74th amendment act- Municipalities

  • The origin of local self-government had very deep roots in ancient India. On the basis of historical records, excavations and archaeological investigations, it is believed that some form of local self-government did exist in the remote past. In the Vedas and in the writings of Manu, Kautilya and others, and also in the records of some travelers like Megasthenes, the origin of local self-government can be traced back to the Buddhist period
  • The Ramayana and the Mahabharata also point to the existence of several forms of local self-government such as Paura (guild), Nigama, Pauga and Gana, performing various administrative and legislative functions and raising levies from different sources.
  • The institution of urban local government originated and developed in modern India during the period of British rule. In 1687-88, the first municipal corporation in India was setup at Madras

Measures taken during the British rule with regards to urban local bodies:

  1. In 1726, the municipal corporation were setup in Bombay and Calcutta
  2. Lord Mayo’s resolution of 1870 envisaged a roadmap for these bodies in India
  3. Lord Ripon’s resolution of 1882 has been hailed as the ‘Magna Carta’ of local-self government
  4. A royal commission was established under the chairmanship of Hobhouse on decentralization in 1907
  5. Government of India Act, 1919 assigned the local-self government subject to an Indian minister
  6. In 1924, the cantonments acts was passed by the central legislature
  7. Local self-government was declared as a provincial subject under the Government of India act, 1935

Post-independent India and urban local government

Independence brought a new kind of activity in every sphere of public life. It opened a new chapter in the history of local government in India. Urban local-bodies received consistent policy attention from various committees that were setup at different times to suggest ways to improve the urban local bodies. Some of these committees include- PK Wattal, John Mathai, Nur-ud-din Ahmed, AP Jain, Rafiq Zakaria. G Mukharji, KN Sahaya and CM Correa

The primary recommendation of some of these committees included constitutionalizing the ULB. Government under Rajiv Gandhi and VP Singh tried to get the ULB constitutionalized. However, it could not be realized during their time. It was only during the time of PV Narasimha Rao that ULB could receive the constitutional status when the 74th amendment act was passed by both the houses of the parliament and it finally received the assent of the President

  • Classification of municipalities: The act provides for the constitution of the following three-types of municipalities in every state- Nagar panchayat, municipal council, municipal corporation
  • Composition:
    • All members of the municipality should be elected directly by the people.
    • For this purpose, each municipal area shall be divided into territorial constituencies known was wards
    • The state legislature is empowered to provide for the manner of election of the chairperson of a municipality
    • The state legislature can also provide for representation of- persons having special knowledge who will not have the right to vote in the meeting, members of LS, RS, state legislature and council from the municipal area
    • The chairpersons of the committees other than wards committee
  • Wards Committees:
    • Article 243S of the Constitution make the provisions for constitution and composition of Wards Committees, etc. consisting of one or more wards, within the territorial area of a Municipality having a population of three lakhs or more.
    • A member of a Municipality representing a ward within the territorial area of the Wards Committee shall be a member of that Committee. Where a Wards Committee consists of two or more wards, one of the members representing such wards in the Municipality elected by the members of the Wards Committee shall be the Chairperson of that Committee.
  • Reservation of seats:
    • Article 243T makes the provisions for the reservation of seats. Seats are reserved for the Scheduled Castes and the Scheduled Tribes in every Municipally and the number of seats so reserved shall bear, as nearly as may be, the same proportion to the total number of seats to be filled by direct election in that Municipality as the population of the Scheduled Castes in the Municipal area or of the Scheduled Tribes in the Municipal area bears to the total population of that area and such seats may be allotted by rotation to different constituencies in a Municipality.
    • Not less than one-third of the total number of seats reserved Scheduled Caste are reserved for women belonging to the Scheduled Castes or, as the case may be, the Scheduled Tribes.
    • Not less than one-third (including the number of seats reserved for women belonging to the Scheduled Castes and the Scheduled Tribes) of the total number of seats to be filled by direct election in every Municipality are reserved for women and such seats may be allotted by rotation to different constituencies in a Municipality.
    • The office of Chairpersons in the Municipalities shall be reserved for the Scheduled Castes, the Scheduled Tribes and women in such manner as the Legislature of a State may, by law, provide.
  • Duration of Municipalities: As per Article 243U of the Constitution, every Municipality, unless sooner dissolved under any law for the time being in force, shall continue for five years from the date appointed for its first meeting and no longer provided that a Municipality shall be given a reasonable opportunity of being heard before its dissolution.
  • Disqualification : A person shall be disqualified for being chosen as or for being a member of a municipality if he is so disqualified
  • Under any law for the time being in force for the purpose of elections for state legislature
  • Under any law made by state legislature. .However, no person shall be disqualified on the ground that he is less than 25 years of age if he has attained 21 years of age. All questions related to this will be decided by an authority so determined by the state legislature
  • State Election Commission: The superintendence, direction and control of the preparation of electoral rolls and the conduct of all elections to the municipalities shall be vested in the state election commission
  • Powers and functions: As per Article 243W of the Constitution states the powers, authority and responsibilities of Municipalities, etc. Subject to the provisions of this Constitution, the Legislature of a State may, by law, endow:
    • the Municipalities with such powers and authority as may be necessary to enable them to function as institutions of self-government and such law may contain provisions for the devolution of powers and responsibilities upon Municipalities, subject to such conditions as may be specified therein, with respect to-
      1. The preparation of plans for economic development and social justice;
      2. The performance of functions and the implementation of schemes as may be entrusted to them including those in relation to the matters listed in the Twelfth Schedule;
    • The Committees with such powers and authority as may be necessary to enable them to carry out the responsibilities conferred upon them including those in relation to the matters listed in the Twelfth Schedule.
  • Finances: The state legislature may
    • Authorize a municipality to levy, collect and appropriate taxes
    • Assign to municipality taxes, levies, tolls and fees levied and collected by state government
    • Provide for making grants-in-aid to the municipalities
    • Provide for constitution of funds for crediting all moneys to the municipalities
  • Audit of account: The state legislature will specify the manner in which the auditing has to be done
  • Application to union territories: It shall apply with such modification and exception has the President may determine
  • Exempted areas: It does not apply to the scheduled areas and tribal areas in the states



District planning committee: It is the committee created as per article 243ZD. As per this, every state shall constitute at the district level, a district planning committee to consolidate the plans prepared by panchayats and municipalities in the district and to prepare a draft development plan for the district as a whole. The state legislature may make provisions with respect to the following:

  • Composition of such committees
  • Manner of election of members of such committees
  • Functions of such committees in relation to district planning
  • Manner of the election of the chairpersons of such committees

The act lay down that 80% of the members of this committee will be elected by the elected members from the municipalities and panchayats in the region amongst themselves.

While preparation of the plans following areas have to be considered:

  1. Matters of common interest between the panchayats and municipalities.
  2. The extent and type of available resources
  3. Consult such institutions and organization as specified by the governor


Metro planning committee: As per Article 243ZE of the constitution, in every Metropolitan area, a Metropolitan Planning Committee may be constituted to prepare a draft development plan for the Metropolitan area as a whole.

The state legislature may make provisions with respect to the following:

  • Composition of such committees
  • Manner of election of members of such committees
  • Functions of such committees in relation to district planning
  • Manner of the election of the chairpersons of such committees


The act lay down that 66% of the members of this committee will be elected by the elected members from the municipalities and panchayats in the region amongst themselves.

While preparation of the plan the following things have to be kept in mind:

  • Plans prepared by the municipalities and panchayats
  • Matters of common interest between the local bodies
  • Overall objectives and priorities set by the GoI and government of the state
  • Available resources of investment
  • Consult such institutions as specified by the governor

The act also bars the interference of the court in electoral matters relating to municipalities. It empowers the state legislature to determine the manner in which a petition questioning the election and also to the authority as it deems fit

  1. Municipal corporation
  • It is created for the administration of big cities
  • They are established by an act of state legislatures and in the case of UTs, it is by an act of Parliament
  • The corporation has three organs- council, standing committees and commissioner
  • The council is the deliberative body consisting of elected and few nominated representatives. They enact laws and policies. The council is headed by a mayor who is to preside over the council meetings. He is elected by the members amongst themselves. He has a renewable one-year term
  • Standing committees are created to simplify the working of the council. They take decision in their respective fields for which they have been made responsible. Ex: Health, education, public works etc
  • Municipal commissioner is responsible for implementing the policies and decisions taken by the council and the committees
  1. Municipality
  • It is established for administration of smaller towns and cities
  • They are established by an act of state legislatures and in the case of UTs, it is by an act of Parliament
  • It also has three authorities- council, standing committees and chief executive officer
  • The council is the deliberative and legislative body. It is headed by a chairperson.
  • Unlike the mayor in a municipal corporation, chairperson here has executive powers
  • The CEO is responsible for day-to-day administration
  1. Notified area committee
  • It is created for fast-developing areas that have not yet achieved the numbers to become a municipality
  • It is notified by state government gazette
  • Only those provisions which are specified in the gazette apply to this area
  • It is entirely a nominated body
  1. Town area committee
  • It is setup for the administration of a small town
  • It is created by a separate act of the state legislature
  • It may be a wholly elected, wholly nominated or party elected and nominated as specified by the state government
  1. Cantonment board
  • It is setup for the civic administration for civilian population living in cantonment areas
  • It is setup under the provisions of the cantonment act, 2006
  • It works under the administrative control of the Union defence ministry
  • It consists of partly elected and partly nominated representatives
  • The commanding officer of the station is the ex-officio chairperson
  • The board will also consists of an executive engineer, health officer, first class magistrate, chief executive officer
  • The nominated members hold office as long as they are part of the station
  • Elected members have a tenure of 5 years
  1. Township
  • It is established by a public sector enterprise to ensure civic administration of their workers in the region
  • The township has no elected members
  • It is an extension of bureaucratic structure of the PSE
  1. Port trust
  • It is established in port areas
  • Functions of these bodies: to manage ports and to provide civic amenities
  • It consists of both elected and nominated members
  1. Special purpose Agency
  • These are setup to address specific issues which are usually the domain of municipalities
  • They are also known as single-purpose or uni-purpose because of the singular role based on which they are created for
  • They are established by an act of state legislature or as departments by an executive resolution
  • They function as autonomous bodies
  1. Addressing the needs of citizens
    • The United nations projections suggest that India’s urban population will increase from about 461 million in 2018, to 877 million in 2050
    • Under such a growth scenario, the ULBs need to play a significant role in financing public services such as providing safe drinking water, affordable housing, public transport. Wastewater treatment, solid waste management etc.
  2. Creation of Urban Infrastructure for Economic growth
    • Urban settlements act as engines of growth and generate ‘agglomeration economies’ by supplying requisite infrastructure. Construction & Maintenance of such infrastructure requires adequate capital investment from ULBs
  3. Role in Disaster management
    • Cities are exposed to high risk from natural and climate change related hazards
    • And thus, local governments are usually the first responders and their first-hand knowledge of community’s social, economic, infrastructure and environmental needs, help them to provide support in a disaster and carry out relief, rehabilitation and reconstruction activities
  4. To mitigate and adopt them to climate change
    • ULBs need to invest in resilient infrastructure, green technologies, clean energy etc.
  5. To help better implement developmental schemes
    • Successful implementation of missions like Smart city mission, AMRUT, HRIDAY etc, finally rests on ULBs efficacy in resource mobilisation and service delivery
    • Hence, financial empowerment of ULBs when seen from this perspective is no longer a matter of choice, but a necessity


  • A study conducted by the 15th Finance commission, highlight the following concerning trends in Municipal finances:
      • Low municipal revenue to GDP Ratio, which has remained stagnant at around 1% of GDP during the period from 2007 to 2017-18
      • The same ratio is 6% for South Africa, 13.9% for United Kingdom
  • Declining own revenue: The share of municipal own revenue in total municipal revenues has declined significantly from 55% in 2007-08, to 43% in 2017-18
  • Low diversification of tax resources
    • At present, property tax remains the only major tax in the municipal portfolio in India, and it has contributed to about 60% to municipal tax revenue in India
    • By contrast, municipalities in other parts of the world have access to a much wider basket of taxes
  • Inadequate intergovernmental transfers: While share of intergovernmental transfers in municipal revenue has been increasing since 2010-11, it still remains insufficient
  • Low per capital expenditure
    • Even though per capita municipal expenditure has increased in India, it still lags far behind in per capita spending when compared to other countries
    • India’s per capita spending is $17, as against $116 of China
  • According to NITI Aayog, India requires Rs.40 trillion investment until 2030 to overhaul its infrastructure, whereas the revenue of all the municipal corporation put together is not more than 1.2 trillion



  1. Attitude of state Governments
    • The state governments have devolved only limited number of taxes to ULBs
    • This limited resources to generate own revenues has resulted in increasing dependence of the municipalities sector on the higher levels of Government
    • Elections to these ULB bodies too have delayed citing multiple issues by the government. Ex: Tamil Nadu
  2. Politicization of the ULB: They are seen as mere platform for political mobilization rather than seeing them as effective tools in ensuring development
  3. Devolution of power:
    • Their powers are being usurped by the rising number of special purpose agency in the country
    • Meaningful devolution of powers in terms of functions, powers to collect taxes are still yet to be achieved
  4. Poor cost recovery of services by ULBs
    • In India, user charges and service provision are seem to be caught in vicious cycle with poor quality services leading to lack of willingness to pay for these and hence poor collection of user charges and fees
  5. Improper maintenance of accounts
    • CAG reports on local governments point out several lacunae in preparation of municipal accounts related to lack of budget preparation, accuracy, updating and timely presentation of accounts by ULBs
  6. Shortcomings of State Finance Commissions
    • Inefficient functioning of SFCs has affected the ability of ULBs to augment financial resources
    • The recommendation made by SFCs are largely adhoc in nature and not based on sound public finance principles
  7. Implication due to introduction of GST
    • Introduction of GST, has taken away critical resources of tax revenue such as octroi, local body tax, entry tax and advertisements tax for ULBs without providing for any compensation
  8. Existence of Multiple bodies
    • There exists less coordination between bureaucrat led agencies like Developmental authorities, at state level; who also have overlapping functions
    • This has led to fragmented governance and thus lack of coordination in financing and expenditure


  1. Greater devolution of powers
  2. Empowering metro-planning committees
  3. De-politicization of ULB.
  4. Conducting elections on time as per the constitutional provisions
  5. Recommendations of 15th Finance commission need to be implemented, according to which the share of Urban local bodies in Finance commission grants to local bodies, should be gradually increased to 40% over the medium term
  6. Performance based grants: National municipal accounts manual: The manual comprehensively provides details to all states/UTs in relation to account policies, procedures and guidelines to ensure correct, complete and timely recording of municipal transaction to produce accurate and relevant financial reports.
  7. Use of technology to reduce corruption and bring in more transparency in the civic administration
  8. Encouraging citizen participation will improve the civic administration by bringing more accountability
  9. Strengthening municipal bonds
  10. Compensating for loss induced by GST


Reforms are needed to enable urban local bodies to act as engine of inclusive growth, so as to broaden & deepen the resource base required to match the growing needs of infrastructure and civic necessities.