Review of the Implementation of 74th Constitutional Amendment Act

A Case of Gujarat

Presented by:

Prof. Madhu Bharti

Ms. Bindu P.

APSA 2007, Colombo

Faculty of Planning and Public Policy, CEPT University

Ahmedabad – 38 00 09.
STRUCTURE OF THE PRESENTATION

 BACKGROUND

 KERALA EXPERIENCE

 IMPLEMENTATION IN GUJARAT

 STUDY AREA

 EMERGING ISSUES

 POLICY OPTIONS
BACKGROUND
 INDIA

Total Population : 1.03 billion (2001)

Urban Population : 28% of total
population
Area : 3179012 sq.km.
Population Density : 324
persons/sq.km.
Total number of States : 35
and Union Territories
Total number of Districts : 593
Total number of Sub Districts: 5564
Total number of Urban : 384
Agglomerations
Total number of Towns : 5161
 EMPOWERMENT OF LOCAL GOVERNMENT-THE RISING NEED..

URBAN SECTOR GROWTH IN INDIA

350 % increase in urban population over
past four decades.
50
45
40

Projected urban population 410 million by 35

% GROWTH
30

2011 and 550 million by 2021(NIUA 2000) 25

20
15

Unplanned &uncontrolled growth of towns - 10

5
immense pressure on ULB 0
1961 1971 1981 1991 2001

Local governments face difficulties in YEAR

meeting their expenditure % of Urban Population to Total Population

Decadal Urban growth rate(Percent)

15%-95% of state government transfer –

discretionary and often distorted.

Need to strengthen governance at local level decentralize to reduce state control

Functional & Financial empowerment of ULB leading to increased local autonomy

THE 74THCAA –DECENTRALIZATION INITIATIVE IN URBAN INDIA

A national effort aimed at „devolution‟ of appropriate functional responsibilities
and the corresponding financial resources to the urban local bodies

Faculty of Planning and Public Policy, CEPT University, Ahmedabad

 Local Government Finances-Post Amendment Scenario
 1991-92 municipal revenues 4.6% of the revenue raised by central government
& 8.05% of state government

 2001-2002relative % share of municipal revenue formed 3.07% while state 39.5

% & centre 57.5% respectively.
 Municipal share in INDIA GDP is 0.61%(1997-98) & 0.63% (2000-2001)

 Goa,Guarat,Maharashtra & Punjab ULB’s revenue averages higher than

national averages.

 Municipal expenditure average forms 0.75% of the GDP

 Average establishment (salaries &wages) 54.2 % while O&M 39.93 % of the

total municipal expenditure

 2002-2003 total expenditure of local bodies as % to total (union +state +ULB)

forms 4.7%.In advanced countries local government expenditure usually account for 20-
25 % of total expenditure (Denmark 45%,Finland 41%)

 Dependency on state government transfer varies across states,10.1%

punjab,13.82% maharashtra,17.81%gujarat.74.48% Uttar Pradesh,83.33
%Rajasthan
DATA SOURECE:Om Prakash Mathur,Sandeep Thakur,,(2004),India's Municipal Sector -Study For Twelfth Finance Commission.

Faculty of Planning and Public Policy, CEPT University, Ahmedabad

 PRESENT SCENARIO…..A MOVE TO WARDS URBAN REFORMS

2003-2007 TOWARDS URBAN REFORMS..

URIF INITIATED URBAN REFORM PROCESS

Reform of property tax levy
Reasonable user charges
Introduction of double entry system

JNNURM -2006 -2011-ENCOURAGE REFORMS AND FAST TRACKED DEVELOPMENT

Implementation of the 74th CAA

Property tax reform

GIS & MIS applications in Urban Local bodies

THRUST ON IMPROVED URBAN GOVERNNANCE & SERVICE DELIVERY SO THAT THE ULB
BECOMES FINANCIALLY SOUND AND SUSUTAINABLE FOR UNDERTAKING NEW
PROGRAMS

Faculty of Planning and Public Policy, CEPT University, Ahmedabad

 BACKGROUND

The 74th CAA.1992. came into force June 1 ,1993 - ULB Constitutional recognition.

Previously, Entry -5 of the State list-only reference to municipalities

ULB was a complete state responsibilty
At the time ,weak and inefficient ULB ,the reason being:
 Failure to hold regular elections ,prolonged super cession
 Inadequate devolution of powers, functions and finance

THE OBJECTIVE OF THIS GREATER DEGREE OF AUTONOMY AND FINANCIAL EMPOWERMENT

WAS TO MAKE ULB EFFICIENT AND VIBRANT DEMOCRATIC UNITS OF SELF GOVERNMENT

More than a decade after the enactment of the Act, in the context of
ongoing reform initiatives the question arises:

- How far have the states adopted the provisions of the 74th CAA?
- How has the ULB functioning mechanism been effected by this amendment?
- Has the ULB been empowered with more powers, functions and resources?
- Has this amendment contributed to greater efficiency and hence greater
development?

Faculty of Planning and Public Policy, CEPT University, Ahmedabad

AIM OF THE STUDY
To review the implementation of the 74th CAA on the municipal bodies in
Gujarat and assess the impact of the amendment on the performance of the
urban local bodies.

OBJECTIVES OF THE STUDY

 Understand the 74th CAA as a step towards empowerment

 Study of the existing status of implementation and the various critical

issues involved and assess the implications of the 74th CAA on the
performance of the municipal bodies

 Analyze the impact of fiscal empowerment of the municipalities on it

efficiency and the development process and how state-local fiscal
relations have altered after the CAA

 To identify and give recommendations on certain methods by which this

amendment can be used as a framework for further development in
the context of ongoing reforms.
Faculty of Planning and Public Policy, CEPT University, Ahmedabad
 STUDY FRAMEWORK
Review of 74th CAA as a step Analyze of the post
Study of Kerala as a

LITERATURE REVIEW
towards empowerment amendment fiscal scenario
successful example in Gujarat
Review post amendment reforms Discussions with KILA
ULB and their implications. officials,CEO Ongoing reforms in Gujarat
Broad Study of the implementation & council member municipal bodies
status of the 74th CAA –All India Thripunithara municipality

STATE LEVEL IMPLEMENTATION CHECK ULB LEVEL CHECK-MUNICIPALITIES OF

GUJARAT BHARUCH DISTRICT

Review of SFC reports and State Municipal Budget documents and

DATA ANALYSIS
Finance Board reports income expenditure details 2001-2006
Interview held with:
Income expenditure details of all •Chief executive officers,
municipalities in Gujarat 1996-2006 •President of elected council,
•Secretary,
•Elected Council Members,
Interviews held with officials of DOM,
•Accounts Offices, Chief Engineer, Internal
GMFB, and GUDM Auditor, Town Planning & Urban Development
Officials.

REVIEW OF ONGOING REFORM

INITIATIVES
GAPS & ISSUE IDENTIFICATION

RECOMMENDATIONS & CONCLUSIONS

 74TH CAA….. AT A GLANCE
PROVISIONS PART IX A
OBJECTIVES FEATURES OF THE 74th CAA
OF THE CONSTITUTION

Three tier system

Nagar -Panchayat,
Municipal Council,
Article243Q Municipal Corporation
Set up institutional mechanism to Article 243 S
facilitate decentralization. Article ZD Constitution of
Article ZE Ward Committees,
District Planning Committees
Metropolitan Planning
Committees.

Demarcate the role of Urban Local

Article 243W Powers authority and functions
Bodies andimplications
Positive specify their functions.
aimed to achieve.
Ensure representation of all sections
•Political
of society,stability
many of which have Article 243T Reservation of seats
been previously under represented.
•Democratization
•Improved
Ensure Decision
that urban localMaking
bodies Process
are At Local Level
Article 243U Continuity-five year tenure
not superseded by states.
•Sustainable Human Development
Regular Elections Article 243K State Election Commission
•Adequate representation of weaker section of society
Strengthen the financial resource Article 243Y State Finance Commission
•Enhanced People participation
available to the local bodies, Article 243Z Audit of Accounts
improve transparency
•Improved service delivery Article 243X Taxation Powers

Faculty of Planning and Public Policy, CEPT University, Ahmedabad

KERALA EXPERIENCE
 THE KERALA DECENTRALISATION EXPERIMENT-A CASE STUDY

Kerala has carried out certain pioneering reforms in the context of decentralized governance.
The state transferred not only of functions and responsibilities, but also the authority
to carry them out, along with resources, both human and financial.

Objectives of Kerala decentralization

• Improve the quality of investment by allocating resources for priorities fixed locally
• Facilitate emergence of local solutions to developmental problems through improved
planning, better implementation, use of traditional knowledge and appropriate
technology etc
• Exploit local production possibilities;
• Enable people’s participation, leading to keener oversight in the execution of
schemes, followed by better upkeep of assets;
• Provide the enabling environment for people to make contributions in kind and cash
for development programs identified by them for priority action;
• Bring about a convergence of resources and services to tackle development
problems with greater vigor; and
• Unleash public action resulting in a demand-led improvement in the delivery of
developmental and welfare services

Unconventional & innovative strategy for the decentralization process

‘Peoples Planning Campaign’ –to set agenda for decentralization
‘Big Bang Approach’ to decentralized governance

Faculty of Planning and Public Policy, CEPT University, Ahmedabad

 KERALA ACHIEVEMENTS & CHALLENGES
ACHIEVEMENTS:
The formula based devolution of funds has ensured equitable funds flow
Peoples Participation -designed to facilitate intervention by the interested citizen at all
stages of the development process
Wide ranging reforms
•independent regulatory institutions like SEC,SFC,OMBUDSMAN,APPELATE TRIBUNALS, STATE
DEVELOPMENT COUNCILS,
•improved management systems both financial and administrative
•enhanced accountability mechanisms –performance & social audit

Development matters local governments

•Better service delivery-evolved efficient and cost effective mechanisms
•Mandatory Women Component Plan
•Poverty reduction-more funds from local government to poverty stricken families
•Many local governments have been able to raise public contributions for improving
service delivery
CHALLENGES:
• The quality of service delivery by local government has not improved to the extent
desired.
• Tendency to spread resources thinly with preference being given to every electoral
constituency whenever a development scheme is taken up.
• Participatory aspect of planning is often limited to airing of needs and sharing of
benefits.
• The flow of bank credit into local schemes has been rather limited resulting more from
bankers‟ reluctance to deal with local governments-thus higher subsidies
IMPLEMENTATION IN GUJARAT
 GUJARAT

Total Population : 51 Million (2001)

Urban Population : 37% of total population
Area : 196024 sq.km.
Population Density : 260 persons/sq.km.
Literacy Rate : 69.17%
Sex Ratio : 920
Total number of Districts : 25
Total number of Towns : 242
Total number of Villages : 18539
Total number of Cities : 27
Major Industries : Chemicals, Petrochemicals, Textiles,
Diamonds, Consumer goods
GUJARAT
 URBANISATION TRENDS IN GUJARAT

Gujarat urban population increased

three fold from 5.315 million(25.77%) in
1961 to 37.6% 2001

The 2001 urban population-Gujarat is

18.22 millions(37.6%) while India 286.02
million(27.85%)

Gujarat stands among the economically

better states, per capita income Rs.16,998
compared to India Rs.14682

Table 6.4 CLASSIFICATION OF MUNICIPALITIES IN GUJARAT -

2001 CENSUS
MUNICIPALITY CLASS POPULATION NUMBER
A ABOVE 100,000 9
B 50,000 to 100,000 32
C 25,000 to 50,000 44
D 15,000 to 25,000 58
TOTAL MUNICIPALITIES 143

Faculty of Planning and Public Policy, CEPT University, Ahmedabad

 CHECK ON THE STATUS OF IMPLEMENTATION

URBAL LOCAL BODY LEVEL

A CASE OF BHARUCH DISTRICT
MUNICIPALITIES
BHARUCH-CLASS A
GUJARAT STATE LEVEL ANKLESWAR-CLASS B
JAMBUSAR-CLASS C

GUJARAT
REFORM
PROVISIONS OF MUNICIPALITIES ACT 1963 STATUS OF
INITIATIVES &
THE 74th CAA .GUJARAT ACT NO. 34 OF IMPLEMANTATION
COMMENTS
1964

STATUS OF IMPLEMENTATION
PROVISIONS OF THE COMMENTS &
74th CAA BHARUCH ANKALESWA JAMBUSAR REFORMS
CLASS A R CLASS B CLASS C

Faculty of Planning and Public Policy, CEPT University, Ahmedabad

 FISCAL EMPOWERMENT OF MUNICIPALITES –A CLOSER LOOK
Review of the Gujarat municipal finances 1996-2006 reveals:

Gujarat-12% total municipal revenues in India after Maharashtra(48%)

•Gujarat per capita internal resource Rs.809.4 ranks third after Maharashtra and Punjab.

•The cumulative tax income of all the municipalities in Gujarat (2002-2006) to total tax
revenues of the state ranges only 0.58 to .61 percent. Indicates the weak contribution of local
economy to the state, the main reason-the abolition of Octroi in municipalities .

•Nearly 75 % of the tax income octroi income prior to its abolition. After octroi abolition
property tax forms the main source of internal revenue .Nearly 52 percent of the total tax
income. Hence focus on property tax for raising revenues.

The octroi income substituted by octroi grant by the state government has increases the
revenue grant component in the revenue income from an average of 13 percent prior to the
abolition of octroi to 60 percent dependency on grant in the revenue income.

The establishment expenditure against revenue income and expenditure increasing at a rate
of 1.04 and 2.4 percent (2003-2006), respectively indicates the need to optimize the resources.

Faculty of Planning and Public Policy, CEPT University, Ahmedabad

 GUJARAT STATE FINANCE COMMISSION-AREAS OF CONCERN..

1st SFC Report submitted to GOG on 13.7.98

Out of total 73 recommendations, 46 have been accepted completely
12 were accepted partially , 15 were not accepted by the State Government

2nd SFC has been constituted on 19th November 2003. With tenure period of 2 years
but extended further. The report awaits final approval.

Certain weak policy aspects of the 1st SFC recommendations that emerge are as
follows

• Weak Devolution Model Framework

• Absence of Untied Funds

• Inadequate Data Base

• Lack of Performance Based Devolution of Resources

• Lack of Social Audit and Performance Audit

• Inadequate Borrowing Policy Framework

Faculty of Planning and Public Policy, CEPT University, Ahmedabad

STUDY AREA
 BHARUCH AS A CASE….

Bharuch as a study case

Rapid increase in economy -“golden corridor”
High trends of urbanization-rapid industrial development
HENCE HIGH DEMAND ON BASIC INFRASTRUCTURE PROVISION
Both Bharuch and Ankleswar have signed MOA with State
Government specifying timelines for the reforms
%SHARE OF URBAN POPULATION TO TOTAL POPULATION
30.00

25.00
% POPULATION

20.00

15.00

10.00

5.00

0.00
1961 1971 1981 1991 2001
YEAR
%SHARE OF URBAN POPULATION TO TOTAL POPULATION
jambusar

MUNICIPALITY CLASS TOTAL POPULATION AREA SQ.KM YEAR OF ESTABLISHMENT

BHARUCH A 148391 17.35 1852

ANKALESHWAR B 67952 8.87 1859
JAMBUSAR C 38771 5.12 1986
Faculty of Planning and Public Policy, CEPT University, Ahmedabad
STATE LEVEL AREA OF CONCERN…THE WARD COMMITEES
GUJARAT
MUNICIPALITIES ACT
PROVISIONS OF 1963 .GUJARAT ACT NO. REFORM INITIATIVES
STATUS OF IMPLEMANTATION
THE 74th CAA 34 OF 1964 & COMMENTS
(As modified up to
31stAugust 2006)
The concept not Reform process to ensure Formation of ward
presented in the community representation committee is in the
existing Act and participation ongoing. process.

Amendment Process State Government current JNNURM REFORM-

process is ongoing. status claim: Area Sabha for
Informal system of taking urban areas GOG is
decision at different level. waiting for the
guidelines on
Article 243 S: The annual plans are community
Constitution and discussed with fellow participation law
composition of corporators and public by from GOI and
the ward and large and their based on that
committees suggestions are incorporated appropriate law
in the plan before putting it would be
to Standing Committee and formulated.
General Board.

Gujarat Town Planning &

Urban Development Act
1976 ensure the community
participation in spatial urban
planning.
STATE LEVEL AREA OF CONCERN…TAXATION POWERS

GUJARAT
MUNICIPALITIES ACT
PROVISIONS OF 1963 .GUJARAT ACT STATUS OF REFORM INITIATIVES &
THE 74th CAA NO. 34 OF 1964 IMPLEMANTATION COMMENTS
(As modified up to
31stAugust 2006)
Contain the The present tax and High political intervention
provisions in detail user charges into the taxation process to
as to which type of decided by the be curbed.
taxes a municipality general body and
can collected. after public Reform
approval, put across
for state government 1.Area based property
approval. taxation system.
Article 243 X:
Power to 2.Mandatory 85 percent of
impose taxes O& M cost recovery on
by and, funds of service proved by
municipalities ULB,moving towards 100
percent cost recovery

3 Setting up of tax rate

setting commission and
fixing tax and user charge
range under process
TAXATION POWERS AND FINANCIAL OBLIGATIONS IN MUNICIPALITIES-THE ISSUES…
COMMENTS
COMPONENTS PARTICULARS
& REFORM INITIATIVES
Political pressure hampers the
Municipality shall, by passed at a
increase in tax rates and hike in
general meeting.
user charges.
The municipality shall publish the rules
Procedure for State Government control- If the
so approved with notice.
imposition of establishment expenditure
Any objection within a month is
taxes exceeds 45% of expenditure 10 %
considered and discussed.
deduction in establishment grant
Notification proposed in accordance
every year and certain other grants
forwarded to state government.
with held.
empowered to revise their tax
rates.
The state government may by
No voluntary initiatives to raise their
notification in the official gazette
tax rates came from municipalities
Revision of empower any municipality to levy any
(2001-2007)-DOM source
Taxes tax or to increase or reduce the amount
Lack of political will. The state
or rate of any tax levied within maximum
government initiates the process in
and minimum limits
monthly review meetings with
CEO.
Existing autonomy hampered by low political will.
Empowered to decide the tax
Automatically leads the State Government to highly intervene
rates and into the local
user charges.
Level of autonomy is this respect is
governance process to help it sustain. high but misutilized due to low
Rate of Tax Not specified
political will.role to ensure
State Government has to constantly perform a monitoring
Reform initiatives: Base tax rates
cost recovery of the service provided would be fixed in the amended
Municipality Act (process ongoing
ULB LEVEL AREA OF CONCERN…TAXATION POWERS

STATUS OF IMPLEMENTATION
PROVISIONS OF COMMENTS &
THE 74th CAA BHARUCH ANKALESHW JAMBUSAR REFORMS
CLASS A AR CLASS B CLASS C
Property Property Property tax Tax rate &user charge
Water Water Water tax setting decisions are
Vehicle Vehicle Sewerage directly taken by
Theatre Entertainment Entertainment elected body
Special fee Special fee Special
Rental Market charges:
property Lighting Special water Political pressure very
Markets Rental tax high.
Article 243 X: Power
Sewerage property Cattle
to impose taxes by
Lighting Shops Reform initiative:
and, funds of
Property sale State government
municipalities
Revision of cess plans to set a tax
water tax setting regulatory
case authority
Area based property
tax system process
ongoing.

Faculty of Planning and Public Policy, CEPT University, Ahmedabad

STATE LEVEL AREA OF CONCERN…AUDIT OF ACCOUNTS
GUJARAT MUNICIPALITIES
ACT 1963 .GUJARAT ACT NO.
PROVISIONS OF
34 OF 1964
THE 74th CAA
(As modified up to 31stAugust
2006)
Audit provided for under
the provisions of the
Gujarat Local Fund Audit
ACT, 1963(GUJ.XLIX).
The municipal accounts
may be audited at any
time by the state
government
Article 243 Z:
Audit of
The auditor shall for the
Accounts of
purpose of his office have
municipalities
access to all accounts
and records of the
municipality.
STATUS OF REFORM INITIATIVES &
IMPLEMANTATION COMMENTS
The audit was Certain irregularities
conducted by the in the existing system
Local funds audit (case study)
team.
Reform aiming at
more accountability
and transparency –
1.The local funds audit to
be under the purview of
CAG
2.Mandatory adoption of
double entry accounting
system in all urban local
bodies based
Reality check micro level
reflects irregularities in
existing auditing and
also low level of
compliance of ULB to
audit team
recommendations.
ULB LEVEL AREA OF CONCERN…AUDIT OF ACCOUNTS

STATUS OF IMPLEMENTATION
PROVISIONS OF COMMENTS &
THE 74th CAA BHARUCH ANKALESHW JAMBUSAR REFORMS
CLASS A AR CLASS B CLASS C

Article 243 Z: Audit Regular, Once Irregular. Irregular. Level of compliance

of Accounts of in every year Two year One year to the
municipalities local fund audit back log.* back log.* recommendations of
the audit team has
also been low.

* As per information given by accounts division officials in the Municipalities

Faculty of Planning and Public Policy, CEPT University, Ahmedabad


CONFORMITY TO THE DEVOLUTION OF FUNCTIONS IN 12TH SCHEDULE
THE TWELFTH SCHEDULE
FUNCTIONS
Urban planning including
town planning
Regulation of land use and
construction of building
Planning for economic and
social development
Roads and bridges
Water supply for domestic,
industrial and commercial
purposes
Urban forestry, protection of
environment and ecology
Safe guarding interest of the
weaker section of the society
including the handicapped
and the mentally retarded.
Slum improvement and
upgradation
Urban poverty alleviation
AREA OF CONCERN IN THE 12TH SCHEDULE
DEVOLUTION
COMMENTS(BASED ON MICRO LEVEL CASESTUDY)
STATUS
Largely comes under the purview of the town
planning department.
Land use as per the town planning schemes.
Development plans prepared by the Town
planning department.
Dependent on the Public Works Department for
Technical sanction-Low Technical capacity
being the reason for such dependence.
GOG Devolved but projects implemented with the help
declared as of Gujarat water supply & sewerage
fully board.Techinical competence lacking.
transferred.
Taken care of by municipality, involvement of
NGO prevalent
No other efforts other than representation in the
elected council
Largely limited to the execution of centre and
state government schemes.
No other efforts other than representation in the
elected council
 REVIEW OF THE LOCAL BODY FINANCES…
FINANCIAL PERFORMANCE OF CLASS A,B,C MUNICIPALITIES-A COMPARISION

FINANCIAL PERFORMANCE INDICATORS BHARUCH ANKALESHWAR JAMBUSAR

Resource Mobilisation
Share of own source of funds in Total
Revenue Income 34.63 41.21 19.56
Share of Property Tax of funds in Total
Revenue Income 14.97 9.91 8.10
Share of revenue grants (octroi incl) and
subsidies of funds in Total Revenue
Income 65.37 58.79 80.44
Share of revenue grants excluding
octroi grant in Total Revenue Income 25.62 16.61 53.5
Fund Application
Share of establishment to total revenue
expenditure (%) 20.85 42.84 28.86
Share of establishment to total revenue
income (%) 19.98 35.07 18.49
Share of O & M in total revenue
expenditure (%) 72.42 55.57 63.40
Performance Indicators
Operating Ratio 1.02 0.82 0.64

Capital Utilization Ratio 0.31 0.79 1.24*

* capital works only in 2003-2004
 REVIEW OF THE LOCAL BODY FINANCES…THE KEY FINDINGS

 The share of own source (tax +non tax ) in revenue income is as low as 19.5
percent in Jambusar which is class C ,while Bharuch class A is also only 34
percent.

 Octroi grant forms nearly 60 percent of the revenue grant due to which the
percentage share of grant (octroi incl.) is as high as between 58-80 percent.

 The average operating ratio Bharuch shows a revenue deficit Ankleswar

,Jambusar less than unity, indicating a revenue surplus.

 Average capital utilization ratio in three cases show lack of utilization of

available capital income indicating the low utilization of funds available for
capital works.
Incase of Jambusar over the five year review period only in the year 2003-04, capital
expenditure has been made. This clearly indicates the low level of developmental
activities.

Faculty of Planning and Public Policy, CEPT University, Ahmedabad

EMERGING ISSUES
 EMERGING ISSUES…

High dependency on grants from state government

Municipality is dependent on state government for both their administrative costs
and capital works.
In order to cover their administrative costs the local body receives a 33 percent
grant and all their capital works are based on state grants and subsidies.
Jambusar - class C reflects high dependency of 59 %on grants in the revenue income while
only 18 %of the revenue income comprises of the own sources tax and non tax)
Ankleswar - class B and Bharuch- class A the percentage own source of income to total
revenue income is 41 % and 36 % respectively.

High state intervention (reflected from Bharuch,Ankleshwar ,Jambusar case studies)

The discussions held reveals that the state government has direct and strong control over the
functioning of the local bodies in the following aspects

All the grants are in the form of tied grants wherein the grant is given for specific purpose
Agenda of local priorities set by state .The concept of community involvement lost .
User charges and taxes as decided by the urban local body requires prior ratification.
Access to banks and financial intermediaries for loan requires prior permission to be sought
from the state government .

Faculty of Planning and Public Policy, CEPT University, Ahmedabad

 EMERGING ISSUES…

High political intervention and lack of public participation

Elected body takes strong control over the most of the decisions of the municipality.

Various committees that are formed completely comprise of the ruling party members and the
decisions are open for discussion only when the general body meetings are held.( information
received from elected body members,Bharuch and Ankleswar

Lack of community involvement –decisions are more politically driven

(“We ,the representatives of people know their needs”)

Local Planning Initiatives –totally dependent on the Town Planning Department –TP.schemes

Technical competence & Organizational Capacity

Execution of public works prior technical sanctioning from PWD department (planning dept.
information-case studies)

Implementation of water and sewerage projects-GWSSB

This reconfirms the need for capacity building to make the local government more
autonomous.

Faculty of Planning and Public Policy, CEPT University, Ahmedabad

 EMERGING ISSUES…

Transparency & Accountability

Ankleswar and Jambusar case reveals one year and two year back log for the
audit.
Lack of strict monitoring on level of adherence to the audit recommendations
,hence remains neglected.
Accounting system needs to be transparent and budgetary documents needs to
be given public access

Double Entry process ongoing since one year (as per case studies) Process needs
to be accelerated.
Capacity Building of accounting staff to adopt new system is area of concern.

Public Disclosure Law to be adopted without delay

Faculty of Planning and Public Policy, CEPT University, Ahmedabad

POLICY OPTIONS
 RECOMMENDATIONS FOR FUTURE POLICY OPTIONS

The state functioning as a facilitator

Local body should function as autonomous units while state monitors the process.
For increased autonomy the need arises to improve the financial resource base & local
level capacity building initiatives.
Separate nodal agency to be set up for continuous capacity building initiatives

Improvement of Technical Competency

The recruitment process of technical staff at local level must be made rigid so that the
technical competency of the staff is ensured.

Capacity building of existing technical staff integration of external experts

Breaking viscous cycle of low performance

The vicious cycle of low financial base, hence low level of service delivery and resulting
lack of willingness to pay would result in the local body continuing to sustain on the state
government
•Widening tax structure
Acceptable tax structure needs to evolve where the citizen are willing to pay for the
good quality service

Faculty of Planning and Public Policy, CEPT University, Ahmedabad

 RECOMMENDATIONS FOR FUTURE POLICY OPTIONS

Efficient resource mobilisation

Focus should be on taxes that yield good revenue and efforts made to make the tax
collection system more water tight.

STATUS OF PROPERTY TAX REFORM IN BHARUCH,ANKLESWAR ,JAMBUSAR

Municipality Existing Surveyed %covered Potential for extra
registered property tax revenue
property
Bharuch 43061 36891 85 Ongoing
Ankleswar 19107 20684 107 7%
Jambusar 10023 12244 122 22%
Source:GUDM last updated on 19th December 2006

Rationalization of user charge

User charges for provision of basic services are generally politicized wherein in the local
body is compelled to provide services for free or at negligible cost

Solution would be by fixing the minimum user charges to be levied for various services.

Cost Recovery for service delivery and thrust to cover at least the O&M charges by GOG
head in the right direction and need to be further strengthened.

Faculty of Planning and Public Policy, CEPT University, Ahmedabad

 RECOMMENDATIONS FOR FUTURE POLICY OPTIONS

Community participation–a structured framework &expert involvement

Social Accountability to all the actions of the local government and transparency should
be instilled into the system.

Committees should involve non political representation in the form of experts from various
fields, social workers and representatives of voluntary organization.

Well defined framework for the non political inclusion at grass root level so that a
common system could be followed and ensured throughout the state

Introduce sense of competition in ULB

Reduce monopoly in the provision of service by the local body.

Parallel service provider like private players would instill the sense of competition and
ensure best service

Regular performance check on the functioning of local bodies and a platform of

comparison among them with certain incentives earmarked for most efficient local bodies.

Faculty of Planning and Public Policy, CEPT University, Ahmedabad

THANK YOU

Faculty of Planning and Public Policy, CEPT University, Ahmedabad

 AN LOOK INTO THE FINANCES OF ALL MUNICIPALITIES IN GUJARAT
%Tax %
%Octroi % Revenue
income in % Property %Establishment Establishment
Financial Income in Grant in total
Total Tax in total Expenditure to Expenditure
year total tax revenue
Revenue tax income revenue expenditure against revenue
income income
Income income
1995-96 72.78 77.76 7.78 12.52 50.07 46.74
1996-97 75.33 77.41 7.88 12.83 52.48 50.12
1997-98 74.65 70.33 7.07 11.55 52.53 46.21
1998-99 72.47 76.77 8.06 14.10 52.55 49.23
1999-2000 71.92 77.16 10.24 15.15 54.58 55.57
2000-2001 69.00 75.22 4.25 19.61 54.03 52.06
2001-2002 32.11 34.99 19.52 55.00 57.91 58.57
2002-2003 22.50 0.00 49.23 66.18 62.47 54.27
2003-2004 27.45 0.00 54.84 61.80 62.47 56.26
2004-2005 24.56 0.00 56.96 63.17 63.12 57.21
2005-2006 22.35 0.00 53.72 64.41 64.14 58.32
Source:GMFB Income Expenditure Tables

Faculty of Planning and Public Policy, CEPT University, Ahmedabad

 LIST OF DISCRETIONARY TAXES & FEES THAT CAN BE LEVIED AS PER GUJARAT
MUNICIPALITIES ACT 1963
LEGISLATION DISCRETIONARY TAXES FEES THAT CAN BE LEVIED
.GUJARAT ACT NO. 34 OF Property, vehicles, boats, animals, Registration fee, license fee,
1964 motor vehicles, octroi, dogs, special swimming bath fee, slaughter
(As modified up to 31stAugust and general sanitary cess, lighting, house fee, building construction
2006) sale of cattle in market, betterment fee, shop registration fee, water or
levy connection fee, cattle pound fee

LIST OF TAXES THAT ARE SHARED BETWEEN MUNICIPALITY & GOG

NAME OF THE TAX THE SHARE GIVEN TO THE URBAN LOCAL BODIES

Non Agricultural Assignment 75 percent of the total amount collected from the municipal area

Land and Revenue

35 percent of the recovery made during the previous year
(Agriculture)
Local cess on Land Revenue After deduction of the recovery -expenditure 100 percent of the remaining
and Water Rate amount
75 percent of 85 percent on the basis of percentage of recovery provided that
Education Cess the responsibilty of the primary education is undertaken ,otherwise 5 percent of
the recovery to the urban local bodies

50 percent of the income, though the amount is given as a contribution against

Entertainment Tax
the scheme expenditure through the Municipal Finance Board.

Professional tax 50 percent of the amount collected from the are given a grant in lieu of the
professional tax.