Local Self Government is the administration of local issues by such local bodies as have been elected by the people. The term ‘Panchayatan,’ which denotes a gathering of five people, including a spiritual man, is referenced in ancient Sanskrit writings. The Rigveda mentions Sabha, Samiti, and Vidatha as local self-units. Parliament ratified the 73rd and 74th Constitutional Amendments in 1992. Local self-governance was introduced in rural and urban India as a result of these modifications. The 74th Amendment establishes a District Planning Committee to coordinate plans made by Panchayats and Municipalities (Article 243ZD).
The paper “State Finances, Study of Budgets for 2021-22” by RBI properly identifies the role of local governments in facing the problems posed by the epidemic; yet, the research also highlights the draining of resources.
What the paper says
- The paper emphasises the frontline role of third-tier governments in executing containment policies and healthcare.
- As a result, their finances have been severely strained, forcing them to reduce expenditures and seek funding from a variety of sources.
- The RBI also stated that civic entities’ functional autonomy must be increased, as well as their governance structure reinforced.
- Financial empowerment: This might be accomplished by ’empowering them financially through increased resource availability.’
- The RBI did, however, reiterate the recommendations of the 15th Finance Commission report on local bodies, which emphasised city governance systems and financial empowerment.
- Property tax coverage is limited: The RBI analysis also emphasises the property tax’s limited reach and its failure to shore up municipal corporation income.
- According to data from the Organization for Economic Cooperation and Development (OECD), India has the world’s lowest property tax collection rate, i.e., the property tax to GDP ratio.
Issues faced by urban local governments
- During the epidemic, when authorities ranging from the Prime Minister to Chief Ministers to District Magistrates were observed discussing catastrophe mitigation methods, city mayors went AWOL.
- The traditional policy paradigm of seeing cities as adjuncts of state governments remains dominant.
- In India, the basic approach to urban empowerment has remained fragmented.
- The first intervention to grasp ‘the urban’ (though there are allusions in the Five Year Plans) and plan with a pan-Indian perspective occurred in the 1980s, with the formation of the National Commission on Urbanisation, chaired by Charles Correa.
- Another significant intervention occurred in the early part of the 1990s with the 73rd and 74th Amendments to the Constitution.
- The latter relates to urban reforms, which allow urban local governments to carry out the 18 functions mentioned in the 12th Schedule. There is, however, no discussion of financial empowerment.
- The sole exception to this trend has been Kerala’s people’s plan model, in which 40 percent of the State’s plan budget was allocated to local bodies (directly), with major topics such as planning, etc. transferred.
What can be done
- Transfer of ‘functions, funds, and officials’ to local governments.
- In India, there are almost 5,000 statutory towns and an equal number of census towns.
- Cities are home to over 35% of the world’s population. Furthermore, cities account for about two-thirds of the country’s GDP and nearly 90% of government income.
- Before value-added tax and other centralised taxing systems, one of the principal profits of cities used to be from octroi. However, the state and federal governments have taken away this method of income collection. Instead, finance commissioners recommended funds to metropolitan local governments based on a demographic profile calculation.
- In such a circumstance, it is difficult for municipalities to maintain their capacity to conduct bare-bones duties, especially in light of the new Pay Commission proposals.
- As a result, individuals have been burdened with additional taxes, and municipal services have been increasingly privatized/outsourced.
- The frequently cited example is how successfully Scandinavian cities handle their operations – from city planning to mobility to trash management.
- However, the fact is that local governments get a portion of the income tax paid by people.
- The Ministry of Housing and Urban Development organised a committee to study the 74th constitutional amendment, and the committee suggested that 10% of income tax received from cities be returned to them as a direct financial grant from the central government.
- Cities must be regarded as key centres of government, where democratic decentralisation may yield extraordinary outcomes. There will be transparency and meaningful public engagement.
- Cities should not be seen as entrepreneurial hotspots whose primary motivation is to make them competitive in order to attract investors.
- The resources needed for quantitative and qualitative data must be delivered to cities quickly in order to create a catastrophe risk reduction strategy that considers vulnerable areas.
- City leadership must be chosen for a five-year term.
- Similarly, the third F, functionaries, must be relocated to cities with a stable cadre.
How to structure
- Give an intro about local self-governments in India
- Explain the challenges faced by urban local self-governments
- Suggest measures