Functions of the Urban Local Bodies (ULBs)

By Vaibhav Anand, IFMR Capital

(This is the second post in the series of posts on the Municipal Finance Scenario in India. In this post, we discuss the functions devolved to ULBs as per the 74th Constitutional Amendment. We also discuss briefly the capabilities of ULBs to carry out these functions successfully.)

The 74th Constitutional Amendment Act (CAA)I incorporated provisions for devolution of certain powers and functions to Urban Local Bodies (ULBs). Section 243W of the 74th CAA aimed at devolving the responsibility for local economic development and social justice. The Twelfth Schedule of the Constitution lists the specific functions under economic and social development that are best devolved to ULBs.

Given the importance of functions and responsibilities entrusted to the local self-governments, the issues relating institutional structure of ULBs gain tremendous significance. These structures are not uniform across states or even metropolitan (or district) areas, and are plagued with political and administrative problems. These shortcomings make the successful execution of devolved functions a challenging task for the local bodies.

We discuss here some of the functions listed in the Twelfth Schedule of the Constitution and the ability of ULBs to carry out these functions successfully.

I. Urban planning including town planning &
II. Regulation of land-use and construction of buildings: Typically the above two functions fall under the purview of the development authority of the city (e.g. Delhi Development Authority (DDA), Bangalore Development Authority (BDA). However, the responsibilities are sometimes shared with multiple authorities (i.e. industrial development authorities, regional development authorities) within a metropolitan region. This multiplicity of authorities and lack of coordination among them make decision making and implementation of public infrastructure and services extremely difficult.

III. Planning for economic and social development: The definition and scope of this function is fairly wide, open ended and to an extent, unwieldy. Social and economic development programmes require sound integrated planning which requires resources and expertise which the most of the ULBs seem not to have endowed with. The HPEC Report on Indian Urban Infrastructure and Services has clearly stressed the need of the appropriate capacity building at local bodies’ level.

IV. Roads and bridges: This function is typically shared by multiple bodies- city development authorities, municipalities and the public works departments (PWDs). However, an integrated planning is essential to ensure that city roads and urban building/housing plans are properly aligned. The lack of coordination among multiple authorities involved often makes it difficult to formulate and implement an integrated plan.

V. Water supply for domestic, industrial and commercial purposes: This is a function that is most appropriately by ULBs. The current state of urban water supply is quite dismal with billing and collection of only 20% of supplied water and Operations &Maintenance cost recovery of 30 – 35%. Also, the connection coverage in urban areas is low (65%) as compared to other developing countries (91% in China, 86% in SA and 80% in Brazil). Again, in some states the urban service delivery is the responsibility of parastatals (state government’s statutory agencies) that are not answerable to ULBs and only to state governments. ULBs, answerable to their smaller jurisdiction, have little control on these parastatals that operate on a larger scale; this complicates incentive structures, leading to poor outcomes.

VI. Public health, sanitation conservancy and solid waste management: Public health, contrary to its significance for social and economic development of the country, is not supported by a consistent institutional structure (each state has a different structure) and policy framework (the last two National Health Policies were made in 1983 and 2002) at the centre or state level. It is highly program driven with the centre government responsible for funding and planning, and state government for implementation. Health care is largely financed by private pockets. As of 2001-02, the share in health financing of the local governments, state and central government was 2.2%, 14.4% and 7.2%II. With dwindling finances of ULBs and the extent of intervention required, it is not clear that this is a mandate that ULBs are well equipped to handle.

Solid waste management comprises of various steps- collection, segregation, transportation, disposal and recycling. These activities are normally carried out by different bodies. Though the current status of solid waste management is dismal (with less than 40% disposal and less than 1% recycling), it accounts for the 25-50% of ULB’s total expenditureIII, and is also a function that is best performed by ULBs.

VII. Slum improvement and up-gradation: Typically falls under the purview of the housing boards and the city development authority. However, similar to the social and economic development functions, it is a challenging task and little exists in terms of a policy framework or planning.

VIII. Urban poverty alleviation: Such a broad mandate with the level of coordination and extent of intervention required again bring to question whether ULBs are the appropriate level of government to discharge this responsibility.

Other functions listed in the Twelfth Schedule are mentioned below. The devolution of some of these functions (e.g. fire services, providing urban amenities, burial & cremation grounds etc) to ULBs is justified as these functions may be best performed by local governments. However, some functions pertaining to social and economic development are either very wide in scope or there is little policy framework to guide ULBs to plan and execute them.

IX. Fire services
X. Urban forestry, protection of the environment and promotion of ecological aspects
XI. Safeguarding the interests of weaker sections of society, including the handicapped and mentally retarded.
XII. Provision of urban amenities and facilities such as parks, gardens, playgrounds
XIII. Promotion of cultural, educational and aesthetic aspects.
XIV. Burials and burial grounds; cremations, cremation grounds and electric crematoriums.
XV. Cattle pounds; prevention of cruelty to animals.
XVI. Vital statistics including registration of births and deaths.
XVII. Public amenities including street lighting, parking lots, bus stops and public conveniences.
XVIII. Regulation of slaughter houses and tanneries.

To conclude, the devolution of functions to the local bodies could meet its intended end only with a commensurate devolution of powers, political freedom and revenues by the state governments. Further, without the administrative, institutional and financial reforms, and capacity building, the local-governments may not be able to execute their functions successfully.

I – Link to the 74th CAA- http://indiacode.nic.in/coiweb/amend/amend74.htm
II – Financing and Delivery of Health Care services in India, MOHFW, 2005
III – HPEC Report on Urban Infrastructure, 2011


74th Amendment and Local Governments in India

By Anand Sahasranaman, IFMR Finance Foundation

This is the beginning of a series of blogs on the Municipal Finance scenario in India. In the first post we look at the 74th Constitutional Amendment Act, the rationale behind it and its intentions.

A municipal or local government is the layer of government that is closest to the people. The principles of fiscal equivalence1 and correspondence2 provide a strong rationale for decentralisation on the grounds of efficiency and accountability. Correspondingly, the principle of subsidiarity3 makes the case for transfer of revenue generating powers to local governments so as to respond to their clients’ needs and provide appropriate services. The literature clearly indicates that local governments are in the best position to be able to communicate with and understand the needs of the community that they represent and that they be given the responsibility to provide basic social and infrastructure services to their constituents. The responsibilities and powers of local government need to be established in a well-defined policy and legislative framework.

The 74th Constitutional Amendment Act (74 CAA) enacted in 1993 was a critical piece of legislation meant to herald a fundamental shift in the philosophy of governance in India, by articulating a vision of decentralised power and responsibility through the provision of constitutional status for urban local governments . All state governments passed enabling legislation to translate the provisions of 74 CAA into reality. These acts laid down the provisions for the devolution of funds, functions and functionaries to enable Urban Local Bodies (ULBs) to perform their duties. Since there is a wide scope of functions devolved to local governments (such as urban planning, water supply, public health, fire services and slum improvement among others), the 74 CAA envisioned that assuring regular and predictable funds flow to ULBs would be critical in enabling them to fulfil their mandate. Mirroring the Central Finance Commission (CFCs), it proposed the creation of State Finance Commissions (SFCs) every five years to decide on the grants-in-aid for ULBs. In addition, the 74 CAA and enabling state level legislations devolved a set of financing levers – taxes and fees – that could be utilised by the ULBs to generate revenues internally.

With the passage of the 74 CAA, local governments were meant to take on more of a developmental character, with direct accountability to citizens. The act envisages long term planning for social and infrastructure services to be done at the local government level and then consolidated as master development plans at the district and metropolitan levels. Among other important provisions of the 74 CAA were adequate representation of women and weaker sections of society in local governments, and regular conduct of municipal elections every five years.

Although the 74 CAA was expected to create a basis for accountable and transparent local government, the reality over the past 20 years has not matched these expectations. In subsequent posts in this series we will explore different aspects of the municipal framework – funds, functions and functionaries – in greater detail to understand the Indian experience better.

1- The principle of fiscal equivalence states that an overlap of the benefit area and political jurisdiction ensures the optimal provision of public services
2- The principle of correspondence states that the jurisdiction that determines the level of provision of a good should precisely include the individuals who consume that good
3- The principle of subsidiarity states that taxing and spending should be exercised by lower levels of government unless a convincing case can be made to the contrary