With the assumption of power by the National Front Government in December 1989, the provisions of the Constitution 65th Amendment Bill 1989 were reviewed.
A revised Amendment Bill, incorporating the provisions relating to Panchayats as well as municipalities, was introduced in the Lok Sabha in September, 1990. This bill also lapsed on account of dissolution of the then Lok Sabha.
When the Narasimha Rao government took charge in 1991, it introduced a Constitution Amendment Bill pertaining to municipalities in the Lok Sabha on 16 September 1991. With a few modifications,
A number of task forces, committees and commissions, appointed by the Government of India, have examined the problem of urban development in India.
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The Task Force on Planning and Development of Small and Medium Towns and Cities (1975), the Study Group on Strategy of Urban Development (1983) and others has made useful recommendations on streamlining urban development in India.
Urban development policy, which needs to be holistic, involves the components of physical planning, socio-economic planning, environment, circulation pattern, local government, financing, and other associated factors.
In August 1988, the Government set up the National Commission on Urbanisation (NCU), reference to which has been made above, under the chairmanship of C.M. Correa, with the purpose of reviewing and analysing the urbanisation process and formulating policies for integrated urban development.
The commission examined several issues and problems relating to urban government. Some of these related to urban management, spatial planning, resource allocation, urban housing, conservation, urban poverty, legal framework, information system etc. Some of the recommendations of the commission are
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1. The Ministry of Urban Development is restructured to make it the nodal ministry to deal with urbanisation.
2. A National Urbanization Council (NUC) is set up to formulate urbanisation policies and monitor and evaluate the implementation of policies.
3. An Indian Council for Citizens’ Action (ICCA) is created to encourage citizens through organized voluntary effort.
4. Every town, with a population of more than 50,000, be provided with an urban community development department, through which development programmes be implemented.
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It’s “New Deal for the Urban Poor”, incorporating 13 points for action, is worthy of consideration. Besides, it gave a large number of recommendations on the efficient administration of urban areas.
The year 1985 proved to be a landmark year as, during that year, the Ministry of Urban Development was set up at the Union level. To begin with, it was under the Ministry of Health.
In 1966, a part of urban government, viz., urban development was shifted to the Ministry of Works and Housing which was later renamed the Ministry of Works, Housing and Urban Development. In 1967, urban development was again shifted to the Ministry of Planning, Works, and Housing and Urban Development. Much later, in 1985, a separate Ministry of Urban Development was set up.
The constitution 65th amendment bill, 1989
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The Constitution 65th Amendment Bill brought by the then Prime Minister, Rajiv Gandhi, sought to ensure municipal bodies being vested with necessary powers and removing their financial constraints to enable them to function effectively as units of local government.
Three types of Nagar Palikas were envisaged; Nagar panchayat for a population between 10,000 and 20,000; municipal council for urban areas with a population between 20,000 and 3, 00,000 and municipal corporation for urban areas with a population exceeding 3, 00,000.
It made provisions for elected Ward Committees, adequate representation for women and SC/ST in the urban bodies, conduct of elections by the Central Election Commission, setting up Finance Commissions in the states to ensure soundness of local body finances, audit of accounts by the Comptroller and Auditor General of India and creation of district level committees to coordinate the plans of Nagar Palikas and Panchayats.
It also envisaged granting of urban bodies with a constitutional status. Though passed in the Lok Sabha, the bill was defeated in the Rajya Sabha in October 1989.
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The constitution 74th amendment act
With the assumption of power by the National Front Government in December 1989, the provisions of the Constitution 65th Amendment Bill 1989 were reviewed.
A revised Amendment Bill, incorporating the provisions relating to Panchayats as well as municipalities, was introduced in the Lok Sabha in September, 1990. This bail also lapsed on account of dissolution of the then Lok Sabha.
When the Narasimha Rao government took charge in 1991, it introduced a Constitution Amendment Bill pertaining to municipalities in the Lok Sabha on 16 September 1991. With a few modifications, it was essentially based on the 65th Amendment Bill. It was passed by both the Houses in December 1992.
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The bill has since been ratified by a resolution of at least half the number of state legislatures. It received the assent of the President on 20 April 1993 and was published in the gazette on the same day as the Constitution 74th Amendment Act, 1992.
The 74th Constitutional Amendment Act (CAA) was passed in 1992 to accord formal recognition to ULBs in the Constitution and make them more autonomous and participatory.
It provided powers to ULBs to function as ‘independent institutions of self-government’ and directed states to devolve specific (18) functions to ULBs under Schedule XII (Annex C). ULBs were also empowered to collect taxes and states were required to set up State Finance Commission (SFCs) to review and make recommendations regarding distribution of taxes, revenue-sharing, grant-in-aid system, issues of local autonomy between the state and ULBs.
This amendment also provided for having an elected council for each ULB (with reservation for women); constitution of ward committees; creation of a district/ metropolitan planning committee and establishment of funds at the ULB level to handle receipts and disbursements.
Although most states have amended their municipal laws in accordance with the CAA, the extent of devolution / decentralization to ULBs has been uneven across the states.
The Act introduces a new part, namely, Part IXA, in the Constitution. This part deal with issues relating to municipalities such as their structure and composition, reservation of seats, elections, powers and functions, finances, and some miscellaneous provisions.
The 74th Amendment Act thus gives a constitutional status to the municipalities. The provisions of the Act apply to the states as well as the union territories. However, in relation to the latter, the President can make certain reservations and modifications.
The provisions do not apply to the Scheduled Areas and Tribal Areas governed by Article 244(1) and (2) of the Constitution. All elected bodies in municipalities existing immediately before the commencement of the Act, shall continue till the expiry of their elected duration, unless they are dissolved earlier by the state legislature.
In order to provide time to allow changes to be made in the existing laws, which are inconsistent with the provisions of the 74th Amendment Act, a transition period of one year was allowed.
The 74th Amendment provides for the constitution of District Planning Committee – which is to prepare the draft development plan for the whole district, including both rural and urban areas. Where there are DPC, they have tended to be rather unwieldy – as its composition comprises a very large number of people.
Absence of Autonomy: At the district, there is little autonomy for planning as national and state plans have to be accommodated. Many of the schemes are centrally funded (IRDP, ICDS, Drinking Water supply, etc.) – and the norms and targets are more or less defined.
There is room at best for slight adjustments. As such, for district plan to be meaningful there has to be a District list. If there is such a list, planning pertaining to these items at the district level can become functional.
The evolutionary review over, we now shift to a discussion on the structure and functioning of urban local government
Recommendation of the second administrative reforms commission on local bodies
A number of recommendations of the Sixth Report of the Second Administrative Reforms Commission titled “Local Governance- an Inspiring Journey into the Future” have been accepted by Government of India.
The following recommendations have been accepted by the Government of India: The accounting system for the urban local bodies (ULBs) as provided in the National Municipal Accounts Manual (NMAM) should be adopted by the State Governments.
The financial statements and balance sheet of the urban local bodies should be audited by an Auditor in the manner prescribed for audit of Government Companies under the Companies Act, 1956 with the difference that in the case of audit of these local bodies, the C&AG should prescribe guidelines for empanelment of the Chartered Accountants and the selection can be made by the State Governments within these guidelines.
The audit to be done by the Local Fund Audit or the C&AG in discharge of their responsibilities would be in addition to such an audit.
The existing arrangement between the C&AG of India and the State Governments with regard to providing Technical Guidance and Supervision (TGS) over maintenance of accounts and audit of PRIs and ULBs should be institutionalized by making provisions in the State Laws governing local bodies.
It should be ensured that the audit and accounting standards and formats for Panchayats are prepared in a way which is simple and comprehensible to the elected representatives of the PRIs.
The right to information act, 2005
This recent Act has far-reaching implication for governance and transparency in public financial management. It requires government bodies to provide any information sought on its operations within a specified time frame.
It also promotes proactive disclosure of certain information by government bodies. The Act provides for elaborate disclosure requirements, appointment of responsible officers as Central and State Information Commissioners, an independent appeal mechanism and stringent penalties for default.
However, its effective implementation at the local government level remains a challenge due to poor recordkeeping and computerization practices, weak political will as well as the traditional mindset of information scarcity and reluctance to part with ‘official information’ by the government.
Draft urban local government disclosure bill, 2006
This proposed initiative is aimed at providing transparency and accountability in the functioning of the municipalities. As per the draft bill, every municipality shall maintain all its records in a manner and the form which facilitates the municipal authority to disclose the required information at regular intervals to the public.
The manner of disclosure has been defined as through newspapers, internet, notice boards, ward offices, etc. This envisages voluntary sharing of information by the ULBs and is a step forward from the RTI Act.
Urban reform incentive fund (URIF)
In order to accelerate and incentivize the process of urban reforms, the Government of India decided to provide reform-linked assistance to states. The 2002-03 budgets called for setting up an Urban Reform Incentive Fund (URIF) with an initial outlay of Rs. 500 crores per annum during the 10th Plan.
URIF was designed to provide incentives to state governments for reforms in state and local government including repeal of Urban Land Ceiling Act; rationalization of stamp duty; reform of rent control laws; introduction of computerized registration; reform of property tax; levy of user charges; and adoption of Double Entry Accounting System (DEAS).
URIF in practice became more allocation-driven than reform-driven. The progress towards the envisaged reforms was extremely slow and one of the prime reasons behind this was stated to be the low levels of incentive to carry out reforms.
Other donor efforts such as City Challenge Fund (CCF) also did not materialize because of similar problems of low levels of incentives. Out of the 24 states that signed Memorandum of Agreement (Moa), only 12 states remained eligible to receive the second installment.
Jawaharlal Nehru national urban renewal mission (JNNURM)
The latest in the realm of urban reforms vehicles in India is the JNNURM. JNNURM is designed to be a reforms-driven, fast track mission for integrated and planned development of 63 identified cities with focus on asset creation and management, efficiency in urban infrastructure and services delivery, community participation and accountability. JNNURM has a central outlay of Rs. 50,000 crore ($11 billion) for a seven year period.
The key to achieving its ambitious objectives includes initiatives for better PFMA in the targeted cities. In fact, the JNNURM requires a tri-partite Moa between the ULB, the State government and the Centre that clearly identifies reforms in areas of PFMA, among others, and a timeline for achieving the same at all levels.
To summarize, there exists a sound policy framework (74th CAA, RTI), reform led nationally sponsored initiatives (JNNURM, NMAM), instances of best practices at state/local level, and increasing demand from civil society for transparency and reforms. More progress has been made in the last five years than in the last two decades. However, a lot still needs to be done.
There is a need for greater institutionalization, internal reforms and more visible results especially in the areas of public financial management and accountability. It is this which the current report hopes to address.
Some other provisions of the 74th constitution amendment act
Together with the various forms of urban local government existing at present, the Act also provides for setting up of Nagar Panchayats.
They exist in some states already. A Nagar Panchayat will be constituted for a transitional area. Such an area is basically rural in character, which over a period of time is likely to develop urban characteristics. Hence, this urban local body would have to perform both rural and urban functions.
Each state/UT will have to constitute a State Election Commission (SEC), headed by a State Election Commissioner appointed by the Governor of the state. The superintendence, direction and control of the preparation of the electoral rolls and the conduct of all elections to the Panchayats and municipalities shall be vested in the SEC. Already; several states have appointed such commissions.
In order that the financial position of the municipalities is reviewed periodically, it has been laid down that a State Finance Commission will have to be constituted by the Governor of the state within one year from the commencement of the Constitution 74th Amendment Act, and, thereafter, at the expiry of every five years.
The composition, qualifications and manner of appointment of the members of the SFC will be determined by the state legislature, it will make recommendations which will broadly cover the following areas:
The mandatory reforms and the 74th amendment and JNNURM
(1) Article 243Q of the 74th Amendment whereby Municipalities shall be constituted at three levels all over India, namely, Nagar Panchayats in areas in transition from rural areas to urban areas; Municipal Councils in smaller urban areas, and, Municipal Corporations in larger urban areas
(2) Article 243Q (2) whereby the classification among the above mentioned categories shall be done having regard to –
(i) Population of the area
(ii) Density of the population therein
(iii) The revenue generated for local administration
(iv) The percentage of employment in non-agricultural activities
(v) The economic importance, or
(vi) Such other factors as the Governor may deem fit
(3) Article 243R (1) whereby all the seats in a Municipality shall be filled by persons chosen by direct election, conducted vide Article 243ZA by the State Election Commission, constituted under Article 243K both for Municipalities and Panchayats, from the wards into which each municipal area shall be divided Article 243R (2) provides an option to the State Legislature (i.e. the State Government) to provide representation in a Municipality of –
(i) Persons having special knowledge or experience in municipal – With no voting rights administration
(ii) MPs, MLAs & MLCs, and – With voting rights
(iii) Chairpersons of Committees constituted under clause 5 of article – With voting rights 243S on “Constitution and composition of Wards Committees” or other Committees
Community Participation Law
Also, according to a JNNURM mandate, a Community Participation Law shall be enacted in each State to institutionalize citizen participation in all urban areas through Area Sabhas
(4) Article 243T provides that seats in each Municipality and for Chairpersons thereof, shall be reserved for the Scheduled Castes, the Scheduled Tribes and women, and may be reserved in favour of backward classes of citizens, as per the norms specified therein
(5) Article 243U stipulates that each Municipality shall enjoy a term of 5 years and no more, provided that if a Municipality is dissolved, subject to the conditions as specified, the election to constitute a new Municipality shall be held “before the expiration of a period of six months” from the date of its dissolution
(6) Article 243Y provides that the Finance Commission constituted under Article 243-1 shall also review the financial position of the Municipalities besides that of the Panchayats, and make recommendations to the Governor for the distribution between the State and the Municipalities of the net proceeds of the taxes, duties, tolls and fees livable by the State as also the assignment of, or appropriation of taxes, duties, tolls and fees by the Municipalities, or of the grants-in-aid from the State and on the measures needed to improve the financial position of the Municipalities.
Article 280, as amended, further provides that the (Central) Finance Commission shall have the duty to make recommendations to the President on the measures needed to augment the Consolidated Fund of a State to supplement the resources of the Municipalities in the State on the basis of the recommendations made by the Finance Commission of the State
(7) Articles 243ZD and 243ZE provide that a Committee for District Planning in each District, and a Committee for Metropolitan Planning in every metropolitan area*, shall be set up, subject to the conditions that:
(i) in the case of a District Planning Committee not less than four-fifths of the total number of members of such Committee shall be elected by, and from amongst, the elected members of the Panchayat at the district level and of the Municipalities in the district in proportion to the ratio between the population of the rural areas and of the urban areas in the district.
(ii) in the case of a Committee for Metropolitan Planning, not less than two-thirds of the members of such Committee shall be elected by, and from amongst, the elected members of the Municipalities and Chairpersons of the Panchayats in the Metropolitan area in proportion to the ratio between the population of the Municipalities and of the Panchayats in that area.
Thus, the people’s representatives would, henceforward, have a predominant say in all planning matters. Distribution of income between the state government and municipalities, determination of taxes, duties, tolls and fees to be assigned or appropriated to the municipalities, grants-in-aid to municipalities from the Consolidated Fund of the state, measures needed to improve the financial position of the municipalities, grants-in-aid to municipalities from the Consolidated Fund of the state, and allocation of the shares of such proceeds between the municipalities at all levels in a state.
The Act also provides for setting up of ward committees in order to provide the citizens ready access to their elected representatives. The composition, territorial jurisdiction and the manner in which seats in ward committees shall be filled has been left to the state legislature to be specified by law.