Urban Local Governance in India: Structure, Committees and Financial Challenges- (Part 02)

The governance of urban areas in India is structured around various local bodies, each designed to address specific needs and challenges. This system is reinforced by constitutional provisions that empower municipalities to operate effectively. Key committees, such as the District and Metropolitan Planning Committees, play a vital role in ensuring comprehensive urban planning and development. Understanding  how urban local governance works is crucial for creating sustainable cities and enhancing the quality of life for residents.

Important committees under Municipalities

District Planning Committee( Article 243ZD)

• Purpose: Every State is mandated to establish a District Planning Committee at the district level. The primary purpose of this committee is to consolidate the plans developed by panchayats and municipalities within the district and formulate a comprehensive development plan for the entire district.
• Composition: The Legislature of a State may, by law, make provision with respect to
  • The composition of the District Planning Committees; 
  • The manner in which the seats in such Committees shall be filled 
  • The Act specifies that four-fifths (80%) of the committee’s members should be elected by the elected representatives of the district panchayats and municipalities from among themselves. This ensures that the local representatives have a significant say in the planning and development of the district.

Metropolitan Planning Committee

• Purpose: For metropolitan areas, which include regions with a population of 10 lakh (1 million) or more, spanning multiple districts and comprising two or more municipalities, the Act requires the formation of a Metropolitan Planning Committee. 
  • This committee is responsible for drafting a development plan for the entire metropolitan area.
• Composition: The Act stipulates that two-thirds (66.67%) of the members of the Metropolitan Planning Committee should be elected by the elected representatives of the municipalities and the chairpersons of the panchayats within the metropolitan area, chosen from among themselves. 
  • This ensures local representation and involvement in the planning process for significant urban areas.

 Diverse Forms of Urban Administration

The administration of urban areas in India involves 8 types of urban local bodies, each with its own specific purpose and jurisdiction are mentioned below:

• Municipal Corporation:
  • Municipal corporations are established for the administration of major cities like Delhi, Mumbai, Kolkata, Hyderabad, and others.
  • They are established by State legislatures (in States) or the Parliament of India (in union territories).
  • Municipal corporations have a council, standing committees, and a commissioner as their key authorities.

• Municipality:
  • Municipalities are set up for the administration of towns and smaller cities.
  • Like municipal corporations, they are established by State legislatures (in States) or the Parliament of India (in union territories).
  • Municipalities have a council, standing committees, and a chief executive officer.
• Notified Area Committee:
  • Notified Area Committees are created for two types of areas: 
    • Fast-developing towns due to industrialization and towns that do not yet meet all the conditions for a municipality but are considered significant by the State government.
  • They are entirely nominated bodies, with all members, including the chairman, nominated by the State government.
• Town Area Committee:
  • Town Area Committees are established for the administration of small towns.
  • They are governed by a separate State legislative act and may be wholly elected or wholly nominated, or a combination of both.
• Cantonment Board:
  • Cantonment Boards are established for municipal administration in civilian areas within cantonments. 
  • They are under the jurisdiction of the Ministry of Defence.
  • They are created and administered by the Central government under the provisions of the Cantonments Act of 2006.
  • Cantonment Boards have both elected and nominated members.
• Township:
  • Townships are established by large public enterprises to provide civic amenities to their staff and workers residing near the enterprise.
  • Town administrators manage the administration, and there are no elected member in this form of urban government.
• Port Trust:
  • Port Trusts are set up in port areas, such as Mumbai, Kolkata, and Chennai, to manage and protect the ports while also providing civic amenities.
  • Port Trusts are created by an Act of Parliament and consist of both elected and nominated members.
• Special Purpose Agency:
  • Special Purpose Agencies are established to carry out designated activities or specific functions that may belong to municipal corporations or municipalities.
  • They are function-based and not area-based.
  • Examples: Include town improvement trusts, urban development authorities like HUDA, DDA, etc. water supply and sewerage boards, housing boards, pollution control boards, electricity supply boards, and city transport boards.
  • These agencies operate autonomously and are responsible for their specific functions independently of other local urban governments. 
  • Example: Agra Smart City Special Purpose Vehicle is implementing the smart city project independently of Agra Municipal Corporation.

Municipal Finances

Municipal finances in India are supported by various sources of income that enable urban local bodies to fund their operations and development programs. Here are the five primary sources of income for urban local bodies:

• Tax Revenue: Tax revenue includes income generated from various local taxes imposed by urban local bodies. These taxes encompass:

• Non-Tax Revenue: Non-tax revenue includes income generated from various sources other than taxes. These sources consist of:
  • Rent from municipal properties
  • Fees and fines
  • Royalty
  • Profits and dividends
  • Interest
  • User charges (e.g., water charges, sanitation charges, sewerage charges)
  • Miscellaneous receipts
  • Bonds( e.g. Pune Municipal Corporation recently issued proposed municipal bonds as non-taxable income option)
• Grants: Grants are financial contributions provided to municipal bodies by both the Central and State Governments. 
  • These grants are allocated for a variety of purposes, including development programs, infrastructure schemes, and urban reform initiatives. 
  • Example: The Fifteenth Finance Commission recommended grants of Rs 1.2 lakh crore for urban local bodies.
• Devolution: Devolution refers to the transfer of funds from the State government to urban local bodies. 
  • The allocation of these funds is typically determined based on the recommendations of the State Finance Commission, which assesses the financial needs of local bodies.
• Loans: Urban local bodies may raise loans to finance their capital expenditure, such as infrastructure projects. 
  • Loans can be obtained from the State government and financial institutions, but their approval usually requires the consent of the State government.

Central Council for Local Governance

• Focus and Evolution: The Central Council of Local Government, initially established in 1954 under Article 263 of the Indian Constitution, serves as an advisory body with a focus on local government matters. 
  • Initially, the Council dealt with both urban and rural local governments, but it shifted its focus to urban local government matters exclusively after 1958.
• Composition: The Minister for Urban Development in the Government of India, who serves as the Chairman and the Ministers for Local Self-Government in various States as members.
• Functions: The Central Council of Local Government performs several functions related to local government:

• Considering and Recommending Policy Matters
• Making Proposals for Legislation
• Recommending and Reviewing Central Financial Assistance

Limitations

The challenges faced by urban local bodies (ULBs) in India are indeed significant obstacles to effective governance and service delivery such as

• Constrained Financial Resources: Urban Local Bodies (ULBs) face financial limitations due to their restricted ability to generate revenue, coupled with inadequate tax collection and revenue generation in many urban areas. 
  • According to the Indian Institute for Human Settlements (IIHS), ULBs’ own sources of revenue were less than half of their total revenue, with largely untapped potential (47% of their total revenue).
  • As per RBI report on  Municipal Finances, about 70% of it gets spent on salaries, pensions, and administrative expenses with the rest left for capital expenditure. 
• Autonomy Deficit: The limited autonomy of ULBs in decision-making, coupled with their reliance on State governments for financial and administrative support, can impede their capacity to respond effectively to the needs and demands of their residents.
• Multiplicity of Agencies: In certain States, ambiguity in the functional scope of ULBs and parastatal bodies creates a sense of distance and inaccessibility in municipal governance for citizens.
• Scarce Human Capital: ULBs in India often grapple with a shortage of competent and qualified personnel, which can impact their ability to efficiently execute their roles and responsibilities.
• Inadequate Infrastructure: Numerous ULBs in India confront infrastructure deficiencies, including roads, water supply, and sewage systems, limiting their ability to furnish essential services to their constituents.
• Political Meddling: ULBs in India are frequently subjected to political intervention, potentially compromising their independence and impartiality in decision-making.
• Limited Civic Engagement: Many ULBs in India encounter challenges related to inadequate public involvement in decision-making processes, potentially impeding their efficiency and accountability.
• Capacity Shortage: A number of ULBs in India lack the capacity to proficiently strategize, execute, and oversee developmental projects and initiatives. This inadequacy can lead to inefficiencies and the squandering of resources.

Way Forward

Financial Independence: Devolve financial powers and resources to ULBs to reduce their dependence on State governments. 

• Allow them to collect and manage their revenues independently.

• Strengthening Municipal Revenue: Implement GIS and digitization to enhance property tax administration, making it more efficient and transparent.
  • Enable municipalities to levy vacant land taxes to generate additional revenue.
• Better Financial Database: Ensure proper maintenance and audit of financial accounts at the local level to create a verifiable financial database that supports performance grant eligibility.
• Active Citizen Participation: Organize public consultations, meetings, and public hearings to involve citizens in decision-making processes.
• Citizen Grievance Redressal Mechanism: Establish an online platform for citizens to register complaints, provide feedback, and track grievance redressal processes.
• Capacity Building: Invest in training and capacity-building programs for ULB staff to enhance their skills and capabilities.
• Performance Monitoring: Implement systems for monitoring and evaluating the performance of ULBs, including financial management and service delivery.
• Resource Mobilization:
  • Alternative Funding: Explore various funding options, including public-private partnerships, bonds, and other innovative financing mechanisms to supplement ULBs’ financial resources.
• Legal and Policy Reforms:
  • Enhance Autonomy: Advocate for greater autonomy for ULBs in decision-making, financial management, and governance.
• Promoting Civic Engagement:
  • Awareness Campaigns: Conduct awareness campaigns to inform citizens about their rights, responsibilities, and opportunities to engage with local government.
  • Use of Technology: Leverage technology, such as mobile apps and social media, to facilitate citizen engagement and provide real-time information.
• Transparency and Accountability:
  • Open Data Initiatives: Promote open data initiatives to share information about ULB activities, budgets, and performance.
  • Citizen Scorecards: Encourage the development of citizen scorecards to measure ULB performance and identify areas for improvement. 

Conclusion

Efficient urban governance is crucial for the sustainable development of cities, as highlighted by the Sustainable Development Goals. 

• Urban local bodies are pivotal in overcoming bureaucratic challenges and enhancing service delivery to citizens. By implementing reforms and promoting citizen engagement, municipalities can become more responsive and effective. 
• Ultimately, a well-functioning urban governance system contributes significantly to the overall growth and prosperity of the nation.

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