Urbanisation in India: Challenges, Opportunities and the Way Forward by Isher Judge Ahluwalia Ravi Kanbur P. K. Mohanty

Author:Isher Judge, Ahluwalia Ravi Kanbur , P. K. Mohanty
Language: eng
Format: mobi
Publisher: SAGE Publications
Published: 2014-02-03T18:30:00+00:00

• 74th CAA (Transfer of 12th Schedule functions, Constitution of a DPC and MPC)

• Transfer of City Planning Functions

• Transfer of Water Supply & Sanitation

• Reform in Rent Control

• Stamp duty rationalisation to 5%

• Repeal of the Urban Land (Ceiling and Regulation) Act

• Enactment of Community Participation Law

• Enactment of Public Disclosure Law

Source: Government of India (2010).

The Thirteenth Finance Commission’s proposal for performance-linked grants does include some measures that would improve revenue dynamics if states respond to the pressure, but it is unclear whether the performance grants offer sufficient leverage. The performance-linked portion of the grant to states on behalf of local bodies requires states to, among other things, set up an electronic system for automatic transfers of grants from the commission to local bodies within five days of receipt from the central government, lay out clear criteria for membership in the SFCs in an act of legislation, ‘fully enable’ local bodies to levy property taxes and remove ‘all hindrances’ to their doing so, set up a Property Tax Board to look into property enumeration and valuation, and declare service performance targets. The electronic system and professionalisation of SFCs will help increase revenue predictability, while the devolution of authority over property taxes could be used to improve administration. Ideally the proposed Property Tax Board would design the taxes to be more responsive to changes in property value, although it is not clear why a state board would be interested in this if revenues remained with ULBs.

The HPEC (Ahluwalia 2011) Report’s recommendation to introduce a Municipal Finance List in the Constitution and empower ULBs with exclusive taxes as well as amend the Constitution to require states to share a pre-specified percentage of their revenues from all taxes on goods and services is the strongest statement yet, but it is unclear how this will fare politically. Market-worthy ULBs with substantial revenue autonomy would be potential political challengers, and states’ history of dealing with potentially powerful local entities is not encouraging (Sivaramakrishnan 2011).

Operational Challenges: Information Infrastructure and Expenditure and Implementation Capacity

Building the information infrastructure and expenditure and implementation capacity are operational challenges. Change in these dimensions of MW is already underway: according to the Ministry of Urban Development (cited in the Thirteenth Finance Commission Report) local bodies’ expenditure has increased in the recent past due, in part, to additional investments in accounting systems, computerisation of operations, tax administration, and project monitoring. The Finance Commission’s record of its conversations with local bodies also notes their demands for more investment in information systems for tax administration and service delivery.

These dimensions of MW could improve further with expansion of the JNNURM mandatory reforms for ULBs (Box 6.4) and implementation of the Finance Commission’s recommended performance grants. The JNNURM mandatory reforms for ULBs already include upgrading accounting practices, implementing e-Governance and MIS for urban services, GIS systems for property tax collections, and other arrangements to increase collection efficiency.16 The Thirteenth Finance Commission’s proposed performance-linked grants specifically include some of the elements of the MW agenda, including: implementing

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