STRENGTHENING
THE CIVIC BODIES
Ashok
Narain*
As per the 2001 census,
the urban population in India is now about 28.5 crore. The cities
with more than 1 million population have also increased from 23
in 1991 to 35 in 2001. So has their problems. There has been an
unplanned growth in the urban areas. Naturally, infrastructure
facilities and services have not kept pace with the growth of
urbanization. Consequently, most of the cities and towns have
serious shortage of basic amenities like water supply, sewerage,
developed land and housing.
Urban governance
and management is predominantly a State subject. The local institutions
of urban governance have become weak over the years due to many
factors including a weak executive system and poor fiscal health.
Most of the urban local bodies do not possess institutional capability
to plan, finance, implement and monitor the delivery of municipal
services and to discharge their assigned functions. Further, opaque
systems of management and governance discourage people’s participation.
Municipalities, particularly in small and medium towns, face financial
difficulties due to their limited resources and limited access
to generate revenue.
Considering these
constraints the 74th Constitution Amendment Act was passed by
Parliament in 1992. A provision was made in the Act for constituting
Finance Commission at the State level every five years to review
the fiscal position of the municipalities and make recommendations
to the concerned State governments regarding taxation. The Act
also provided for sharing of taxes between the State Government
and the local bodies, principles for governing grant-in-aid and
measures for improving the financial position of urban local bodies.
Suitable amendments have also been made in Article 280 of the
Constitution which has helped in setting up proper linkages among
the local bodies, State governments and the Central Government.
Since municipality
is a State subject, as per the Constitution, it is the State governments’
obligation to take necessary steps for increasing the financial
resources of the municipal bodies to improve their functioning.
Nevertheless, the Central Government has initiated a number of
schemes to bring in a fresh breeze of reforms in the urban sector.
An Urban Reforms
Incentive Fund has been set up to provide reform-linked assistance
to the States with an initial allocation of Rs. 500 crore. A provision
has been made to facilitate small and medium-size urban local
bodies to access the capital market for investment in essential
municipal infrastructure, development of bankable urban infrastructure
project and introduction of necessary financial reforms in the
urban local bodies.
The municipal bodies
have been empowered to issue tax-free municipal bonds for potable
water supply, sewerage or sanitation, drainage, solid waste management,
roads, bridges, flyovers, and urban transport. In addition, the
Central Government has announced tax exemption in case of bonds
issued by the local self-governments for raising resources for
urban infrastructure. So far, the Municipal Corporations of Ahmedabad
and Hyderabad have been allowed to raise tax-free municipal bonds
for Rs. 100 crore and Rs. 82.50 crore respectively. The Nashik
Municipality in Maharashtra has also been permitted to issue tax-free
municipal bonds for Rs. 50 crore.
A City Challenge
Fund for catalyzing city-level economic reform programmes has
also been formed.
Presently, pubic-private
participation guidelines are being prepared for providing directions
to the States and municipalities to involve the private sector
in infrastructure development. A model Municipal Act is proposed
to be developed which would include modification and simplification
of municipal bylaws, provision for enhanced borrowing, allowing
for entry of private sector and authorizing concessionaires to
penalize users for non-payment of tariffs.
The Ministry of Urban
Development and Poverty Alleviation issued Property Tax Guidelines
in 1988 to all State Governments with the objective of rationalising
and simplifying the property tax, considered as one of the best
sources of revenue for the urban local bodies. States like Bihar,
Madhya Pradesh, Gujarat, Tamil Nadu, Uttar Pradesh and Karnataka
are in the process of implementing property tax reforms.
In order to strengthen
the municipalities or urban local bodies and to raise funds from
other sources for provision of infrastructure facilities, the
Centre has proposed reforms in the urban infrastructure sector.
However, the initiative to avail benefits of the new reform strategy
would rest with the State governments and urban local bodies.
(PIB Features)
*DPR,
PIB, New Delhi
