CAG Report Highlights Critical Issues in Urban Local Bodies Across 18 States

Context:

The Comptroller and Auditor General (CAG) of India has raised serious concerns about the condition of urban local bodies (ULBs) in 18 states, which serve approximately 241 million residents. According to the report, there are systemic weaknesses in financial management, staffing, and functional autonomy within these ULBs. These issues are significant as they undermine the objectives set forth by the 74th Constitutional Amendment, which aimed to strengthen the role and efficiency of ULBs in urban governance and development.

Relevance:

GS II: Polity and Governance

Dimensions of the Article:

1. 74th Constitutional Amendment Act of 1992
2. CAG Report on Urban Local Bodies (ULBs) in India
3. Recommendations for Strengthening ULBs

74th Constitutional Amendment Act of 1992

Overview

The 74th Constitutional Amendment Act, passed in 1992, is a significant piece of legislation that granted constitutional status to Urban Local Bodies (ULBs), positioning them as fundamental units of governance in Indian cities and towns. This act aimed to enhance urban governance through a structured decentralization of authority and powers.

Key Provisions

• Constitutional Framework:
  • The amendment introduced Part IX-A to the Constitution, encompassing Articles 243-P to 243-ZG, which specifically address the structure and governance of municipalities.
• Devolution of Powers:
  • One of the critical elements of the amendment is the mandated devolution of 18 functions to ULBs, as outlined in Schedule 12 (Article 243W). These functions include crucial areas such as urban planning, regulation of land use, water supply, public health, and sanitation.

Importance of Robust ULBs

• Urbanization Trends:
  • With projections indicating that 50% of India’s population will be residing in urban areas by 2050, robust urban governance systems become crucial. This demographic shift emphasizes the need for well-structured and empowered ULBs to manage the growing urbanization effectively.
• Role of ULBs:
  • Empowered ULBs are essential for ensuring the economic, environmental, and democratic vibrancy of cities. They are pivotal in managing urban challenges, including infrastructure development, waste management, and environmental conservation. Additionally, ULBs can significantly influence local economic development and quality of life for urban residents.

CAG Report on Urban Local Bodies (ULBs) in India

Key Findings

• Incomplete Devolution of Powers:
  • Despite the 1992 amendment intended to decentralize 18 functions to ULBs, only 4 functions have been fully devolved after 30 years. This lack of complete autonomy has been noted in 393 ULBs across 18 states including Andhra Pradesh, Assam, Haryana, Himachal Pradesh, Odisha, Madhya Pradesh, and Maharashtra, indicating a failure to fully embrace the spirit of the amendment.
• Financial Gaps and Dependency:
  • ULBs exhibit a substantial financial gap, with a 42% discrepancy between resources and expenditures. Internal revenue generation is notably low, with only 32% coming from within the ULBs and the remainder dependent on Union and state government funding. Property tax, a critical revenue source, achieves only 56% of its potential collection.
• Limited Expenditure on Development:
  • A mere 29% of ULB expenditures are allocated towards developmental and programmatic work, which is insufficient to support substantial urban growth and improve the quality of life.
• Staffing Issues:
  • ULBs suffer from an average 37% vacancy rate in sanctioned staff positions. Additionally, ULBs in 16 states have limited or no control over their staffing, which further complicates operational efficiency.

Recommendations for Strengthening ULBs

• Enhance Financial Autonomy:
  • The CAG suggests granting ULBs greater control over their taxation and user charges to bolster financial independence and resource generation.
• Improve Revenue Collection Mechanisms:
  • Streamlining property tax collection and other revenue sources is recommended to maximize financial resources available to ULBs.
• Focus on Fund Utilization:
  • There is a critical need to ensure that funds allocated to ULBs are used effectively, particularly for development purposes to foster better urban infrastructure and services.
• Strengthen Decentralization:
  • The report calls for a revival of efforts to empower ULBs both politically and administratively, fulfilling the original intentions of the 1992 constitutional amendment.
• Call for Collaboration:
  • Recognizing the empowerment of ULBs as a national priority, the CAG advocates for collaboration among government, academia, and civil society. This cooperation is deemed essential for achieving meaningful progress in strengthening ULBs.

-Source: Indian Express