One of the conditions laid down by the Centre for the state governments to increase their borrowing limit is to ‘bring in reforms to streamline the revenue of urban local bodies (ULBs)’. Though this has been in the discussion since the 74th amendment, nothing has changed for the majority of the ULBs. Now, this has been taken up by the Centre and there is a hue and cry about the imposition and infringement of the federal principles by mandating reforms.
It is worth exploring the role of the ULBs in the investment strategies of both the State and the Centre, especially when we are going through the toughest times for the economy, mostly due to the COVID-19 pandemic.
The ULBs still remain one of the weakest links in the administrative and political economy in India, though we have been trying to implement decentralisation, and thus impart more power to the ULBs through various initiatives in the past few decades. While our urbanisation has been in an upward trend for the last two decades, the capacity building and power transfer have been ad-hoc and limited to the schemes announced by the Centre from time to time.
Lame Duck ULBs
Globally, mayors and councils are glorified as the panacea for the urban challenges faced in the 21st century; however, in India, they lack autonomy, authority and the powers to solve the most basic local issues, which still remain under the Centre and the State. The administrative wing of the ULBs lack upgrading, up-skilling and one-upmanship. The ULBs depend on the State or the Centre for funds, and approvals for their decisions.
The discussion doing the rounds now, in the times of COVID-19, is about the possibilities of attracting companies operating from China to shift to India. For this, the Centre has talked about special economic zones, industrial corridors, parks and townships, and clusters. How can the Centre expect that by setting up a large piece of the land made available and managed by the state bureaucracy, investors would be happy to invest? The companies will still have to deal with the challenges faced at the local level (panchayat or municipal), in addition to liaison with state and central governments.
The ecosystem that is expected to support and facilitate investment in urban areas is not with the ULBs, but it is under the control of the state. The confusion could increase if the big-ticket investment comes straight from the Centre to the urban area.
China’s Empowered Mayors
One of the major attractions for investment in China is the power enjoyed by the local administration, especially the mayor, in deciding on various factors related to the opportunities available. A mayor in China has more say in setting up or ensuring the local support system — which, sadly, is not the case with mayors in India. The investments in Indian cities are primarily driven by the proximity to the power centres in the state, such as capital cities, so that the Chief Minister or the departments concerned can oversee the developments from close quarters. The other set of cities, which have attracted investments in India, are those developed as industrial towns in the past. There again, the state or Centre plays a significant role. In the ease of doing business lexicon, the role of a mayor or city council is forgotten.
Indian cities are not always known for conducting ‘vibrant city summits’. Rather, they are infamous for filthy drainage systems and poor air quality compounded with traffic snarls and frequent power outages.
It is often witnessed that states oppose the diktats from the Centre—but, what about cities opposing diktats from the state bureaucracy or the Centre? Why aren’t cities allowed to compete for investments or publish reports on their health?
The CEO Mayor
Most of the urban issues can be solved if the power is transferred to the ULBs. There is also a need to transfer the decision-making powers over land and labour to the city councils based on the Centre or state guidelines. The mayor should enjoy CEO status and should be directly elected by the locals. The mayor’s election manifesto can also include the kind of investments and health she envisages for the city.
A huge change can be expected if the powers enjoyed by the district magistrates during the lockdown are transferred to the mayors. A composite index of the cities, in turn, would encourage the towns to improve the services and conditions at the local level not only for the benefits of the investors but also for its citizens. The set of objectives for the 74th amendment shall be amended again to suit the present day requirements such as investments, and GST at the local government level. It is time for us to think about the city-state economies rather than the nation-state economies, keeping the federal spirit intact.
This article was published in Money Control on May 21, 2020. Click here to read
Views expressed by the author are personal and need not reflect or represent the views of Centre for Public Policy Research.