments at local level lead to poor implementation of urban policies.
What should be the way forward to improve the ULB functioning in India?
The following recommendations of the 6th ARC on Urban Governance and NITI aayog’s recommendations must be implemented to ensure that the ULBs function as true instruments of local self-government in India.
6th ARC recommendations on Urban Governance
1. Constitution of Metropolitan Planning Committee- The metropolitan Planning committee must be constituted to prepare development plan, review and coordinate the plans of various local bodies in India.
2. Establishment of Unified Metropolitan Transport Authority (UMTA)- To integrate and manage public transportation services and improve traffic management in the region.
3. Strengthening of ULBs- Conduct regular elections, devolve maximum functions and supplement the urban local bodies with adequate resources.
4. Creation of National Urban Development and Housing Fund (NUDHF)- NUDHF must be created to provide financial assistance to ULBs for urban development and housing projects.
5. Implementation of PPP model and e-Governance- PPP model and e-Governance like citizen grievance redressal mechanism must be adopted by the ULBs to enhance their transparency and accountability of functioning.
NITI Aayog’s Recommendations
1. Improving Financial Management of ULBs- ULBs must be provided adequate sources to raise their revenues. Also, there must be an increase in the central devolution of funds by the Finance Commission. State Finance Commissions should be regularly constituted with clearly defined Terms of Reference (ToR).
2. Capacity Building- Capacity building programs must be developed for local government officials, urban planners and other stakeholders in urban governance.
3. Strenghthening citizen participation- Ward committees and other mechanisms like NGOs and civil society organizations must be used for strengthening citizen’s participation in the ULBs functioning.
CAG’s Recommendations for Strengthening ULBs
The CAG emphasized the urgent need for state governments to enhance ULB autonomy and participation in key areas like urban planning. Stronger laws, policies, and institutional frameworks are critical to fostering economically, environmentally, and democratically vibrant cities.
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