The Smart Cities Mission has brought out the significance of planning and resource management at level of an Urban Local Body (ULB) in the new light. The objective of the Mission, started in 2014 by the Union government, is to promote cities that provide core infrastructure and give a decent quality of life to its citizens.

In order to achieve the objective, Special Purpose Vehicles (SPVs) have been created to work in conjunction with ULBs. While most of the attention has been given to the structure of these SPVs, enough attention hasn’t been given to the existing capacity of ULBs.  

The ULBs are currently responsible for providing public services such as water and sanitation, primary education, and basic infrastructure to the respective smart city. But ULBs are hardly equipped to bear the expenditures required to provide these basic amenities. On top of that, they also have the onus of matching the financial contribution of the states to the budget of the SPVs.

The ULBs were made a part of the constitutional machinery of governance by the 74th Amendment of the Constitution. According to the amendment, the state legislatures have the authority to devolve financial resources as well as provide funds and grants-in-aid to the municipalities. These additional revenue sources provided by the Union and the state supplement the finances of ULBs.

However, the ULBs can also raise revenue from conventional sources such as property tax, rent from municipal markets and trade licenses. But these  so-urces are unable to meet the existing budgetary needs of ULBs due to shortcomings such as administrative inadequacies and illegal constructions that reduce the property tax base. Additionally, projects announced without an adequate budget lead to bloated budgetary outlays and under-delivery of basic services.

For example, the Bruhat Bangalore Mahanagara Palike (BBMP), for the fiscal year 2015-16 has proposed the total outlay to be Rs 6,730 crore. However, the disparity between budgeted and actual receipts and the budgeted and actual payments, indicates that the BBMP does not have adequate financial resources. A study done by the Janaagraha Centre for Citizenship and Democracy shows that in the year 2014-15, the difference between budgeted and actual receipts was Rs 3,084 crore.

The ULBs can also raise additional revenue from untapped sources like parking fees. This income generation can be supplemented by auctioning vacant land to private companies to op-en parking lots. ULBs can also  auction advertising space on buses and properties they hold.

Transparency in budget

In addition to raising financial resources, ULBs should also allocate available resources to specific projects. This will help build transparency in the budget and raise citizen confidence.

The ULBs must also make efforts to increase the payment of taxes; ambiguous regulations, cumbersome rules and lax monitoring system are some of the primary reasons for the low compliance. Multiplicity of regulations and repeated alterations in the rules disincentivise citizens from abiding rules.

For instance, in March 2015, the BBMP started a scheme, Akrama-Sakrama to regularise unauthorised constructions and developments in urban areas. Though this scheme has helped address the problem of informal housing, it is unfair to the citizens who have complied with the regulations.

To make the rules and regulation easy and effective, they need to be clear precise and consistent. Once the rules are formulated, ULBs should apply them universally and only change them when absolutely necessary. A good example is the property tax reform by the BBMP in 2002. These reforms removed ambiguity by rationalising tax rates, and making them uniform and predictable.

The priority of the ULBs must be to maximise their internal re-venue sources. It is only after th-ey exhaust their existing reven-ue opportunities, that they should ask for additional financial resources. This will help make resource devolution by the state more demand sensitive and help ULBs become more self reliant.

It is clear that ULBs face multiple constraints in their functioning. The Smart Cities Missi-on cannot overcome urban problems without addressing these issue. The healthy functioning of ULBs will be integral to ens-ure that basic amenities like gar-bage disposal, piped water and sanitation are provided efficiently. Unless ULBs are reformed, they will be the Achilles’ heel to the success of the Mission.

(Kher is a policy analyst and Amin, a Research Associate at the Takshashila Institution)