How Much Can the Municipality Do?

by Katie Jo Walter

Organizations like UNESCO and INTACH insist that if we want sensible development that will protect heritage in Vrindavan, we need to focus on the municipality, namely the mayor and the Nagar Palika Parishad. This is based on the 73rd and 74th amendments to the Indian Constitution, which initiated a process of decentralization of power to panchayats and urban local bodies. However, implementation of these amendments has been “tardy and uneven,”(1) leaving municipalities like ours here in Vrindavan unable to tread water in terms of finance and provision of services.

Some of this may be common knowledge for Indians, but I am going to present some information on municipalities in India and Uttar Pradesh in particular, including service provision responsibilities, revenue and obstacles to adequate functioning. A conversation with Neeraj Saigal, General Manager at Food for Life Vrindavan, inspired me to compile this information. I hope that some of you find it useful in formulating opinions about what should be done to improve Vrindavan’s situation, as well as by whom and how.

First of all, in Uttar Pradesh, the following services are listed as being the responsibility municipality:

• Providing water supply for domestic, industrial and commercial purposes;
  
• Establishing, maintaining and assisting maternity centers and child welfare and birth control clinics and promoting population control, family welfare and small family norms;
  
• Regulating tanneries;
  
• Construction and maintenance of parking lots, bus stops and public conveniences;
  
• Promoting urban forestry and ecological aspects and protection of the environment;
  
• Safeguarding the interests of weaker sections of society including the handicapped and mentally retarded;
  
• Promoting cultural, educational and aesthetic aspects;
  
• Constructing and maintaining cattle pounds and preventing cruelty to animals;
  
• Slum improvement and upgradation;
  
• Urban poverty alleviation;
  
• Providing urban amenities and facilities such as gardens, public parks and play grounds. (2)

According to a recent report by the Confederation of Indian Industry,

Cities have narrow financial resource bases leading to monetary constraints. Share of transfers from state governments in the revenues of municipalities was 31.7 per cent on an average (2001/02). Municipalities in several states are almost entirely transfer-dependent for running local services. The dependence was as high as 84 per cent in case of Jammu & Kashmir, 83 percent in case of Rajasthan and 74 percent in case of Uttar Pradesh. Therefore, the financial viability of municipal corporations is dependent on the transfers from the State Governments.A city’s own revenues are mostly dependent on octroi and property taxes. Most urban districts have abolished octroi; property tax collections suffer from evasion and low levels of collection efficiency. Consequently, Indian cities are unable to commit requisite financial resources for development (Exhibit 4.7). (3)

I am told that in the particular case of Vrindavan, the municipality has found it extremely difficult to raise property tax over the years to meet the town’s needs because the moneyed interests of temples and ashrams have strongly resisted and even refused to pay higher taxes, clinging to archaic codes and often paying little more than an ordinary householder.

According to the Commonwealth Human Rights Initiative,

The present condition of Municipalities in India is very dismal in terms of the wide gap between the functions to be performed and the available resources for it. The studies instituted by the 11th Central Finance Commission confirmed this fact across all the states. In spite of this, the Commission declared an ad hoc award of Rs. 1600 crores for Panchayats and only Rs. 400 crores for Municipalities. The amount is less than half of what the earlier finance commission had awarded. Nevertheless, the Commission recommended that there should be a separate tax.

An explanation of state transfers and the lack of municipal revenue outside of property tax is offered by the Commonwealth Human Rights Initiative:

The Constitution, even after the 74th Amendment does not provide for an independent set of taxes that the Municipalities can raise. The Constitution has made it mandatory for every state to constitute a State Finance Commission (SFC). The SFC is to review the financial position of the Municipalities and make recommendations regarding distribution of taxes between the States and the Municipalities. It is also expected to look into the criteria for grants-in-aid and suggest measures needed to improve the financial position of the Municipalities. But the SFC has to function strictly according to the terms of reference provided to it by the state.

Since funds required and the functions to be performed are interrelated the SFCs could review the existing situation and recommend a functional domain that would serve public interest and also be financially viable. But most of the SFCs did not touch on the subject at all. (4)

By 1997, the Uttar Pradesh SFC recommended that Uttar Pradesh 7% of the net proceeds of State’s total tax revenue should be transferred to urban local bodies. According to the 2009-2010 UP budget, a little under 4% of state revenue is being transferred to ULB’s, with an additional 2 percent allocated for specific projects like targeted city development (such as funds allocated for the Braj projects), slum housing, latrines and river pollution control. 200 crore is earmarked for interest-free loans that municipalities could take out.(5)

The State Planning Department points out that, “the financial position of ULBs in the State continues to be precarious and they are often unable to meet expenditure on salaries and other essential services like power dues. As a result, the quality of urban services remains poor. Urgent steps are, therefore, called to revamp the financial situation of ULBs. The fiscal domain of these bodies needs to be expanded and they have to be persuaded to take steps to raise revenue from their own resources. Access of these bodies to institutional sources of funding and capital market has to be improved.”(6) The Planning Department also reports that the financial power of the Nagar Palika Parishad is limited to Rs. 50,000.

Both Human Rights Initiative and the Confederation of Indian Industry point to a lack of manpower and organizational infrastructure as well as (or as a consequence of) low revenues. From the Confederation of Indian Industry report:

Resource constraints are not only financial but also capability driven. Planning capabilities often do not match up to requirements. Consequently, city development has mostly been short sighted and not holistic. Capacity to execute has also traditionally been poor due to shortage of skilled personnel. Our interviews with Municipal Commissioners and Mayors clearly highlighted that he biggest limitation to project execution is unavailability of skilled personnel. This is further exacerbated by the use of archaic tools and processes. (7)

Corruption and fragmented accountability or overlapping areas of responsibility are also cited as problems facing municipalities as urbanization trends place more demands on them for infrastructure and services (See exhibit E.1 below).

This is yet another example of India having legislation in place (the constitutional amendments), but not having a proper delineation of detail and framework for accountability. It is therefore important that we try to understand the position of the municipality and the constraints under which it works. This tells us that the state is who we really want to target when it comes to demanding better municipal service, that property taxes should be increased for high revenue institutions in town, and that NGO’s and public private partnerships should be recognized as possible key participants in any plans for improvement or change.

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NOTES

1. Commonwealth Human Rights Initiative. "Decentralization and Municipalities." Commonwealth Human Rights Initiative. Commonwealth Human Rights Initiative, 18 Jul 2002. Web. 16 May 2010.
   
2. Planning Department, Government of Uttar Pradesh. "Chapter X: Self-Governance through Panchayati Raj." Tenth Five Year Plan 2002-2007 and Annual Plan 2002-2003 Volume I (Part I). Planning Department, Government of Uttar Pradesh, n.d. Web. 16 May 2010.
   
3. Cisco and Booz & Co. "Intelligent Urbanization." Confederation of Indian Industry, 06 May 2010. Web. 16 May 2010.
   
4. Commonwealth Human Rights Initiative.
   
5. "Uttar Pradesh Budget 2009-2010 Salient Features." Information and Publlice Relations Department, Government of Uttar Pradesh. Press Information Bureau Information and Public Relations Department Uttar Pradesh, 15 Feb 2009. Web. 16 May 2010.
   
6. "Chapter 5: Self Governance Through Local Self Government." Planning Department, Government of Uttar Pradesh, n.d. Web. 16 May 2010.
   
7. Cisco and Booz & Co