Urban governance: Democratise and empower city governments

News: Recently, the Reserve Bank of India released a report titled “state finances, study of budgets of 2021-22 “.

What does the report talk about?

RBI report, on the lines of 15th finance commission report, mentioned that:

– local governments played a great role in combating the pandemic, but this has now worsened their economic situation.

– Functional autonomy of civic bodies must increase and governance structures should be strengthened.

What steps have been taken for urban governance empowerment in the past?

First intervention took place in the 1980s and the formation of the national commission on urbanisation with Charles Correa as its chairperson.

Second important intervention was in the 1990s with the 73rd and 74th amendment act and empowering urban local bodies to perform 18 functions listed in the 12th schedule.

Some states like Kerala adopted a people’s plan model where 40% of the state’s budget was for local bodies.

What are the challenges in urban governance?

Cities are treated as an extension of State governments, with very limited freedom is given to cities. Also, 73rd and 74th amendment act gave no mention of financial empowerment.

Octroi was a significant means of city finances. But this was taken away by the state and central governments and instead, the Finance commission recommended grants to local bodies based on the formula of demographic profile. While earlier 55% of revenue was met by octroi, now grants cover only 15% of the expenditure.

Goods and services tax now have completely reduced the city’s capacity to tax and finance themselves.

What measures should be adopted to address urban governance?

A committee under the ministry of housing and urban development had earlier recommended 10% of income tax flows should be directed to cities. But this was not implemented. The government should implement the recommendation.

Apart from that,

– City should be treated as the centre of governance with a focus on transparency and participation of the people.

– Cities should not be considered only as business centres, but as spaces for plant development.

– Cities should be made climate-resilient by incorporating climate change into the development plan.

– Focus should be on enabling residents to drop plans and make them part of decision-making.

– Leadership in the cities must be elected for five-year terms.

This will enable India to go the Scandinavian Way, where cities are self-reliant centres of Governance. Empowering the three F’s – functions functionaries and finances should be the way forward.

Source: This post is based on the article “How to avert a demographic disaster” published in the Indian Express on 20th January 2022.