Challenges faced by ULBs

  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