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

Reasons for Reluctance: Functional Devolution

Functional devolution refers to transferring specific responsibilities and powers to ULBs. Several factors contribute to state reluctance in this regard:

• Fear of Losing Control: State governments often perceive devolution of functions as a loss of direct control over urban areas, which are significant sources of revenue and political influence.
• Administrative Capacity Concerns: States often express concerns about the capacity of ULBs to effectively handle complex functions like water supply, sanitation, and urban planning. This is often a self-fulfilling prophecy, as limited resources and powers hinder capacity building.
• Lack of Political Will: Devolution requires a genuine commitment from state political leadership, which is often lacking due to vested interests and bureaucratic inertia.
• Fragmented Legislation: Many states have not fully aligned their state-level legislation with the provisions of the 74th Amendment, leading to ambiguity and hindering functional devolution.

Reasons for Reluctance: Financial Devolution

Financial devolution, the transfer of adequate financial resources to ULBs, is even more problematic. Key reasons include:

• Dependence on State Funding: ULBs are heavily reliant on state government funding, making them susceptible to political interference and budgetary constraints.
• Limited Own-Source Revenue: ULBs often lack the capacity to generate sufficient revenue through property taxes, user charges, and other local levies. This is often due to outdated valuation methods, political opposition to tax increases, and inefficient collection mechanisms.
• Inadequate Sharing of Taxes: The State Finance Commissions (SFCs), mandated by the 74th Amendment to recommend principles governing the distribution of taxes between the state and ULBs, have often been ineffective in securing adequate financial devolution. Many SFC recommendations are not fully implemented by state governments.
• Central Government Funding Issues: While central government schemes provide some funding to ULBs, these are often tied to specific projects and do not address the core financial needs of these bodies.

Consequences of Reluctance

The reluctance to empower ULBs has several negative consequences:

• Weakened Urban Governance: Lack of functional and financial autonomy hinders the ability of ULBs to effectively address urban challenges like congestion, pollution, and inadequate infrastructure.
• Inefficient Service Delivery: Limited resources and powers lead to poor quality of basic services like water supply, sanitation, and waste management.
• Increased Corruption: Dependence on state funding can increase opportunities for corruption and rent-seeking.
• Hindered Urban Development: Lack of local planning and decision-making capacity hampers sustainable urban development.
• Disparities in Urban Development: States with greater devolution experience better urban development outcomes compared to those with limited devolution.

Example: Karnataka, despite being a relatively progressive state, has faced criticism for its slow pace of financial devolution to ULBs. A 2018 report by the Karnataka Economic Survey highlighted the significant gap between the funds recommended by the SFC and the actual funds devolved to ULBs.

State	Financial Devolution (as % of State Own Tax Revenue) - 2021-22 (Estimate)
Kerala	38.2%
Karnataka	22.5%
Maharashtra	25.7%
Uttar Pradesh	18.9%

(Source: Reserve Bank of India, State Finances: A Study of Budgets, 2022-23 - Knowledge Cutoff 2023)