Table of Contents

PYQs.................................................................................................................. 2
Panchayati Raj................................................................................................... 3
Historical Evolution........................................................................................... 3
Constitutional Provisions...................................................................................4
Data................................................................................................................... 5
Important Case Studies...................................................................................... 6
Powers and Functions........................................................................................ 7
Significance....................................................................................................... 8
Performance Analysis........................................................................................ 9
Government Schemes........................................................................................ 9
Role of District Planning Committee................................................................. 11
PESA Act Provisions......................................................................................... 12
Funds................................................................................................................15
Functions......................................................................................................... 16
Functionaries................................................................................................... 17
The reluctance of states to empower PRI.......................................................... 18
Women Reservation......................................................................................... 21
Aspirational Block Program............................................................................. 23
Urban Local Bodies.......................................................................................... 25
Historical Evolution......................................................................................... 25
Constitutional Provisions................................................................................. 25
Data................................................................................................................. 26
Powers and Functions...................................................................................... 27
Performance Analysis...................................................................................... 29
Government Schemes...................................................................................... 29
Way Forward................................................................................................... 30
Municipal Bonds...............................................................................................31
Direct Election of Mayor.................................................................................. 34
Urban Local Bodies Financing..........................................................................35
LOCAL GOVERNMENT
PYQs
2024 - Analyse the role of local bodies in providing good governance at local level and bring
out the pros and cons merging the rural local bodies with the urban local bodies. (10)

2023- “The states in India seem reluctant to empower urban local bodies both functionally
as well as financially.” Comment. (10)

2022: To what extent, in your opinion, has the decentralization of power in India changed
the governance landscape at the grassroots? (10)

2020-The strength and sustenance of local institutions in India has shifted from their
formative phase of ‘Functions, Functionaries and Funds’ to the contemporary stage of
‘Functionality’. Highlight the critical challenges faced by local institutions in terms of their
functionality in recent times. (15M)

2019: "The reservation of seats for women in the institution of local self-government has
had a limited impact on the patriarchal character of the Indian political process". Comment.
(15)

2018: Assess the importance of the Panchayat system in India as a part of local government.
Apart from government grants, what sources can the Panchayats look out for financing
developmental projects? (15)

2017: "The local self-government system in India has not proved to be an effective
instrument of governance". Critically examine the statement and give your views to improve
the situation. (10)
Answer Writing Framework
Introduction
1. Start with Constitutional provisions - 73rd and 74th Amendment - 243-243O for
Panchayats, 243P-243Z for ULBs.
2. For negative questions - GVK Committee - ‘Grass without roots’
3. Data - for question on Finances
4. "The success of democracy in India depends on the success of democracy at the
grassroots through Panchayati Raj." - Rajiv Gandhi
5. Local Bodies (73rd and 74th Constitutional Amendments) play a vital role in
ensuring grassroots democracy and decentralized governance by enhancing
citizen participation, fostering inclusive development, and addressing local
needs in areas like health, education, and infrastructure.

Main Body
Prepare 2 Flow Charts -
1. Objectives
2. Constitutional provisions on 3F’s - Funds,
Functions, Functionaries
3. Try to substantiate your points with specific
examples and Data
4. Add 1 case study in small Box

Significance - PIES

Framework for issues - PIES

Way Forward - 3F Approach
Conclusion
1. Link with the vision of ‘Sabka Saath Sabka Vishwas’, Viksit Bharat, Gandhian
Swarajya, Driving socio-economic development from the bottom-up, Inclusive and
participatory development.
Panchayati Raj
"The success of democracy in India depends on the success of democracy at the grassroots
through Panchayati Raj." - Rajiv Gandhi

"Panchayati Raj embodies the spirit of participatory democracy, enabling citizens to have a
direct say in their governance."

Panchayats are effective ways to fulfil the aspirations of people in rural India. They are
playing a vital role in India’s transformation- PM Narendra Modi

Historical Evolution
1. Ancient and Medieval Beginnings:
a. Vedic Period: References to local governance structures called 'Sabha' and
'Samiti' appear in ancient texts like the Rigveda.
b. Epic Era: Epics like Ramayana and Mahabharata also mention decentralized
governance with structures like 'Gramik' for villages and 'Dashap' for ten
villages.
c. Medieval Period: During the Sultanate and Mughal eras, the village was
governed by local officials like Mukkaddam (village headman), Patwari
(revenue collector), and Choudhrie (judicial authority).
2. First Generation (Pre-1950s): Colonial Foundations
a. 1870: Introduction of Mayo's resolution which advocated for local
self-governance.
b. 1882: Lord Ripon's reforms further strengthened local governance,
promoting elected local bodies and enhancing local self-governance.
3. Second Generation (1950s-1970s): Post-Independence Structuring and
Reforms
 a. 1952-53: Introduction of the Community Development Programme
(CDP), marking the first significant post-independence effort to incorporate
local governance in rural development.
b. 1957: The Balwant Rai Mehta Committee recommended the three-tier
Panchayati Raj system, which was adopted starting with Rajasthan in 1959.
This laid the foundational structure for local governance in India.
c. 1977: The Ashok Mehta Committee recommended a two-tier system and
emphasized stronger powers and resources for Zila Parishads, including a push
for constitutional recognition for Panchayati Raj institutions.
4. Third Generation (1980s-1990s): Strengthening and Constitutional
Recognition
a. 1985: The G.V.K. Rao Committee suggested that districts should become
the primary unit of rural planning, advocating for enhanced powers to the Zila
Parishads.
b. 1986: The L.M. Singhvi Committee advocated for constitutional status for
Panchayati Raj institutions and emphasized the importance of the Gram Sabha
and recommended regular elections.
c. 1992: The 73rd Constitutional Amendment Act provided a constitutional
framework for Panchayati Raj institutions, mandating a uniform three-tier
system across India, establishing regular elections, and setting guidelines for
devolution of powers.
5. Fourth Generation (Post-1992): Implementation and Ongoing Reforms
a. 1996: Provisions of the Panchayats (Extension to Scheduled Areas)
Act (PESA): This Act extends the provisions of the Panchayati Raj to tribal
areas in ten states with Scheduled Areas, recognizing the special nature of
tribal communities and their traditional rights over natural resources.

Constitutional Provisions
Article 40: Organization of Village Panchayat.

Part IX: Article 243 to 243O: The Panchayats

1. Article 243B: Establishment of Panchayats: mandates the establishment of
Panchayats at the village, intermediate, and district levels across all states.
2. Article 243C: Composition of Panchayats
a. Sub-section (1): Specifies that all members of Panchayats at the village,
intermediate, and district levels are to be elected directly by the people.
b. Sub-section (2): Details the manner of election and the eligibility to be a
chairperson of a Panchayat at various levels.
3. Article 243D: Reservation of Seats
a. Sub-section (1): Reserves seats for Scheduled Castes (SCs) and Scheduled
Tribes (STs) in every Panchayat at all levels, proportional to their population in
the Panchayat area.
b. Sub-section (2): Ensures that not less than one-third of the total number of
seats are reserved for women. This includes the seats reserved for women
belonging to SCs and STs.
4. Article 243E: Duration of Panchayats, Dissolution
a. Sub-section (1): Establishes a five-year term for Panchayats, after which
elections must be held.
b. Sub-section (2): Provides provisions for earlier dissolution and subsequent
elections.
 5. Article 243G: Powers, Authority, and Responsibilities of Panchayats:
Empowers Panchayats with the authority necessary to function as units of
self-government and enables states to delegate powers and responsibilities related to
economic development and social justice. (Schedule XI: 29 items)
6. Article 243H: Powers to Impose Taxes: Grants Panchayats the power to levy,
collect, and retain taxes, duties, tolls, and fees as authorized by law.
7. Article 243I: State Finance Commission: Requires the state to constitute a
Finance Commission every five years to review the financial position of Panchayats and
make recommendations on their economic well-being.
8. Article 243J: Audit and Accounts: Provides for the maintenance of accounts by
the Panchayats and the auditing of these accounts.
9. Article 243K: State Election Commission: Assigns the responsibility of
conducting Panchayat elections to the State Election Commission.
10. Article 243L: Application to Union Territories: Specifies the application of
these provisions to the Union Territories, with the ability for adaptations by the
President.
11. Article 243M: Exclusions: Lists the areas and states where the provisions of this
part do not apply, such as the scheduled and tribal areas, unless extended by
Parliament through a specific law.

Data
'Finances of Panchayati Raj Institutions' report released by the Reserve Bank of
India (RBI) for the fiscal year 2022-23.

Composition of Revenue:
1. Panchayats derive merely 1% of their revenue from taxes.
2. The bulk of their
revenue is sourced
from government
grants, with 80%
coming from the
Central government
and 15% from State
governments.
Revenue per Panchayat:
1. On average, each
panchayat generated
Rs 21,000 from its
own tax revenues
and Rs 73,000 from
non-tax revenues.
2. Grants from the
Central government
amounted to about
Rs 17 lakh per panchayat, while those
from State governments were over Rs
3.25 lakh per panchayat.
State Revenue Share and Inter-State
Discrepancies: In Andhra Pradesh, panchayat
revenues account for just 0.1% of the State's total,
whereas in Uttar Pradesh, this figure rises to
2.5%, the highest among all states.
Data Related to ULBs:
1. Vacancies:
a. 42% of sanctioned positions of town planners are vacant.
b. Vacancies in sanctioned staff - 80% in Gurgaon and 50 % in Kolkata.
2. Lack of Devolution of Functions: out of 18 subjects mentioned in 12th schedule,
Brihanmumbai Municipal Corporation (BMC) has power related with only 9 subjects
and Municipal Corporation of Delhi (MCD) has power related with 4 subjects only.
3. Limited funds aside, about 70% of it gets spent on salaries, pensions and
administrative expenses with the rest left for capital expenditure.
4. Studies by the Indian Institute for Human Settlements (2022) have
highlighted that urban local bodies’ (ULBs) own revenue was only 47 per cent of their
total revenue, with property tax accounting for approximately 29 percent of it.
5. Property tax collection in India was much lower compared to OECD countries due to
undervaluation, and poor administration, the report argues. Property tax revenue
as a share of GDP in India is 0.15%, while in OECD countries it is around 1%.
6. Municipal revenues/expenditures in India have stagnated at around 1 percent of
GDP for over a decade. In contrast, municipal revenues/ expenditures account for 7.4
per cent of GDP in Brazil and 6 percent of GDP in South Africa.
7. A World Bank report (2022) estimates that India will need to invest $840 billion
over the next 15 years—or an average of $55 billion per annum—into urban
infrastructure if it is to effectively meet the needs of its fast-growing urban population.
8. Between 2016 and 2021, approximately nine municipal bodies raised Rs 38.40
billion through bonds, as reported by the Reserve Bank of India.
9. Recently, Vadodara Municipal Corporation has raised 1 billion rupees ($12.07
million) by issuing Asia's first certified green municipal bond.

Important Case Studies

1. Hiware Bazar, Maharashtra - Increased groundwater levels through watershed
development.
2. Punsari, Gujarat - Installation of CCTV cameras, Wi-Fi connectivity, and
solar-powered streetlights.
3. Menda Lekha, Maharashtra - Successful distribution of land titles under the
Forest Rights Act.
4. Kuthambakkam, Tamil Nadu - Construction of low-cost, eco-friendly houses
using local materials.
5. Kerala Panchayats (Kudumbashree Mission) - Empowerment of women and
poverty alleviation through grassroots initiatives. Formation of over 300,000 women
self-help groups.

Successful Case Studies of Women Sarpanchs in India

1. Chhavi Rajawat, Soda Village, Rajasthan - an MBA graduate, left her corporate
job to become the Sarpanch of Soda village, focusing on modernizing and developing
the village infrastructure. Improved water supply through rainwater harvesting
projects, constructed roads, and introduced better sanitation facilities.
 2. Rajkumari Devi, Anandpur Panchayat, Bihar - popularly known as 'Kisan
Chachi,' used her role as Sarpanch to promote organic farming and women’s
entrepreneurship.
3. Arati Devi, Ganjam District, Odisha - Former investment banker. Introduced
benefits of the Public Distribution System and initiated a major literacy campaign for
women.
4. Meena Behen, Vyara, Gujarat - Led an all-women Panchayat board, addressing
women and children's issues in a patriarchal society. Built roads for better
accessibility and utilized government schemes to construct over 30 houses.
5. Sushma Bhadu, Haryana - Increased literacy rate to 69.10% and improved the
sex ratio to 903 per 1,000 men.
6. Radha Devi, Rajasthan - Persuaded parents to send their kids back to school,
leveraging local NGOs and self-help groups.

Powers and Functions

1. Gram Panchayat
a. Administrative Functions:
i. Management and sanitation of village facilities.
ii. Registration of births and deaths.
iii. Maintenance of public properties.
iv. Collection of local taxes and levies.
b. Developmental Functions:
i. Execution of minor irrigation projects.
ii. Development of village infrastructure like roads, wells, ponds.
iii. Implementation of local sanitation and cleanliness projects.
c. Social Welfare Functions:
i. Management of welfare programs for vulnerable groups.
ii. Organizing cultural and educational activities in the village.
iii. Regulation of markets and local fairs.
d. Regulatory Functions:
i. Enforcement of local laws and regulations.
2. Panchayat Samiti
a. Administrative Functions:
i. Coordination of development planning and activities at the block level.
ii. Supervision of Gram Panchayat activities.
iii. Administration of block-level public health and education institutions.
b. Financial Functions:
i. Distribution of funds to Gram Panchayats.
ii. Financial planning for block-level development projects.
c. Developmental Functions:
i. Implementation of block-wide development schemes for agriculture,
education, and health.
ii. Road construction and maintenance at the block level.
iii. Promotion of vocational training and technical education.
d. Social Welfare Functions:
i. Administration of social welfare schemes at the block level.
ii. Management of block-level health and sanitation programs.
e. Regulatory Functions:
i. Regulatory oversight over economic activities within the block.
ii. Ensuring compliance with agricultural and market regulations at the block
level.
3. Zila Parishad
 a. Administrative Functions:
i. Coordination and supervision of development activities across the district.
ii. Allocation of resources to Panchayat Samitis.
iii. Management of district-level public institutions.
b. Financial Functions:
i. Control over district budgets and financial management.
ii. Allocation and monitoring of funds to Panchayat Samitis and major district
projects.
c. Developmental Functions:
i. Planning and execution of comprehensive development projects for the
district.
ii. Supervision of educational, healthcare, and infrastructural projects across
the district.
d. Social Welfare Functions:
i. Oversight of district-wide social welfare programs.
ii. Coordination of efforts aimed at improving social equity and justice.
e. Regulatory Functions:
i. Regulation of district-level markets and services.
ii. Oversight of regulatory compliance across the district.

Significance
1. Democratic Decentralization: PRIs facilitate direct participation in
decision-making at the village level, enhancing democratic values and local
governance. Kerala's People's Plan Campaign empowers local bodies to manage over
40% of the state's plan budget.
2. Principle of Subsidiarity: The principle of subsidiarity emphasizes that decisions
should be made at the most local level possible, ensuring that governance is closer to
the people.
3. Development: They are instrumental in executing development programs specific to
rural needs, including health, education, and infrastructure, promoting socio-economic
development.
4. Efficient Resource Management: Eg- Hiware Bazar in Maharashtra effectively
managed water resources through watershed development.
5. Inclusivity: By reserving seats for women, Scheduled Castes, and Scheduled Tribes,
PRIs ensure representation for marginalized groups, fostering social justice.
6. Empowerment of Women: With a mandatory one-third reservation for women,
these institutions empower women to participate in governance processes. As of 2020,
states like Bihar, Rajasthan, and Madhya Pradesh have reported over 50% women
representatives in PRIs.
7. Implementation of Schemes: PRIs efficiently implement government schemes at
the local level, ensuring that benefits reach the grassroots. Over 2.5 lakh rural projects
were implemented through PRIs in 2019-20 under schemes like MGNREGA.
8. Transparency: Direct accountability to local constituents increases transparency and
reduces corruption. Eg- Rajasthan’s Social Audit Mechanism allows villagers to audit
local projects, ensuring transparency.
9. Financial Autonomy: PRIs have the power to levy taxes and mobilize resources,
which helps them fund and manage local development projects.
10. Capacity Building: Training programs for PRI members enhance their skills in
governance and administration, making them more effective. The e-Panchayat
initiative by the Ministry of Panchayati Raj launched to enhance the capacities of over
2.45 lakh Panchayats across the country.
 11. Conflict Resolution: Reports indicate a 30% reduction in petty disputes reaching
district courts due to effective Panchayat mediation.

Performance Analysis
Aspect Positive Role Limitations
Decentralization Enhances grassroots democracy Devolution of powers is often
by establishing self-governance superficial, leading to
at the village level. decentralization of corruption.
Community Plays a critical role in rural Hindered by ritualistic
Development infrastructure development and meetings and non-compliance
empowerment of weaker with decisions, leading to
sections. frustration.
Social Inclusion Promotes inclusivity through Actual participation of SCs and
reservations for marginalized STs tends to be more
groups in decision-making procedural than substantive.
bodies.
Accountability Facilitates direct involvement in Struggles with transparency;
planning and implementation, needs regular social audits to
boosting local accountability. improve accountability.
Economic Direct role in implementing Economic impact is limited by
Development central schemes like MGNREGA low local expenditure as a
aids local economic percentage of GDP.
development.
Financial Some autonomy in local tax Over-reliance on state and
Autonomy collection, although it varies central grants, which are often
significantly. earmarked, restricting
autonomy.
Principle of Local decision-making in Overlap of authority and
Subsidiarity Kerala resulting in effective jurisdiction with state and
public service delivery. central governments.

Resistance to decentralization
from higher levels of
government.

Efficient Resource Successful implementation of Corruption and

Management local development projects. mismanagement of funds.

Eg- Hiware Bazar’s watershed Inadequate technical and

management projects. managerial skills among
Panchayat members.

Government Schemes
1. Rashtriya Gram Swaraj Abhiyan (RGSA): Launched to enhance the capabilities
of Panchayati Raj Institutions through training and infrastructure development.
2. National Panchayat Portal: This initiative under e-Panchayat is aimed at
improving the delivery of services and transparency by enabling PRIs to manage public
grievances and maintain public data efficiently.
3. Activity Mapping Initiatives: For balanced distribution of functions amongst the
different levels of PRIs, an activity mapping concerning 29 functions consisting of 83
activities listed in the eleventh schedule was developed by the Second State Finance
Commission (SFC).
4. Training and Capacity Building: Programs like the National Institute of Rural
Development and Panchayati Raj (NIRDPR) provide specialized training to PRI
members to improve their administrative and governance skills.
5. Rajiv Gandhi Panchayat Sashaktikaran Abhiyan (RGPSA)/ Capacity
Building: Launched in 12th Five Year Plan to strengthen the Panchayati Raj system
across the country and address critical gaps. The Ministry of Panchayati Raj provides
assistance to the States/ UTs for capacity building and training of Panchayat Elected
Representatives (ERs) and other stakeholders.
6. Mahatma Gandhi National Rural Employment Guarantee Act
(MGNREGA): The vision of Mahatma Gandhi NREGA is to enhance the livelihood
security of rural households across the country by providing at least 100 days of
guaranteed wage employment in a financial year to every rural household whose adult
members volunteer to do unskilled manual work.
7. Swachh Bharat Mission -Grameen (SBM): Phase II (2019-2025)-The key
objective of Swachh Bharat Mission Grameen (Phase2) is to sustain the ODF status of
all the 6 lakh rural villages and to improve the level of cleanliness by making
arrangement of solid and liquid waste management as ODF Plus by 2024-25.
8. Pradhan Mantri Awaas Yojana –Gramin (PMAY-G): PMAY-G aims at
providing a pucca house, with basic amenities, to all houseless householders and those
households living in kutcha and dilapidated houses, by 2024.
9. Pradhan Mantri Gram Sadak Yojana (PMGSY): PMGSY, was launched by the
Govt. of India to provide connectivity to unconnected Habitations as part of a poverty
reduction strategy.
10. Shyama Prasad Mukherji Rurban Mission: Main objective of the scheme is
bridging the rural-urban divide-viz: economic, technological and those related to
facilities and services.
11. Mission Antyodaya: Adopted in Union Budget 2017-18, Mission Antyodaya is a
convergence and accountability framework aiming to bring optimum use and
management of resources allocated by 26 Ministries / Department of the Government
of India under various programmes for the development of rural areas. It is envisaged
as a state-led initiative with Gram Panchayats as focal points of convergence efforts.
12. Jal Jeevan Mission: It is envisioned to provide safe and adequate drinking water
through individual household tap connections by 2024 to all households in rural India.
13. SVAMITVA Scheme: This is a reformative step towards establishment of clear
ownership of property in rural inhabited (“Abadi”) areas, by mapping of land parcels
using drone technology and providing ‘Record of Rights’ to village household owners
with issuance of legal ownership cards (Property cards/Title deeds) to the property
owners.
14. e-Panchayat Mission Mode Project (MMP): Under e-Panchayat MMP, Ministry
of Panchayati Raj launched eGramSwaraj, a simplified work-based accounting
application to address various aspects of Panchayat functioning viz. planning,
budgeting, accounting and online payments through eGramSwaraj-PFMS Interface for
expenses incurred.
Role of District Planning Committee
The District Planning Committee (DPC) is set up under Article 243ZD of the Constitution
of India at the district level.

The state legislature constitutes a DPC to consolidate the plans prepared by the Zilla
Parishad, Gram Panchayats, Nagar Panchayat, Municipal Council, and Municipal
Corporation in the district.

Role of DPC:
1. Consolidation of Development Plans: District Planning Committees (DPCs) take
charge of merging the development plans from Panchayats and Municipalities within a
district, crafting a unified draft plan that addresses the entire district’s needs.
2. Promotion of Economic Equity and Social Justice: DPCs create plans that are
designed to foster economic growth and social equity. These plans focus on fair fund
distribution, specifically targeting support towards marginalized groups, including the
economically disadvantaged, women, and minorities.
3. Targeted Development Initiatives: The District Planning Committee formulates
specialized plans across various sectors including agriculture, infrastructure,
watershed management, as well as programs focused on women, children, public
health, and education.
4. Optimization of Resource Distribution: DPCs enhance the efficient utilization of
essential physical and human resources, facilitating coordinated infrastructure
development across the district.
5. Comprehensive Spatial Planning: Engaging in detailed spatial planning, DPCs
integrate environmental considerations with geographic planning to ensure
sustainable district-wide development.
6. Provision of Technical Guidance: DPCs offer essential technical advice and
support to local bodies, aiding them in devising effective plans at the community level.
7. Implementation Oversight: These committees actively monitor and assess the
execution of various developmental schemes, ensuring that the projects are carried out
effectively and meet planned objectives.

Challenges:
1. Political Influence: The effectiveness of DPCs is often compromised due to political
interference, as many are chaired by ministers, which can hinder unbiased
developmental progress.
2. Lack of Clear Mandate - DPCs often overlap with other local governance bodies,
causing confusion and inefficiency.
3. Lack of Coordination: Despite their role to ensure integration between rural and
urban planning, DPCs frequently struggle with effective coordination between the two.
4. Funding Issues: DPCs often face financial constraints as they typically do not receive
dedicated funds in state budgets, which affects their operational capabilities.
5. Operational Challenges: In many regions, District Planning Committees (DPCs)
are not properly established, and in some cases, they are completely non-operational.
Way Forward:
1. Institutional Strengthening: Ensuring that DPCs are fully and properly constituted
in all states. This involves establishing clear guidelines for their formation and
operation to prevent non-functionality.
2. Autonomy and Authority: Strengthening the independence of DPCs by minimizing
political interference. This could involve changes to the appointment processes to
ensure that chairs and members are selected based on merit and expertise rather than
political affiliation.
3. Improved Coordination: Enhancing the coordination mechanism between rural
and urban planning bodies under the DPCs. This can be achieved by regular meetings,
integrated planning exercises, and shared databases for better decision-making.
4. Dedicated Funding: Allocating specific budgets for DPCs in state finances to ensure
they have the necessary resources to perform their functions effectively. This funding
should be protected and earmarked specifically for planning and development
activities.
5. Capacity Building: Conducting regular training and development programs for
members of the DPCs to enhance their skills in urban and rural planning, financial
management, and project implementation.
6. Performance Monitoring: Implementing a robust monitoring and evaluation
system to assess the performance of DPCs regularly. This would help in identifying
issues early and formulating strategies for improvement.
7. Public Engagement: Increasing transparency and involving local stakeholders in the
planning process to ensure that the plans reflect the real needs and aspirations of the
community.

PESA Act Provisions

The Provisions of the Panchayats (Extension to Scheduled Areas) Act, 1996 (PESA) aim to
empower tribal communities through self-governance and control over local resources
within Scheduled Areas.

Objectives of the PESA Act:

1. Extend Panchayat Provisions: To extend the provisions of Part IX of the Indian
Constitution related to Panchayats to the Scheduled Areas, subject to certain
modifications.
2. Self-Governance: Promote self-governance through the Gram Sabha for substantial
decision-making authority at the grassroots level.
3. Empowerment: Empower Panchayats at the appropriate levels with specific powers
conducive to tribal requirements.
4. Preservation of Culture and Traditions: Safeguard and preserve the customs,
cultural identity, community resources, and traditional management practices of tribal
communities.
5. Social Justice: To ensure social justice for Scheduled Tribes by recognizing their
traditional rights and customs.
Key Features of the PESA Act:
1. Conformance with Traditional Practices: State legislation on Panchayats should
align with the customary law, social and religious practices, and traditional
management practices of community resources.
2. Village Definition and Autonomy: A village under PESA is defined to include a
habitation or a group of habitations or a hamlet or a group of hamlets, managing its
affairs in accordance with traditions and customs.
3. Empowered Gram Sabha: The Gram Sabha is empowered to safeguard and
preserve the traditions and customs of the people, their cultural identity, community
resources, and the customary mode of dispute resolution.
4. Approval of Plans and Projects: The Gram Sabha has the authority to approve
plans, programs, and projects for social and economic development before they are
taken up for implementation by the Panchayat at the village level.
5. Identification of Beneficiaries: The Gram Sabha is responsible for the
identification of beneficiaries under poverty alleviation and other programs.
6. Certification of Utilization of Funds: The Panchayat at the village level needs to
obtain a certification from the Gram Sabha for the utilization of funds meant for plans,
programs, and projects.
7. Reservation of Seats: Reservation of seats in the Scheduled Areas in every
Panchayat should be in proportion to the population of the communities for whom
reservation is sought to be given under Part IX of the Constitution. However,
reservation for Scheduled Tribes shall not be less than one-half of the total number of
seats.
8. Reserved Seats for Chairpersons: All seats of Chairpersons in Panchayats at all
levels should be reserved for Scheduled Tribes.
9. State Government Nomination: The state government may nominate Scheduled
Tribes which have no representation in the Panchayat at the intermediate level or the
district level. However, such nomination shall not exceed one-tenth of the total
members to be elected in that Panchayat.
10. Consultation in Land Acquisition: The Gram Sabha or the Panchayats at the
appropriate level shall be consulted before making the acquisition of land in the
Scheduled Areas for development projects and before resettling or rehabilitating
persons affected by such projects.
11. Management of Minor Water Bodies: Planning and management of minor water
bodies in the Scheduled Areas are to be entrusted to Panchayats at the appropriate
level.
12. Regulation of Minor Minerals: The recommendations of the Gram Sabha or the
Panchayats at the appropriate level are mandatory for the grant of prospecting license
or mining lease for minor minerals.
13. Power to Regulate Alcohol: The Gram Sabha is empowered to enforce prohibition
or to regulate or restrict the sale and consumption of any intoxicant.
14. Ownership of Minor Forest Produce: The ownership of minor forest produce is
vested in the Panchayats, with the Gram Sabha playing a crucial role in their
management.
15. Prevention of Land Alienation: The Panchayats and the Gram Sabha have the
power to prevent alienation of land in the Scheduled Areas and to take appropriate
action to restore any unlawfully alienated land of a Scheduled Tribe.
16. Control over Local Plans: The Panchayats and the Gram Sabha have control over
local plans and resources for such plans, including tribal sub-plans.

Issues related to PESA Act:

1. Implementation Issues
a. Partial Adoption in Jharkhand:
 i. Jharkhand has adopted only 7 out of the 22 provisions of PESA, replacing
the remaining 15 with general administrative norms of the Panchayat
system for non-Scheduled Areas.
ii. States like Andhra Pradesh and Telangana have not amended laws related
to key sectors such as land acquisition, excise, forest produce, mines and
minerals, agricultural produce markets, and money lending.
2. Legal and Administrative Framework
a. Lack of Clarity and Legal Infirmity: Ananth and Kalaivanan (2017) note the
failure of PESA due to a lack of clarity, legal infirmity, bureaucratic apathy,
absence of political will, and resistance to change in the hierarchy of power.
b. No Specific Delegation and Timeline:
i. The PESA Act does not specify the competent authority for framing rules or
impose a timeline for state governments to adopt PESA rules.
ii. Implementation depends on the intent of state governments rather than a
mandate from the central government.
3. Bureaucratic and Political Challenges
a. Bureaucratic Domination: In states where PESA rules have been enacted,
bureaucratic hurdles and domination by non-Adivasi sections hinder the
act's implementation.
b. Absence of Political Will: A noted lack of political will hampers the effective
implementation of PESA.
4. Consultation and Approval Processes
a. Consultation vs. Approval Misconception: The PESA Act mandates
consultation with Gram Sabhas before land acquisition, but this is often
misconstrued to imply that Gram Sabha approval is not necessary.
b. Social Audit Findings: Social audits indicate that developmental schemes are
often approved on paper by Gram Sabhas without actual meetings for discussion
and decision-making.
5. Governance and Self-Governance Issues
a. Limited Control to Gram Sabhas: In states where rules were enacted,
control over institutions, functionaries, and planning did not effectively devolve
to Gram Sabhas.
b. Followed in Letter Rather than Spirit: The act is often followed in letter
rather than spirit, with social audits pointing out the lack of real meetings and
decision-making by Gram Sabhas.

Way Forward
1. The Standing Committee on Rural Development report on ‘Improvement
in the functioning of Panchayats’ (2018):
a. State governments should make adequate efforts to devolve funds, functions, and
functionaries to panchayats for them to effectively plan economic development
and social justice schemes.
b. To ensure regular meetings and high attendance, the Committee recommended
that state governments establish a quorum requirement for gram sabha
meetings, including the participation of panchayat representatives and women.
c. The Committee recommended that the Ministry should monitor the release and
expenditure of Finance Commission grants to ensure that there is no delay in
their release.
 d. It should also be ensured that grants are utilised in a proper and effective
manner.
e. Panchayats should also be encouraged to carry out local audits regularly so that
Finance Commission grants are not delayed.
f. The Committee recommended that strengthening of panchayats through capacity
building and training should be given more encouragement from the centre and
state governments. This would enable them to prepare better Gram Panchayat
Development Plans, as well as become more responsive towards citizens’ needs.
g. The Committee recommended that the Ministry should make serious efforts
towards recruitment and appointment of support and technical staff such as
secretary, junior engineers, computer operators, and data entry operators to
ensure the smooth functioning of panchayats.
2. The Second Administrative Reforms Commission (2nd ARC)
a. It recommended legislative councils in all states whose members should be
elected through local bodies. This gives a strong voice to local bodies at state
level.
b. Local legislators should not become members of PRIs and municipalities. This
will minimize political interference.
c. State Election Commissioner should be appointed by a committee consisting of
the Chief Minister, Speaker of Vidhan Sabha and Leader of Opposition of Vidhan
Sabha.
3. Efficient implementation of ePanchayat, alongside other e-Governance initiatives such
as e- District, State Data Centre, and State Service Delivery Gateway, is crucial.
4. The political determination and insight of leaders are essential for adopting measures
that safeguard the interests of vulnerable groups and enhance the smooth operation of
Panchayati Raj Institutions.

Funds
Article 243I: State Finance Commissions: Constitutionally mandated to determine the
financial powers of PRIs and ensure adequate fund allocation.

Issues:
1. Inadequate Financial Resources: There is often a significant gap between the
functions assigned to PRIs and the funds allocated.
2. Delayed Fund Transfers: Delays in the disbursement of funds from central and
state governments impact the timely execution of development projects.
3. Lack of Financial Autonomy: Limited control over financial resources hampers the
effective implementation of local projects.
4. Dependence on Higher Government Levels: Excessive reliance on state and
central funds, with little financial independence. The bulk of their revenue is sourced
from government grants, with 80% coming from the Central government and 15% from
State governments.
5. Insufficient Financial Literacy: Many PRI members lack the necessary skills in
financial management, leading to inefficient utilization and management of funds.
Only 25% of the total population in India are financially literate and ranked 23rd
among 28 countries.
6. Mismanagement and Corruption: A 2019 audit in Rajasthan revealed
misappropriation of funds in 20% of the Panchayats audited.
 7. Transparency and Accountability Issues: Absence of robust auditing and
monitoring systems to ensure proper utilization of funds.
8. Complex Fund Allocation Process: The World Bank's assessment pointed out
procedural complexities as a major bottleneck in fund allocation and utilization.

Government Steps:
1. Finance Commission Grants provide direct funds to PRIs, aiming to strengthen
local governance capacities. The 15th Finance Commission (2021-26) allocated Rs 4.36
lakh crore to local bodies, including Rs 2.4 lakh crore for rural bodies, with
performance-linked incentives.
2. Panchayat Empowerment & Accountability Incentive Scheme (PEAIS):
Financial incentives provided based on performance indicators.
3. Capacity Building and Training Programs: The Rashtriya Gram Swaraj Abhiyan
(RGSA) scheme aims to strengthen Panchayati Raj institutions.
4. E-Governance Initiatives: Introduction of e-Gram Swaraj portal to promote
transparency and efficiency.
5. AuditOnline application to facilitate online audits. Audits of over 9900 Gram
Panchayats of Telangana, Andhra Pradesh and Goa have already been completed.
6. The Backward Regions Grant Fund (BRGF) aims to address regional imbalances
by providing additional funds to PRIs in backward areas.

Way Forward:
1. Regular Financial Audits: Implementing strict audits to ensure proper use of funds
and to increase transparency.
2. Enhancing Financial Autonomy (2nd ARC): Eg- In Brazil, municipalities have
significant taxation powers, enhancing local revenue generation.
3. Timely Fund Disbursement: Implement recommendations from the Fourteenth
Finance Commission for direct fund transfers to Panchayats.
4. Capacity Building: Eg- The Philippines' Local Government Academy offers
extensive capacity-building programs for local officials.
5. Leveraging Technology: Expand the e-Gram Swaraj platform for better financial
tracking and transparency.
6. Encouraging Public Participation: Eg- Participatory budgeting in Porto Alegre,
Brazil, allows citizens to decide on municipal budget allocations.
7. Policy Reforms: Simplify fund allocation processes as recommended by the National
Institute of Rural Development and Panchayati Raj (NIRDPR).
8. Collaboration with Private Sector: Follow the NITI Aayog’s guidelines on
public-private partnerships to mobilize resources. Eg- UK’s Local Enterprise
Partnerships (LEPs) facilitate collaboration between local authorities and private
sectors.
9. Monitoring and Evaluation: Establish robust M&E frameworks as suggested by the
World Bank for local governance projects. Eg- Rwanda’s local governments use
performance contracts (Imihigo) for systematic monitoring and evaluation.

Functions
Provisions: 73rd Constitutional Amendment: Specifies the delegation of specific
responsibilities concerning 29 subjects listed in the Eleventh Schedule.
Issues:
1. Incomplete Devolution: Despite constitutional provisions, many states have not
fully devolved the 29 functions listed in the Eleventh Schedule to Panchayati Raj
Institutions (PRIs). Eg- functions related to health, education, and sanitation often
remain with state departments.
2. Insufficient Autonomy: PRIs frequently operate under the shadow of state control,
with limited freedom to make substantive decisions.
3. Policy and Legislative Gaps: Some states have not enacted necessary laws or
amendments to facilitate full devolution of functions to PRIs.
4. Role Clarity: Ambiguity in PRI functions across different levels leads to inefficiencies
and repeated efforts.
5. Implementation Disparity: The extent of function devolution varies significantly
across different states.
6. Lack of Capacity: PRIs often lack the technical expertise required to manage
devolved functions, impacting the quality of governance at the local level. Eg- limited
training and expertise in financial management
7. Resistance from State Bureaucracy: State bureaucracies resist devolution due to
fears of losing control and authority. Eg- withholding information or resources that are
supposed to be transferred to PRIs.

Way Forward:
1. Standardized Activity Mapping: Implementing a uniform activity mapping across
all states to prevent ambiguity in function distribution.
2. Strengthen Legal Frameworks: Enforcing legal measures to ensure states comply
with constitutional mandates for devolution.
3. Enhanced PRI Autonomy: Moving towards greater financial and administrative
autonomy for PRIs.
4. Capacity Building: Continuous training and development programs for PRI
members to improve their functional management skills.
5. Monitoring and Evaluation: Set up a central monitoring framework to regularly
assess the performance of PRIs in managing their devolved functions, ensuring
accountability and effective governance.

Functionaries
"Local self-government can only be as effective as the people who run it."

Issues:
1. Shortage of Skilled Staff: Inadequate number of qualified personnel to fulfill the
complex roles demanded by PRIs.
2. High Turnover Rates: Frequent changes in staffing lead to discontinuity and
disruption in governance.
3. Lack of Professional Training: Insufficient training opportunities lead to gaps in
expertise among PRI functionaries.
4. Centralized Control: State control over the recruitment and management of
functionaries limits the autonomy of PRIs.
 5. Gender and Social Biases: Women Sarpanchs may face resistance from male
colleagues and community members, affecting their ability to lead.
6. Lack of Accountability Mechanisms: Absence of regular audits and performance
evaluations allows for mismanagement of funds and resources.
7. Low Compensation and Motivation: Functionaries often receive inadequate
compensation, leading to low motivation and commitment.
8. Inadequate Support from Higher Authorities: Insufficient communication and
coordination between state departments and PRIs lead to delays and inefficiencies in
project implementation.

Government Steps:
1. Training Institutes: The establishment of institutes like the National Institute of
Rural Development and Panchayati Raj (NIRDPR) provides targeted training for PRI
functionaries in administrative and technical skills.
2. Technology Integration: The rollout of e-Panchayat across states aims to leverage
digital tools to streamline PRI operations and improve service delivery.

Way Forward:
1. Decentralize HR Management: Legislative changes are needed to grant PRIs
greater control over their recruitment and management practices, aligning with the
principle of local self-governance.
2. Professional Development: Expanding access to continuous learning
opportunities, including online courses that cater specifically to the governance
challenges faced by PRIs.
3. Attractive Career Paths: Making positions in PRIs attractive through competitive
salaries and clear career progression paths.
4. Local Engagement: Encouraging local talents and knowledge by recruiting from
within the community, thereby enhancing the relevance and effectiveness of PRIs.

The reluctance of states to empower PRI

"Empowerment and autonomy at the grassroots are not just about good governance, they are
fundamental rights."

Reasons for Reluctance

1. Lack of Political Will: Transferring powers to PRIs may reduce the direct
administrative and fiscal control of State Governments over rural areas, which could
diminish the influence of state-level politicians and bureaucrats​​.
2. Financial Concerns: Devolving financial powers means sharing significant revenue
streams like taxes and duties, which states rely on for their own fiscal stability and
budgetary operations​​.
3. Administrative Complexity: Adjusting the existing bureaucratic structures to
accommodate devolution is complex and may reduce the roles and responsibilities of
state-level officials, leading to administrative resistance​​.
 4. Capability Doubts: States are concerned about PRIs' lack of trained personnel and
proper governance structures to effectively manage devolved responsibilities​​.
5. Historical and Cultural Factors: Legacy of centralized governance structures
inherited from colonial times persist, affecting attitudes towards local empowerment.
6. Fear of Fragmentation: Concerns that decentralization might lead to fragmented
governance and reduced uniformity in policy implementation.

Impact of Reluctance
1. Development Delays: Without sufficient powers, PRIs cannot effectively address
local issues, leading to delays in rural development and infrastructure projects that are
better managed at a local level​​.
2. Reduced Effectiveness of Decentralization: Incomplete devolution undermines
the overall objective of decentralization. PRIs cannot act as true self-governance bodies
if critical powers are withheld.
3. Governance Deficit: Limited empowerment of PRIs leads to a lack of accountability
and inefficiency, as local bodies remain unable to tailor governance and development
initiatives to specific community needs​​.
4. Inefficient Service Delivery: The centralization of authority hinders the timely
delivery of services. Local bodies, being closer to the ground realities, are better
positioned to address local needs swiftly if empowered​​.
5. Lower Civic Engagement: When local governance bodies lack real power, public
participation and interest in local governance diminish, weakening democratic
processes at the grassroots level​​.
6. Inefficient Resource Utilization: Funds meant for local development remain
underutilized or misallocated due to central control.
7. Administrative Inefficiencies: Overlapping responsibilities between state
departments and PRIs cause delays and bureaucratic red tape.
8. Social Inequities: Issues like caste discrimination and gender inequality require
local governance for effective solutions, which is hindered by lack of empowerment.

Case Studies
1. Kerala’s People's Plan Campaign: Kerala stands out for its decentralized planning
and substantial fiscal autonomy to PRIs, leading to improved service delivery and local
infrastructure development.
2. Karnataka’s Panchayat Raj Amendment Act 1993: This act provided clear
delineation of functions and enhanced fiscal powers to PRIs, leading to improved
governance and local development outcomes in the state​​.
3. Sikkim’s Functional Devolution: Sikkim has effectively transferred not only
functions but also aligned financial resources and functionaries, creating a model of
integrated local governance​​.

Way Forward
1. Model Legislation: Implement the Second Administrative Reforms
Commission's recommendation for a model law on devolution that ensures
mandatory adoption by the states.
2. Financial Empowerment: Fully adopt Finance Commission
recommendations for increased financial allocations to PRIs and establish
independent revenue streams for them​​.
3. Capacity Enhancement: Develop state-funded training programs to enhance the
administrative, financial, and technical skills of PRI members.
4. Enforce Devolution: Enact and enforce laws that clearly mandate the transfer of
specific functions, finances, and functionaries to PRIs, with penalties for
non-compliance.
Women Reservation
Since the 73rd Constitutional Amendment in 1993, about 45% of Panchayat representatives
are women, with 21 states offering 50% reservation, enhancing women's empowerment in
local governance.

Provisions
1. Constitutional Amendments: 73rd Amendment Act, 1992, mandated a one-third
reservation of seats for women in Panchayati Raj Institutions.
2. State Extensions: 21 states have increased the reservation to 50 percent, enhancing
women's representation.

Positive Impact
1. Increased Leadership: Over 1.4 million women elevated to leadership positions,
improving local governance and lower corruption rates.
2. Developmental Focus: Women leaders have been pivotal in prioritizing and
improving health, education, and water facilities.
3. Gender-Sensitive Policies: The presence of women has led to more policies
addressing issues like domestic violence and child marriage.
4. Social Equity: Promotes gender equality and challenges patriarchal norms.
Improved gender ratios and reduced gender biases in local communities.
5. Inclusive Decision-Making: Diverse perspectives lead to more holistic
decision-making. Women leaders often prioritize health, education, and welfare issues.
6. Role Models: Eg- Increased female school enrollment and aspirations due to visible
female leaders.
7. Global Standing: With around 45% of seats held by women, India surpasses many
other nations in women's local political empowerment.

Limitations and Challenges

1. Rotation of Seats: This policy prevents women from leveraging their experience over
multiple terms, disrupting career continuity.
2. Digital Divide: In rural areas, the lack of access to digital tools and low digital literacy
among women impedes their ability to perform administrative tasks effectively. NFHS
5 data reveals that in Rural India, men are nearly twice as likely as women to have used
the internet (49% vs 25%).
3. Societal Challenges: Gender-based discrimination and the stereotype of women as
proxy candidates exemplified by the "sarpanch pati" phenomenon, where husbands
unofficially assume the roles intended for elected women representatives, undermining
their authority and role legitimacy.
4. Policy Restrictions: Norms like the two-child policy and educational requirements
for candidates can disproportionately limit women's political participation.
5. Lack of Capacity: Inadequate training and support for women leaders. Women
leaders often lack formal education and experience in governance.

Case Studies
1. Bubnal: Breaking Political Stagnation and Fostering Development - A
village previously mired in caste-related disputes and political stagnation, witnessed
transformative change with the election of an all-women Gram Panchayat.
 2. Neerawagaj: Leveraging Political Lineage for Progressive Governance -
Neerawagaj's all-women Panchayat was formed against a backdrop of strong female
political influence, reflecting a strategic move to empower women through formal
political channels.

Way Forward
1. Institutional Reforms: Reevaluate the rotation policy and other restrictive policies
to create a more supportive and stable environment for women’s continuous political
engagement.
2. Bridging the Digital Divide: Increasing access to technology and improving digital
literacy among women in rural areas. AS per National Sample Survey Office (NSSO)
data, only 24% of households have internet access and merely 14% of rural citizens
actively use it.
3. Empowering Women Candidates: Ensuring more support for women candidates,
including financial and educational opportunities and extensive training programs to
equip them with necessary governance skills and digital competencies.
4. Gender Sensitization: Conducting campaigns to reduce gender bias and
discrimination in political and administrative arenas, educate the public on the
importance of women’s roles in governance and to foster a supportive community
environment.
5. Financial Support: Implement financial aid and sponsorship programs to assist
women candidates in overcoming economic barriers to entry and sustainability in
politics.
Aspirational Block Program
The Aspirational Block Program (ABP), introduced by NITI Aayog in January 2023, builds
on the success of the Aspirational Districts Program (ADP), focusing on holistic development
in India’s least developed blocks.

Features:
1. Introduction and Scope: Focuses on improving governance to enhance the quality
of life and service delivery in the remotest and less developed blocks of India​. Targets
500 blocks across 329 districts in 27 states and 4 Union Territories​​.
2. Strategic Themes: Concentrates on five key areas: Health and Nutrition, Education,
Agriculture and Allied Services, Basic Infrastructure, and Social Development​​. Each
block is evaluated and monitored based on specific themes, fostering targeted
development interventions​​.
3. Monitoring and Evaluation:
a. Delta Ranking: Measures block performance on Key Performance Indicators
(KPIs), fostering competitive and cooperative federalism​​.
b. Nodal Officers: Block officials are designated as Leaders of Change, overseeing
and driving the program initiatives under state and district guidance​​.
c. Public Recognition: Top performers are featured on the "Wall of Fame" at
NITI Aayog, serving as a motivational tool and benchmark for other blocks​​.
4. Benefits:
a. Effective Service Delivery: Improvements in governance aimed at enhancing
life quality and service accessibility in remote areas.
b. Development Leadership: Empowers local leaders, fostering accountability
and effective management​​.
c. Economic and Social Development: Focus on developing basic
infrastructure and agricultural services to boost economic and social conditions​​.

Challenges:
1. Resource Allocation: Balancing adequate financial and human resources to ensure
effective implementation across diverse and often remote areas​​.
2. Coordination Complexity: Ensuring smooth coordination across multiple levels of
government and between various departments and sectors​​.
3. Data Management: Achieving accurate and timely data collection to assess and
adapt program strategies effectively​​.
4. Sustainability Concerns: Embedding sustainable development practices that can
continue to deliver benefits over the long term​​.

Way Forward:
1. Enhanced Capacity Building: Strengthening training and support for block
officials to effectively manage and lead development projects​​.
2. Improved Data Systems: Utilizing technology to enhance data accuracy and
facilitate real-time monitoring and decision-making​​.
3. Greater Integration: Fostering a more cohesive approach among all stakeholders,
including local communities, to ensure that initiatives are well-supported and
effectively implemented​​.
4. Sustainability and Innovation: Encouraging the adoption of innovative and
environmentally sustainable methods in development projects to ensure long-term
viability​​.
Urban Local Bodies
Historical Evolution
1. Ancient Period
a. Vedic Period: Existence of local governance structures like 'Sabhas' and
'Samitis'.
b. Mauryan Era: Urban administrative roles well-defined, with positions like
'Nagaraka' overseeing urban planning and maintenance.
2. Medieval Period
a. Gupta Period: Continued emphasis on local governance with local councils
managing civic functions.
b. Mughal Era: Introduction of the role of 'Kotwal', handling municipal functions
including policing, market regulation, and sanitation.
3. Colonial Era
a. 1687: Establishment of Madras Municipal Corporation, the first such body
in India, with a Mayor and Aldermen.
b. 1726: Similar municipal structures replicated in Bombay and Calcutta.
c. 1882: Lord Ripon's Resolution introduced elected municipal governance,
emphasizing local self-government.
4. Post-Independence Era
a. 1950: Constitution of India recognizes ULBs, assigns urban local government to
state purview.
b. 1950-1990s: Various state-specific acts enhance ULBs' roles in urban
governance.
5. 74th Constitutional Amendment Act, 1992
a. Mandated structuring of ULBs: Municipal Corporations, Municipal
Councils, and Nagar Panchayats.
b. Decentralization: Devolution of significant powers to ULBs for planning and
development.
c. Accountability: Introduction of statutory provisions for regular elections and
financial transparency.

Constitutional Provisions
Urban local bodies (ULBs) in India are governed by Part IX-A of the Constitution,
introduced by the 74th Amendment Act, 1992, which aims to strengthen urban
governance through decentralization.

Key Provisions
1. Article 243P to 243ZG: These articles establish the structure, powers, and functions
of ULBs, including the creation of Nagar Panchayats, Municipal Councils, and
Municipal Corporations.
2. Article 243R, 243S (Elections and Composition):
a. Direct election of all municipal members by local residents.
 b. Provisions for the election or appointment of chairpersons as determined by
state laws.
3. Article 243T (Reservation): Seats are reserved for Scheduled Castes (SCs) and
Scheduled Tribes (STs) proportional to their population, with at least one-third of seats
reserved for women.
4. Article 243U (Duration and Dissolution): Municipalities have a five-year term,
subject to earlier dissolution with mandatory elections within six months of
dissolution.
5. Article 243W (Powers and Functions): State legislatures may grant
municipalities powers to function as self-governing bodies, including urban planning,
land use, water supply, and public health as listed in the Twelfth Schedule.
6. Article 243X (Finance): Municipalities may levy taxes, duties, tolls, and fees as
authorized by state legislatures, which may also provide grants-in-aid.
7. Article 243Y (State Finance Commission): Every five years, a Finance
Commission is constituted to review and recommend financial distributions between
the state and municipalities.
8. Article 243Z (Audit and Accounts): States may regulate the maintenance of
accounts and auditing for municipalities.

Data
1. Vacancies:
a. 42% of sanctioned positions of town planners are vacant.
b. Vacancies in sanctioned staff - 80% in Gurgaon and 50 % in Kolkata.
2. Lack of Devolution of Functions: out of 18 subjects mentioned in 12th schedule,
Brihanmumbai Municipal Corporation (BMC) has power related with only 9 subjects
and Municipal Corporation of Delhi (MCD) has power related with 4 subjects only.
3. Limited funds aside, about 70% of it gets spent on salaries, pensions and
administrative expenses with the rest left for capital expenditure.
4. Studies by the Indian Institute for Human Settlements (2022) have
highlighted that urban local bodies’ (ULBs) own revenue was only 47 per cent of their
total revenue, with property tax accounting for approximately 29 percent of it.
5. Property tax collection in India was much lower compared to OECD countries due to
undervaluation, and poor administration, the report argues. Property tax revenue
as a share of GDP in India is .15%, while in OECD countries it is around 1%.
6. Municipal revenues/expenditures in India have stagnated at around 1 percent
of GDP for over a decade. In contrast, municipal revenues/ expenditures account for
7.4 per cent of GDP in Brazil and 6 percent of GDP in South Africa.
7. A World Bank report (2022) estimates that India will need to invest $840 billion
over the next 15 years—or an average of $55 billion per annum—into urban
infrastructure if it is to effectively meet the needs of its fast-growing urban
population.
8. Between 2016 and 2021, approximately nine municipal bodies raised Rs 38.40
billion through bonds, as reported by the Reserve Bank of India.
9. Recently, Vadodara Municipal Corporation has raised 1 billion rupees ($12.07
million) by issuing Asia's first certified green municipal bond.

Case Studies
Indore - India’s cleanest city - Introduction of door-to-door waste collection and
segregation at source, leading to nearly 100% segregation.
Pune Municipal Corporation (PMC), Maharashtra - The "Pune Participatory Budget"
allows citizens to propose and vote on local projects, enhancing transparency and
community involvement.
Visakhapatnam Municipal Corporation (VMC), Andhra Pradesh - Implementation
of early warning systems and disaster preparedness measures, particularly against cyclones.

Powers and Functions

1. Regulatory Functions
a. Land-use regulation: Manage zoning and land-use, approve building plans,
and oversee construction to ensure compliance with urban planning norms.
b. Environmental regulation: Implement and monitor environmental
protection standards, including pollution control and maintenance of green
spaces.
2. Public Health and Sanitation
a. Waste management: Organize solid waste collection, treatment, and disposal.
Implement recycling and waste reduction initiatives.
b. Sanitation and sewerage management: Maintain and develop sewage
systems and ensure sanitation in public areas, including prevention of open
defecation.
3. Urban Infrastructure and Services
a. Water supply: Manage the distribution and regulation of water supply to
ensure safe and adequate water for urban residents.
b. Roads and transportation: Construct and maintain roads, streets, footpaths,
and other transport infrastructure. Regulate urban traffic and parking.
4. Public Safety and Services
a. Fire services: Provide fire fighting services, conduct fire safety inspections, and
promote fire safety awareness and education.
b. Street lighting: Install and maintain street lighting to enhance public safety
and urban aesthetics.
5. Social and Economic Development
a. Education and schools: Administer primary education facilities and support
infrastructure for education.
b. Healthcare services: Operate healthcare facilities including hospitals,
dispensaries, and maternity homes to provide medical services to the urban
population.
6. Welfare Functions
a. Social welfare programs: Implement and manage welfare programs targeting
the underprivileged, disabled, and elderly.
b. Community facilities: Develop and maintain community centers, parks, and
recreational facilities to improve quality of life.
7. Financial Management
a. Revenue generation: Levy and collect taxes such as property tax,
entertainment tax, and advertisement tax. Manage revenues from utility services
and government grants.
b. Budgeting and financial control: Prepare and execute the municipal budget,
manage municipal finances, including expenditures and investments.
8. Governance and Administrative Functions
a. E-governance and citizen services: Implement e-governance initiatives to
streamline administrative processes and improve service delivery.
b. Public participation: Facilitate citizen engagement in urban governance
through ward committees and public consultations
Significance
1. Local Governance and Democracy:
a. Empowerment of Local Citizens: ULBs provide a platform for local
citizens to participate in governance, ensuring that their voices are heard and
their needs addressed.
b. Decentralization: ULBs promote democratic decentralization, bringing
government closer to the people and enabling more responsive and
accountable governance.
2. Urban Planning and Development:
a. Infrastructure Development: ULBs are responsible for planning and
implementing urban infrastructure projects such as roads, bridges, public
transportation, and utilities.
b. Urban Management: They manage essential urban services including
water supply, sanitation, waste management, and street lighting. Over 90% of
urban households are covered by solid waste management services by 2020.
3. Service Delivery:
a. Public Health: ULBs play a key role in maintaining public health
infrastructure, including hospitals, health centers, and sanitation services.
b. Education: They manage primary education and some aspects of secondary
education, ensuring access to education within urban areas.
4. Economic Development:
a. Local Economic Growth: By developing infrastructure and providing
services, ULBs facilitate local economic growth and attract investment.
b. Employment Generation: Infrastructure projects and urban management
activities generate employment opportunities at the local level.
5. Sustainable Urbanization:
a. Environmental Management: ULBs implement policies for sustainable
urban development, including pollution control, green spaces, and sustainable
waste management practices. Surat Municipal Corporation's water recycling
efforts, treating 115 million liters per day.
b. Climate Resilience: They develop and implement strategies to make cities
more resilient to climate change and natural disasters.
6. Revenue Generation:
a. Local Revenue Sources: ULBs generate revenue through property taxes,
user fees, and local levies, which are crucial for funding urban development
projects.
b. Financial Autonomy: Effective revenue generation allows ULBs greater
financial autonomy and reduces dependence on state and central government
transfers.
7. Social Equity:
a. Inclusive Development: ULBs focus on inclusive urban development,
ensuring that marginalized and vulnerable communities have access to basic
services and opportunities.
b. Community Participation: By involving local communities in planning
and decision-making processes, ULBs promote social equity and inclusion.
8. Civic Engagement and Transparency:
a. Public Participation: ULBs facilitate civic engagement through public
meetings, participatory budgeting, and transparency initiatives.
b. Accountability: They implement mechanisms for accountability and
transparency, such as online portals for service delivery and grievance
redressal.
Performance Analysis
Positive Role of Urban Local Bodies
1. Decentralization of Power: Empowers local governance by decentralizing
administrative powers and responsibilities, allowing for localized decision-making
tailored to specific urban challenges.
2. Democratic Participation: Promotes democratic involvement through direct
elections, enabling residents to influence the governance and development of their
localities.
3. Provision of Basic Services: Manages essential services like water supply,
sanitation, and solid waste management, directly impacting urban quality of life.
4. Urban Planning and Development: Play a crucial role in infrastructure projects,
city planning, and maintenance of public spaces, contributing to sustainable urban
growth and living conditions.
5. Economic Development: Manages local economic activities, marketplaces, and
property taxes, contributing to the economic vitality and growth of urban areas.
Vadodara Municipal Corporation recently raised 1 billion rupees through Asia's first
certified green municipal bond.

Limitations of Urban Local Bodies

1. Financial Constraints: ULBs often face significant financial issues, relying heavily
on state government allocations or limited local tax revenues, which can hamper
development projects and service delivery. ULBs’ own revenue was only 47% of their
total revenue in 2022, with property tax accounting for 29%. Property tax revenue as a
share of GDP in India is 0.15%, while in OECD countries, it is around 1%.
2. Bureaucratic Hurdles: Encounters bureaucratic delays and red tape which can
impede efficient decision-making and project implementation.
3. Lack of Capacity: Gaps in technical and managerial capacity can hinder effective
urban management and planning, challenging the implementing complex urban
development projects efficiently.Vacancies in sanctioned positions, such as the 42%
vacancy rate for town planners and 80% in Gurgaon, reflect capacity constraints in
ULBs.
4. Political Interference: Political influence can lead to biased decision-making and
prioritization of projects, affecting the efficiency and effectiveness of ULBs in serving
the public interest. BMC exercises power over 9 out of 18 subjects mentioned in the
12th Schedule, while MCD has power over 4 subjects.
5. Inadequate Public Participation: Actual level of public involvement in ULB
governance and decision-making can be low, affecting the responsiveness of ULBs to
community needs and priorities.

Government Schemes
1. Smart Cities Mission: The objective of SCM is to promote cities that provide core
infrastructure and give a decent quality of life to its citizens, a clean and sustainable
environment through the application of 'Smart' solutions.
2. Atal Mission for Rejuvenation and Urban Transformation (AMRUT): The
Mission focuses on development of basic infrastructure, in the selected cities and
towns, in the sectors of water supply; sewerage and septage management; storm water
 drainage; green spaces and parks; and nonmotorized urban transport. A set of Urban
Reforms and Capacity Building have been included in the Mission.
3. The Swachh Bharat Mission - Urban (SBM-U): Launched on 2nd October 2014
aims at making urban India free from open defecation and achieving 100% scientific
management of municipal solid waste in 4,041 statutory towns in the country. The
second phase of SBM-U was launched on 1st October 2021, for a period of 5 years. The
vision for SBMU 2.0 is to achieve “Garbage Free” status for all cities by 2026.
4. The National Heritage City Development and Augmentation Yojana
(HRIDAY): A central sector scheme of the Government of India, launched with the
aim of bringing together urban planning, economic growth and heritage conservation
in an inclusive manner & with the objective of preserving the heritage character of the
City.
5. Pradhan Mantri Awas Yojana-Urban (PMAY-U): Aim is to provide all weather
pucca houses to all eligible beneficiaries in the urban areas of the country through
States/UTs/Central Nodal Agencies. All houses under PMAY-U have basic amenities
like toilets, water supply, electricity and kitchen.
6. Aspirational Districts Programme (ADP): It aims to quickly and effectively
transform 112 most underdeveloped districts across the country.
a. This program focuses on the strength of each district, identifying low-hanging
fruits for immediate improvement and measuring progress by ranking districts
on a monthly basis. The ranking is based on the incremental progress made
across 49 Key Performance Indicators (KPIs) under 5 broad socio-economic
themes - Health & Nutrition, Education, Agriculture & Water Resources,
Financial Inclusion & Skill Development and Infrastructure.
7. Aspirational Block Programme: This new programme is aimed at improving
performance of blocks lagging on various development parameters. This will enable
holistic development in those areas that require added assistance.

Way Forward
1. Improve urban governance and people's participation:
a. Recommendations of Second ARC:
i. Four tier municipal set-up to increase people's participation: Municipal
corporation-Ward committee-Area committee- Area sabha.
ii. Direct election of Mayors to improve efficiency in urban governance.
iii. Participatory social audit and users feedback-eg Citizen report card
(Bangalore).
iv. Set second Commission on urbanisation (First was set-up in 1985)
● The recently constituted Kerala Urban Commission is slated to
reform the urban landscape in the state.
b. NITI Aayog’s Recommendations:
i. Development of Local Governance Capacities: There should be
targeted capacity building initiatives for local government officials, urban
planners, and other urban governance stakeholders to enhance their skills
and effectiveness.
ii. Boosting Community Involvement: To improve governance, ward
committees, nongovernmental organizations, and civil society groups
should be actively involved in the
iii. functioning of ULBs, fostering stronger community participation.
c. Filling vacant positions of town planners and sanctioned post of
municipal staff.
 i. 42% of sanctioned positions of town planners are vacant.
ii. Vacancies in sanctioned post -80% in Gurgaon and 50 % in Kolkata.
d. Implementing a Technological Solution for Citizen Feedback: Urban
Local Bodies (ULBs) can develop a technology-driven platform for citizens to
submit grievances, enhancing the responsiveness of city administrations to
public needs.
2. Improve the financial resources of urban local bodies:
a. RBI report on Municipal Finances (2022):
i. Recommended that in order to improve the buoyancy of municipal
revenue, the Centre and the States may share one-sixth of their GST.
ii. The RBI has said municipal corporations should adopt sound and
transparent accounting practices with proper monitoring and
documentation of various receipt and expenditure items.
b. 14th Finance commission recommendations: 14th FC has called for
reforms in property tax regime which includes:
i. Periodic review: The assessment of properties may be done every four or
five years and the urban local bodies should introduce the system of
self-assessment.
ii. All the State Governments should empower the panchayats and
municipalities to levy property tax on plinth area basis.
iii. Granting of exemptions should be minimised.
c. Second ARC recommendations:
i. Enhance fines on civic offences such as spitting, littering etc on public
spaces.
ii. Big municipalities may set up municipal public sector enterprises, for eg-
local municipal bus services etc.
d. Enhanced Financial Management: NITI Aayog recommends that Urban
Local Bodies (ULBs) should have access to better revenue-raising resources and
receive increased fund allocations from the central government. Additionally,
State Finance Commissions should be consistently established with clearly
defined Terms of Reference (ToR).
e. Introduce performance index to induce competitive sub-federalism for the fund
dispersal among municipalities.
3. Functions
a. Enhancing Local Governance Autonomy: Urban Local Bodies (ULBs) in
India should be granted more autonomy to enable a devolved governance model
that empowers them to effectively deliver high-quality services to the
community.
i. Lack of devolution of functions is one big problem for ULBs. For ex- out of
18 subjects mentioned in 12th schedule, Brihanmumbai Municipal
Corporation (BMC) has power related with only 9 subjects and Municipal
Corporation of Delhi (MCD) has power related with 4 subjects only.

Municipal Bonds
Municipal bonds, or muni bonds, are debt instruments issued by municipal corporations or
associated bodies in India to finance public projects such as bridges, schools, and hospitals,
as well as to provide proper amenities to households.
Data:
1. In 1997, the Bengaluru Municipal Corporation (BMC) initiated India's first bond
issue, followed by the Ahmedabad Municipal Corporation in 1998. Since then, cities
like Pune and Hyderabad have also issued similar bonds.
2. Between 2016 and 2021, approximately nine municipal bodies raised Rs 38.40 billion
through bonds, as reported by the Reserve Bank of India.

Benefits:
1. Developmental projects: Raising money from capital markets incentivises
municipal corporations to fund new projects and improve civic infrastructure while
encouraging them to become financially disciplined and governance oriented.
2. Alternative source: Municipal Bonds can help the Urban Local Bodies (ULBs) to
garner revenue to complete budgetary projects as property tax is the only major source
of municipal revenue.
3. Complement initiatives of the Union government: The ability of municipal
bodies to be self-sustaining is also critical to the success of the Centre’s pet projects
such as Smart Cities and AMRUT.
4. Improved Creditworthiness and Financial Discipline: Issuing bonds requires
ULBs to maintain credit ratings and adhere to financial regulations, fostering greater
fiscal responsibility and transparency. Eg- Surat Municipal Corporation improved its
credit rating from AA- to AA+
5. Transparency: Bonds issued to the public are rated by reputable agencies such as
CRISIL, providing transparency about the investment’s credibility.
6. Lower Cost of Capital: Bonds can be a cheaper source of capital compared to bank
loans, especially if they are tax-exempt, reducing the overall cost of borrowing for
ULBs.
7. Long-Term Funding for Infrastructure Projects: Municipal bonds offer
long-term capital, which is essential for financing large infrastructure projects like
roads, water supply, and sanitation systems.
8. Enhanced Investor Confidence and Market Access: Following successful bond
issues, ULBs like Hyderabad have been able to attract more private investments for
urban development projects.
9. Tax benefits: Municipal bonds offer tax exemptions under certain conditions, and
the interest earned is also tax-free.
10. Offer safe and secure investment option: Municipal bonds are issued by
municipal authorities, implying involvement of minimal risk with these securities.
Government bonds are usually viewed as low-risk investments, because the likelihood
of a government defaulting on its loan payment tends to be low.
11. Ensure fiscal autonomy: While the size of the municipal budgets in India are much
smaller than peers in other countries, revenues are dominated by property tax
collections and devolution of taxes and grants from upper tiers of government,
resulting in lack of financial autonomy. Municipal Bonds would ensure more fiscal
autonomy.

Factors Driving the Growth of Municipal Bonds in India:

1. Population: In 2011, 37.5 crore people lived in cities and according to an estimate
this figure will be 80 crores by 2050.
a. Municipalities and local authorities need funding to build roads, bridges, schools,
hospitals, and other public works, and municipal bonds have become an
important source of financing for these projects.
 2. Government's efforts:
a. SEBI launched an information database on municipal bonds.
b. SEBI’s guidelines related to the issuance of municipal bonds: SEBI
revised the guidelines related to the issuance of municipal bonds in 2015 in an
attempt to enable ULBs or local government bodies to raise finances from such
sources.
c. Municipal Bond Index: It will track the performance of municipal bonds
issued by Indian municipal corporations across maturities and having
investment grade credit rating.
d. The Ministry of Urban Development has established guidelines for the issuance
of municipal bonds, which require issuers to disclose information about the
projects being funded by the bonds and the risks associated with the
investments.

Challenges:
1. Financial challenges: Limited revenue base of municipalities and more dependence
on grants from centre and states.
2. Lack Of Data: Lack of availability of updated financial information.
3. Credit Ratings: Only a few municipalities with high credit quality.
4. Governance related issues: Lack of consistency and stability because frequent
changes in management.
5. Trust factor: Weak financial position and poor governance and management of city
agencies have limited their ability to issue bonds, and reduced investor trust and
confidence.
6. Other Issues: Low accountability and autonomy of city agencies followed by lack of
an enabling environment.

Way Forward:
1. Incentivizing Municipal Corporations for bonds issuance
a. Incentive by way of Additional Grants: A clause can be introduced to the
effect that municipalities which raise debt by way of bond issuances are
beneficiary to additional grants from the Centre and State governments that go
beyond the allocations as specified by the Finance Commission.
b. The borrowings of the Municipal Corporations from Financial Institutions such
as HUDCO etc. can be linked to the bond market: For instance, HUDCO can be
mandated to lend to municipal bodies close to 80-90% of the financing
requirement provided the municipal body raises the balance 10-20% through the
debt market.
2. Incentivizing investors to invest in Municipal Bonds: There is a need to spur
investments in Municipal bonds by making them attractive both at the retail level and
the wholesale level. Some suggestions on encouraging demand at the retail and
wholesale level are elaborated upon below.
a. At the retail level:
i. All bonds issued by municipalities should be made tax-free.
ii. The interest rate can be marked at 50 basis points higher than the 5-yr
Government security paper. Such a step would enable municipal bonds to
become a second alternative to the safe government bonds and thereby
induce investments.
b. At the wholesale level:
i. Banks should be mandated to lend to ULBs as a part of the ‘priority sector’.
ii. Alternatively, Bank holdings of Municipal Bonds should also be given space
in the SLR requirements provided they are of a certain specified category.
 3. The development of credit rating agencies that specialize in rating municipal bonds
is expected to help improve the creditworthiness of issuers and increase investor
confidence in the market.

Direct Election of Mayor

Indian ULBs largely follow the ‘commissioner as chief executive’ (CACE) model. The
municipal commissioner is an appointee of the state government and exercises substantial
power, while the mayor has a largely ceremonial role. At present, mayors are usually elected
by city councillors who themselves are directly elected by urban voters.

Some states have tried the direct election model; others have tried and abandoned it. Today,
six states – Uttarakhand, Chhattisgarh, Jharkhand, Madhya Pradesh, Uttar Pradesh and
Tamil Nadu – have mayors who are elected directly.
In Madhya Pradesh, for example, the state adopted the system of directly electing mayors in
1998. However, the mayor must constitute a mayor-in-council (MIC) out of the elected
councillors to aid and advise her/him. The mayor presides over the MIC meetings and
deliberations.
Shashi Tharoor introduced a private member bill (2016) on direct elections for mayors,
which included a provision for a mayor-in-council that would be nominated by the directly
elected mayor.

Benefits Of Direct Election:

1. A direct mandate from urban residents adds to the legitimacy and accountability of the
mayor’s office. The municipal commissioners, as unelected and state appointed
executives, have no local democratic legitimacy, since they do not represent the will of
the people.
○ Second Administrative Reforms Commission (Sixth Report) is of the firm view
that executive power must be exercised by the elected Mayor/Chairperson
because basic democratic legitimacy demands that power is exercised by the
elected executive
2. In the current model, councillor elections are held at the ward level and are based on
hyper-local issues, which may not resonate with the whole city. A directly elected
mayor would ensure a focus on the whole city instead of certain wards.
3. Bureaucracies by nature tend to work for the preservation of status quo, are averse to
taking risks and not expected to go beyond the written script handed over to them.

Challenges:
1. The 74th Constitutional Amendment Act of 1992 did not specify a model of governance
for cities; the manner in which the chief executive of ULBs would be elected; the tenure
that the chief executive would have or the power they would exercise. It was left to the
states to decide since “local self-government” is a state subject
2. There is little evidence to suggest that directly elected mayors are better. In fact, States
like Rajasthan and Himachal Pradesh which introduced directly elected Mayors
reversed the decision due to the difficulties posed by such a system.
 3. A fundamental issue with a directly elected Mayor is that instead of enabling efficiency,
it might actually result in gridlock in administration, especially when the Mayor and
the majority of elected members of the city council are from different political parties.
4. We do not directly elect the Prime Minister or the Chief Minister. Still, they enjoy wide
powers and are democratically accountable. Mayors do not enjoy similar powers not
because they are not directly elected, but because State governments exercise
enormous control over ULBs — politically, administratively and financially.
5. Other issues:
a. Tenure: Short tenure of mayors in many states which is hardly enough to create
lasting changes in a large metropolis.
b. Executive Head: Head of the municipal corporation, the mayor, functions
merely as a ceremonial authority and executive decisions are largely carried out
by the municipal commissioner appointed by the state government. As a result of
such a peculiar arrangement, situations of gridlock are not infrequent.

Way Forward:
1. Recommendations of Second Administrative Reforms Commission 2007:
a. The functions of chairing the municipal council and exercising executive
authority in urban local government should be combined in the same functionary
i.e. Chairperson or Mayor.
b. The Chairperson/Mayor should be directly elected by popular mandate through a
city-wide election.
c. The Mayor should be the Chief Executive of the municipal body while the
Commissioner should perform the functions delegated to him/her.
d. Mayor should have a fixed tenure of five years.
2. An alternative model in which simultaneous elections are held for both mayors and
councillors. This will result in democratic decentralization and greater efficiency in
urban governance.

Urban Local Bodies Financing

● Studies by the Indian Institute for Human Settlements (2022) have highlighted that
urban local bodies’ (ULBs) own revenue was only 47 per cent of their total revenue,
with property tax accounting for approximately 29 percent of it.
● Property tax revenue as a share of GDP in India is .15%, while in OECD countries it is
around 1%.
● Municipal revenues/expenditures in India have stagnated at around 1 percent of GDP
for over a decade. In contrast, municipal revenues/ expenditures account for 7.4 per
cent of GDP in Brazil and 6 percent of GDP in South Africa.

Benefits:
1. Infrastructure Enhancement: Adequate funding empowers ULBs to develop
essential infrastructure like transportation and sanitation facilities, crucial for
managing the rapid urbanization and its associated challenges​.
○ A World Bank report (2022) estimates that India will need to invest $840
billion over the next 15 years—or an average of $55 billion per annum—into
 urban infrastructure if it is to effectively meet the needs of its fast-growing urban
population.
2. Economic Development: Financially equipped ULBs can initiate projects that boost
local economies, such as creating business hubs and improving market facilities. This
leads to job creation and increased economic activity within the urban area​.
3. Service Improvement: Robust financing allows ULBs to enhance the quality and
range of public services, including education, healthcare, and public safety, directly
improving residents' quality of life​.
4. Sustainable Development: With innovative financing methods like green
municipal bonds, ULBs can invest in sustainable urban projects, promoting
eco-friendly development and long-term environmental benefits​.
○ India's Vadodara Municipal Corporation has raised 1 billion rupees ($12.07
million) by issuing Asia's first certified green municipal bond.
5. Governance and Accountability: Sufficient funding improves governance by
increasing transparency and accountability in municipal operations, ensuring that
financial resources are used efficiently and projects are executed effectively.

​Issues:
1. RBI report on Municipal Finances (2022):
a. Dependence on centre/state: The report said, MCs mostly rely on
borrowings from banks and financial institutions and loans from centre/ state
governments to finance their resource gaps in the absence of a well-developed
market for municipal bonds.
b. State Finance Commission: The RBI said state governments have not set up
state financial commissions (SFCs) in a regular and timely manner even though
they are required to be set up every five years. Accordingly, in most of the States,
SFCs have not been effective in ensuring rule-based devolution of funds to Local
governments.
c. Type of expenditure: Municipal Corporations (MCs) committed expenditure
in the form of establishment expenses, administrative costs and interest and
finance charges is rising, but capital expenditure is minimal, the report said
d. Lack of audit: The report said that most municipalities only prepare budgets
and review actuals against budget plans but do not use their audited financial
statements for balance sheet and cash flow management, resulting in significant
inefficiencies.
2. 14th FC:
a. In most states where property tax is being levied, the rates have not been revised
periodically.
b. The list of taxable properties is not being updated and a large number of
properties remain outside the tax net.
3. GST Impact on Local Revenue: Post-GST, Urban Local Bodies (ULBs) face
reduced revenue raising options due to the integration of major local taxes like sales
tax, octroi, and local entertainment taxes into the GST framework.
4. Limited Taxation Authority: Unlike their counterparts in developed countries,
Indian ULBs have restricted taxation powers. For example, in China, ULBs generate
significant revenue from selling land use rights, while in Denmark and the US, local
bodies can levy personal income taxes and a variety of other taxes.
5. Underutilized Tax Potential: The Economic Survey of 2018 highlighted that ULBs
in India have not fully capitalized on the potential of property taxes, indicating a gap in
capacity utilization for revenue generation.
Way Forward:
1. RBI report on Municipal Finances (2022):
a. Recommended that in order to improve the buoyancy of municipal revenue, the
Centre and the States may share one-sixth of their GST.
b. The RBI has said municipal corporations should adopt sound and transparent
accounting practices with proper monitoring and documentation of various
receipt and expenditure items.
2. 14th Finance commission recommendations: 14th FC has called for reforms in
property tax regime. which includes:
a. Periodic review: The assessment of properties may be done every four or five
years and the urban local bodies should introduce the system of self-assessment.
b. All the State Governments should empower the panchayats and municipalities to
levy property tax on plinth area basis.
c. Granting of exemptions should be minimised.
3. Second ARC recommendations:
a. Enhance fines on civic offences such as spitting, littering etc on public spaces.
b. Big municipalities may set up municipal public sector enterprises, for eg- local
municipal bus services etc.
4. Property tax collection can be improved by updating existing databases, reassessing
properties using digital tools and imposing taxes on non-compliers and defaulters.
5. Concessions will need to be rationalised, with state and local bodies incentivised to
move away from fiscally ruinous measures (for example, free water and electricity).
6. Expenditure efficiency needs to be boosted by pushing for outsourcing (for example,
garbage services) and exploring PPP models (hybrid annuity models), and
participatory budgeting.
7. The Centre can expand incentives given to states under interest-free capex loans to
cover aspects of urban development like framing building bylaws, pushing for public
transport and pursuing mixed housing schemes.
8. Innovative financing mechanisms can be pursued, including having states and
municipalities pursue asset monetisation, financing from carbon credit generation, etc.
9. Municipal corporations should explore different innovative bond and land-based
financing mechanisms to augment their resources.
a. Land value capture -Gujarat offers an interesting example in land pooling
systems, any increase in land value due to public investment or civic initiatives is
taxed to unlock funding for additional infrastructure and service delivery-related
spend.
 उम्मीदवारों को
Q1. Analyse the role of local bodies in providing good governance at local level and bring out इस हाशिए में नहीं
लिखना चाहिए।
the pros and cons merging the rural local bodies with the urban local bodies. (10) Candidates
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 उम्मीदवारों को
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 उम्मीदवारों को
Q2. “The states in India seem reluctant to empower urban local bodies both functionally as
इस हाशिए में नहीं
लिखना चाहिए।
well as financially.” Comment. (10)
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 उम्मीदवारों को
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 उम्मीदवारों को
Q3. To what extent, in your opinion, has the decentralization of power in India changed the
इस हाशिए में नहीं
लिखना चाहिए।
governance landscape at the grassroots? (10)
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 उम्मीदवारों को
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 उम्मीदवारों को
Q4. The strength and sustenance of local institutions in India has shifted from their formative
इस हाशिए में नहीं
लिखना चाहिए।
phase of ‘Functions, Functionaries and Funds’ to the contemporary stage of ‘Functionality’.
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recent times. (15M)

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 उम्मीदवारों को
Q5.
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 उम्मीदवारों को
"The reservation of seats for women in the institution of local self-government has had a इस हाशिए में नहीं
लिखना चाहिए।
limited impact on the patriarchal character of the Indian political process". Comment. (15) Candidates
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 उम्मीदवारों को
Q6.
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 उम्मीदवारों को
Q7. Assess the importance of the Panchayat system in India as a part of local government.
इस हाशिए में नहीं
लिखना चाहिए।
Apart from government grants, what sources can the Panchayats look out for financing
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 उम्मीदवारों को
Q8.
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 "The local self-government system in India has not proved to be an effective instrument उम्मीदवारों को
इस हाशिए में नहीं
लिखना चाहिए।
of governance". Critically examine the statement and give your views to improve the
Candidates
must not
situation. (10) write on
this margin.

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Civilsdaily IAS, Apsara Arcade, ORN, New Delhi | 73033 16700 | www.civilsdaily.com
 उम्मीदवारों को
Q9.
इस हाशिए में नहीं
लिखना चाहिए।
Candidates
must not
write on
this margin.

Civilsdaily IAS, Apsara Arcade, ORN, New Delhi | 73033 16700 | www.civilsdaily.com
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