As the monsoon sweeps across India, cities, in particular, bear the brunt of the fury of rains, and municipal corporations find
themselves perennially underprepared for these seasonal crises.
What are Urban Municipal Bodies?
Urban Local Self-Governance: It is a system of governance of urban areas through representatives elected by the people.
Urban Municipalities: They are the lowest unit of governance in cities and towns, also known as Urban Local Bodies (ULBs).
Indian Constitution: The original constitution did not contain provisions for municipal bodies. The 74th Constitutional
Amendment Act of 1992 established a framework for municipalities.
Part – IX A
Articles – 243P to 243ZG
This amendment, also known as the Nagarpalika Act, came into force on 1st June 1993.
Constitution of Municipalities: Article 243Q deals with the constitution of municipalities in urban areas in every state:
Nagar Panchayat: For a transitional area from a rural to an urban area.
Municipal Council: For a smaller urban area.
Municipal Corporation: For a larger urban area.
Powers and Functions: They are constituted for local planning, development, and administration in urban areas, tasked with
providing essential civic amenities such as water supply, sanitation, roads, public health, and urban planning.
How Do They Manage Their Finances?
Fiscal Governance: Involves managing revenue and expenditure to ensure effective governance and service delivery at the
local level.
Revenue Sources:
Tax Revenues: Property taxes, advertisement taxes, taxes on animals, vacant land taxes, taxes on carriages and carts.
Non-tax Revenue: User charges, municipal fees, sale and hire charges, lease amounts.
Other Receipts: Fees, fines, lapsed deposits, rent on tools and plants, etc.
Shared Revenue: Entertainment tax, surcharges on stamp duty, professional tax, and motor vehicles tax.
Grants-in-aid: Plan and non-plan grants from upper tiers of government.
Loans: Borrowed for capital works from central and state governments, banks, and other government agencies.
Expenditures:
Public Services: Emergency services, waste management, street lighting, public transportation.
Social Services: Housing subsidies, public health initiatives, recreational facilities.
Infrastructure Development: Roads, bridges, public buildings, parks, utilities.
Administrative Costs: Salaries, benefits, operational expenses.
Debt Servicing: Interest and principal payments on loans and bonds.
Maintenance Costs: Regular maintenance of public facilities and infrastructure.
Financial Challenges
Decline in Municipal Revenue: A recent ICRIER study based on data from 37 of the 53 municipal corporations with populations
exceeding 1 million revealed a decline in total municipal revenue as a percentage of GDP from 0.49% in 2012-13 to 0.45% in
2017-18.
Financial Inadequacy: Municipal corporations’ revenue receipts accounted for less than 1% of India’s GDP until 2019-20.
Decline in Own Revenue Collection: The ability to raise own revenues saw a sharper decline from 0.33% of GDP to 0.23% during
the same period.
Higher Dependence on Transfers: Transfers from central and state governments form a slightly larger share in revenue
receipts than own tax revenues (OTRs).
Impact of GST: The implementation of Goods and Services Tax (GST) subsumed several taxes, exacerbating dependence on
state and central transfers.
Lesser Allocations: The 15th Finance Commission recommended grants amounting to ₹4.36 trillion for local governments
from 2021-22 to 2025-26, but 67% was earmarked for rural local bodies.
Lower Disbursement of Funds: Actual disbursement lagged by about 15% due to municipalities failing to meet stipulated
conditions.
Non-constitution of SFCs: Many states have not established State Finance Commissions in a timely manner.
Insufficient Capital Expenditures: Capital expenditure remains a minuscule portion of the country’s economic size.
What Lies Ahead?
Increase Revenue: Assign more revenue to urban local bodies to improve resilience during extreme weather events.
Reduce Regulation Norms: Ease regulations for disbursing allocated funds fully.
Promote Municipal Bonds: Encourage selling of municipal bonds to fund public projects.
Private Sector Partnerships: Form partnerships with private sector entities to bring in expertise and funding for infrastructure
projects.
A robust and well-funded municipal body is crucial for effective urban governance and disaster management. By addressing
these financial challenges, municipalities can better prepare for and mitigate the impacts of seasonal crises like the monsoon
rains.