The 74th Constitutional Amendment Act, 1992 sought to institutionalize Urban Local Bodies (ULBs) as self-governing institutions. However, incomplete devolution of funds, functions, and functionaries by state governments has constrained municipal autonomy across India.

State Reluctance to Empower ULBs Functionally

• Incomplete Devolution of Twelfth Schedule Matters: Most states have transferred only a subset of the 18 functional domains listed in the Twelfth Schedule to ULBs, retaining control over critical municipal functions like town planning and land use.
• Proliferation of Parallel Parastatals: States frequently establish parallel bureaucratic agencies (e.g., Urban Development Authorities, Special Purpose Vehicles under the Smart Cities Mission) that bypass municipal councils and reduce local democratic oversight.
• Subordinated Mayoral Authority: In most Indian cities, the political Mayor possesses ceremonial functions, while actual executive authority is vested in a state-appointed Municipal Commissioner, creating administrative asymmetry.
• Irregular Municipal Elections and Ward Delays: State governments sometimes postpone municipal polls or delay constituting Ward Committees and Metropolitan Planning Committees.

State Reluctance to Empower ULBs Financially

• Over-Dependence on State Grants: ULBs rely heavily on discretionary state grants, with own-source revenues remaining low and limiting fiscal autonomy.
• Inadequate Property Tax Collections: Outdated property valuation registries, low coverage, and political hesitation to revise user charges limit municipal tax yields.
• Underutilization of Innovative Financing: Municipal bond issuances and Public-Private Partnerships (PPPs) remain restricted to a few credit-rated metropolitan corporations.
• Weak State Finance Commissions (SFCs): States frequently delay setting up SFCs every five years, and SFC recommendations regarding predictable local tax-sharing are often selectively accepted or implemented with delay.

Measures for Effective Urban Governance

• Mandate comprehensive transfer of all Twelfth Schedule functions along with corresponding staff.
• Empower Mayors with executive authority and stable tenures.
• Modernize property tax administration through GIS mapping and expand municipal credit ratings for bond financing.

Empowering Urban Local Bodies functionally and financially is necessary to handle rapid urbanization and build sustainable, accountable cities.