India's urban crisis deepens as states choke city-level governance

Cities are crumbling, but the local bodies that govern them remain powerless

Urban infrastructure nationwide is under increasing strain. Cities, once viewed as drivers of productivity and as a promise of a better quality of life, now grapple with waterlogging, long traffic jams, and pollution, jeopardising both residents’ quality of life and overall productivity. These inherent failures point to a lack of urban planning, placing the blame on the local bodies that govern our cities. Urban local bodies (ULBs), also referred to as urban local self governments, are the primary governing institutions, directly responsible for translating policy into on-ground implementation, failure of which can lead to deteriorating public amenities for the urban population. 

A recent audit of ULBs conducted by the Comptroller and Auditor General (CAG) raises a more fundamental question: Do these bodies possess the power to plan effectively in the first place? 

ULBs were granted constitutional status under the 74th Constitutional Amendment Act (CAA) of 1992. Through the amendment’s 12th schedule, the Constitution devolved a total of 18 functions to these bodies, ranging from urban planning and land use regulation to the maintenance of social and infrastructure services, such as sanitation, solid waste management, slum improvement, and poverty alleviation. Even though the amendment was introduced more than 30 years ago, the performance audit by CAG in 2024, conducted across ULBs in 18 states, reveals a glaring truth: The provisions under the 74th amendment remain largely unimplemented. 

According to the audit, on average, only 4 out of the 18 powers under the 12th schedule are fully under the autonomous control of ULBs, with most functions being performed with regular interference from the state government or parastatals, often without any representation from local bodies. 

In addition, ULBs are being deprived of making their own recruitment decisions, as the staff assessments are conducted by the state government, leading to frequent underestimation of personnel requirements. For instance, the Shimla Municipal Corporation, which required 720 personnel, was sanctioned only 20 new posts by the state government. This lack of autonomy has not only resulted in fewer sanctioned positions but has also left one out of three posts vacant across the 18 states, depriving ULBs of the human resources necessary to carry out their functions properly. 

The 74th CAA provides for the constitution of new institutional designs, such as State Election Commissions (SECs) to ensure regular municipal elections, and district planning committees (DPCs) and metropolitan planning committees (MPCs) to facilitate integrated and coordinated regional planning. However, the CAG audit reveals a complete neglect of these provisions. According to the report, 61 per cent, or 1,600 of the 2,625 ULBs in 17 states assessed, didn’t have an elected council, with only five states appointing a mayor through a direct election.

 

A significant reason for this shortcoming is that the power of ward delimitation rests with the state government, which often delays the conduct of regular municipal elections. In the absence of an elected council, the public is unable to hold ULBs accountable. The lack of strategic planning further weakens these urban bodies. Only 10 states covered in the audit were found to have constituted DPCs, and just three had prepared annual district plans. The MPCs exhibit a similar trend. Of the nine states mandated to form MPCs, only three had done so, resulting in a total of seven metropolitan ULBs, and only three had developed plans.

 

On the financial side, a considerable delay in both the constitution of State Finance Commissions (SFCs) (responsible for coordinating fiscal transfers between state government and ULBs) and the implementation of SFC recommendations was observed. In several cases, state governments did not release the entire amount recommended by the SFCs to ULBs, resulting in an average shortfall of ₹1,606 crore in receipts for ULBs across 15 states.

 

Apart from grants, taxes, such as on property, are one of the major sources of funding for these bodies. Even though ULBs have the right to collect such taxes, they don’t have the power to fix the rate of property taxes, conduct assessments, or revise tax rates, with many property taxes still being levied at preexisting rates.

 

All these factors significantly contribute to financial distress of local bodies, with 11 states reporting an expenditure-revenue gap of a staggering 42 per cent. Even with the available funds, local bodies are unable to adequately support development activities, as only 29 per cent of the funds are being allocated to development activities. All these factors significantly contribute to crippling urban bodies financially, leaving critical infrastructural needs chronically underfunded.

 

The urban crisis cannot be averted without the genuine empowerment of ULBs. States must adhere firmly to the 74th Amendment by granting these bodies real autonomy over their functions, free from interference by the state government. This would require strengthening the SECs to ensure democratic accountability through regular elections.

 

Further, the DPCs and MPCs must be made functional, along with the timely constitution of SFCs, and ULBs must be given autonomy over workforce recruitment. This will ensure that development plans are regularly constructed, timely finance is made available, and local bodies have adequate manpower to carry out development projects in their jurisdiction. Without these reforms, India’s urban centres will continue to decline, falling short of their promise as epicentres of productivity and quality living.

 

The author is chair, Institute for Competitiveness. X: @kautiliya. With inputs from Kartik