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Urban Local Governments (together with Panchayati Raj Institutions) have long existed in India. They were created to promote democratic decentralisation.

The 74th Amendment to the Indian Constitution authorised urban local governments to fulfil 18 responsibilities from the 12th Schedule.

Key Issues Impeding ULB Efficiency : –

An RBI assessment of 221 municipal corporations (2020-21) indicated that revenues fell by over 70% while expenditure climbed by about 71.2 percent.

It also fails to boost municipal corporation revenues, according to the RBI research.

During the pandemic, national, state, and district authorities were observed making decisions on disaster mitigation methods, but municipal leaders were not included.

While the crisis management plan places cities at the frontline of the pandemic fight, elected leadership is absent. The old policy paradigm of seeing cities as adjuncts of state governments still dominates.

Lowered Octroi (a fee charged on products entering a town or city) was eventually replaced by grants to urban local authorities (approved by FC) based on a demographic profile.

Previously, octroi covered over 55% of total revenue spending in urban centres, but currently it only covers 15%.

This has led to increased taxation and more privatisation/outsourcing of municipal services. The GST made matters worse. Some metropolitan local governments lack essential utilities including bathrooms, drinking water, and power.

Local bodies also lack support staff such as secretaries, junior engineers, computer operators, and data entry operators. This affects their operation and service delivery.

Measures To Support Smooth Urban Local Governance : –

Lessons for Local Government: The transfer of ‘functions, funds, and functionaries’ to local governments must be authorised. Functional autonomy would be hollow without them.

Kerala’s people’s plan budgeted 40% for local bodies (directly), transferring essential subjects like planning, etc.

This ushered in a new era of urban governance. Proposed state legislation is appreciated.

The city leaders must be chosen for five years. Because some mayors only serve for a year, the officials must be moved to cities with a permanent cadre.

From city planning to transportation to trash management, the Scandinavian countries manage their functions successfully by distributing a portion of the income tax earned to local governments.

If significant urban agglomerations in India could collect a percentage of income tax for handling urban affairs, it would help much. It was also suggested that the federal government return 10% of the income tax received by the cities as a direct grant.

  • Cities must be considered as key centres of governance, where democratic decentralisation can produce extraordinary benefits.
  • Transparency and public participation are required.
  • Cities should not be viewed as entrepreneurship hubs solely focused on attracting investment.
  • They must be viewed as planned development areas with adequate resource allocation.
  • This was emphasised in the 15th Finance Commission report on local bodies.
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