Urban local bodies

The first principle

A city is a dense web of shared services, water, drains, roads, buses and land, and someone has to run that web as a whole and answer to the people who live in it. The Seventy fourth Amendment made the elected municipality that someone, but states kept the money, the planning powers and the big agencies with themselves. Almost every urban governance problem in India, from flooded streets to stalled elections, comes from this gap between the municipality the Constitution imagined and the one states allowed to grow.

The core

What Part IXA provides

• Three types of bodies. Article 243Q provides a nagar panchayat for an area in transition from rural to urban, a municipal council for a smaller urban area and a municipal corporation for a larger one, with the state deciding the category on population, density, revenue and non farm employment. Industrial townships may be left out.
• Elections and term. Seats are filled by direct election, municipalities have a five year term with re election within six months of dissolution (Article 243U), and the State Election Commission conducts the polls (Article 243ZA). Seats are reserved for Scheduled Castes and Scheduled Tribes, and not less than one third for women (Article 243T).
• Wards committees. Every municipality with a population of three lakh or more must have wards committees (Article 243S), to bring decisions closer to neighbourhoods.
• Powers and finances. Article 243W lets the state endow municipalities with powers over the 18 functions of the Twelfth Schedule, including urban planning, regulation of land use, water supply, sanitation, fire services and slum improvement. Article 243X lets it assign taxes and grants, and the State Finance Commission under Article 243Y reviews municipal finances as it does for panchayats.
• Planning committees. The District Planning Committee (Article 243ZD) consolidates the plans of panchayats and municipalities into a district plan, and the Metropolitan Planning Committee (Article 243ZE) prepares a plan for every metropolitan area of ten lakh or more.

Who actually runs a city

• A fragmented system. In most cities the elected council shares power with a state appointed commissioner who holds executive authority, with parastatals such as development authorities and water boards that answer to the state, and with special purpose vehicles created under national missions.
• Weak mayors. Most mayors are elected indirectly by councillors, and in some cities for terms as short as a year, so they have neither a personal mandate nor time to deliver.

Dimensions

• Constitutional. As with panchayats, devolution under Article 243W is permissive, so the Twelfth Schedule is a menu that states may or may not serve. Urban planning and water supply, the two functions that shape a city most, remain with state agencies in many states.
• Fiscal. The Reserve Bank of India (RBI) Report on Municipal Finances (November 2022) found municipal revenue at about 1 per cent of gross domestic product (GDP), far below the share in comparable countries. Property tax is undervalued and poorly collected, octroi has gone, and the Goods and Services Tax (GST) of 2017 subsumed entry tax and several other local levies, leaving municipalities to depend on compensation and grants.
• Political. States are reluctant to empower cities because a strong mayor of a big city can become a rival centre of power, and because urban land is a source of patronage. This is the core of the complaint that states seem unwilling to empower municipalities functionally and financially.
• Democratic. Elections are often delayed, and several large cities, including Bengaluru and Mumbai, went for years without elected councils in the early 2020s while administrators ran them. In Kishansing Tomar v Municipal Corporation of Ahmedabad (2006) the Supreme Court held that elections must be completed before the term ends, and later rulings, such as Suresh Mahajan v State of Madhya Pradesh (2022), directed polls to proceed without waiting for backward class surveys.
• Spatial. Census 2011 counted 3,894 census towns, places urban in character but governed as villages, and the gap between where people live and how they are governed keeps growing at the edges of cities.

In practice

Financing cities

• Own revenue. Property tax reform using geographic information system mapping, periodic revaluation and online payment is the single largest lever. The Fifteenth Finance Commission made grants to urban bodies conditional on states notifying floor rates of property tax and on growth in collection, and on audited accounts being published online.
• Grants. The Fifteenth Finance Commission recommended about ₹1.21 lakh crore for urban local bodies for 2021 to 2026, with a separate challenge fund for million plus cities tied to air quality, water and solid waste results.
• Municipal bonds. Ahmedabad issued India's first municipal bond without a state guarantee in 1998. After the Securities and Exchange Board of India (SEBI) regulations of 2015, Pune raised ₹200 crore in 2017, and Ghaziabad issued the country's first green municipal bond in 2021. Bonds need clean accounts and a credit rating, which forces better financial management.

National missions

• Atal Mission for Rejuvenation and Urban Transformation (AMRUT), 2015. It funds water supply, sewerage and green spaces, and its second phase from 2021 aims at universal tap water in all statutory towns, linked to reforms such as property tax and user charges.
• Smart Cities Mission, 2015. It selected 100 cities and ran projects through special purpose vehicles registered as companies, which delivered faster but were criticised for bypassing elected councils.
• Swachh Bharat Mission (Urban), 2014. It made cities open defecation free and, in its second phase from 2021, targets garbage free cities, with municipal performance ranked in the annual Swachh Survekshan.

Should rural bodies be merged into cities?

• The case for merger. Cities spill into surrounding villages, which then grow without drainage, roads or building rules. Merging them, as Pune did with dozens of fringe villages between 2017 and 2021, gives one authority for a planning region, extends urban service standards and lets the city tax the land whose value its growth has raised.
• The case against. Villagers lose their Gram Sabha and the closeness of a panchayat, pay higher property tax for services that often arrive years later, and farmers may lose protections tied to rural status. A larger corporation also dilutes local democracy, because one councillor then represents far more people.
• A middle path. Notify peri urban areas as nagar panchayats first, plan them through the Metropolitan Planning Committee, phase in taxes as services arrive, and keep ward level forums so that merger does not become loss of voice.

Issues and way forward

• Unclear functions. States should map each Twelfth Schedule function to a level, as the Second Administrative Reforms Commission (ARC) recommended in its sixth report on Local Governance (2007), and bring parastatals under the elected council or make them report to it.
• Fragile finances. Property tax on updated valuations, a fixed share of GST or state taxes through the State Finance Commission, and user charges for water and waste would give cities a dependable base. States must also constitute their finance commissions on time and place their reports before the legislature.
• Weak leadership. Proposals include directly elected mayors with a five year term and control over the commissioner, so that citizens know whom to hold to account.
• Planning without the planners. Few states have working Metropolitan Planning Committees. Making them functional, with councillors in the majority, would join land use, transport and water planning across municipal boundaries.
• Capacity. Municipalities need a professional cadre of urban planners, engineers and accountants, and accounts kept on the accrual basis so that lenders and citizens can read them.

Common confusions

• Statutory town and census town. A statutory town has a municipality notified by the state; a census town meets the Census tests of population, density and non farm work but is still governed by a panchayat.
• District Planning Committee and Metropolitan Planning Committee. The first plans for the whole district, rural and urban; the second plans for a metropolitan area of ten lakh or more, which may cover several districts.
• Municipal commissioner and mayor. The mayor is the elected head of the council; the commissioner is a state appointed officer who, in most corporations, holds the executive power.
• Smart Cities special purpose vehicle and municipality. The vehicle is a company that executes projects; the municipality is the elected government of the city and owns the long term responsibility.

For the exam

• Keyword bank: Seventy fourth Amendment, Part IXA, Twelfth Schedule, Article 243W, wards committee, Metropolitan Planning Committee, parastatals, property tax reform, municipal bonds, State Finance Commission, census towns, peri urban governance, directly elected mayor, AMRUT, Fifteenth Finance Commission conditions.
• Practise the previous year questions on this topic →
• Use in an answer:
  • Introduction with data: "According to the RBI Report on Municipal Finances (2022), Indian municipalities raise revenue equal to only about 1 per cent of GDP, though cities produce a far larger share of national output."
  • Introduction with a report: "The Second ARC, in its report on Local Governance (2007), called for activity mapping that assigns each municipal function clearly to a level, because the Seventy fourth Amendment left the actual transfer of powers to the states."
  • Conclusion: "Cities will govern themselves well only when the council that voters elect also controls the land, water and money of the city, under a mayor who can be held to account."
  • Conclusion: "Merging villages into cities should follow services, not precede them, so that urban growth extends citizenship rather than only the tax net."