The general approach towards urban empowerment, including financial capabilities, has remained piecemeal in India
How significant are ULBs?
There are nearly 5,000 statutory towns and 5000 census towns in India.
Nearly 35% of the population lives in urban centres.
Nearly two-thirds of the country’s GDP stems from cities
Almost 90% of government revenue flows from urban centres.
What are the concerns regarding urban local bodies?
RBI recommendations are similar to 15th Finance Commission report on local bodies.
Financially weak - The third-tier governments in India is playing a frontline role in combating the pandemic by implementing containment strategies, healthcare etc.
But their finances have come under severe strain, forcing them to cut down expenditures and mobilise funding from various sources.
An RBI survey revealed that more than 70% decline in revenues; in contrast, their expenditure rose by almost 71.2%.
Property Tax –According to OECD India has the lowest property tax collection rate in the world.
Octroi tax - Octroi tax has been taken away by the State and the central governments which remained as major earnings of cities.
It is replaced with grants under GST regime based on a formula of demographic profile.
55% of the total revenue expenditure of urban centres was met through octroi. Now, the grant covers only 15% of expenditure.
GST has completely robbed the city’s ability to tax.
Functional Autonomy – The functional autonomy of civic bodies must increase.
Their governance structure must be strengthened.
This could happen by empowering them financially through higher resource availability.
Inclusion in planning - In disaster mitigation strategies during pandemic city mayors were found missing.
Cities being treated as adjuncts of State governments continue to dominate the policy paradigm.
What reforms have been made so far?
Urban development is a state subject.
National Commission on Urbanisation was formed to plan with a pan-Indian vision in the 1980s.
In the 73rd and 74th Amendments 18 functions listed in the 12th Schedule were transferred to urban local bodies enabling them to generate their own resources.
The idea of “competitive cites” to attract investments in the urban centres by making land laws flexible have not really been able to enhance their financial capabilities.
The people’s plan model of Kerala where 40% of the State’s plan budget was for local bodies (directly) with a transfer of important subjects such as planning paved the way for a new dimension to urban governance.
What needs to be done?
Best models - Cities in the Scandinavian countries manage their functions well — from city planning to mobility to waste management.
A chunk of the income-tax from citizens is given to city governments.
Share in income tax - For large urban agglomerates in India a percentage of income tax can be given for managing their affairs.
A committee to review the 74th constitutional amendment recommended 10% of income-tax collected from the cities to be given back to them as a direct revenue grant from the central government.
Functional autonomy - This should happen with three F’s: the transfer of ‘functions, finances and functionaries’ to city governments.
Without these, functional autonomy would be empty rhetoric.
Democratic decentralisation can bring in amazing results (as seen in Kerala). There will be transparency and adequate participation of the people.
Cities must be treated as important centres of governance.
Cities must be considered as spaces for planned development by giving adequate attention to resources rather than focusing on attracting investments.
Disaster risk reduction plan – Cities do not have adaptive strategies to deal with the impact of climate change.
Resources required for quantitative and qualitative data must be immediately provided to ensure a disaster risk reduction plan keeping vulnerable communities in mind.
Smart cities - The concept of smart cities must be shunned altogether.
This approach widens the gap between different sets of people.
Rather, the grants from the Centre must be enhanced.
Cities must be asked to draw up their plans themselves. People must be a part of the decision-making process.
Functionaries - Leadership in the cities must be elected for a term of five years. In some cities, the term of the mayor is for a year
The functionaries must be transferred to the cities with a permanent cadre.
