Urban Local Government in India: Post-Independence Developments

When India gained independence in 1947, its cities inherited a patchwork of municipal systems from the British. Calcutta had one set of rules, Bombay another, and smaller towns operated under whatever provincial laws had been stitched together over the decades. For nearly 45 years after independence, this inconsistency continued largely unchecked – until a landmark constitutional reform in 1992 attempted to bring order, dignity, and democratic accountability to urban governance. The story of urban local government in the post-independence era is essentially the story of this long, uneven journey from neglect to constitutional recognition, and the gap that still remains between what was promised and what has been delivered.

The constitutional silence that defined the early decades 🔗

When the Constituent Assembly drafted the Indian Constitution, it paid close attention to Parliament and the State Legislatures but gave relatively little space to urban local bodies. The Constitution made detailed provisions for democracy at the Union and State levels, but it did not mention urban self-government as a clear-cut constitutional obligation. Village panchayats at least found a mention in the Directive Principles of State Policy under Article 40, but municipalities were left out even from that aspirational chapter.

Instead, urban local government was placed under Entry 5 of the State List in the Seventh Schedule, making it entirely a state subject. This meant that each state was free to design, reform, or even ignore its municipal system as it pleased. The result was predictable: cities continued operating under colonial-era laws, with minor state-level amendments. In West Bengal, for instance, the Bengal Municipal Act of 1932 remained in force until 1993, and between 1960 and 1980 alone the act was amended twenty times to try to cope with rapid urbanisation.

Why cities were left in limbo 🔗

The neglect was not entirely accidental. The political energy of the 1950s and 1960s was directed towards rural development, planned industrialisation, and village panchayats. Urban areas were seen as pockets that would naturally benefit from national growth. Municipal bodies were treated as junior partners of state governments rather than as genuine institutions of self-rule.

A broader study of this period captures the issue bluntly: since municipal government was a state subject, these bodies suffered from indifference, neglect and excessive control of state governments, and the basic framework of the municipal bodies continued to be that of the British days with very little change since independence. Functions expanded with the welfare state, but financial resources did not keep pace.

The slow build-up to reform 🔗

Problems accumulated steadily. Elections to municipal bodies were postponed for years in many states. Administrators or state-appointed officers often replaced elected councils for extended periods. Finances were chronically weak, slums expanded, and basic services like water supply, sanitation, and solid waste management collapsed in many cities.

By the 1980s, the urban crisis was impossible to ignore. Several committees and commissions were set up to examine the issue. The National Commission on Urbanisation, set up in 1985, gave detailed recommendations on strengthening the management and administration of urban local government institutions and considered the need for granting them an independent status. Around the same time, the L.M. Singhvi Committee and the P.K. Thungon Committee called for constitutional recognition of urban local bodies.

A first attempt at constitutional reform – the 65th Amendment Bill introduced in 1989 by the Rajiv Gandhi government – was defeated in the Rajya Sabha. It took another three years and a change in government before the idea finally crossed the finish line.

The 74th Constitutional Amendment: a turning point 🔗

The Constitution (74th Amendment) Act, 1992, popularly known as the Nagarpalika Act, changed the architecture of urban governance fundamentally. It introduced a new Part IXA in the Constitution dealing with Municipalities under Articles 243P to 243ZG, and came into force on 1 June 1993, giving constitutional status to municipalities and bringing them under the justiciable part of the Constitution.

In practical terms, this meant that states could no longer treat municipalities as optional institutions. They were now constitutionally obliged to set them up, hold elections, and honour a defined set of structural and procedural rules. An entire Twelfth Schedule was added to list eighteen functional areas that municipalities were expected to handle.

A three-tier structure for diverse urban realities 🔗

One of the most important contributions of the amendment was to standardise the types of urban local bodies. Article 243Q provides for three types of municipalities: Nagar Panchayat for areas in transition from rural to urban, Municipal Council for smaller urban areas, and Municipal Corporation for larger urban areas, with the Governor determining these categories through public notification based on population, density, revenue potential and employment patterns.

An exception was carved out for industrial townships. If municipal services in an urban area were already being provided by an industrial establishment, the Governor could declare that area an industrial township and skip the formation of a municipality altogether. This recognised the reality of company towns like Jamshedpur.

Regular elections and democratic representation 🔗

Before 1992, one of the biggest complaints was that elections to urban bodies were indefinitely postponed. The amendment fixed this by mandating a clear five-year term. A municipality has a fixed term of five years from the date appointed for its first meeting, and if it is dissolved before the expiry of five years, elections for constituting a new municipality must be completed within six months from the date of dissolution.

The amendment also democratised representation in meaningful ways. Seats are reserved for Scheduled Castes and Scheduled Tribes in proportion to their population, and at least one-third of all seats – including the seats reserved for SC and ST – are reserved for women. Many states have since expanded this reservation for women to fifty per cent. State legislatures were also permitted to provide for reservation in favour of backward classes.

Institutions for planning and accountability 🔗

The amendment did not stop at elections. It also introduced a set of institutional innovations designed to coordinate planning across jurisdictions and ensure fiscal discipline. The Act prescribes institutional changes including the setting up of Ward Committees, District Planning Committees and Metropolitan Planning Committees to coordinate planning across jurisdictions, along with the setting up of State Election Commissions and State Finance Commissions.

Ward Committees were made mandatory in municipalities with a population of three lakh or more, bringing governance closer to neighbourhoods. District Planning Committees were tasked with consolidating the plans of panchayats and municipalities into a unified district development plan, while Metropolitan Planning Committees were to perform a similar role for large metropolitan regions.

The role of State Finance Commissions 🔗

Fiscal weakness had been the Achilles heel of urban local bodies for decades. To address this, the amendment required every state to constitute a State Finance Commission (SFC) every five years to review the financial position of municipalities and recommend how revenues should be distributed between the state and local bodies.

The SFC was imagined as a kind of mini Finance Commission for the local tier. It would look at the taxes, duties, tolls, and fees that could be assigned to municipalities, the grants-in-aid that should flow from the state’s consolidated fund, and the measures needed to improve municipal finances overall.

A promise that has been unevenly kept 🔗

On paper, the SFC mechanism is elegant. In practice, its track record has been disappointing. By 2023, all states should have constituted their Sixth State Finance Commission, but a report by the standing committee on rural development and panchayati raj tabled in Lok Sabha noted that out of 26 states only nine had constituted their 6th SFC, and of those only two were active.

Recommendations made by SFCs are not binding on state governments, and Action Taken Reports are frequently delayed or simply not placed before state assemblies. This undermines the very spirit of fiscal devolution that the 74th Amendment sought to guarantee.

Functions on paper, powers in practice 🔗

The Twelfth Schedule lists eighteen functional areas for municipalities, ranging from urban planning and regulation of land use to water supply, public health, sanitation, fire services, urban forestry, slum improvement, and the protection of weaker sections. It reads like a comprehensive charter of city life.

However, the amendment does not automatically transfer these functions. The 74th Amendment Act of 1992 provides a basic framework for the decentralisation of powers and authorities to municipal bodies at various levels, but the responsibility for giving it a concrete shape rests with the states. It is the State Legislature that must pass specific laws to actually hand over functions, funds, and functionaries to the municipalities.

Why devolution remains patchy 🔗

This is where the reform meets its biggest obstacle. Many states have been reluctant to let go of control over cities, which happen to be the most economically valuable parts of their territory. Parastatal agencies – urban development authorities, water boards, transport corporations, housing boards – continue to perform functions that the Twelfth Schedule ideally assigns to municipalities.

Studies of urban finance point to a chronic shortfall. Municipal revenues in India stand at about 0.6 per cent of GDP, which is very low compared to many developing countries. The subsumption of local taxes like octroi and entertainment tax under the GST regime has further squeezed municipal revenue bases.

There is also a significant human resource gap. Skilled urban planners, engineers, and finance professionals are in short supply in most city governments, leaving municipalities ill-equipped to use even the funds they do receive.

Variations across states 🔗

Because implementation was left to the states, outcomes have varied widely. Kerala is often cited as a model where significant functions and finances have genuinely moved to the local tier, particularly after its “People’s Plan Campaign” in the late 1990s. Maharashtra and Gujarat have relatively strong Municipal Corporations in their largest cities, though smaller councils often remain underpowered.

In several northern and eastern states, mayoral offices carry limited executive authority. Real decision-making often lies with the Municipal Commissioner, a state-appointed officer, reducing the mayor to a largely ceremonial role. The tenure of mayors also differs across states, with some having terms as short as one year, which weakens political continuity and leadership at the city level.

Newer directions and continuing challenges 🔗

Since the mid-2000s, the central government has launched several urban missions – JNNURM, AMRUT, the Smart Cities Mission, and Swachh Bharat Mission (Urban) – that have channelled significant funds to cities while also imposing reform conditions. These have nudged many municipalities towards double-entry accounting, e-governance, property tax reforms, and better service benchmarks.

The Finance Commissions have also stepped up. The 16th Finance Commission has increased the urban local bodies’ share of grants to 45 per cent for 2026-31 and recommended ₹3.56 lakh crore, more than double the 15th FC allocation, marking the highest-ever urban share since structured third-tier devolution began. This is a welcome recognition that India’s urban population is now the economic engine of the country.

Yet the deeper problems persist. Municipalities still depend heavily on state and central transfers for their survival. Own-source revenue is weak because property tax assessment is outdated and politically sensitive. Ward Committees and Area Sabhas, though mandated, often exist only on paper. Political interference in electoral delimitation and ward reservation continues to delay or distort local elections in several states.

What has changed, and what hasn’t 🔗

Looking back over the post-independence journey, it is clear that urban local government has travelled a long distance. From being an afterthought in the Constitution, it has become a constitutionally recognised third tier of governance, with protected elections, reserved seats for women and marginalised groups, and a defined functional domain. Over 4,000 urban local bodies now serve hundreds of millions of residents.

At the same time, the gap between the letter and the spirit of the 74th Amendment remains real. The amendment set up a framework, but the true devolution of power – the “3Fs” of functions, funds, and functionaries – has moved at the speed of individual state governments, most of which remain ambivalent about empowering city governments that might one day rival them politically.

What do you think? Has the 74th Amendment delivered on its promise of making cities genuine institutions of self-government, or has it merely created a uniform structure without real autonomy? Should urban local bodies be given a more protected share of tax revenues, similar to what states enjoy vis-à-vis the Union, to free them from the uncertainties of state-level politics?

References

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