CAG Report on the 74th Constitutional Amendment Act (CAA)

Context

The Comptroller and Auditor General (CAG) of India has raised concerns over the inadequate compliance with the devolution of powers to Urban Local Bodies (ULBs) as mandated by the 74th Constitutional Amendment, even after 31 years of its enactment.

 

Key Highlights of the CAG Report

Compliance Status

• Limited Autonomy: Only four functions (burial grounds, public amenities, animal cruelty prevention, and slaughterhouse regulation) have been fully devolved across 18 states.
• Partial Devolution: Most states have devolved 17 functions, but urban planning and fire services remain largely untouched.
• Full Compliance: Only nine states (e.g., Chhattisgarh, Haryana, Jharkhand) have devolved all 18 functions to ULBs.

Fiscal Challenges

• Revenue Dependence: ULBs generate only 32% of their revenue independently, relying heavily on state and central grants.
• Revenue-Expenditure Gap: A 42% gap persists between resources and expenditures in 18 states.
• Property Tax Collection: ULBs collect only 56% of the total property tax demand.
• Low Fund Utilization: 11 states have utilized just 61% of the funds available to ULBs.

Administrative Issues

• Staff Shortages: An average vacancy rate of 37% in sanctioned posts, with Madhya Pradesh (61%) and Telangana (53%) facing acute shortages.
• Recruitment Autonomy: ULBs in 16 states lack control over their hiring processes.

Governance Concerns

• Election Provisions:
  • Only five states (e.g., Tamil Nadu, Uttarakhand) conduct direct mayoral elections.
  • Only nine states ensure that a mayor’s tenure aligns with the five-year term of ULBs.
  • Ward delimitation is under state control in 11 states.
• Representation of Women: Only six states reserve 50% of seats for women in ULBs.

 

Challenges in Empowering ULBs

1. Fragmented Governance: Limited control over urban planning reduces ULBs’ role in shaping city development.
2. Special Purpose Agencies: These agencies handle critical services like water and transport, diminishing ULB autonomy.
3. Restricted Taxation Powers: State control over property tax limits ULBs’ revenue-generation potential.
4. Budget Variances: Unrealistic budgeting, as seen in Himachal Pradesh, causes significant fiscal discrepancies.
5. Insufficient Staffing: High vacancy rates impair service delivery.
6. Inconsistent Elections: Delays in ULB elections undermine their operational efficiency.

 

Recommendations and Way Forward

1. Direct Election of Mayors: Expand direct elections to more states to foster stronger and accountable local leadership.
2. Strengthen Devolution: Ensure full autonomy for ULBs in areas like urban planning and fire services.
3. Institutional Mechanisms: Develop robust frameworks to support ULB operations.
4. Increase Revenue Autonomy: Allow ULBs greater control over local taxation, including property taxes and user charges.
5. Efficient Budgeting: Align budgeting processes with realistic expenditure forecasts to bridge fiscal gaps.
6. Address Staffing Issues: Focus on filling vacancies and improving working conditions for ULB personnel.
7. Empower State Election Commissions: Transfer responsibilities for ward delimitation and election duties to State Election Commissions.
8. Encourage Women’s Representation: Mandate 50% reservation for women across all states.