Context:

  • India is in such a pathetic state that urban local governments have to rely on state governments to fund even basic operational expenditure.

Introduction:

  • About 814 million people are expected to live in the cities of India by 2050.
  • Just in terms of scale, the task of effectively managing cities in India will potentially be touted as the world’s greatest managerial challenge.
  • A 2010 McKinsey report estimates that India will need to spend $1.2 trillion on cities by 2030.
  • But as of now, India’s annual per capita spending on cities stands at a measly $50.

The pitiful condition:

  • The financial health of Indian cities is in such a pathetic state that revenue generated by urban local government accounts for less than 0.9% of the total GDP (gross domestic product) despite cities contributing almost 60% towards GDP.
  • The government’s flagship urban development schemes fund only a fraction of the required investment and cities are tasked with finding other ways to bridge the funding gap.
  • Over the last decade, public-private partnerships (PPPs) have been the preferred route for infrastructure creation in India.
  • But PPPs have not worked as well as they were expected to owing to the poor rate of return for the private sector and other inefficiencies.

Suggestions:

  • The government must commit to developing a city’s creditworthiness.
  • Credit rating of cities is the first step towards raising money through the bond market, sub national governments, and international lenders.
  • Ratings are assigned based on the assets and liabilities of urban local bodies, revenue streams, resources available for capital investments and implementation of credible double-entry accounting mechanisms.
  • When a government invests in developing a particular area, for example, building a new airport outside a city, land prices around the area rise.
  • A portion of this benefit could accrue to the government either through betterment charges, tax increment financing, developer extractions, or impact fees.
  • Several states like Tamil Nadu, Karnataka, Andhra Pradesh, Maharashtra, Gujarat and West Bengal are slowly beginning to explore this instrument as a method to generate revenue.
  • People suggest for the inclusion of a city GST (goods and services tax) rate within the state GST rate, a formula-based mechanism to ensure that municipalities get their share.

Local Government of India:

  • Local Government of India refers to the government of the 28 Indian states and the 7 union territories.
  • There are a total of 6, 45,000 local governments of India.
  • Local governments of the rural regions are termed as the Panchayats.
  • The local government in the urban areas is referred to as the Nagar Panchayats and the Municipalities.
  • These local governments of India are self-sufficient and self-enabled units that work under the state government of India.

Acts for the local government:

  • The 73rd Constitution Amendment Act, 1992 and the 74th Constitution Amendment Act, 1992 came into force in the year 1993.
  • In this Act, the constitutional status was attached to the city as well as village councils in India.
  • Some of the significant steps that were taken for the local government in India include regular elections, the fixed five-year term and the review and augmentation of the finances by the State Finance Commissions.

Municipal governance in India Background:

  • Municipal governance in India has existed since the year 1666, with the formation of Madras Municipal Corporation, and then Calcutta and Bombay Municipal Corporation in 1726.
  • In the early part of the nineteenth century almost all towns in India had experienced some form of municipal governance.
  • In 1882 the then Viceroy of India, Lord Ripon’s resolution of local self-government laid the democratic forms of municipal governance in India.
  • In 1919, a Government of India act incorporated the need of the resolution and the powers of democratically elected government were formulated.
  • In 1935 another Government of India act brought local government under the purview of the state or provincial government and specific powers were given.

Responsibilities:

  • Implementing national policy and strategy on environmental management is largely decentralized to municipal government.
  • These authorities prepare local regulations and have both the legal and financial means to implement and enforce decisions and regulations.
  • Municipalities may also work together with public authorities such as Water Boards on water quality and wastewater treatment.
  • The municipalities are responsible for preparing regulations for implementing and enforcing the regulations in the national Environmental Management Act and other environmental regulations.
  • The Environmental Management Act covers matters such as separated waste collection, disposal of hazardous waste, air quality, and noise nuisance, and environmental permits for industrial and commercial activity.
  • Environmental regulations may vary from one municipality to another, for instance on separated waste collection from households and commercial and industrial activity, and the treatment, recycling and disposal of waste.
  • Besides the traditional core functions of municipalities, it also includes development functions like planning for economic development and social justice, urban poverty alleviation programs and promotion of cultural, educational and aesthetic aspects.

74th Constitutional Amendment:

  • The 74th Constitutional Amendment granted Constitutional status to local bodies and made them mandatory and laid down the procedure for their constitution.
  • It provides for reservations in Municipalities at par with the PRIs.
  • Ensuring timely elections every five years, and in case of supersession, elections to be held before the expiration of six months from date of dissolution, and a proper report to be submitted by the state govt. for dissolving/superseding before the state legislature.
  • Setting up of Finance Commission to review the financial position of the Municipalities and make recommendations regarding distribution of taxes between the states and municipalities. It is also expected to look into the criteria for grants-in-aid and suggest measures needed to improve the financial position of the Municipalities.
  • State Election Commission to ensure timely and fair conduct of elections.
  • Setting up of District Planning Committees for Municipal Councils and Nagar Panchayats to prepare draft development plan for the district as a whole and submit their draft development plan to the state govt.  for review and inclusion in the state plan.
  • Setting up of Metropolitan Planning Committee for Metropolis who would submit their draft development plan to the state govt. for review and inclusion in the state plan.

Problem Areas of Municipal Boards:

  • Lack of Finance due to reluctance of the state and central legislators not wanting to strip further taxation and grants powers to them more than what they already have for fear of loss of power.
  • And the municipal bodies fear increasing tax or asking for new tax collection options for loss of popularity among people.
  • Adding to the above is the drawing of rural people and other city people to a place where there is rapid urbanization through industrialization. Law and order becomes difficult, slums develop, and etc. leading to multiplicity of problems for these already stressed out urban local governance bodies.
  • In spite of many central and state committees sitting and recommending better financial and administrative autonomy for the Municipal bodies, there has been no concrete effort from the legislator’s side to implement the same.
  • Lack of consistent and coherent urban development policy, faulty and improper urban planning,
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