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

The question “The states in India seem reluctant to empower urban local bodies both functionally as well as financially.” Comment. was asked in the Mains 2023 GS Paper 2. Let us look at the model answer to this question.

Answer: The 74th Constitutional Amendment Act of 1992 aimed to empower urban local bodies (ULBs) for democratic decentralization. However, ULBs still grapple with challenges in funds, functions, functionaries, and functionality. This has hindered their effective functioning and limited their empowerment in various states.

Reluctance Of States To Empower Urban Local Bodies

• Functional Reluctance:
  • Limited Devolution of Functions:
    • Many states have been slow in transferring functions listed in the Twelfth Schedule to ULBs, impeding their ability to effectively govern urban areas.
    • Parallel Bodies: The establishment of parallel bodies like Special purpose vehicle overseeing significant urban functions weakens the role and significance of ULBs.
  • Non-transparent Appointment Procedures: In some states, ward committees are not constituted transparently, leading to delays and potential compromises in the democratic process.
  • Mayoral Authority: In states where mayors are directly elected, their authority is often nominal due to Municipal commissioners wielding more decision-making power inadequate power devolution, limiting their effectiveness in local governance.

• Financial Reluctance:
  • Dependency on State Grants: ULBs rely heavily on grants from state governments, which limits their financial autonomy and leaves them vulnerable to changing state priorities.
  • Inefficient Revenue Collection: Many ULBs face challenges in efficiently collecting property taxes and other local dues, resulting in strained financial resources.
  • Lack of Diversified Revenue Sources: A significant portion of revenue for ULBs, up to 60%, is derived solely from property taxes, indicating a lack of diversification in revenue streams like public-private partnerships, municipal bonds, or user charges.
  • Ineffective State Financial Commissions: As per RBI report, State governments often fail to establish State Financial Commissions (SFCs) as mandated every five years. Consequently, SFCs largely fall short in guaranteeing a systematic and rule-based allocation of funds to Local governments.

To Tackle These Obstacles, Following Steps Can Be Implemented

• Enhancing Financial Autonomy:
  • Devolve More Taxes: State governments should allocate a greater share of taxes to ULBs, reducing dependence on higher levels of government for funding.
  • Promoting Innovative Financing: Encourage ULBs to explore alternative financing mechanisms to diversify revenue sources. For Ex: Municipal Bonds
• Strengthening Devolution of Powers: Periodic reviews should be conducted to ensure that the provisions of the 74th Amendment Act are effectively implemented, empowering ULBs to carry out their functions.
• Capacity Building: States should invest in capacity-building programs for local bodies, as exemplified by successful initiatives in Karnataka and Mizoram. This would enhance the competence and efficiency of ULBs.
• Streamlining Accounting Practices: ULBs should implement improved accounting practices, ensuring accurate budget preparation, maintenance, and timely presentation of accounts.

States like Karnataka, Mizoram focus on capacity building for local bodies. Some states like Gujarat, Maharashtra, and Andhra Pradesh have granted financial autonomy. The 74th Amendment's vision needs consistent empowerment efforts and political commitment for effective urban development.