The states in India seem reluctant to empower urban local bodies both functionally as well as financially.…

Question

The states in India seem reluctant to empower urban local bodies both functionally as well as financially. Comment.

Ghissu Editorial · Accepted Answer

States have largely created elected urban local bodies in form while retaining functions, staff and taxes, keeping municipalities dependent on them. Municipal own-source revenue was only 0.38% of GDP in 2021-22, as states control property tax rates and parastatals run key services.

**Introduction**

Article 243W leaves it to states to endow municipalities with the eighteen Twelfth Schedule functions. Three decades after the 74th Amendment, most states created elected councils but kept real power, so the observation is largely accurate.

**Functional Reluctance of States**

SKETCH: iceberg | Urban Local Bodies: Form and Substance
visible: Elected councils, Twelfth Schedule, Mayors
hidden: State-run parastatals, Commissioner holds power, State-controlled staff, Unheeded SFCs

1. **Parastatals**: Water, planning and transport sit with state boards and development authorities, such as Bengaluru's water supply board, leaving corporations to maintain what others build.
2. **Weak mayors**: Mayors in many states are indirectly elected with short terms, Delhi's for one year, while the state-appointed commissioner holds executive power.
3. **Borrowed staff**: Recruitment, transfers and supersession remain state decisions, so councils cannot build capacity.
4. **Planning withheld**: Metropolitan Planning Committees under Article 243ZE exist in only a few cities, so state authorities still draft master plans.

**Financial Reluctance of States**

1. **Thin own revenue**: Municipal own-source revenue was only 0.38% of GDP in 2021-22 (Janaagraha), because states fix property tax rates and rarely revise them.
2. **Taxes taken away**: The 101st Amendment (2016) folded octroi and entry tax into GST without a municipal share.
3. **Neglected SFCs**: The IIPA study for the 16th Finance Commission (2025) found that Punjab, for its second SFC, was the only state to table an Action Taken Report within six months.
4. **The exceptions**: Kerala devolved funds and staff, and Ahmedabad issued India's first municipal bond without a state guarantee in 1998, showing what empowered cities achieve.

**Conclusion**

States accept urban democracy in form but resist it in substance. Activity mapping, directly elected mayors, a GST share and property tax reform can make cities the engines of Viksit Bharat 2047.

The states in India seem reluctant to empower urban local bodies both functionally as well as financially. Comment.

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