CITY GOVERNMENTS: Democratise and Empower : Daily Current Affairs

Relevance: GS-2: Issues and challenges pertaining to the federal structure, devolution of powers and finances up to local levels and challenges therein.

Key phrases: urban local government, 74th amendment 1992, democratise, financial autonomy, elected representative

Why in News?

  • The Reserve Bank of India (RBI) in a report, “State Finances, Study of Budgets of 2021-22”, released in November 2021, wrote: “With the third-tier governments in India playing a frontline role in combating the pandemic by implementing containment strategies, healthcare,... their finances have come under severe strain, forcing them to cut down expenditures and mobilise funding from various sources.”.
  • India is undergoing rapid urbanisation, the pace of which poses significant challenges to urban governance. India’s urban population has expanded from 26 percent of the total population in 1991, to 31 percent (or 400 million people) in 2011. It is estimated that by 2030, more than 40 percent of the Indian population will be living in cities.

Why is local government important?

  • Local governments are the closest to understanding the problems and requirements of their citizens, and are therefore best equipped to make policies and decisions and implement projects. This is in line with the principle of subsidiarity, according to which the central authority should have a subsidiary function, performing only those tasks which cannot be performed efficiently at the local level by smaller bodies.
  • Urban Local Bodies are vested with a long list of functions delegated to them by the state governments. These functions broadly relate to public health, welfare, regulatory functions, public safety, public infrastructure works, and development activities.
  • In third-tier governments in India, it plays a frontline role in combating the pandemic by implementing containment strategies.

State Finances: A Study of Budgets of 2021-22

  • The RBI report also highlights the limited coverage of property tax and its failure in shoring up municipal corporation revenues. Organisation for Economic Co-operation and Development (OECD) data show that India has the lowest property tax collection rate in the world — i.e., property tax to GDP ratio.
  • With the third-tier governments in India playing a frontline role in combating the pandemic by implementing containment strategies, healthcare, quarantining and testing facilities, organising vaccination camps and maintaining the supply of essential goods and services, their finances have come under severe strain, forcing them to cut down expenditures and mobilise funding from various sources.
  • An RBI survey of 221 municipal corporations (2020-21) revealed that more than 70% saw a decline in revenues; in contrast, their expenditure rose by almost 71.2%.

Issues in current structure of city government:

  • No place for elected representative: During the pandemic, while leaders from the Prime Minister to Chief Ministers to District Magistrate were seen taking a call on disaster mitigation strategies, city mayors were found missing. Why? Because under the disaster management plan of action, cities are at the forefront to fight the pandemic; however, the elected leadership finds no place in them. It is not just in disaster mitigation.
  • The old approach of treating cities as adjuncts of State governments continues to dominate the policy paradigm.
  • No mention of financial empowerment: The 74th amendment 1992 added the Twelfth Schedule to the Constitution, which outlines 18 functions that may be devolved to the city governments. Though the democratic transfer of 18 subjects was an important element, and necessary, there was, however, no mention of financial empowerment.
  • It was linked more to the idea of “competitive cites” to attract investments in the urban centres by making their structures and land laws flexible. We now know that not much investment has happened, and cities have not really been able to enhance their financial capabilities.
  • Before value added tax and other centralised taxation systems, one of the major earnings of cities used to be from octroi. But this source of revenue collection was taken away by the State and the central governments. Instead, finance commissions recommended grants to urban local bodies based on a formula of demographic profile. Previously, while almost 55% of the total revenue expenditure of urban centres was met by octroi (e.g., Shimla), now, the grant covers only 15% of expenditure. In such a situation, it is difficult for the towns to sustain their ability to perform their bare minimum functions, especially with the latest Pay Commission recommendations.
  • This has resulted in a vicious circle of burdening people more with taxes and further privatisation/outsourcing of the services of the municipalities. This is a pan-India phenomenon and the grading of cities and urban policies are linked to this. Now with Goods and Services Tax, the ability to tax has been ‘completely robbed’; cities find themselves in a worse state than States.

What needs to be done to democratise and empower city governments?

  • Cities must be treated as important centres of governance, where democratic decentralisation can bring in amazing results (as seen in Kerala). There will be transparency and adequate participation of the people.
  • Cities should not be considered as entrepreneurship spaces where the sole driving force is to make them competitive to attract investments. We have seen how fallacious this argument is. They must be considered as spaces for planned development by giving adequate attention to resources.
  • Our cities are hardly prepared for the impact of climate change; nor do they have adaptive strategies. The resources required for quantitative and qualitative data must be immediately provided to the cities to ensure a disaster risk reduction plan keeping vulnerable communities in mind.
  • A piecemeal approach such as the concept of ‘smart cities’ must be shunned altogether. This approach further widens the gap between different sets of people. Rather, the grants from the Centre must be enhanced and cities asked to draw up their plans themselves based on priority seeking from city residents. Cities are people, as they say, and people must be a part of the decision-making process.
  • 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! Likewise, the third F, i.e., functionaries, must be transferred to the cities with a permanent cadre.

Way Forward:

  • Going forward, increasing the functional autonomy of the civic bodies, strengthening their governance structure and empowering them financially via higher resource availability, including through own resource generation and transfers, are critical for their effective interventions at the grass-root level.

Source: The Hindu

Mains Question:

Q. India with its third-tier governments played a frontline role in combating the pandemic by implementing containment strategies. In this context what are the issues faced by city government? Suggest measures to democratise and empower city governments in India. Critically examine.