Strengthening Local government

Figure 4: No Copyright Infringement Intended

Context:

• The Reserve Bank of India (RBI) suggests that civil society groups need to strengthen their functional autonomy and strengthen their governance structure.

Background

• The RBI said in its report, State Finance, 202122 Budget Survey, that third-tier governments are at the forefront of the fight against pandemics by implementing containment strategies and medical care.
• Public sector finances are terribly tense, resulting in spending cuts and the mobilization of funds from a variety of sources.
• The RBI added that it needs to increase functional autonomy and strengthen governance structures.
• This can be achieved by empowering financially by increasing the availability of resources.

Challenges:

• Decline in Revenue: According to an RBI survey of 221 local governments, revenues fell by more than 70% and spending increased by nearly 71.2%.
• Failure to collect property tax: The RBI report also highlights the failure to collect limited property taxes and integrate local government revenues. According to data from the Organization for Economic Co-operation and Development (OECD), India's property tax collection is the lowest in the world.
• Poor participation of Mayor: In addition, during the pandemic, both center and state leaders called for disaster mitigation strategies without involving the mayor.
• Treating the city as subordinate: However, the chosen leader cannot find a place for disaster management. The approach of treating a city as a subordinate of the state government has been carried over to policymaking.
• Removal of Octroi: Octroi covered nearly 55% of the municipal's total income, but subsidies now cover only 15% of its expenses. The Goods and Services Tax (GST) has completely deprived local businesses of their ability to tax.

Way Forward:

• Increase Functional autonomy: The RBI report correctly emphasized that the functional autonomy of the city government must be granted.
• Three Fs: Functional autonomy must be accompanied by three Fs: function, finance, and city government function.
• Mention in 12^th Schedule: Financial empowerment needs to be added to the 18 features listed in the 12th list, introduced by the 74th Amendment aimed at empowering the city's local government.
• Focus on democratic decentralisation: Cities need to be treated as important government centers where democratic decentralization can bring about transparency and proper participation of people.
• Follow Successful model of Kerala: The state was to follow the planning model of the people of Kerala, and 40% of the state's planning budget was allocated to local governments with the transfer of significant issues.
• Space for Planned development: Cities should be considered as spaces for planned development, with due consideration of resources.
• Giving a due in income tax: Cities in Scandinavian countries were examples of managing functions ranging from urban planning to mobility and waste management. This is because the citizen's income tax has been remitted to the city hall. In this regard, it is necessary to implement the recommendations of the Department of Housing and Urban Development committee to return 10% of the income tax collected by the city to the city.

Conclusion:

• Local governments play an important role in society, and in this regard there is a need to improve subsidies from the center, requiring cities to develop their own plans based on the priorities of their inhabitants. Citizens need to be part of the decision-making process to properly manage their functions.