Challenges faced by Municipal corporations in India

The governing structure in India is made up of three tiers - the central government, the state government, and the local self-government. The local self-governments are further divided into urban local bodies and rural local bodies. The 73 rd and 74 th amendments to the constitution (1992) give recognition and protection to the local self-governments in India. Urban local governments include the Municipal corporations (generally for settlements with population > 500,000), Municipal councils (generally for settlements with population > 25,000 and < 500,000) and Municipal committees (generally for settlements with population > 10,000 and < 25,000). India is getting rapidly urbanized, and it is expected that the urban local governments will provide the citizens with basic infrastructure and services like roads, health care centers, water supply, sanitation, solid waste management, maintenance of public property etc. Let us take a look at couple of key issues faced by the urban local governments in India and the resulting poor service delivery to the citizens.

Data Sources - Report on Municipal finances by RBI (2022), Annual Report 2020-21 on Implementation of Solid Waste Management Rules by Central Pollution Control Board, Best practices in municipal solid waste management by NITI Aayog (2021), Swachh Survekshan results 2022 and multiple newspaper & research articles.

1. Poor Financial Health
   
   

   Indian cities have grown at a rapid pace, but the municipal revenue needed to govern the cities has not grown proportionately. The municipal corporations in India are struggling financially and remain largely dependent on the state government for transfer of funds. While cities contribute to more than 60% of India's GDP, the municipal revenue in India is below 1% of the GDP. This value is much higher in other countries (Brazil - 7.4% and South Africa - 6%). Furthermore, more than 35% of this municipal revenue comes from the funds transferred by the state and central governments.

We have listed a few key reasons for the revenue crunch faced by the municipal corporations in India:

1. Inefficient property tax collection - Property tax collection is one of the most important source of own revenue for the municipal corporations. Property tax collection in India is much lower than OECD countries due to property undervaluation, incomplete registers, and ineffective administration. Also, there is a large variation in the per capita property tax collected in different cities. However, it has been observed that the property tax collection in Pune, Chennai, and Kolkata along with some other cities has improved significantly according to estimates for the year 2019-20.

2. Implementation of GST - After the implementation of GST, taxes like octroi & it's variants and advertisement tax were subsumed in GST. This reduced the tax revenue from sources other than property tax.
3. Dependence on state governments for funds - The share of state transfers in the total municipal revenue is quite significant. State governments are required to constitute State Finance Commissions (SFCs) every five years. SFCs are expected to spell out the principles to be applied for determining the allocation of funds to local governments and the range of taxes and non-taxes to be devolved to them. However, state governments have not set up SFCs in a regular and timely manner and hence in most of the states, SFCs have not been effective in ensuring rule-based devolution of funds to local governments. The municipal councils and municipal committees are dependent on the state governments for funds to an even greater extent than municipal corporations. It has been observed that the state governments are generally reluctant to grant greater financial independence to the urban local governments.

2. Devolution of Power to Urban Local Bodies



12th Schedule of the Indian Constitution deals with the provisions that specify the powers, authority, and responsibilities of Municipalities. This schedule was added by the 74th Amendment Act of 1992. But, in reality, functions such as fire and rescue services are not even devolved on to the ULBs and many other functions like the maintenance of roads and bridges, electrification and related works, etc. are devolved partially as there are parastatal organizations entrusted with similar duties as of the Municipal corporations. The parastatal organizations mostly report to the state government and the coordination between them, and the municipal corporations is generally poor. This causes poor service delivery and citizen engagement. The number of parastatals is going up as the states show reluctance to devolve various functions to the municipal corporations.




3. No Say in Urban Planning



Instead of the municipal corporations, state government-controlled development authorities mainly carry out urban planning in most of the major cities of India. These are bureaucratic agencies with no accountability to the urban local government. In absence of proper planning, the municipal services find it difficult to cope with the increasing needs of the population. The administrative machinery of the local bodies is also often insufficient to deal with the increasing population.




4. Poor Service Delivery



From potholed roads to piles of garbage on the streets and from traffic congestion to poor public health centers, the list of grievances of people living in cities is endless. Insufficient funds, lack of coordination between municipal corporations and parastatals, inefficient administration, political tussle between local & state governments and corruption are some of the reasons which result in poor service delivery to citizens.

1. Building and maintenance of urban roads - India boasts of a vast network of urban roads. However, the quality and maintenance of these roads is a huge concern. The pothole ridden roads in Indian cities have been responsible for innumerable accidents, especially during the monsoon season. These roads also need to be repaired with alarming regularity. The situation was aptly described by a union minister who sarcastically remarked - “Maintenance is a subject that makes everyone — politicians to officials and contractors — happy. Frequent maintenance work brings a lot of satisfaction, though the public is the only loser. Contractors get upset when decisions are taken for durable roads as they feel they will lose their business.”


2. Solid waste management - The urban solid waste management scenario in India has improved at a rapid pace in the past decade, although a lot still remains to be done. The percentage of urban solid waste treated has risen from 19% in 2015-16 to 50% in 2020-21 while the percentage of urban solid waste landfilled has fallen from 39% in 2015-16 to 18% in 2020-21. The door-to-door collection of waste and its segregation has improved over the years and the number of composting and biogas plants has also gone up. However, there is huge variation in the performance of different states and municipalities when it comes to solid waste management.

3. Public health and education - Municipal corporations across the country also run some schools and health centers for the cities' populace. The municipal schools in India are typically characterized by shortage of teachers, high student to teacher ratio and very poor infrastructure. Public health care centers and hospitals run by the municipalities too face infrastructural shortcomings and acute shortage of medical staff as they cater to a much larger population than what they are designed for. Public health & education remains one of the few areas where there has not been any major improvement over the past decades (barring a few exceptions) and this deprives the urban poor of quality and affordable healthcare & education. Shortage of funds and the ineptitude of officials & local politicians are the major reasons which prevent a large-scale facelift of this sector.



4. Cleanliness and sanitation - Indian cities perform very poorly with regards to cleanliness and sanitation when compared with their counterparts in Europe or America. To be fair, in this case, the blame is shared by both the citizens and the urban local governments. However, in the last decade there has been an increased national focus on cleanliness and beautification of cities. According to the Swachh Survekshan 2022 which ranked the urban local bodies (ULBs) based on various cleanliness and sanitation parameters; Madhya Pradesh, Chhattisgarh and Maharashtra were the front runners in the > 100 ULBs category while Tripura and Jharkhand were the front runners in the < 100 ULBs category.

5. Steps to Empower Urban Local Bodies and Improve Service Delivery




Below is a list of actions which we believe will greatly help in improving the local governance in Indian cities:



1. Improving the Municipal Revenue -
• Better and efficient property tax collection (use of GIS a possibility).
• Efficient collection of user charges and fines.
• Regular and timely setting up of State finance commissions.
• Better financial databases and account audits at local level.
2. Clear separation of powers and duties between the parastatals and urban local bodies.
3. Including urban local self-government in urban planning.
4. Creating decentralized platforms like area committees for discussions between people and the elected representatives.
5. Creating a robust, technologically aided mechanism for grievance redressal of the citizens.
6. Encouraging public-private partnership and private investments in various local development projects.

References -

1. Report on Municipal finances by RBI (2022)
2. Finances of Municipal Corporations in Metropolitan Cities of India by ICRIER (2019)
3. Annual Report 2020-21 on Implementation of Solid Waste Management Rules by Central Pollution Control Board
4. Best practices in municipal solid waste management by NITI Aayog (2021)
5. Swachh Survekshan results 2022
6. Urban local government in India
7. Functions of municipal corporations
8. Problems of Urban Self-governance in India