“Crumbling Cities, Powerless Councils: India’s Urban Governance Crisis”
Urban infrastructure nationwide is under increasing strain. Cities, once viewed as the drivers of productivity and a promise of a better quality of life, now grapple with waterlogging, long traffic jams, and pollution, jeopardising both the quality of life and productivity of their residents. These inherent failures point towards an evident lack of urban planning, directing blame towards 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 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 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 infrastructure facilities and other social facilities, 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 the 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 twelfth commission are fully under the autonomous control of the ULBs, with most functions being performed with regular interference from the state government or Parastatals, with no representation from the local bodies whatsoever. In addition, ULBs are being deprived of making their own recruitment decisions, as the staff assessments of ULBs are conducted by the state government, leading to frequent underestimation of personnel requirements. In one such example, Shimla Municipal Corporation, which supposedly had a requirement of 720 people, were granted only 20 new posts by the state government. The lack of autonomy has resulted in not only fewer positions but also leaving one out of three positions in ULBs vacant across the 18 states, thereby depriving them of the necessary human resources to carry out their operations.
In addition to providing powers to the ULBs, the 74th CAA provides for the constitution of new institutional designs, such as State Election Commissions (SECs), to ensure regular municipal elections. It also establishes District Planning Committees (DPCs) and Metropolitan Planning Committees (MPCs) to provide integrated and coordinated regional planning. However, the CAG audit majorly reveals a complete neglect of these provisions. According to the report, 61 per cent, i.e. 1600 out of 2625 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 is that the power of ward delimitation is vested in the hands of the state government, which delays the conduct of regular municipal elections. A lack of elected council renders the public unable to hold the ULBs accountable. In addition to the lack of accountability, a lack of strategic planning further hampers the urban bodies, as only 10 states in the audit were found to have formed DPCs, and only three had prepared annual district plans. The MPCs exhibit a similar trend, as out of the nine states mandated to form MPCs, only 3 created them, resulting in a total of 7 metropolitan ULBs, with only three of these seven having 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 the ULBs, resulting in an average shortfall of ₹1,606 crore in receipts for ULBs across 15 states. Apart from grants, taxes such as property taxes are one of the significant sources of funding for these bodies. Even though the bodies 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 among the local bodies, with 11 states reporting an expenditure revenue gap of a staggering 42%. Even with the available funds, local bodies are unable to adequately fund development activities, as only 29% 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 the ULBs. The states must adhere firmly to the 74th Amendment by providing the bodies with genuine autonomy over their functions, free from any interference by the state government. This would require strengthening the State Election Commission to ensure democratic accountability through regular elections. Further, the DPCs and MPCs must be made functional along with the on-time constitution of the State Finance Commissions and providing autonomy to ULBs over workforce recruitment, ensuring that development plans are regularly constructed, timely finance is made available, and the bodies have adequate manpower to carry out development projects in their areas of 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 article was published with Business Standard on October 22, 2025.
