In tandem, the Union Budget allocated ₹1 trillion to the Urban Challenge Fund, aimed at catalysing fund flows to urban local bodies (ULBs) over the next five years. Here as well, there are conditionalities: 25 per cent of the allocation will be released only if the state government contributes a similar amount, with the rest to be mobilised from market sources in the form of bonds, loans, public-private partnership, etc. The Budget therefore aims to incentivise not just fund flows but also the strengthening of market institutions.
In my view, both these measures will lead to significant improvements in the institutions that govern the operations of ULBs and funds flow to them. But while they ease funds flow, they do not address the urban governance problem that has led to the widespread poor performance of Indian cities. We, therefore, need another initiative to correct an underlying issue that lies at the root of almost everything that’s wrong with India’s cities.
But first, consider this. Why are there so many rural areas that do not want to be classified as urban? Some believe that this is because of the fear of higher taxes, but property taxes are minimal in India, so that is not the core issue. Others believe that this will mean zoning regulations that could adversely affect large landowners. But that is also not the case because conversion to urban area leads to an improvement in infrastructure, and increase in land values, so the landowners benefit immensely.
The core reason is that rural governments are controlled by politicians, but city governments have allocated powers to the bureaucracy. Therefore, by agreeing to convert a rural area into an urban one, a rural politician would effectively be signing away his powers to a bureaucracy controlled by the state government.
Scores of opinions, studies, and reports have identified the issue as this: The locally elected authority (e.g., the Mayor), who is accountable to the public through the electoral process, has few powers. The bureaucrat-chief executive officer (CEO) who runs the city has greater powers; he controls the administration and effectively reports to the state government. Therefore, those who are accountable to the city’s residents (municipal councillors and the mayor) have to get work done through bureaucrats who are accountable not to the people of the city but to the state government. This mismatch between accountability and authority causes all kinds of governance failures. It also impacts fund flows to city governments, which, in turn, perpetuates the poor resources and capacities available to city governments in India.
But consider this factoid as well. Nothing in our institutional structure stops the state government from allocating greater powers to the political head of the city council. But in over 75 years of Independence, not a single state government has delegated powers to the city-level politician. In other words, while there is a consensus among civil society and academia over greater powers to the local politician, there is also an unstated consensus among the bureaucracy and politicians that the state government should control India’s cities through state-appointed bureaucrats.
But all would agree that the current state is leading to all kinds of urban governance and resource failures that the Union government and Finance Commission have to step in to try and correct. How can we resolve this tension? The Union government, for instance, could empower local politicians through a conditional scheme. In such a scheme, the powers over hiring and firing city CEOs would be allocated to the mayor as a first step, and there would then need to be some collateral reforms as well, including changes to certain reporting structures.
Of course, no one in the bureaucracy is likely to agree to such reforms, since serving officers would prefer to report to state or national headquarters, which determine their career progression. To further correct it, the government may also open up city CEO positions to managers from outside the bureaucracy. Who knows, a reform-minded government may also allow cities to hire city-CEOs from other countries. But all of this, while enabling efficiency may anger bureaucracy and cause resistance. Moreover, many chief ministers will also not like it, as power over cities will shift to local politicians. Consequently, India may find it difficult to adopt what most other countries practise: An empowered-mayor model. This model is unlikely to be implemented in India simply because the established centres of power have too much to lose.
Therefore, a more feasible solution for India is the accountable-CEO model. This would require three different elements. First, it would need an annual, all-round objective monitoring of cities’ performance. Two, it would require clear and well-defined key responsibility areas (KRAs) for the CEO based on the above metrics, and a specified mechanism of rewards associated with these KRAs. Three, it would require the CEO-led city administration to be answerable to civil society, resident welfare associations, and market associations at the neighbourhood level; ward-level corporators at the ward level; and the city council at the city level. Finally, there are a few countries, such as China, where bureaucrats lead cities. However, unlike in those countries, Indian city CEOs do not have a well-defined method of assessing or rewarding success or failure, or even clear answerability to the people of the city.
Such a monitoring mechanism will ensure that the objective of the bureaucrat-CEO is not merely to maintain order, but to ensure improvements in the economy, livelihoods, basic services, safety, public transport, public spaces, etc. The combination of civil society feedback, objective metrics, and an appropriate incentive mechanism will ensure a better urban governance mechanism than is the case currently. This will then enable better funds usage, better feedback loops, and superior outcomes to resource allocations.
The author heads CSEP Research Foundation.
 "Illustration: Binay Sinha")
