Why Urban Local Government? The Case for the Municipal Tier

If the village was the unit of the Gandhian imagination, the city is the unit of India's economic reality. Census 2011 counted 377 million urban Indians — 31.16% of the population, spread across roughly 4,000 statutory towns; NITI Aayog estimates urban areas contribute close to 60% of India's GDP; and the 16th Finance Commission has planned on the basis of a projected 41% urbanisation by 2031. Water, sanitation, solid waste, roads, drainage, building approvals, street lighting — every service that makes a city liveable is a municipal function.

The problem is structural. Municipalities are creatures of State legislation (Entry 5, State List), and for four decades after Independence they existed entirely at the mercy of State governments: superseded at will, starved of funds, kept without elections for years. The 74th CAA was the attempt to give the urban tier the same constitutional shield that the 73rd gave to panchayats.

Rural India was constitutionalised because it was where the people lived. Urban India had to be constitutionalised because it is where the economy lives — and where the failure of governance is most visible, most expensive, and most immediate.

— Legacy IAS Faculty

Historical Development of Urban Local Government in India

Colonial Foundations

• 1687 — Madras Municipal Corporation: the first municipal corporation in India, set up by the East India Company.
• 1726 — Bombay and Calcutta: Mayor's Courts established under a Royal Charter; municipal corporations followed.
• 1870 — Lord Mayo's Resolution: the first push for financial decentralisation, transferring certain departments to provincial control and involving Indians in local administration.
• 1882 — Lord Ripon's Resolution: the Magna Carta of local self-government. It provided for local boards with a two-thirds non-official majority and elected non-official chairpersons, and framed local bodies as instruments of political education, not merely administration. Ripon is rightly called the Father of Local Self-Government in India.
• 1907 — Royal Commission on Decentralisation (Chairman: Charles Hobhouse; report 1909): recommended strengthening village panchayats and urban bodies, and giving them independent finances.
• 1919 — Government of India Act (Montagu–Chelmsford Reforms): local self-government became a transferred subject under dyarchy, placed in the charge of an Indian minister in the provinces.
• 1924 — Cantonments Act: enacted by the Central legislature — the reason Cantonment Boards sit under the Union even today.
• 1935 — Government of India Act: under provincial autonomy, local self-government was declared a provincial subject — the ancestor of today's Entry 5, State List.

The Committees Before Constitutionalisation

Where rural local government had a clean committee chain (Balwant Rai Mehta → Ashok Mehta → GVK Rao → Singhvi), urban local government was studied by a series of narrower, more technical committees — largely under the Central Council of Local Self-Government (1954), an advisory body constituted under Article 263.

What the Committees Collectively Established

• Finance is the binding constraint: the Zakaria Committee established, as early as 1965, that ULBs simply do not have a revenue base commensurate with their functions.
• Personnel is the second constraint: the Nur-ud-din Ahmed and Mukharji committees converged on training, service conditions and a professional municipal cadre.
• Planning must cross the rural–urban line: the A.P. Jain Committee's integrated area planning idea resurfaces as Article 243ZD (DPC) and 243ZE (MPC).
• Urbanisation is an economic opportunity: the Correa Commission changed the frame — cities as engines, requiring empowered local governments.

Addition in the Constitution — The Road to the 74th CAA

The Failed Attempt: 65th Constitutional Amendment Bill, 1989

• Introduced by the Rajiv Gandhi government — the Nagarpalika Bill, the urban twin of the 64th Amendment Bill on panchayats.
• Lok Sabha: ✔ Passed.
• Rajya Sabha: ✘ Failed in October 1989 — the majority was not there. Opposition States read it as central encroachment on a State subject.

The Interruption

The V.P. Singh National Front government reintroduced a revised Nagarpalika Bill in September 1990, but the bill lapsed with the fall of the government and the dissolution of the Lok Sabha.

The Success: P.V. Narasimha Rao

• The Narasimha Rao government introduced a modified Nagarpalika Bill in September 1991.
• It was enacted as the Constitution (74th Amendment) Act, 1992, and came into force on 1 June 1993.
• It inserted Part IXA — "The Municipalities" (Articles 243P to 243ZG) and added the Twelfth Schedule (18 subjects).
• It also gave constitutional sanction to Article 243ZD (District Planning Committee) and 243ZE (Metropolitan Planning Committee) — provisions with no parallel in Part IX.

Article-by-Article: Part IXA of the Constitution (Articles 243P to 243ZG)

The Twelfth Schedule — All 18 Subjects

1. Urban planning including town planning.
2. Regulation of land-use and construction of buildings.
3. Planning for economic and social development.
4. Roads and bridges.
5. Water supply for domestic, industrial and commercial purposes.
6. Public health, sanitation, conservancy and solid waste management.
7. Fire services.
8. Urban forestry, protection of the environment and promotion of ecological aspects.
9. Safeguarding the interests of weaker sections of society, including the handicapped and mentally retarded.
10. Slum improvement and upgradation.
11. Urban poverty alleviation.
12. Provision of urban amenities and facilities such as parks, gardens and playgrounds.
13. Promotion of cultural, educational and aesthetic aspects.
14. Burials and burial grounds; cremations, cremation grounds and electric crematoriums.
15. Cattle pounds; prevention of cruelty to animals.
16. Vital statistics including registration of births and deaths.
17. Public amenities including street lighting, parking lots, bus stops and public conveniences.
18. Regulation of slaughter houses and tanneries.

Compulsory and Voluntary Provisions of the 74th CAA

As with the 73rd, the Act separates the binding core from the discretionary shell. The urban tier's chronic weakness is almost entirely explained by what sits in the second column.

Compulsory / Binding Provisions

1. Constitution of the three types of municipalities — Nagar Panchayat, Municipal Council, Municipal Corporation (Art. 243Q).
2. Direct election of all members from territorial wards (Art. 243R).
3. Constitution of Wards Committees in municipalities with population 3 lakh or more (Art. 243S).
4. Reservation of seats for SC/ST in proportion to population (Art. 243T).
5. Reservation of 1/3rd of total seats for women, including within the SC/ST quota (Art. 243T).
6. Fixed tenure of 5 years, and fresh elections within 6 months of dissolution (Art. 243U).
7. Minimum age of 21 years to contest (Art. 243V).
8. Constitution of a State Election Commission (Art. 243ZA).
9. Constitution of a State Finance Commission every five years (Art. 243Y read with 243I).
10. Constitution of District Planning Committees in every district (Art. 243ZD).
11. Constitution of Metropolitan Planning Committees in every metropolitan area of 10 lakh+ (Art. 243ZE).
12. Bar on court interference in electoral matters (Art. 243ZG).

Non-binding / Optional (Voluntary) Provisions

• Reservation for backward classes (OBC) — left entirely to the State legislature.
• Representation of MPs, MLAs and MLCs in municipalities.
• Representation of persons with special knowledge or experience in municipal administration (without the right to vote in meetings).
• Powers of taxation — whether the municipality may levy, collect and appropriate taxes, duties, tolls and fees (Art. 243X).
• Devolution of the 18 subjects of the Twelfth Schedule — Article 243W says the State legislature "may" endow. This single word is the reason municipal India remains hollow.
• Assignment of State-levied taxes and provision of grants-in-aid from the Consolidated Fund of the State.
• Manner of election of the chairperson (Mayor / President) — direct or indirect, and the tenure of that office.

Composition: The Structure of Urban Governance

The Three Constitutional Types (Article 243Q)

The Governor specifies which category an area falls in, having regard to population, population density, revenue generated for local administration, percentage of employment in non-agricultural activities, economic importance and other factors. Under the industrial township exception, the Governor may dispense with a municipality altogether where an industrial establishment provides municipal services in that area.

Deliberative Wing vs Executive Wing

The parallel with rural India is exact: the elected head deliberates, the State-appointed officer executes — and in the urban case, the Commissioner is typically more powerful than the Mayor, holding the budget, the staff and the statutory powers.

Beyond Part IXA — The Other Urban Bodies

Not every urban body is a "municipality" under Article 243Q. UPSC frequently tests these eight types of urban government:

• Municipal Corporation — larger urban areas.
• Municipality / Municipal Council — smaller urban areas.
• Notified Area Committee — for a fast-developing town or a town that does not yet fulfil the conditions for a municipality; created by a notification in the gazette; entirely nominated, hence neither elected nor statutory in the ordinary sense.
• Town Area Committee — for small towns; set up by a separate Act of the State legislature; may be wholly elected, wholly nominated or partly both.
• Cantonment Board — set up under the Cantonments Act (a Central Act, administered by the Ministry of Defence) for civilian population in a military station; partly elected, partly nominated; the military officer commanding the station is the ex-officio President; the Executive Officer is appointed by the President of India.
• Township — established by a public enterprise for its staff near a plant; no elected members; a Town Administrator with engineers and technicians runs it — an extension of the bureaucratic structure, not a form of self-government.
• Port Trust — established in port areas by an Act of Parliament; manages the port and provides civic amenities; partly elected, partly nominated.
• Special Purpose Agency — single-purpose or function-based bodies (water boards, housing boards, development authorities, pollution control boards, electricity supply boards). These are parastatals — autonomous of the municipality, and the single biggest reason urban governance is fragmented.

Issues Associated with Urban Local Government

1. Incomplete Devolution — the Tyranny of "May"

• Article 243W uses "may", not "shall". States are under no obligation to transfer the 18 subjects of the Twelfth Schedule — and most have not transferred them fully.
• Functions without funds or functionaries: where subjects are transferred on paper, the money and the staff often remain with the State department — the classic 3F failure (Funds, Functions, Functionaries).
• No activity mapping: which tier does what, at what cost, with whose staff, is rarely specified.

2. Fragmentation — the Parastatal Problem

• Core municipal functions are held by Special Purpose Agencies: development authorities own land-use and town planning; water boards own water supply and sewerage; housing boards own housing; transport corporations own urban transport.
• These parastatals report to the State government, not to the elected municipal body — so the Mayor is accountable to citizens for services he does not control.
• Multiplicity of agencies in one city produces overlapping jurisdiction, duplication of work, and the familiar spectacle of one agency digging up a road another agency has just laid.

3. The Weak Mayor

• Indirect election in most States — the Mayor is chosen by councillors, not by the city.
• Short tenures — several States have run one-year or two-and-a-half-year mayoral terms, making the office ceremonial and rendering long-term city vision impossible.
• Power asymmetry: the Municipal Commissioner — a State appointee, transferable at will — holds executive authority. India's cities have no equivalent of the empowered directly-elected mayor found in most global cities.

4. Municipal Finances — The Core Crisis

• The RBI's Report on Municipal Finances found that Municipal Corporations generate revenue of only about 0.6% of GDP (2023-24), against the Centre's 9.2% and the States' 14.6%. An earlier edition noted municipal revenues/expenditures have stagnated at around 1% of GDP for over a decade, against 7.4% in Brazil and 6% in South Africa.
• Overwhelming dependence on transfers from the Centre and the States; own-source revenue streams — property tax, user charges — remain underdeveloped and under-collected.
• Property tax suffers from outdated valuations, poor coverage, weak enforcement and political reluctance to revise rates.
• Loss of buoyant taxes: the abolition of octroi and the subsumption of local taxes into GST removed elastic revenue sources without a durable compensation mechanism.
• Undeveloped municipal bond market — municipal bonds total only a few thousand crore, a rounding error in the corporate bond market, and mostly privately placed.
• State Finance Commissions are not constituted on time, their reports are tabled late or never, and their recommendations are routinely rejected — the very failure the 15th and 16th Finance Commissions tried to force States to fix.

5. Elections and Democratic Deficit

• Delayed elections and prolonged supersession — despite Article 243U, several municipalities across States function for long stretches under administrators, with no elected council.
• Weak State Election Commissions — dependent on State governments for staff, funds and for the very act of notifying elections; ward delimitation and OBC quota disputes are routinely used to postpone polls.

6. Participation Deficit

• Wards Committees are mandatory only above 3 lakh population, and where constituted, are often large, multi-ward and councillor-dominated — not genuine neighbourhood platforms.
• There is no urban equivalent of the Gram Sabha. The Area Sabha idea, pushed through the Community Participation Law under JNNURM and the Nagara Raj Bill, was adopted by very few States.
• MPCs are largely unconstituted — many metropolitan areas still have no functioning MPC decades after 243ZE, leaving metropolitan planning to development authorities.

7. Capacity Deficit

• Severe staff shortages and the absence of a professional municipal cadre in most States — the very gap the Mukharji committees flagged in the 1960s.
• Poor accounting and audit: most municipalities prepare budgets but do not use audited financial statements for balance sheet or cash flow management; audit outside the CAG's ordinary ambit; provisional and audited accounts often not in the public domain.
• No urban planners: a large share of towns have no qualified town planner at all, even as land-use regulation is the first entry of the Twelfth Schedule.

8. Proxy and Political Distortion

• The "Councillor Pati" phenomenon — the urban cousin of Pradhan Pati — where the husband of an elected woman councillor exercises the office.
• Party politics at the State level determines grants to a municipality; a corporation controlled by the opposition finds its budgets and projects stalled.

Suggestions — The Reform Agenda

1. Convert "may" into "shall": mandatory devolution of all 18 Twelfth Schedule subjects with matching funds, functions and functionaries, backed by activity mapping that fixes roles and responsibilities at each tier.
2. Directly elected Mayor with a 5-year term, on a Mayor-in-Council model, with the Commissioner reporting to the elected head — the 2nd ARC's 6th Report, "Local Governance — An Inspiring Journey into the Future", is the anchor recommendation here.
3. Bring parastatals under municipal control — merge or subordinate development authorities, water boards and transport agencies to the elected municipal body, so that accountability and authority sit in the same place.
4. Make State Finance Commission recommendations binding — or at minimum require the State to table an Action Taken Report with reasons for every rejection; constitute SFCs on time, every five years, as both the 15th and 16th Finance Commissions have insisted.
5. Own-source revenue reform: GIS-based property mapping, unit-area or capital-value assessment, minimum floor rates, periodic revision, rationalised user charges for water and waste, and monetisation of municipal land assets.
6. Deepen the municipal bond market — credit rating of all large ULBs, accrual-based accounting, and green/municipal bonds on the lines of the Pune, Ahmedabad, Indore and Ghaziabad issues.
7. Guarantee timely elections: empower State Election Commissions with independent staff, secure tenure and the statutory power to notify elections regardless of pending delimitation or quota litigation.
8. Institutionalise participation: Area Sabhas and functional Wards Committees below the 3-lakh threshold as well, giving cities a real equivalent of the Gram Sabha; social audit of municipal works.
9. Constitute and empower MPCs and DPCs in every metropolitan area and district — spatial planning must be led by elected bodies, not by parastatal development authorities.
10. Build a professional municipal cadre — dedicated recruitment, training institutes, and a stop to the constant transfer of Commissioners; qualified town planners for every ULB.
11. Transparency and accountability: full RTI compliance with PIOs appointed in every ULB, citizen charters, publication of provisional and audited accounts in the public domain, and an independent audit mechanism.

The 74th Amendment gave India's cities a constitution. What it did not give them was a budget, a bureaucracy, or a boss. Until the Mayor controls the money and the machinery, urban local self-government will remain a body without a spine.

— Legacy IAS Faculty