Democratise and empower city governments
- The Reserve Bank of India (RBI) in a report, “State Finances, Study of Budgets of 2021-22”, released in November 2021 mentioned about the strain on the finances of third-tier governments in India playing a frontline role in combating the pandemic by implementing containment strategies, healthcare forcing them to cut down expenditures and mobilise funding from various sources.
- The RBI further commented that the functional autonomy of civic bodies must increase and their governance structure strengthened.
- This could happen by ‘empowering them financially through higher resource availability’.
Essence of report
- While correctly identifying the role of the city governments in meeting the challenges the pandemic has thrown up, the report also points to the draining of resources.
- 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%.
- 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.
Old problem continues
- 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.
- The reason for this was 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.
Approaches to urban empowerment
- The general approach towards urban empowerment has remained piecemeal in India.
- Urban development is a state subject, which is more linked to political and democratic movements in States.
- The first intervention to understand ‘the urban’ (though there are references in the Five Year plans) and plan with a pan-Indian vision took place in the 1980s when the National Commission On Urbanisation was formed with Charles Correa as its chairperson.
- Another important intervention was in the first half of the 1990s with the Constitution 73rd and 74th Amendments.
- The latter refers to urban reforms — empowering urban local bodies to perform 18 functions listed in the 12th Schedule.
- But this was also the period of neo-liberal reforms, so the generation of own resources and a slow withdrawal of the state could be witnessed.
- 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.
- The only exception to the rule has been the people’s plan model of Kerala where 40% of the State’s plan budget was for local bodies (directly) with a transfer of important subjects such as planning, etc.
- This paved the way for a new dimension to urban governance.
- The RBI report has been right in highlighting that functional autonomy of city governments must be allowed.
- But this should happen with three F’s: the transfer of ‘functions, finances and functionaries’ to city governments.
- Without these, functional autonomy would be empty rhetoric.
- There are nearly 5,000 statutory towns and an equal number of census towns in India.
- Nearly 35% of the population lives in urban centres.
- And, nearly two-thirds of the country’s GDP stems from cities and almost 90% of government revenue flows from urban centres.
- 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.
- 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.
- 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.