Municipal Government and the 74th Amendment

The paradox at the centre of Indian urban government

PSIR Optional Notes {PDF}

Complete Notes Package (Paper I & II) | 1500+ Pages | Instant Download

Discounted Price | Buy Now @ ₹1000 →

India built cities before it built states. The Indus Valley civilisation — gridded streets, standardised brick, covered drains, municipal water management at Mohenjo-daro and Dholavira — is among the earliest and most technically advanced urban civilisations anywhere. The mahajanapadas were organised around fortified capitals; Kautilya’s Arthashastra prescribes a city administration of wards, registers of inhabitants and officers of sanitation; Mauryan Pataliputra was run by municipal boards described by Megasthenes; Vijayanagara maintained a great fortified capital whose water works still stand.

• The contrast with the present is the whole subject. Cities and towns occupy roughly 2% of India’s land and generate close to 70% of GDP, yet the municipality is the weakest unit of government in the Indian system — weaker in practice than the village panchayat it was constitutionalised alongside.
• Urban centres have always been India’s wealth-generating nodes — the trading cities of the mahajanapada period, the port towns, the manufacturing towns. Their neglect is not the neglect of a periphery but of the core of the economy.
• The Economic Survey 2025-26 put the scale beyond argument: measured by satellite settlement data rather than administrative definitions, India was already about 63% urban in 2015, nearly double the Census figure, and the World Bank projects 600 million urban residents by 2036.

“India is far more urban in economic and functional terms than official definitions suggest.” — Economic Survey 2025-26

• The deficit is therefore compounding. Every year widens the gap between the economic weight of cities and the constitutional weight of the bodies that govern them.
• Isher Judge Ahluwalia, who chaired the High Powered Expert Committee on urban infrastructure and services, framed the cost as an unimagined one.

“We fail to even imagine the amount of loss we are incurring because of the neglect of urban administration.” — Isher Judge Ahluwalia

• The formulation that best captures the condition is the “overdeveloped state” — a polity whose apparatus of government is more advanced than the society it governs, inherited from a colonial administration built to extract and control rather than to serve.
  • At municipal level the inversion is complete: the elected councillor is the weakest actor in the city and the state-appointed officer the strongest.
  • It survives not by accident but because no level of government above the municipality has an interest in ending it.

Why urban government was left out

The colonial municipal inheritance

Municipal institutions were created by a colonial state for colonial purposes, and the purposes shaped the institutions. They were devices for raising local revenue and for co-opting an urban elite, not instruments of self-government, and much of that inheritance survived 1947 intact.

• The Madras Corporation of 1688, under a charter from the East India Company, is the earliest municipal corporation in India — created so the settlement could tax itself for its own upkeep rather than draw on Company funds.
• The Calcutta and Bombay corporations followed, reconstituted through the nineteenth century as partly elected bodies on heavily restricted franchises.
• Lord Mayo’s Resolution of 1870 decentralised certain heads of expenditure to the provinces — fiscal devolution driven by imperial deficit, not democratic principle.
• Lord Ripon’s Resolution of 1882, which earned him the title father of local self-government in India, is the founding document of the modern municipality: an elected non-official majority, non-official chairpersons, and an explicitly educative rationale.
  • Ripon justified local bodies as “an instrument of political and popular education” rather than of administrative efficiency, which shows how the colonial state ranked the two.
  • Practice fell far short — franchise restricted by property, official veto retained, finances kept dependent.
• The Government of India Act, 1919 made local self-government a transferred subject under dyarchy, handing it to Indian ministers with inadequate money; the Government of India Act, 1935 made it a provincial subject. The pattern was constant — responsibility devolved, resources withheld.

The constitutional silence

• The Constituent Assembly debated village panchayats at length and municipalities barely at all. Article 40 asks the state to organise village panchayats and endow them with powers to function as units of self-government. Municipalities are mentioned nowhere in the original Constitution.
  • Local government sat in Entry 5 of the State List, making the subject a state preserve.
  • The omission is odd because most leading figures of the national movement were urban in background — the bias against the city was ideological rather than sociological.
• The Gandhian idealisation of the village supplied a moral vocabulary for rural preference; the city was read as colonial and derivative. Ambedkar’s dissent — the village as “a sink of localism, a den of ignorance, narrow-mindedness and communalism” — cut against the idealisation without producing any corresponding case for the city.
• Three structural reasons explain the neglect after 1947, and all three still operate.
  • The Lok Sabha’s rural constituency bias. With an overwhelmingly rural electorate, the votes that made and unmade governments were rural votes, and urban administration has never been an electoral issue.
  • Revenue. Urban territory concentrates land value, property tax, octroi and business taxation. A state asked to devolve urban functions is asked to hand over its richest territory.
  • Rivalry. A powerful mayor commands a platform, a budget and a constituency comparable to a Chief Minister’s, and no state leadership has an incentive to create that rival.
• The 74th Amendment inherited the resulting asymmetry and did not cure it: panchayats had a Directive Principle and four decades of committee reports behind them; municipalities had neither a constitutional mention nor a reform lineage.

The Constitution asked the state to build village panchayats and said nothing at all about the places where two-fifths of Indians now live.

Part IXA: the constitutional architecture

The Constitution (Seventy-fourth Amendment) Act, 1992 came into force on 1 June 1993, five weeks after its rural twin. It inserted Part IXA — Articles 243P to 243ZG — and the Twelfth Schedule of eighteen subjects. Part IXA fixes the form of urban government and the calendar of urban elections, and leaves the content of urban government to state discretion.

Definitions and the classification of urban space

• Article 243P — Definitions. Two definitions do real constitutional work.
  • “Metropolitan area” — an area of ten lakh population or more, comprised in one or more districts and consisting of two or more municipalities or panchayats or other contiguous areas, specified by the Governor by public notification. It is the trigger for the Metropolitan Planning Committee.
  • “Municipality” means an institution of self-government constituted under Article 243Q — the constitutional promise the rest of the Part fails to deliver.
  • “Municipal area” is the territory of a municipality as notified by the Governor: the boundary of a city government is an executive decision of the state.
  • “Population” means that of the last preceding census published, which ties every threshold — three lakh, ten lakh, reservation quantum — to an ageing enumeration.
• Article 243Q — Constitution of municipalities. Every state shall constitute three types of municipality, classified by the character of the area rather than by tier.

• The Governor specifies the class of each area by public notification, “having regard to” the criteria in 243Q(2) — population, density, revenue generated for local administration, percentage of employment in non-agricultural activities, economic importance, and the catch-all “such other factors as he may deem fit.”
• Because classification is executive and discretionary, the state decides what counts as a city, and can hold a growing settlement in a lower class to keep its government small.

The industrial township exception

• The proviso to Article 243Q(1) is the most consequential opt-out in Part IXA: a municipality need not be constituted at all where an industrial establishment provides or proposes to provide municipal services.

“…having regard to the size of the area and the municipal services being provided or proposed to be provided by an industrial establishment in that area…” — proviso to Article 243Q(1), Constitution of India

• A notified industrial township therefore has no elected government. Services are delivered by a company or authority, and residents are serviced but not represented.
• The proviso rests on the premise that service delivery can substitute for self-government — the same premise behind parastatals and special purpose vehicles.
  • There is no equivalent in Part IX. No proviso lets a state decline to constitute a panchayat because someone else delivers rural services.
  • It has kept revenue-rich enclaves around large plants and new economic zones outside elected municipal government altogether.
• With cantonment boards under central law and port trusts under separate statutes, substantial and often prosperous urban territory is governed wholly outside Part IXA.

Composition, wards and reservation

• Article 243R — Composition. All seats shall be filled by direct election from territorial constituencies known as wards. This is the democratic core of the Amendment and it is mandatory.
  • The state legislature may additionally provide for four categories, each a dilution of the elected principle: persons with special knowledge of municipal administration (who shall not vote in meetings); MPs and MLAs of constituencies within the municipal area; members of the Rajya Sabha and Legislative Council registered as electors there; and chairpersons of wards committees.
  • The nominated-expert category has been used to place party appointees on councils, and the legislator seats put state and national politicians inside the city council.
• The manner of election of the chairperson is left entirely to state law — direct or indirect, for any term. This single silence is the origin of the mayoral problem.
• Article 243S — Wards committees. Constitution is mandatory only in municipalities of three lakh or more, covering one or more wards.
  • Composition and the manner of filling seats are left to the state legislature: the Constitution mandates the container and not the contents.
  • A member representing a ward within the committee’s area is a member of that committee; where the committee covers one ward that member is chairperson, otherwise as state law provides.
  • The three-lakh threshold excludes the overwhelming majority of urban bodies, so most Indian urban residents have no sub-municipal institution at all.
  • 243S(5) additionally permits committees in addition to wards committees, the clause under which zonal and area bodies have occasionally been created.
• Article 243T — Reservation of seats.
  • Scheduled Castes and Scheduled Tribes — seats in proportion to population, allotted by rotation to different wards.
  • Women — not less than one-third of seats filled by direct election, including one-third of the SC and ST seats, by rotation. Many states have legislated 50%.
  • Chairperson offices are reserved for SCs, STs and women in such manner as the state legislature may provide — the top post is delegated, not commanded.
  • Backward classes — 243T(6) merely permits reservation. It is enabling only, and the litigation this permissive clause generates is now a principal cause of postponed municipal elections.

Term, disqualification and the electoral guarantee

• Article 243U — Duration. Every municipality continues five years from the date appointed for its first meeting and no longer.
  • It shall not be dissolved without a reasonable opportunity of being heard.
  • Election shall be completed before the expiry of the term, and on premature dissolution within six months.
• Article 243V — Disqualifications. A person disqualified for the state legislature is disqualified here too — except that the age qualification is 21, not 25 — and questions are referred to such authority as state law provides.
• Article 243ZA — Elections. Superintendence, direction and control of rolls and of all municipal elections vest in the State Election Commission of Article 243K.
• Article 243ZG — Bar to interference by courts. The validity of any law on delimitation of constituencies or allotment of seats cannot be questioned in court, and no election may be called in question except by election petition.
  • It mirrors Article 329 and is defensible as a bar on stalling an election in progress, but it creates an asymmetry: courts are constrained in reviewing how an election is conducted, yet are the only forum available when an election is not held at all — which is urban India’s actual problem.

Powers, taxation and finance

• Article 243W — Powers, authority and responsibilities. The decisive permissive clause. The state legislature “may, by law, endow” municipalities with such powers as will enable them to function as institutions of self-government.
  • Such law may provide for devolution with respect to preparation of plans for economic development and social justice and performance of functions and implementation of schemes, including the eighteen Twelfth Schedule matters; it may also endow wards committees.
  • Every operative verb is discretionary. The Twelfth Schedule is a menu, not a transfer.
• Article 243X — Taxation and funds. Equally permissive: the state may authorise a municipality to levy, collect and appropriate taxes, duties, tolls and fees; may assign state taxes; may provide grants-in-aid; may provide for municipal funds.
  • There is no constitutionally guaranteed municipal tax. Every rupee exists at the pleasure of a state statute that can be amended.
  • This is why municipal finance collapsed when octroi and entry tax went into GST: the base was statutory, not constitutional, and removing it required no amendment.
• Article 243Y — Finance Commission. The State Finance Commission under Article 243-I also reviews municipalities and recommends on distribution of the net proceeds of taxes, duties, tolls and fees, on taxes assignable, on grants-in-aid, and on measures to improve their financial position.
  • The Governor must lay every recommendation with an explanatory memorandum of action taken before the legislature — a duty of disclosure, not of compliance.
• Article 243Z — Audit. The legislature may provide for maintenance of accounts and their audit — which is why standards run from accrual double-entry systems in a few corporations to almost nothing in thousands of small bodies.
• Article 243ZB applies Part IXA to Union territories subject to presidential modification. Article 243ZC excludes Fifth Schedule Scheduled Areas and Sixth Schedule tribal areas and preserves the functions of the Darjeeling Gorkha Hill Council, while permitting Parliament to extend the Part by a law that is not an amendment for Article 368 purposes — and no urban PESA has ever been enacted. Article 243ZF continued inconsistent state laws and existing municipalities for up to one year after commencement.

The Twelfth Schedule — eighteen subjects

• The Schedule reads as a list of what a nineteenth-century municipality did, updated at the edges — competent on conservancy, cremation grounds and cattle pounds, evasive on everything that defines a modern city.

What the Twelfth Schedule leaves out

• Urban transport is absent as a subject. There is “roads and bridges” and, buried in public amenities, “bus stops” — but no public transport, traffic management, parking policy or mass transit.
• Housing is absent. The Schedule offers “slum improvement and upgradation”, a remedial function applied after the housing system has failed, but not housing supply, rental policy or land assembly. The municipality must clean up a problem it has no power to prevent.
• Urban commons are absent. Lakes, tanks, wetlands, floodplains and open space have no entry of their own; the nearest are urban forestry and parks and gardens, neither of which confers custody of the water bodies whose loss drives urban flooding in Chennai, Bengaluru and Hyderabad.
• Police, and therefore public order, is nowhere near the Schedule — unlike the metropolitan police authorities answerable to elected mayors in London and New York.
• Some entries are present in name only. Urban planning and regulation of land-use head the list and are exactly the functions development authorities exercise in almost every large Indian city.
• Transfer is not the same as capacity: NITI Aayog’s 2026 assessment found million-plus city governments exercising full authority over about four of the eighteen functions.

The 73rd and the 74th Amendments compared

The two Amendments were drafted together, passed together and brought into force five weeks apart. They share an architecture, and every divergence marks a point at which the urban settlement was made weaker than the rural one.

Common features

Unique features

• The most important asymmetry is the absence of a gram-sabha equivalent. The gram sabha is the constitutional recognition that the people, not their representatives, are the base unit of local democracy; Part IXA has no such base.
  • The wards committee is a poor substitute — a committee of representatives and nominees, not an assembly of citizens, and confined to the largest cities.
  • Mohalla Sabhas exist only as state experiments: Delhi’s neighbourhood-assembly model under its Swaraj framework and Kerala’s ward sabhas. Neither has constitutional protection.
  • The Model Nagara Raj Bill, circulated as the Community Participation Law under JNNURM, proposed exactly this missing layer — an Area Sabha of one to five polling booths, with elected area representatives on the wards committee and a share of ward funds. It was a conditionality, not a command, and compliance was formal.

The 73rd Amendment gave the village an assembly of citizens; the 74th gave the city a committee of nominees, and only if the city was large enough.

The unfulfilled dream: the three Fs

No institution discharges a mandate without functions, funds and functionaries. The 74th Amendment created the institution and withheld all three, which is why it is called unfulfilled rather than failed. Failure implies a design tried and found wanting. This design was not tried: the decisive clauses were written so that a state need never act on them.

Functions

• Article 243W is permissive, and states have used the permission sparingly. The pattern is consistent: states transfer the expensive and unglamorous functions and retain the powerful ones.
• The functions that define a city are precisely the functions municipalities do not hold.
  • Urban planning and land-use regulation — entries 1 and 2 of the Schedule, and globally the quintessential local government function — are exercised by state-controlled development authorities such as the Delhi Development Authority, the Bangalore Development Authority and the Mumbai Metropolitan Region Development Authority.
  • Water supply and sewerage sit with state boards and utilities with their own budgets, staff and state-appointed chairpersons.
  • Urban transport sits with state transport undertakings and metro corporations, several of them Union-state joint ventures with no municipal seat.
  • Housing sits with state housing boards and schemes run from the secretariat.
• The elected municipality is left with conservancy, street lighting, birth and death registration, licensing and local roads — a sanitation and licensing authority with a democratic mandate attached.
• By 2013 only about eleven of thirty-one states and Union territories had transferred all eighteen functions, and transfer on paper repeatedly meant transfer without staff, budget line or rule-making power.
• The result is a body that cannot plan the city it governs. A council with no control of land use, water, transport or housing administers the consequences of decisions taken elsewhere.

Funds

• Own-source revenue of urban local bodies is about 0.6% of GDP, and total municipal revenue has been falling as a share of GDP — from roughly 1.08% in 2007-08 to 0.72% in 2019-20 — precisely as urban population and output rose fastest.
  • The comparison is not close: Brazil around 7.4%, South Africa around 6%, the United Kingdom near 14%.
  • India’s annual per capita spending on cities is around $50, against roughly $362 in China and $1,772 in the United Kingdom.
• Municipal revenue is extraordinarily concentrated: ten municipal corporations account for roughly 60% of all municipal revenue in India.
• Property tax — the one buoyant, locally administered, internationally standard municipal tax — is under-assessed and under-collected. Properties go unmapped, valuations are frozen by political decision, exemptions proliferate, and collection efficiency in many corporations is below half of demand.
  • The Fifteenth Finance Commission made notification of floor rates for property tax an entry condition for urban grants precisely because states would not act voluntarily.
• The tax base is narrow, inflexible and non-buoyant. Municipal taxes fall on stocks (property) and specific activities, not on income or consumption, so municipal revenue does not grow with the city’s economy.
• GST removed the last elastic municipal tax. Octroi and entry tax were subsumed into the Goods and Services Tax.
  • Abolition was defensible economically; the constitutional problem is different. It was a loss of self-rule with no compensating shared rule.
  • There is no third-tier representation on the GST Council. Municipalities lost a tax and gained no seat at the body that now sets the structure they depend on, and compensation flows to states.
• Accounting and audit are broken. Most bodies keep no accrual double-entry accounts; audited annual accounts run years in arrears; audit is by a state examiner of local funds of uneven capacity, with the Comptroller and Auditor General involved only under technical guidance arrangements.
• User charges are not levied or not recovered. Water, sewerage, waste and parking are supplied below cost for political reasons, converting a service relationship into a grant relationship.
• State Finance Commission recommendations are not acted upon: constitution delayed, reports late, action-taken reports untabled. The constitutional duty under 243Y is to lay the report, not to act on it.
• The end state is dependence. Several urban governments rely on state transfers to pay employee salaries, which is the point at which a government stops being one.
  • Municipal borrowing is about 2.4% of total municipal receipts — negligible for bodies expected to build the country’s infrastructure.
  • Weak revenue produces weak capacity, which produces weaker revenue: a low-level equilibrium trap that is self-reinforcing.

Functionaries

• Municipal staff are usually state-cadre employees. A Municipal Commissioner, chief engineer, health officer and town planner are drawn from state services, posted, transferred and promoted by the state.
  • They report upward, not to the elected council. An officer whose career the secretariat controls has no professional reason to obey a councillor.
  • There is no municipal cadre in most states — no career path inside city government, no city-level recruitment for senior posts, no institutional loyalty to the municipality as employer.
• Roughly 35% of sanctioned municipal posts were vacant on a 2023 count, concentrated in the technical categories cities most need: town planners, engineers, environmental and public health specialists, finance and accounts staff.
• The skills gap is structural. Strategy for New India @75 identified municipalities as under-staffed with a significant gap in the skills required, alongside the absence of modern spatial planning frameworks.
• India has a severe shortage of qualified urban planners, and the small and medium towns where most urban growth now occurs have effectively none.
• Frequent transfer of Municipal Commissioners destroys continuity: an officer posted for eighteen months cannot own a five-year capital programme, and knows it.

The mayor and the commissioner

The deepest defect in Indian urban government is not a missing power but a missing office. There is no institutional counterpart to a Chief Minister for a city. Part IXA creates a council and leaves the executive question unanswered, and every state has answered it the same way — in favour of its own appointee.

• Article 243R leaves the manner of election of the chairperson entirely to state law and says nothing about the chairperson’s powers. The Constitution does not require that a city have an elected executive at all.
• The mayor is ceremonial in almost every Indian city, whether directly or indirectly elected. The office presides over meetings and receives visitors; it does not command the administration.
• Executive authority is vested by state municipal statutes in the Municipal Commissioner — an officer of the state, usually of the Indian Administrative Service, appointed by the state government and answerable to it.
  • The commissioner prepares the budget, controls the establishment, sanctions expenditure and executes works. The council approves; the commissioner acts.
  • A mayor cannot appoint, transfer, discipline or remove the commissioner. The state can, and does.
• Mayoral terms are short by design. Many states run one-year terms and others two and a half years with mid-term rotation; Chandigarh’s mayoral term is one year.
  • A one-year mayor has no time to learn the city’s finances, and no prospect of being held accountable for outcomes that take longer than a term to appear.
  • Rotation of the office among reserved categories compounds the churn.
  • The effect is intentional. Short terms prevent the emergence of a city-level political leader with an independent base — the outcome state leaderships most wish to avoid.
• Direct election of mayors has been tried and reversed. Himachal Pradesh adopted it in 2012 and abandoned it in 2017-18; Haryana has directly elected mayors since 2018; Madhya Pradesh, Uttar Pradesh, Uttarakhand, Tamil Nadu and Odisha have moved in and out of it over three decades.
  • Direct election alone changes little while the statute still vests executive power in the commissioner: a directly elected mayor without executive authority is a more legitimate ceremonial figure, not a city government.
• The international contrast is not one between rich and poor countries. The Mayor of London heads the Greater London Authority, controls Transport for London and holds the capital’s spatial development strategy on a four-year term; the Mayor of New York City is the city’s chief executive, appointing agency heads and the police commissioner; the Mayor of Shanghai heads a municipal government of provincial rank.
• The Chinese comparison is the uncomfortable one. China is not a democracy and its municipal leaders are appointed through the party, yet Chinese municipal governments enjoy far more functional and fiscal autonomy than Indian ones, control land monetisation and infrastructure investment on a scale no Indian mayor approaches, and are given a role in attracting investment and in city-to-city diplomacy.
  • The lesson is not that authoritarianism produces better cities. It is that India has combined electoral legitimacy at local level with an almost total absence of local authority. A democracy that elects a mayor and gives him nothing to do teaches citizens that local elections do not matter, which is the surest way to make that true.
• NITI Aayog’s framework of April 2026, Moving Towards Effective City Government — A Framework for Million-Plus Cities, made the point official: mayors “generally do not play a significant role in city administration” and are of “largely symbolic stature”.
  • Its package: a directly elected mayor for the whole municipal area with a fixed five-year term and executive authority; a Mayor-in-Council with councillors holding sector portfolios; the Municipal Commissioner reporting to the mayor; parastatals brought under municipal control; and zonal committees, wards committees and area sabhas below the corporation.
  • It addressed India’s forty-six million-plus cities, which hold about a third of the urban population and generate roughly 60% of national GDP, and recorded the failure that makes reform urgent — fragmented authority with no single institution responsible for urban outcomes.

A city with an elected mayor who cannot move an officer is not being governed locally; it is being administered remotely with a local face.

Active disempowerment, not merely implementation failure

The standard critique of the 74th Amendment is an implementation-failure story: municipalities are underfunded, understaffed and undertrained, and better implementation would fix them. That account is true and insufficient. It treats as neglect what is better understood as design. Urban local government has been actively disempowered and depoliticised, and the instruments have grown more sophisticated since 1993, not less.

Parastatals and development authorities

• Parastatal agencies are the principal mechanism. They take two forms — development authorities that acquire land and build infrastructure, and public corporations and boards that supply water, electricity, transport and housing.
• Each has its own budget, staff, statute and state-appointed chairperson, and each is accountable to the state government and to no elected local body.
• The pattern predates the Amendment and was left entirely undisturbed by it: Part IXA neither abolished parastatals nor subordinated them to municipalities.
• The consequence is jurisdictional chaos: land use decided by a development authority, water by a board, transport by a corporation and a metro company, electricity by a distribution utility, conservancy by the municipality — with no institution accountable for the city as a whole.
  • Bengaluru is the standard illustration, its responsibilities divided among the corporation, a water supply and sewerage board, a development authority, a metro corporation, a transport corporation and a state-level metropolitan committee.
  • When such a city floods, no office can be held responsible, because no office holds the powers whose exercise would have prevented it.

The Smart Cities Mission and the Special Purpose Vehicle

• The Smart Cities Mission, launched in 2015 for 100 cities, is the clearest recent case of a central programme ring-fencing itself from elected local government.
• It mandated a Special Purpose Vehicle for each city — a company under the Companies Act, promoted by the state and the urban local body, headed by a Chief Executive Officer, with a board on which the state has decisive representation.
• The guidelines gave the SPV, in terms, “operational independence and autonomy in decision making and mission implementation” — and went further.

“…encourages the State Government to delegate the decision-making powers available to the ULB under the municipal act/government rules to the Chief Executive Officer of the SPV.” — Smart Cities Mission Guidelines

• The constitutional significance is easy to miss. A central executive scheme is encouraging a state to transfer the statutory powers of a constitutionally mandated elected body to an unelected company officer.
  • No amendment was required. None is ever required, because 243W made devolution optional in the first place.
  • The SPV is a company answerable to its board, not a government answerable to voters: its accounts are corporate accounts, its decisions board resolutions, its CEO faces no electorate.
• The record does not vindicate the model. The Mission ended on 31 March 2025 after repeated extensions from an original 2019 deadline; of roughly 8,000 tendered projects about 7,500 were reported complete, but only a small minority of the hundred cities finished their full project set.
  • The Comptroller and Auditor General found deficient financial administration, inclusion of unfeasible projects, diversion of funds to unapproved activities, inadequate public consultation and poor inter-agency coordination.
  • The deeper cost is institutional: a decade of urban investment was routed around municipal government rather than through it, so capacity that should have been built inside city governments was built inside temporary companies now being wound down.

Permission for powers already held

• Even for functions within its own purview — levying a local tax, revising a user charge, sanctioning a civic project above a modest ceiling, creating a post, borrowing — a municipality typically requires state government permission.
• This is the least visible and most complete form of control. It does not take a function away; it makes its exercise conditional on a file moving through the secretariat.
• The cumulative conclusion is the sharp one: after two constitutional amendments India effectively still has two levels of government — Union and State. The third tier exists constitutionally and does not exist as a decision-making level.

The counter-caution: depoliticisation from the reformers’ side

• There is a version of urban reform that also depoliticises the city, and it comes from the reform camp rather than the state.
• Civic activism has concentrated on getting ward committees and metropolitan planning committees constituted and on nominating civil society members into them.
  • Over-reliance on semi-representative bodies does not create a democratic city government. A body composed partly of nominees is not accountable to an electorate, however public-spirited its members.
  • Where nomination is dominated by elite resident welfare associations, ward committees become instruments of propertied neighbourhoods — enforcement against street vendors, removal of informal settlements, restriction of public space — against the interests of the poorer majority.
• The correct frame is that local government is an inherently political space in which multiple interests compete, not a technocratic arena to be insulated from politics.
  • The instinct to insulate the city from politics and hand it to experts, companies and committees is precisely the instinct the SPV embodies — reformer and secretariat arriving at the same institution from opposite directions. The corrective is more politics, not less: empowered representatives, competitive municipal elections, and a mayor who can be blamed.

Elections that do not happen

Article 243U is one of the few genuinely mandatory clauses in Part IXA, and it is comprehensively disregarded. The failure is not marginal; it is the normal condition of Indian urban democracy.

• More than 60% of urban local body elections run late. A Comptroller and Auditor General review across seventeen states found about 61% of city governments without an elected council at the time of audit, an average delay of about 22 months, and some states going four and a half years without one.
• Maharashtra is the reference case. All 27 municipal corporations were without elected councils through 2023, several for years, with state-appointed administrators running cities including Mumbai.
  • Polls followed Supreme Court direction: municipal councils and nagar panchayats on 2 December 2025, and 29 municipal corporations including the Brihanmumbai Municipal Corporation on 15 January 2026, ending a gap of roughly five years. Through it the richest municipal corporation in India — its budget larger than several state governments’ — was run by an administrator with no council to answer to.
• Bengaluru went without an elected corporation from 2020, after the Bruhat Bengaluru Mahanagara Palike council’s term ended, into a restructuring under the Greater Bengaluru Governance Act, 2024 that replaced one corporation with five city corporations under a Greater Bengaluru Authority. By the time the Supreme Court fixed a 2026 deadline for polls, the city had gone about eleven years without a fresh council election.
• The instruments of delay are procedural and repeat across states.
  • Delimitation of wards — an exercise the state controls, and can start, restart and litigate indefinitely.
  • OBC reservation litigation. After the Supreme Court’s triple test — a commission’s empirical inquiry into backwardness in local bodies, a proportionate quantum, and total reservation not exceeding 50% — states that had reserved seats without the inquiry had to redo it, and elections waited.
  • Restructuring of the municipal body itself, which conveniently requires fresh delimitation.
  • Outright political convenience — an unfavourable expected result, or a preference for administrator rule.
• Article 243ZG works against the remedy. Because delimitation law cannot be questioned and elections can be challenged only by election petition, judicial intervention is structurally constrained at exactly the point where a court order is the only thing that will produce a poll.
• Kishansing Tomar v. Municipal Corporation of the City of Ahmedabad (2006) is the governing authority and it is unambiguous.
  • Elections must be completed before the expiry of the five-year term under Article 243U, and this is a mandatory constitutional requirement, not a direction subject to administrative convenience.
  • State Election Commissions are to be treated on a par with the Election Commission of India under Article 324 in respect of the conduct of elections, and states must supply them the funds, staff and cooperation required.
  • The Court rejected the usual excuses — incomplete delimitation, unfinished electoral rolls, administrative unpreparedness, want of staff.
• The judgment has not been complied with, and non-compliance carries no consequence — the strongest available evidence that the problem is political will rather than legal ambiguity.
• The State Election Commission is weaker than its constitutional description. Removal is protected on High Court judge terms, but appointment, tenure and conditions of service are left to state law. Andhra Pradesh cut its State Election Commissioner’s tenure from five years to three by ordinance in 2020, and the Allahabad High Court in Aparmita Prasad Singh (2007) accepted that a Governor may alter tenure rules by executive action.
• Reform proposals are well established and unimplemented: collegium appointment of State Election Commissioners; permanent independent secretariats; a statutory deadline for delimitation before term expiry; and coordination with the Election Commission of India.

Planning without planners

District Planning Committees

Article 243ZD is one of the two genuinely innovative provisions of the 74th Amendment and one of the least used. It creates the only institution in the Indian constitutional scheme designed to plan rural and urban space together.

• Every state shall constitute a District Planning Committee in every district — the language is mandatory.
• Its task is to consolidate the plans prepared by the panchayats and the municipalities in the district and to prepare a draft development plan for the district as a whole.
• Composition is prescribed and substantially elected.Not less than four-fifths of the members shall be elected by, and from amongst, the elected members of the district panchayat and of the municipalities, in proportion to the ratio between the rural and urban population of the district.
  • The remaining one-fifth is filled as state law provides — in practice officials and nominees.
  • The manner of election of the chairperson and the Committee’s functions relating to district planning are left to state law.
• In preparing the draft plan the Committee shall have regard to —
  • matters of common interest between the panchayats and the municipalities, including spatial planning;
  • sharing of water and other physical and natural resources;
  • integrated development of infrastructure and environmental conservation;
  • the extent and type of available resources, financial or otherwise;
  • consultation with such institutions and organisations as the Governor may specify.
• The chairperson shall forward the development plan, as recommended by the Committee, to the state government. The chain ends there: the Constitution requires transmission, not adoption.
• The record is poor and the reasons are consistent.
  • Constituted late — many states took a decade or more, several only after litigation — and many have never prepared a plan; where one exists it is often a compilation of departmental schemes rather than a spatial and financial plan.
  • Plans are rarely integrated with state budgets. A district plan that determines no allocation is a document, not a plan.
  • Chairpersonship is frequently held by a minister or state nominee, converting a body of elected local representatives into an extension of the state government.
• Kerala is the standard exception, and instructively a political rather than a constitutional one: through the People’s Plan Campaign from 1996 it routed a large share of plan outlay through local bodies, built the technical support system to use it, and made district planning real.

Metropolitan Planning Committees

• Article 243ZE requires a Metropolitan Planning Committee in every metropolitan area — every area of ten lakh or more notified under 243P — to prepare a draft development plan for the metropolitan area as a whole.
• Not less than two-thirds of the members shall be elected by, and from amongst, the elected members of the municipalities and chairpersons of the panchayats in the area, in proportion to their populations.
• The state legislature shall provide for representation of the Union and state governments and such organisations and institutions as may be necessary, and for the functions of the Committee.
• It must have regard to the plans of the municipalities and panchayats; matters of common interest including coordinated spatial planning, water sharing, integrated infrastructure and environmental conservation; priorities set by the Union and state governments; and the investments Union and state agencies are likely to make in the area.
• Metropolitan Planning Committees are almost entirely non-functional. Most metropolitan areas have never constituted one; where constituted they have rarely met; almost none has produced a plan that governs anything.
• The vacuum is filled by metropolitan development authorities under state control — bodies with land, money and statutory planning powers and no elected component at all. A constitutional body with an elected majority has been supplanted by a statutory body with none.
• Isher Judge Ahluwalia identified three fundamental roadblocks to Indian urban governance, and this is the third.
  • A federal system that does not empower the third tier.
  • A political system heavily biased towards rural areas.
  • The absence of an adequate institutional framework for metropolitan planning and governance.
• The third is the roadblock Part IXA actually tried to remove, and where failure is most complete. The Constitution created the only Indian institution designed to plan a metropolitan region and then left it to states that had already built rival bodies without elections to do the same job. Metropolitan regions are where India’s population and output are concentrating, and they are the least governed spaces in the country.

The multiplicity of urban bodies

• Part IXA rationalised three types of municipality; the actual landscape is far more crowded, and the confusion is itself a source of weakness.
  • Nagar panchayats for transitional areas; municipal councils — nagarpalika, municipal board, municipal committee — for smaller urban areas; municipal corporations for cities.
  • Notified area committees and town area committees, created by state notification for new or small towns not meeting municipal criteria — wholly or largely nominated.
  • Cantonment boards under the Cantonments Act, administered by the Union Ministry of Defence, with an elected minority and the station commander as president.
  • Port trusts delivering civic services in port areas under central statutes, with wholly nominated bodies.
  • Special purpose agencies — development authorities, water and sewerage boards, housing boards, metro corporations, Smart City SPVs — with functional or area mandates cutting across municipal boundaries.
  • Industrial townships exempted from having a municipality at all under the 243Q proviso.
• There is no uniformity of nomenclature, composition, powers or accountability across these forms, and no principle assigning an area to one rather than another.
• Jurisdictions overlap: one household may fall under a corporation for conservancy, a water board for supply, a development authority for building permission and a metro corporation for transport, each with different boundaries.
• Peri-urban areas are the worst governed of all. Land at a city’s edge is often still under a panchayat while being developed at urban densities by a development authority, so it receives neither rural nor urban standards and no institution can impose either.
• The chaos is not merely untidy. It is the mechanism through which political accountability disappears: where every function has a different master, the voter has nobody to hold to account.

Services, and the drift to private provision

• Sanitation is the clearest case of a Twelfth Schedule function municipalities formally hold and cannot discharge at scale.
  • About 75-80% of municipal solid waste is collected, and independent assessments have put scientific treatment of what is collected at only 22-28% — though reporting under Swachh Bharat Mission-Urban 2.0 now claims processing rising from about 16% in 2014 to roughly 80% in 2026, on a contested measurement basis.
  • Sewerage coverage lags water supply coverage in most cities, so a large share of urban sewage reaches water bodies untreated.
• The approach has increasingly been “minimum government, maximum governance” in the literal sense of contracting the function out, while the new urban middle class buys its own services — private tankers and borewells, private waste collection, private security, captive power, gated maintenance.
  • This produces enclaves of service inside cities — clean, watered, lit neighbourhoods beside neighbourhoods without basic amenities, within the same municipal jurisdiction.
  • The political consequence is graver than the distributional one. Citizens who have exited public provision have no stake in improving it, and the constituency for municipal reform shrinks among exactly those with the most political voice.
  • Privatisation is not a general solution: it is beyond the reach of the majority, and a service bought individually cannot deliver the network externalities — drainage, sewerage, public transport, air quality — that make a city liveable.
• Housing and land expose the same contradiction.
  • Slum households are about 17% of India’s urban population, living in settlements the municipality must “improve and upgrade” under entry 10 without any power over land or housing supply.
  • At the same time roughly 11 million urban homes stand vacant — the product of a market that builds for investment rather than occupation, and of rental law and titling that make letting unattractive.
  • A city government with no housing supply powers, no rental policy and no land assembly powers cannot resolve a paradox of that kind — and none of those functions is in the Twelfth Schedule.
• Air quality, urban flooding and heat are the emerging failures, and all three are cross-jurisdictional — which returns the argument to metropolitan governance.

Reform programmes: what was tried

• JNNURM remains the most serious attempt to use money to force devolution, and its record is the strongest argument both for and against conditionality.
  • Its mandatory reform agenda covered the 74th Amendment’s devolution provisions, a Community Participation Law and a Public Disclosure Law, accrual double-entry accounting, property tax reform with 85% collection efficiency targets, user charges covering operation and maintenance, and earmarking of budget for the urban poor.
  • States complied on paper and not in substance: participation laws were enacted and area sabhas never constituted; functions were notified as transferred without staff or budget.
  • The lesson is that a conditionality satisfiable by a notification will be satisfied by a notification. Conditions must attach to observable outputs — a functioning ward committee, an audited account, a collected tax — not to legal instruments.

Financing the Indian city

• Municipal bonds are how a city government converts a credible revenue stream into capital investment, and India’s market has been small and episodic since the first issues of the late 1990s.
  • Credit rating is the precondition: ratings assess assets, liabilities, revenue streams and the presence of credible double-entry accrual accounting, so the exercise itself forces financial reform. About 162 urban local bodies hold investment-grade ratings under the AMRUT programme.
  • The market has deepened — nine issuances in the year to December 2025 against three the previous year, outstanding bonds of roughly ₹3,784 crore, and first-time issuers including Agra, Prayagraj, Varanasi and Bhavnagar — driven largely by AMRUT 2.0 incentives of up to ₹13 crore per ₹100 crore raised. It remains shallow, concentrated in highly rated issuers and without a secondary market, and the totals are trivial against a requirement measured in lakhs of crores.
• Land value capture is the most promising untapped instrument, resting on a simple proposition: when public investment raises land values, a share of the increase should accrue to the authority that created it.
  • Betterment charges — a levy on properties whose value rises because of a specific public work.
  • Tax increment financing — borrowing against the future rise in property tax revenue from an improved area to fund the improvement.
  • Developer extractions — obligations on developers to provide infrastructure, land or amenities as a condition of permission.
  • Impact fees — charges reflecting the infrastructure cost a new development imposes.
  • Tamil Nadu, Karnataka, Andhra Pradesh, Maharashtra, Gujarat and West Bengal have begun exploring these, and rising land prices in tier-2 and tier-3 cities make them viable well beyond the metros.
  • The instrument requires what most cities lack — reliable land records, clean titling, and the planning authority in the same hands as the taxing authority — which returns to devolution.
• A broader municipal tax portfolio is the structural remedy. The case, made most fully by P. K. Mohanty, is that municipalities should have access to taxes that grow with the urban economy — motor vehicle tax, professional tax, entertainment tax, fuel and excise levies, business and financial taxes — all currently appropriated by states.
  • The sharpest proposal is a city GST share: a defined municipal share within the state GST rate, distributed by formula, restoring to cities a claim on consumption in their own territory and partly repairing the octroi loss.
  • It would also strengthen the case for third-tier representation on the GST Council, without which municipalities remain the only level of government taxed by a body they cannot address.
• The Economic Survey 2025-26 points the same way, treating planning as a fiscal instrument rather than a technical exercise: statutory twenty-year City Spatial and Economic Plans for million-plus cities, updated every five years, with three non-negotiable components — a transport network plan, a housing supply plan with annual targets and a land value capture framework — and a shift from standalone projects to system performance across housing, mobility, sanitation and climate resilience.

The Finance Commissions and the urban turn

• Union Finance Commissions became the principal federal instrument of municipal finance by default, because states would not act and the Constitution gave the Union no other lever. Article 280(3)(c) requires every Commission to recommend measures to augment a state’s Consolidated Fund to supplement municipal resources on the basis of the State Finance Commission’s recommendations.
• The Fourteenth Finance Commission made no distinction among sizes of municipality and split local body grants 70:30 between rural and urban, excluding Fifth and Sixth Schedule areas and cantonment boards.
• The Fifteenth Finance Commission changed the urban frame in three ways.
  • It raised the urban share, beginning at 67.5:32.5 in 2020-21 with the declared intent of reaching 40% over the medium term, reasoning from projected urbanisation of about 38% by 2025.
  • It differentiated by city size, treating the fifty million-plus urban agglomerations — about 38% of the urban population — as a separate category with emphasis on ambient air quality, water supply, groundwater and sanitation, and giving all other cities basic and tied grants with the tied half earmarked equally for drinking water and solid waste management.
  • It made grants conditional. Entry conditions were publication of provisional and audited annual accounts in the public domain and, from 2021-22 for urban bodies, notification of floor rates for property tax with demonstrated improvement in collection. No grants were to be released to a state’s local bodies after March 2024 if it had not constituted its State Finance Commission and acted on its recommendations.
  • It recognised for the first time the metropolitan area as a unified theatre of action, and recommended a common digital platform for municipal accounts. Total local body grants for 2021-26 were ₹4.36 lakh crore.
• The Sixteenth Finance Commission’s award for 2026-31, tabled in Parliament on 1 February 2026, is the largest fiscal shift towards local government since 1993.
  • ₹7,91,493 crore — about ₹7.9 lakh crore — for local bodies over the award period, against ₹4.36 lakh crore for 2021-26.
  • Rural local bodies receive about ₹4.35 lakh crore and urban local bodies about ₹3.56 lakh crore — an urban share of roughly 45% against 32.5% at the start of the previous award, worked out from a projected urban population share of about 40.7% by 2031.
  • A dedicated Special Infrastructure Grant of ₹56,100 crore for wastewater management in cities in the 10-40 lakh population band — the tier growing fastest and least served by earlier programmes.
  • 80% basic grants and 20% performance grants, with half the basic grant tied to sanitation, solid waste and water, and a cap of 20% of untied funds on roads.
  • Entry conditions were tightened and are now explicitly institutional: local bodies must be duly constituted — that is, elections must actually have been held; provisional and audited accounts must be published; and State Finance Commissions must be constituted on time with action-taken reports filed within six months.
  • States’ share of the divisible pool was held at 41%.
• The election condition is the most significant of these. A state that does not hold municipal elections now risks the money for all its local bodies, converting Article 243U from an unenforceable command into a fiscal condition — the only enforcement mechanism that has ever worked in Indian fiscal federalism.
• The criticisms are real. Heavy tying leaves local bodies little discretionary money; own-source-revenue benchmarks calibrated nationally are unrealistic in the poorest states; and a Finance Commission grant, however large, treats local bodies as recipients of transfers rather than governments with revenue rights of their own. Grants can finance a municipality; they cannot empower one.

What the reform actually requires

• The remedy is not more bodies. Thirty years of reform have produced ward committees, area sabhas, district planning committees, metropolitan planning committees, special purpose vehicles and mission directorates. Adding institutions to a system whose problem is the absence of authority multiplies the confusion.
• The first change is obligatory devolution. Article 243W must say “shall” where it says “may”, or the state must be placed under an enforceable duty to devolve within a fixed period.
  • Devolution must carry activity mapping — the exercise the Second Administrative Reforms Commission recommended, breaking each Twelfth Schedule subject into discrete activities and assigning each, with its funds and functionaries, to a specific tier.
  • The governing principle is subsidiarity — what can be done at the lower level should not be done at a higher one — endorsed by the Second ARC and the Punchhi Commission and applied by neither Union nor states. Transfer must carry the staff, the budget line and the rule-making power, or it transfers workload rather than authority.
• The second change is a real city executive: a directly elected mayor with a five-year term co-terminous with the council, holding executive authority, with the Municipal Commissioner as chief officer accountable to the mayor, and a Mayor-in-Council giving councillors portfolio responsibility. This requires state municipal legislation, not constitutional amendment — which removes the last excuse.
• The third is bringing parastatals under municipal control, or at minimum making their boards answerable to the elected city government.
• The fourth is metropolitan governance that exists — a two-tier structure for large cities, with a metropolitan authority holding region-wide functions on an elected majority, and empowered zonal, ward and area bodies below the corporation.
  • Strategy for New India @75 set out the diagnosis — absence of modern spatial planning frameworks, weak land titling, understaffed municipalities with a skills gap, no capacity to raise funds — and the remedies: two-tier metropolitan governance with regional councils and empowered ward committees, transfer of the Twelfth Schedule functions, a roadmap to financial self-sufficiency, capacity building, and open-city frameworks for citizen reporting and feedback.
• The fifth is money that is genuinely municipal — a broader own-tax portfolio, land value capture, cost-reflective user charges and a claim on consumption taxes raised in the city.
• The sixth is the missing base of the pyramid. A constitutional or statutory Mohalla Sabha or Area Sabha below the ward, with defined functions, would give the city what the village has had since 1993 — an institution in which citizens rather than representatives are the constitutional actor.

Urbanisation is not a scenario India can plan for at leisure; it is the condition the country is already in. The 2011 Census recorded 31.1% urban; current estimates put the figure above 36%, with roughly 40% expected around 2030 and more than half by 2050 — and functional measures of settlement suggest the real figure is already far higher. Every year of delay adds population to cities whose governments were built for towns.

There cannot be a smart city without a smart municipality — technology added to a body that cannot decide anything only automates its powerlessness.

• The 74th Amendment is best described as unfulfilled rather than failed, and the distinction is analytical rather than charitable.
  • What it achieved is real: municipalities can no longer be abolished or superseded indefinitely; elections are constitutionally due; Dalits, Adivasis and women hold urban office in numbers no other measure produced; a floor exists below which no state may now go.
  • What it withheld is also real: functions, funds, functionaries, an executive and an institution of direct democracy — each left to the discretion of the tier with the strongest interest in withholding it.
• The Amendment created a form of government without the substance of government, and thirty years of programmes have worked around that gap rather than closing it. Closing it requires making devolution obligatory and giving the city an executive who can be voted out.