Urban Civic Bodies
Kartavya Desk Staff
Syllabus: Economics
Source: IE
Context: A recent RBI report highlights challenges in municipal corporations’ revenue generation, heavy dependence on government transfers, and insufficient capacity to meet urban development demands.
Data Facts on Urban Civics (Source: RBI Report on Municipal Finances)
• Property Tax Revenue: Contributes 0.12% of GDP (2023-24). Accounts for 16% of municipal revenue receipts and 60% of own tax revenue.
• Contributes 0.12% of GDP (2023-24).
• Accounts for 16% of municipal revenue receipts and 60% of own tax revenue.
• Revenue Receipts: Municipal receipts: 0.6% of GDP in 2023-24, compared to 9.2% (Central) and 14.6% (State governments). Top 10 MCs generate 58% of municipal revenue receipts.
• Municipal receipts: 0.6% of GDP in 2023-24, compared to 9.2% (Central) and 14.6% (State governments).
• Top 10 MCs generate 58% of municipal revenue receipts.
• Grants and Transfers: Central government grants increased by 24.9% (2022-23). State transfers grew by 20.4%.
• Central government grants increased by 24.9% (2022-23).
• State transfers grew by 20.4%.
• Municipal Bonds: Total outstanding bonds: ₹4,204 crore (March 2024), only 0.09% of total corporate bonds.
• Total outstanding bonds: ₹4,204 crore (March 2024), only 0.09% of total corporate bonds.
• Digitalisation: GIS-based property tax mapping can improve compliance and reduce revenue leakages.
• GIS-based property tax mapping can improve compliance and reduce revenue leakages.
Issues Plaguing Urban Bodies:
• Low Revenue Generation: Property tax collection remains abysmally low. Dependence on government transfers undermines financial autonomy.
• Property tax collection remains abysmally low.
• Dependence on government transfers undermines financial autonomy.
• Operational Inefficiencies: Poor enforcement of tax laws. Leakages in revenue collection systems.
• Poor enforcement of tax laws.
• Leakages in revenue collection systems.
• Underutilized Financing Options: Limited use of municipal bonds and PPPs.
• Limited use of municipal bonds and PPPs.
• Infrastructure and Service Delivery Gaps: Insufficient funds to maintain roads, drainage, and sanitation systems.
• Insufficient funds to maintain roads, drainage, and sanitation systems.
• Dependence on Upper Tiers: Over-reliance on state and central transfers stifles long-term planning.
• Over-reliance on state and central transfers stifles long-term planning.
Way Ahead:
• Strengthen Own Revenue Sources: Reform property tax structures to reflect real valuation. Introduce GIS-based property tax mapping.
• Reform property tax structures to reflect real valuation.
• Introduce GIS-based property tax mapping.
• Enhance Non-Tax Revenues: Regularly revise user charges for services like water and waste management. Adopt digital platforms for efficient fee collection.
• Regularly revise user charges for services like water and waste management.
• Adopt digital platforms for efficient fee collection.
• Leverage Innovative Financing: Expand municipal bond market participation. Promote PPPs in urban transport, waste management, and renewable energy.
• Expand municipal bond market participation.
• Promote PPPs in urban transport, waste management, and renewable energy.
• Optimize Expenditures: Digitize operations to streamline costs. Automate processes to free resources for capital investments.
• Digitize operations to streamline costs.
• Automate processes to free resources for capital investments.
• Ensure Timely Transfers: Develop rule-based frameworks for predictable state and central transfers.
• Develop rule-based frameworks for predictable state and central transfers.
• Capacity Building: Provide technical training for local bodies to improve planning and enforcement.
• Provide technical training for local bodies to improve planning and enforcement.
Conclusion:
Strengthening revenue sources, leveraging technology, and fostering collaborative frameworks can enhance their capacity to deliver essential services. This transformation is essential for sustainable urban growth and improved quality of life.
Insta Links:
• Report-on-municipal-finances
• Consider the following: (UPSC-2023)
• Demographic performance
• Forest and ecology
• Governance reforms
• Stable government
• Tax and fiscal efforts
For the horizontal tax devolution, the Fifteenth Finance Commission used how many of the above as criteria other than population area and income distance?
• Only three
Answer: b)
• According to the Constitution of India, it is the duty of the President of India to cause to be laid before the Parliament which of the following? (UPSC-2012)
• The Recommendations of the Union Finance Commission
• The Report of the Public Accounts Committee
• The Report of the Comptroller and Auditor General
• The Report of the National Commission for Scheduled Castes
Select the correct answer using the codes given below:
• 2 and 4 only
• 1, 3 and 4 only
• 1, 2, 3 and 4
Answer: c)