Urban Local Governments: Undercurrents of Strengthening Centralisation

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The omissions and commissions of several state governments across India now make it abundantly evident that there is a strong undercurrent of centralisation building against the forces of local democratic decentralisation, resulting in the further disempowerment of urban local governments. The objectives of the 74th Amendment Act have been significantly diluted in practice and, in effect, remain only on paper.

In 2021, in the wake of the COVID-19 pandemic, elections that were due in several Municipal Councils and Nagar Panchayats could not be conducted in Maharashtra. The state government promptly appointed sub-divisional officers and tehsildars as administrators to manage these urban local bodies (ULBs). Similarly, elected bodies of the state’s 27 municipal corporations expired between 2022 and 2023, and are now being run by state-appointed administrators. Pending judicial scrutiny of the 27 percent reservation for the state’s OBC groups in the Supreme Court,  local elections are in abeyance, and there is no certainty about when the elections will be held.

The state government promptly appointed sub-divisional officers and tehsildars as administrators to manage these urban local bodies (ULBs).

This is despite an explicit provision in the 74^th Amendment that election to a municipality shall be completed before the expiration of six months from the date of its dissolution. In the exceptional event of the dissolution of a municipality before its five-year duration, presumably on account of serious misdemeanours, the municipality shall be given a reasonable opportunity to be heard. In the past, whenever states attempted to dissolve or unduly interfere with the electoral process, the courts have frowned upon such attempts, invariably weighing on the side of the ULBs. In the current example, however, despite the breach of the 74th Amendment’s provisions, no urgency appears to be in sight for restoring the electoral process to the ULBs, where the popular body has been in abeyance for several years.

Earlier, the disempowerment of the local bodies took the fiscal route. The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act (RFCTLARR), 2013, and the Central Goods and Services Act (CGST), 2017, resulted in the gravest assaults on the financial salubrity of the municipalities. The first modified the ULB Act for acquiring land, and the second took away the local revenue handles. The RFCTLARR mandated that ULBs pay two times the Annual Ready Reckoner (ARR) value for urban land. Also called the circle rate, the ARR is a land value set by state governments for property transactions based on past land transactions registered in a specific area. These are generally revised upwards annually. The ULBs must acquire vast lands to provide civic amenities to rising populations. Thanks to the RFCTLARR, land acquisition capacity now seems seriously debilitated.

The first modified the ULB Act for acquiring land, and the second took away the local revenue handles.

The GST Act virtually subsumed all municipal revenue sources, including local body tax, tax on entertainment, advertising through hoardings and billboards, and entry or octroi tax on articles entering the region, except property tax. Even property tax collection has suffered due to political expediency. For example, in Mumbai, in a populist pre-election decision that further hurt the municipal finances, the state waived property tax for all residential properties measuring less than 500 sq ft in 2019. For a city where 64 percent of dwellings are below 500 sq ft, this waiver cleaved off nearly two-thirds of the property tax revenue earned by the Brihanmumbai Municipal Corporation (BMC). Property tax collection also remains weak because of archaic assessment and collection methods. A November 2024 Reserve Bank of India (RBI) report on municipal finances revealed that while 96.2 percent of cities maintain property registers, 55 percent of those are yet to transition to GIS-based surveys and depend on physical property assessment, and 25.5 percent use error-prone manual records.

Octroi, which accounted for almost half of their annual revenue, is entirely lost. Since the passage of these two Acts, the country’s ULBs have been financially rendered among the weakest in the world. They cannot survive without grants from the state governments and the Central government.

In this context, the Central government’s schemes for ULBs must be studied. Ever since the introduction of the Jawaharlal Nehru National Urban Renewal Mission (JNNURM), launched in 2005, Government of India schemes directed at city-based services have preferred to use the Special Purpose Vehicle (SPV)  route to disburse central money and monitor its utilisation. The trend has continued over the past two decades. For example, the implementation of the Smart Cities Mission (SCM), launched in 100 cities in 2015, was done by a Special Purpose Vehicle in each city, created for scheme implementation. The SPV was headed by a full-time CEO with central, state and ULB nominees participating. The structure of the SPVs has been more bureaucratic, less popular in composition, and clearly showing procedural distrust of the popularly elected local bodies to implement programmes at speed. In effect, the SPV is designed to bypass the democratic processes that dictate how the ULBs are supposed to function. Additionally, with the SCM concluding in March, the future of these SPVs is uncertain, with states like Uttar Pradesh already contemplating mass layoffs of staff and others awaiting guidelines for their status beyond 31 March 2025. Some of the efficiencies brought about by the SCM may get eroded as the ULBs do not have the human resources, financial capacity, or technical know-how to sustain some SPV-driven SCM initiatives.

The SPV is designed to bypass the democratic processes that dictate how the ULBs are supposed to function.

The practice of parastatals assuming control over particular functions of a municipality has been happening for a long time. Bengaluru presents a significant example of this phenomenon. Not only is the city’s fractured municipal service delivery system unique, but it also best illustrates the norm prevalent in several states. A parastatal, the Bengaluru Water Supply and Sewerage Board (BWSSB)  provides water to the city and manages wastewater treatment and disposal. Another parastatal, the Bengaluru Metropolitan Transport Corporation (BMTC) provides bus services. The Bangalore Metro Rail Corporation Limited (BMRCL) is a more recent addition to the list of parastatals. It provides rail-based public transport. On the planning side, the Bengaluru Development Authority (BDA) and the Bengaluru Metropolitan Regional Development Authority (BMRDA) prepare the city Master Plan to manage zoning, regulation and planning of land use. The Lake Development Authority (LDA) is charged with the protection, conservation and integrated development of lakes in the BMRDA jurisdiction. The Karnataka Slum Clearance Board (KSCB) provides basic amenities and houses to slum dwellers and assists in income-generating activities. The Karnataka Urban Infrastructure Development and Finance Corporation (KUIDFC) is the nodal agency for externally aided projects, assisting the urban agencies in planning, financing and providing expertise in urban infrastructure development. All these are parastatals. These creations of the state supposedly ‘help’ the Bruhat Bengaluru Mahanagara Palike (BBMP), but in effect, they have taken over practically all municipal functions, leaving the BBMP as a rump.

Lately, there have been examples of both the Central and state governments experimenting with the geographical boundaries of municipal corporations. Readers may recall the earlier demerger of the Delhi Municipal Corporation (2011) and the subsequent merger of ULBs (2022) carried out in the national capital. The latest example is the Greater Bengaluru Governance Bill, 2024. Its stated objectives are the establishment of the Greater Bengaluru Authority (GBA) to ‘coordinate and supervise the development of the Greater Bengaluru Area’. The BBMP Commissioner will work under the GBA’s Chief Commissioner. The GBA itself would be split into a maximum of 10 municipal corporations for ‘effective, participatory and responsive governance’. The Bill specifically states that it will have the power to alter the boundaries of the ULBs within GBA and exclude any geography from the confines of a municipal corporation. The Chief Minister of the State would be the ex-officio Chairman of the GBA, and the Chief Commissioner—appointed from the state administrative services not below the rank of an Additional Chief Secretary, would be the ‘Principal Executive Officer of the GBA’. In effect, even the fig leaf of democratic decentralisation that existed has been removed, and governance of the ULBs in the area of the GBA stands substantially taken over by the state government.

The Bill specifically states that it will have the power to alter the boundaries of the ULBs within GBA and exclude any geography from the confines of a municipal corporation.

All instances cited above decidedly point towards the emaciation of the concept of democratic decentralisation at the local level. They demonstrate how popular representation at the lowest level can be dispensed with for reasons considered more significant than a democratically elected body. Municipalities are now being made to significantly cede their governance to either the state or institutions and functionaries run by the state. The planning function is already in the hands of the state. Now, even their geographical boundaries are threatened by alteration at the state’s pleasure. The cumulative effect of these steps signifies the loss of autonomy for the ULBs, devaluing them as mere agents of the state, and rendering the visionary 74th Amendment to an optional guideline document rather than a constitutional mandate.

Ramanath Jha is a Distinguished Fellow at the Observer Research Foundation.

• Urbanisation in India
• Urbanisation
• India
• ulb
• ulb governance
• urban governance
• urban governance in india
• urban local bodies
• urban local bodies functions
• urban local governments

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