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Democratise and empower city governments

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January 20, 2022

What is the issue?

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.

 

Reference

  1. https://www.thehindu.com/todays-paper/tp-opinion/democratise-and-empower-city-governments/article38294738.ece
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