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The Comptroller and Auditor General of India (CAG) report found a 42% gap between resources and expenditure in urban local bodies (ULBs) in 18 states.

74th Constitutional Amendment

The 74th Constitutional Amendment Act (1992) granted constitutional status to Urban Local Bodies (ULBs), making them the smallest level of government in cities and towns.

The Amendment added Part IX-A to the Constitution to deal specifically with municipalities and consists of Articles 243-P to 243-ZG.

The Amendment requires the devolution of 18 functions to ULBs, as outlined in Schedule 12 (Article 243W). These functions include urban planning, public health, water supply, and other essential city services.

Urban Local Government in India

The term "Urban Local Government" refers to a system of self-government in which representatives elected by the urban population manage governance and administration. It is the third level of government and promotes participatory democracy by directly involving citizens in decision-making processes.

Types of Urban Local Bodies

Municipal Corporation	Municipal Corporations are established through State Legislature Acts or Parliamentary Acts for Union Territories. They are made up of Council (Mayor, Deputy Mayor, Councilors, and Nominated Members) and Standing Committees (functional groups such as sanitation and finance). Municipal Commissioner (Chief Executive Authority appointed by the state government).
Municipality	Municipalities manage smaller cities and towns, whereas Municipal Corporations oversee larger metropolitan areas. Municipalities are led by a President/Chairman who has executive powers.
Notified Area Committee	The Notified Area Committee (NAC) governs areas experiencing rapid industrial growth or that do not yet qualify as municipalities but are considered important by the state. It is formed through government notification and has nominated members. NACs are not elected bodies, but they have powers similar to municipalities under notified state municipal laws.
Town Area Committee	A Town Area Committee manages small towns that have limited civic responsibilities such as drainage, road maintenance, and street lighting. It functions as a semi-municipal authority, with members elected, nominated, or both, depending on state legislation.
Cantonment Board	The Cantonment Board was established by the Cantonments Act of 2006 and operates under the Ministry of Defence. It consists of elected members, nominated ex-officio members, a President (station commander), and a Vice President (elected by members). The function is similar to municipalities with both obligatory and discretionary duties.
Township	Townships are created by large public enterprises to provide civic amenities for their employees. Unlike elected ULBs, they are led by a Town Administrator who is appointed by the enterprise.

Significance of the Role of Urban Local Bodies (ULBs)

They are responsible for land-use planning, infrastructure development, and policy implementation to promote sustainable urban growth.

They are responsible for providing urban residents with essential services such as water supply, sanitation, solid waste management, street lighting, and public health services.

They play a significant role in developing and implementing local plans to mitigate the effects of natural disasters and emergencies.

ULBs have empowered women and marginalized groups through reservations in local bodies, as mandated by the 73rd and 74th Constitutional Amendment Acts. This has resulted in increased participation in decision-making processes.

Key highlights of the CAG report: Urban Local Bodies (ULBs) Challenges

The 74th Constitutional Amendment act delegated 18 functions to ULBs such as urban planning, land use regulation, and public health. The report found that the Act's provisions have not been fully implemented.

On average, only 32% of ULB revenue comes from self-generated sources and the remaining comes from Union and state government transfers. ULBs also collect only 56% of their property tax revenue.

Urban local bodies (ULBs) receive about 68% of their revenue from central and state transfers. They lost key sources of revenue after the GST was implemented, including sales tax, and local entertainment taxes.

ULBs have limited decision-making autonomy, and depend heavily on state governments for financial and administrative support. This dependency reduces their ability to respond quickly and effectively to the needs and demands of urban residents.

ULBs have an average staff vacancy of 37% of sanctioned strength, this limits operational effectiveness.

With half of India's population expected to live in cities by 2050, strong ULBs are essential for ensuring a good quality of life and promoting economically, environmentally, and democratically vibrant cities.

NITI Aayog Report on ‘Reforms in Urban Planning Capacity in India’ 2021

Challenges

Most states have not delegated sufficient funds, functions, and functionaries for urban planning to local governments, as required by the 74th Amendment Act (1992).
Urban planning and infrastructure development involve multiple agencies, resulting in overlapping functions that cause delays and waste of resources.

Recommendations

Mayors and standing committees should be given more power to plan and manage cities.
States and UTs should hire urban planners as advisors or fellows in mayors' offices.
A high-powered committee should be formed to review urban governance structure and propose necessary reforms.
Provide incentives for states to develop sectoral visions based on budget allocations and citizen expectations.
Establish Metropolitan and District Planning Committees to integrate planning at multiple levels.
Expand the scope of the Ease of Living Index to include 500 cities to encourage healthy competition among them.

Way Forward

The government should implement recommendations made by the 6th Administrative Reforms Commission (ARC), such as establishing Metropolitan Planning Committees (MPCs) to prepare development plans and coordinate with local bodies in metropolitan regions.

The NITI Aayog suggested creating capacity-building programs for local government officials, urban planners, and other stakeholders to improve the skills and knowledge required to effectively govern cities and manage urbanization challenges.

The CAG highlights the need for state governments to increase ULB autonomy. This includes increasing ULB participation in key areas such as urban planning and improving laws, policies, and institutional frameworks. Such reforms will ensure economic and environmental growth, and also strengthen democratic values.

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Source:

Indian Express