Evaluation of Punjab Municipal Legislation Post-74th Amendment

Punjab’s urban landscape has transformed dramatically in the past three decades, yet the laws governing its cities still carry the weight of colonial-era thinking. The Punjab Municipal Act, 1911, and the Punjab Municipal Corporation Act, 1976 form the legislative backbone for managing towns and cities across the state. When the 74th Constitutional Amendment came into force in 1993, both statutes were amended in 1994 to fall in line with the new constitutional vision of empowered urban local self-government. But more than three decades on, an honest evaluation reveals a story of partial compliance, structural bottlenecks, and missed opportunities.

The legislative backdrop 🔗

Before diving into the evaluation, it helps to understand what these two laws do. The Punjab Municipal Act, 1911 (PM Act) governs Municipal Councils and Nagar Panchayats, while the Punjab Municipal Corporation Act, 1976 (PMC Act) governs the larger Municipal Corporations. As of March 2020, Punjab had 167 Urban Local Bodies in total, classified into three categories of municipalities based on population, revenue, and other factors notified by the State Government. The 1994 amendments to both Acts were meant to translate the spirit of Part IXA of the Constitution into state-level law.

What the 74th Amendment promised 🔗

The 74th Amendment introduced Part IXA into the Constitution, dealing with Municipalities through Articles 243P to 243ZG, and came into force on 1st June 1993. It gave constitutional status to municipal bodies, mandated three tiers of urban local government – Nagar Panchayat, Municipal Council, and Municipal Corporation – and fixed a five-year term with compulsory elections. It also introduced the Twelfth Schedule listing 18 functions meant to be devolved to ULBs, ranging from urban planning to poverty alleviation.

How Punjab aligned its statutes 🔗

The Punjab Municipal (Amendment) Act, 1994 rewrote key portions of the 1911 Act. Every area previously constituted as a Municipality continued as a “smaller urban area”, and areas earlier classified as Notified Areas under Section 241 were deemed to be transitional or smaller urban areas with municipalities constituted accordingly. The Act also incorporated definitions for the District Planning Committee under Article 243 ZD and recognised the State Election Commission constituted under Articles 243K and 243ZA. On paper, therefore, the statutory structure ticked most of the constitutional boxes.

Where the reform fell short 🔗

The CAG’s Performance Audit on the efficacy of implementing the 74th CAA in Punjab offers the most thorough evaluation available. The audit found that while the state statutes largely complied with the provisions of the 74th CAA, compliance with the constitutional provisions by municipal bodies in practice was uneven. In other words, the text of the law was updated, but the spirit of self-governance did not fully translate into practice.

Incomplete functional devolution 🔗

The Twelfth Schedule lists 18 functions that states are expected to devolve to ULBs. The CAG observed that the notification regarding devolution of functions had not been issued by the State Government even as of June 2021, and that ULBs were performing only those functions that were already entrusted to them before the 74th CAA. The PMC Act itself does not clearly enumerate the devolution of all 18 subjects to Municipal Corporations, leaving a legislative gap between constitutional intent and operational reality.

A recent analysis in The Tribune, drawing on the latest CAG report tabled in the Budget Session of the 16th Vidhan Sabha, noted that although all 18 functions have been nominally devolved to ULBs, they retain full operational control over only six, with the remaining functions fragmented across multiple departments. This mismatch between assigned functions and real authority is at the heart of the state’s urban governance malaise.

Overlap with parastatal agencies 🔗

A striking feature of Punjab’s urban governance is the heavy presence of parastatal bodies that do work meant for ULBs. The Department of Local Government has three key parastatal bodies – the Punjab Water Supply and Sewerage Board (PWSSB), the Punjab Municipal Infrastructure Development Company (PMIDC), and the State Urban Development Authority (SUDA) – that deliver or facilitate urban infrastructure and services. While they bring technical expertise and scale, they also crowd out local decision-making.

The problem is systemic across the country. ULBs across India lack autonomy in city management, with several city-level functions handled by parastatals that are managed by and accountable to the state. In Punjab, specific instances illustrate the tension – the audit flagged that GMADA released only ₹35 crore out of a due ₹250 crore to the Municipal Corporation, SAS Nagar over 2016-17 to 2020-21, while the Corporation had already spent ₹100.10 crore of its own funds on works in areas handed over by GMADA. Such financial overhang directly burdens ULBs.

State control over finances and taxation 🔗

Perhaps the most restrictive feature is the degree of state control over ULB finances. Even with the 1994 amendments, Punjab’s Urban Local Bodies cannot freely decide on tax rates, borrowing, or major expenditure without state approval. The PM Act requires prior approval of the Government for several financial actions, which erodes fiscal autonomy.

A NIPFP study on state-level fiscal reforms in Punjab noted that the recommendations of the first two State Finance Commissions remained unimplemented in so far as the imposition of local taxes and other fiscal reforms were concerned. This pattern has repeated across subsequent commissions. The consequence is predictable – ULBs depend heavily on state and central transfers, and their own-source revenue remains weak.

The State Finance Commission story 🔗

Article 243Y of the Constitution makes the State Finance Commission (SFC) the pivot of municipal finance. In Punjab, the Punjab Finance Commission for Panchayats and Municipalities Act, 1994 was enacted to give effect to this requirement.

Recommendations versus implementation 🔗

Successive Punjab SFCs have pushed for stronger property tax administration, rational user charges, and predictable devolution from the state. Yet their impact has been modest. The CAG observed that timely constitution of the SFC and acceptance of its recommendations would have a direct bearing on the assured transfer of funds to ULBs, and that the devolution of adequate resources from the State Government to local bodies remains critical for the financial health and stability of local institutions.

The same audit also highlighted shortfalls in central transfers – against allocations of ₹1,962.36 crore as Basic Grant and ₹490.59 crore as Performance Grant under the 14th Central Finance Commission, the Government of Punjab received ₹1,902.65 crore and ₹200.15 crore respectively, resulting in short receipts. Since central grants are often conditional on state compliance with norms like publishing audited accounts and acting on SFC recommendations, the state’s slow pace compounds the loss.

National context for fiscal weakness 🔗

Punjab’s problems mirror those of ULBs nationally. ULBs across India suffer chronic revenue weakness, with only 32% of their revenues internally generated and heavy dependence on state and Union transfers, while property tax realisation stands at just 56% of demand and contributes barely 10-11% of municipal revenues in many states. The 16th Finance Commission, whose report was tabled in Parliament on February 1, 2026, has recommended that 50% of the basic grant to local bodies be untied while the rest be tied to sanitation and solid waste management, signalling a continued push for performance-linked fiscal transfers.

Persistent challenges on the ground 🔗

Even with amended laws, Punjab’s cities face visible service-delivery gaps. Urban Punjab faces multiple challenges including water supply, sewerage, storm water drainage, solid waste management, roads, and street lighting, with acute pressure on these services in the wake of growing urbanisation. These are precisely the domains where the 18 Twelfth Schedule functions were meant to be exercised by ULBs.

Capacity deficits 🔗

A law is only as effective as the institution implementing it. ULBs in Punjab – like those elsewhere – struggle with staff shortages, technical gaps, and limited planning capacity. On average, ULBs face a 35 to 37% vacancy rate in sanctioned posts, and in 16 states municipalities lack independent recruitment powers. For Punjab, this means even well-intentioned amendments to the PM Act and PMC Act cannot translate into effective governance without parallel investment in human resources.

Depoliticisation and bureaucratic dominance 🔗

Municipal Commissioners and Executive Officers in Punjab are appointed by the State Government and wield significant executive authority. The executive powers are vested with the State government-appointed commissioner, and parastatal agencies created by the State further deny municipal corporations their political role. The elected Mayor or President often ends up playing a ceremonial or limited role, which is at odds with the spirit of the 74th Amendment.

What reform could look like 🔗

An honest reading of the evaluation points to four broad areas of reform.

The first is genuine functional devolution, where the PMC Act and PM Act should be amended to explicitly enumerate all 18 subjects as ULB responsibilities, with matching transfer of funds and functionaries. The second is rationalisation of parastatal roles, either by folding them into ULBs or making them accountable to elected councils. The third is fiscal empowerment, which requires the state to accept and act on State Finance Commission recommendations in a time-bound manner, along with giving ULBs real powers over property tax, user charges, and borrowing. The fourth is capacity building, with a dedicated urban cadre, digital property tax systems, and performance-linked grants.

Experts have argued that states must fully operationalise the 18 functions under the 74th Constitutional Amendment, reduce overlap with parastatal agencies, activate District Planning Committees, and reform property tax systems through GIS mapping, digital assessment, and better enforcement. For Punjab, this agenda is less about fresh legislation and more about faithfully implementing the framework that was put in place in 1994.

The larger picture 🔗

The Punjab Municipal Act, 1911 and the Punjab Municipal Corporation Act, 1976 are classic examples of how legislative amendments alone cannot deliver the promise of constitutional reform. The 1994 amendments did the necessary plumbing – they introduced three-tier municipalities, fixed-term elections, reservation for women and SC/ST communities, the State Election Commission, and the State Finance Commission. But the harder work of devolving power, money, and staff has lagged behind.

In the end, the evaluation of Punjab’s municipal legislation post-74th Amendment is not a verdict on the statutes themselves, but on the political will to use them. The framework is largely in place; the question is whether the state is willing to let its cities actually govern themselves.

What do you think? Should Punjab pursue a fresh, consolidated municipal law that merges the 1911 and 1976 Acts with explicit devolution of all 18 Twelfth Schedule functions, or is the gap really about implementation rather than legislation? And how would you balance the technical expertise of parastatal bodies with the democratic legitimacy of elected ULBs?

References

1. https://cag.gov.in/webroot/uploads/download_audit_report/2021/Report%20No.%207%20of%202021_PA%20on%2074th%20CAA_English-062bd5610e610a5.58061202.pdf
2. https://secforuts.mha.gov.in/74th-amendment-and-municipalities-in-india/
3. http://www.bareactslive.com/Pun/pu928.htm
4. https://cag.gov.in/uploads/download_audit_report/2021/10-Chapter-IV_Auidt%20Objective%202-062bd5611217a20.22763656.pdf
5. https://www.tribuneindia.com/news/comment/lets-talk-local-governance-in-punjab/
6. https://prsindia.org/theprsblog/examining-urban-local-governance-in-india-through-the-case-of-bengalurua?page=39&per-page=1
7. https://cag.gov.in/uploads/download_audit_report/2021/11-Chapter-V_Audit%20Objective%203-062bd5611299961.16936538.pdf
8. https://nipfp.org.in/media/documents/wp05_nipfp_026.pdf
9. https://laex.in/daily-mains-question/16th-finance-commission-urban-local-bodies/
10. https://prsindia.org/files/policy/policy_committee_reports/16th_FC_Report_Summary.pdf
11. https://www.shankariasparliament.com/current-affairs/concerns-in-urban-local-governments