Municipal corporations were given more authority due to a constitution amendment in 1992
- Led to formal recognition of these local bodies in the governance hierarchy
- More decentralization
- There are 18 functions that are handed over to municipal corporations, such as urban planning, roads, water supply, etc.
- By law, municipal corporations are required to maintain a balanced or surplus budget
Revenue generation
- They can generate revenue through taxes, fees, fines and charges
- In most cases, they can’t tax people directly
- The state and centre government handles taxation and transfers some of the proceeds to municipal corporations
40% of municipal revenue comes from central and state governments
How does the state decide on the tax amount to be given to the municipal corporations
- The state governments have to set up a State Finance Commission(SFC) every 5 years
- State Finance Commission is incharge of determining the allocation of funds to municipal corporations
How is the state government failing municipal corporations?
- In many states, SFCs have not been set up in time.
As of 2022, Rajasthan has set up 6 SFCs, Gujarat has set up 3 SFCs in the same time
- SFCs take 32 months (~3 years) on average to submit a report. Then there is a delay of 16 months.
- Then state governments take 11 months on average to table their reports in the state assembly
With hardly any revenue, how do municipal corporations do any work
The municipal corporation of Bengaluru (BBMP) handed over 11 of its properties to banks in 2011 in a bid to raise funds - including the famous K R market and the Public Utility Building.
In 2013, it used the Town Hall building as collateral for funds too