Three decades after the 74th Constitutional Amendment Act promised decentralisation, Indian urban local bodies remain structurally weak, fiscally constrained, and functionally fragmented. This essay examines why ULBs continue to struggle for meaningful autonomy and what institutional reforms are needed.
The 74th Constitutional Amendment Act (1992) was a watershed moment in India's urban governance history. It promised to transform Urban Local Bodies (ULBs) into self-governing institutions with defined functions, finances, and functionaries — the three F's of decentralisation. Three decades later, the promise remains largely unfulfilled.
The Implementation Gap
State governments have been reluctant to devolve meaningful functions to ULBs. The 18 functions listed in the 12th Schedule — which includes urban planning, regulation of land use, and urban poverty alleviation — remain largely with state-level parastatals and development authorities.
Hyderabad's Outer Ring Road was planned by HMDA (Hyderabad Metropolitan Development Authority), not by the GHMC (Greater Hyderabad Municipal Corporation). Bengaluru's metro is run by BMRCL, a state-level body. In nearly every Indian city, the most consequential urban infrastructure decisions are made by agencies that bypass the elected ULB entirely.
Fiscal Fragility
Indian ULBs are among the most fiscally dependent urban governments in the world. Own-source revenue averages just 40–50% of total expenditure for large corporations — and this drops dramatically for smaller ULBs. Property tax collection remains chronically below potential across most Indian cities.
The 15th Finance Commission did introduce a performance-based urban grant mechanism and mandated direct transfers to ULBs, but implementation has been uneven. Most ULBs lack the technical capacity to produce the audited financial statements required to access these grants.
The Way Forward
Meaningful urban governance reform in India requires:
- 1. Mandatory devolution of planning functions to ULBs with clear exclusion of parastatals from core city functions
- 2. Professionalisation of municipal cadres through a dedicated Indian Urban Service
- 3. Property tax reform using GIS-based unit area value assessment systems
- 4. Directly elected mayors with executive powers and a longer tenure
Urban India needs cities that govern themselves. The 74th CAA gave Indian cities the constitutional mandate for self-governance; it is time to build the institutional architecture to make it real.