THE FOURTEENTH FINANCE COMMISSION AND

URBAN SERVICES

D. RAVINDRA PRASAD AND V. SRINIVAS CHARY

The Fourteenth Finance Commission (14th FC) was constituted
at a time when the role and contribution of urban areas for
the nations economy and development is being recognised.
With urbanisation, cities and towns experience service delivery
deficit both to general and slum households. With benchmarks
for some services in place, the State Finance Commissions
(SFCs) and Finance Commissions (FCs) need to allocate
grants-in-aid to local bodies to bridge the deficit and to meet
future needs based on a formula instead of ad hoc grants which
has been the case hitherto. The 14th FC need to address a
comprehensive agenda that includes infrastructure provision,
improved service delivery, services to poor, bridging the
resource gap of Urban Local Bodies (ULB) and improve
governance and workout a formula for grants-in-aid based
on efforts of local bodies and state governments. This is critical
to address the challenges of sustainable urban development
and Indias urban future.
INTRODUCTION

THE FOURTEENTH Finance Commission1 was constituted at a time when

the significance and contribution of urban areas is being recognised in the
country. During the last decade, several developments have taken place in
the urban sector including launching of Jawaharlal Nehru National Urban
Renewal Mission (JNNURM),2 publication of Handbook of Service Level
Joshi, B.M. Fourteenth Finance Commission; Constitution and Terms of Reference,
The Indian Journal of Public Administration, Vol. LIX, No. 4, Oct.-Dec., pp. 821-834,
2013. Thimmaiah, G. Terms of Reference of the Fourteenth Finance Commission,
Economic and Political Weekly, Vol. 45, No.48, pp.18-21, 2013.
2
Government of India, Ministry of Urban Development, Jawaharlal Nehru National Urban
Renewal Mission An Overview, Ministry of Urban Development, New Delhi, 2005.
1

236 / INDIAN JOURNAL OF PUBLIC ADMINISTRATION

236 / VOL. LX, NO. 2, APRIL-JUNE 2014

Benchmarks (SLBs)3 for core services and appointment of a High Powered

Expert Committee on Indian Urban Infrastructure and Services (HPEC)4
for estimating the urban investment requirements by the Ministry of Urban
Development, Government of India (MoUD). The 12th Five Year Plan (12th
Plan)5 and Working Group reports6 constituted by the Planning Commission
underpinned the need and urgency to improve service levels. They also
highlighted the problems of governance, human resources and capacities
of Urban Local Bodies (ULBs) in the context of emerging urban challenges.
Studies by Mathur, Oommen and others clearly bring out the fragile
municipal finances, insufficiency of grants-in-aid, need to strengthen
performance linked assistance to ULBs, problems of inter-governmental
transfers and the challenges of 14 th FC to strengthen democratic
decentralisation and improve local finances and governance.7 Oommen
discusses the terms of reference of the 14th FC and argues the need to
increase the share of devolutions to local bodies and special financial
assistance to six metropolitan cities to improve infrastructure. This article
discusses and analyses the status of urban infrastructure and gaps in service
delivery, investment needs to meet the gaps and governance issues. It argues
that the 14th FC need to address a comprehensive urban agenda, viz. service
Government of India, Ministry of Urban Development, Handbook on Service Level
Benchmarking, New Delhi, 2008.
4
Government of India, Ministry of Urban Development, Report on Indian Urban
Infrastructure and Services, New Delhi, 2010.
5
Government of India, Planning Commission, The Twelfth Five Year Plan, (2012-13 to
2017), Economic Sectors, Volume II, New Delhi, 2013.
6
Government of India, Planning Commission, 2011, Report of the Working Group on
Financing Urban Infrastructure, New Delhi. See, http://planningcommission.nic.in/
aboutus/committee/wrkgrp12/hud/wg_Financing_rep.pdf. Accessed on 27th October, 2013;
Government of India, Planning Commission, 2012: Report of the Sub-committee on
Financing Urban Infrastructure in the 12th Plan, New Delhi.
7
Mathur, Om Prakash, India: India Municipal Finance Study (2011), (ADB Technical
Assistance Consultants Report (2013), See, http:www.adb.org/projects/documents/
municipal-finance-matters-india-municipal-finance-study-tacr. Accessed on 3rd
November, 2013; (2013), Finances of Municipalities: Issues before the Fourteenth Finance
Commission, Economic and Political Weekly, 48(22), pp.23-27; Oommen M.A. (2010),
The Thirteenth Finance Commission and the Third Tier, Economic and Political Weekly,
Vol. 45, No.48; (2013), The Third Tier and the Fourteenth Finance Commission,
Economic and Political Weekly, Vol. 48, Nos.45&46; Mohanty, P.K. et al, (2007): Municipal
Finances in India: An Assessment, (Mumbai, Reserve Bank of India); Mathur, Mukesh P.
Municipal Finance and Municipal Services in India,Present Status and Future
Prospects, See www.developmentfunds.org/.../Mukesh%20Paper%20on%20
Municipal%20Situation%20in%20India.doc. Accessed on 27th October, 2013; United
Nations (2012), World Populations Prospects, The 2011 Revision, Department of Economic
and Social Affairs, Population Division, File 2, (New York).
3

THE FOURTEENTH FINANCE COMMISSION AND URBAN SERVICES / 237

D. RAVINDRA PRASAD AND V. SRINIVAS CHARY

delivery improvements, formula based inter-governmental transfers,

strengthening ULB finances through efforts of local bodies, state and
Central governments, effective monitoring of performance and to bring
professionalism into municipal governance to meet the emerging urban
challenges.
Urban Challenges
Indias urban population with 377 million in 20118 constituting 31.16
per cent of total population is projected to be about 600 millions by 2030
and the United Nations project that it would cross 50 per cent by 2050.9
The number of statutory and census towns increased from 3799 and 5161
to 4041 and 7935 during 2001and 2011 respectively.10 It is now widely
recognised that urbanisation contributes significantly to the economic
development goals of a country. However, the pace of urbanisation is posing
challenges related to service delivery and infrastructure, poverty, housing,
environment, traffic and transportation, etc. Infrastructure is often deficient,
service delivery standards are sub-optimal especially for the urban poor.
With haphazard planning and weak governance, cities are becoming places
of growth and public health threat. As the 12th Plan noted that if the urban
challenges are not tackled appropriately, not only Indian cities get
increasingly chaotic and choked, rural poverty will be converted into urban
poverty with no gains to improvement of livelihoods of Indias burgeoning
population.11
Urban Infrastructure
The physical infrastructure supports economic activity but weak
resource base constrain the ULBs to provide, maintain and renew
infrastructure and they do not have the creditworthiness to borrow and
invest. The 12th Plan period (2012-13 to 2016-17) coincides, in part, with
the award period of 14 th FC (2015-16 to 2019-20) and latters
recommendations will have a bearing on urban infrastructure improvements
during the 12th and subsequent plans.
Despite urban areas contributing about two-thirds of nations GDP,
there is a wide infrastructure gap affecting the economic productivity of
cities and urban quality of life. For the first time Zakaria Committee (1963)
8
Census of India, Primary Census Data Highlights-India, 2011. See, http://
www.censusindia.gov.in/2011census/PCA/PCA_Highlights/pca_highlights_india.html
9
United Nations, World Populations Prospects, The 2011 Revision, Department of
Economic and Social Affairs, Population Division, File 2, New York, 2012.
10
Pradhan, Kanhu Charan, Unacknowledged Urbanisation: New Census Towns of
India, Economic and Political Weekly, 48(36), pp.43-51, 2013.
11
The Twelfth Five Year Plan, op. cit. para.18.12.

238 / INDIAN JOURNAL OF PUBLIC ADMINISTRATION

238 / VOL. LX, NO. 2, APRIL-JUNE 2014

laid physical and expenditure norms for five services, viz. water supply,
sewerage, storm water drains, roads and street lighting. This was followed
by Town and Country Planning Organization (1974), Planning Commission
(1983 and 1999), etc.12 Some state governments also attempted norms for
different services. Despite these prescriptions, the Zakaria Committee norms
are used as benchmarks with adjustments for inflation despite them being
decades old. In 2008 the MoUD published benchmarks for water supply,
sewerage and sanitation, solid waste management and storm water drains
with 28 indicators.13 Select eight indicators are given in Table 1. The HPEC
accepted these benchmarks and expanded the list to cover roads, transport,
traffic and support infrastructure and street lighting. It noted that if cities
are indeed to serve as engines of growth a concerted plan should be put in
action to achieve the standards in 20 years.14
Access to Services
Access to services as per Census 2011is given in Table 2.
TABLE 1: SERVICE LEVEL BENCHMARKS

Sl.No. Indicator

Benchmark

Water Supply
1

Coverage of water supply connections

Per capita availability of water at consumer end

Extent of non-revenue water

100
135 lpcd
20%

Sewage Management
1

Coverage of Toilets

100

Coverage of waste sewerage network services

100

Solid Waste Management

1

Household level coverage of solid waste management

services

100

Efficiency of collection of municipal solid waste

100

Storm Water Drainage

1

Coverage of storm water drainage network

100

SOURCE: Handbook on Service Level Benchmarking, MoUD.

Report on Indian Urban Infrastructure and Services, op. cit, Chapter 2.

Handbook on Service Level Benchmarking, op.cit.
14
Report of the Indian Urban Infrastructure and Services, op.cit., para, 2.2.6.
12
13

THE FOURTEENTH FINANCE COMMISSION AND URBAN SERVICES / 239

D. RAVINDRA PRASAD AND V. SRINIVAS CHARY
TABLE 2: STATUS ON ACCESS TO SELECT URBAN SERVICES
Sl.No. State /UT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36

INDIA
Jammu & Kashmir
Himachal Pradesh
Punjab
Chandigarh
Uttarakhand
Haryana
NCT, Delhi
Rajasthan
Uttar Pradesh
Bihar
Sikkim
Arunachal Pradesh
Nagaland
Manipur
Mizoram
Tripura
Meghalaya
Assam
West Bengal
Jharkhand
Odisha
Chhattisgarh
Madhya Pradesh
Gujarat
Daman & Diu
D & N Haveli
Maharashtra
Andhra Pradesh
Karnataka
Goa
Lakshadweep
Kerala
Tamil Nadu
Puducherry
A & N Is.

Tap Water
Type of Latrine Piped
Drainage
Coverage Treated Safe Others OD Sewers Closed Open No
70.6
87.9
95.5
76.4
96.8
78.4
77.5
81.9
82.6
51.5
20.0
92.1
84.2
35.7
56.3
74.4
54.0
77.6
30.2
55.6
41.6
48.0
62.5
62.2
85.6
72.6
50.3
89.1
83.5
80.4
90.2
16.9
34.9
80.3
95.4
97.9

62.0
70.6
93.3
66.1
93.8
72.7
70.2
75.8
75.4
44.7
15.1
70.0
46.5
6.0
50.9
61.8
43.5
68.1
27.4
50.0
34.7
42.1
44.2
50.6
68.8
48.7
35.7
85.7
75.5
68.4
87.8
11.7
30.4
66.3
91.8
92.7

78.6
70.3
91.0
86.4
96.2
87.6
81.8
93.1
75.0
79.3
65.6
94.4
78.7
82.3
65.6
81.5
50.8
84.8
72.3
65.3
66.5
60.8
64.1
74.8
88.8
94.7
87.9
88.3
81.4
76.0
85.8
97.6
76.2
75.1
86.9
91.9

8.8
19.0
2.1
7.8
0.6
7.7
9.4
3.9
8.3
5.9
5.5
3.4
14.6
15.5
32.1
17.6
47.9
12.8
22.7
23.4
2.5
6.0
1.5
2.7
2.5
1.2
1.0
4.0
6.7
13.3
4.7
0.5
22.1
8.7
0.9
0.3

12.6
10.7
6.9
5.8
3.2
4.7
8.8
3.0
16.7
14.8
28.9
2.2
6.7
2.2
2.3
0.9
1.3
2.4
5.0
11.3
31.0
33.2
34.4
22.5
8.7
4.1
11.1
7.7
11.9
10.7
9.5
1.9
1.7
16.2
12.2
7.8

32.7
25.3
40.7
63.7
85.9
31.7
54.8
60.5
25.6
28.3
7.2
34.4
13.8
4.5
7.4
5.1
6.7
9.7
15
13.6
14
11.5
9.1
20.2
60.4
6.3
8
37.8
33.7
53.3
18.6
2.9
14.3
27.4
19.9
3

44.5
32.7
65.0
57.6
87.3
42.3
49.4
60.3
34.4
32.2
30.0
39.5
15.7
8.6
6.0
20.4
7.3
17.9
15.4
24.4
24.9
19.9
17.5
31.9
69.4
46.5
47.0
62.7
49.6
56.5
54.8
14.8
33.5
44.8
32.3
12.1

37.3
50.4
28.6
33.3
8.7
50.6
42.8
35.7
51.6
61.2
41.4
52.6
50.6
67.9
64.4
59.1
46.2
62.5
40.9
42.4
45.9
39.2
51.4
50.4
13.2
30.7
15.7
28.4
38.7
31.1
23.2
11.1
21.0
30.2
50.2
74.0

18.2
16.9
6.4
9.1
4.0
7.1
7.8
4.0
14.0
6.6
28.6
7.9
33.8
23.5
29.6
20.5
46.6
19.7
43.7
33.2
29.2
41.0
31.1
17.7
17.4
22.8
37.3
8.8
11.7
12.4
22.0
74.1
45.5
25.1
17.4
14.0

SOURCE: Compiled from Census Reports, 2011.

Water
Over 70 per cent people have access to tap water in their premises and
the rest depend on alternate sources. Only 62 per cent of urban residents
get treated water. In Bihar, only 20 per cent households have access to
water within the premises, in Assam 30.2 per cent and lowest access is in
Lakshadweep with only 16.9 per cent. In Tamil Nadu and Karnataka, though

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240 / VOL. LX, NO. 2, APRIL-JUNE 2014

over four-fifths have access to tap water in the premises, only 66.3 per
cent and 68.4 per cent, respectively receive treated water (Table 2).15 City
water supply ranges from a few hours a day to once in a few days. There is
no ULB in the country except Malkapur in Maharashtra, which supplies
city wide continuous (24/7) water.16 Public health hazards and coping costs
involved in intermittent water supply are well-known. This in part can be
attributed to weak governance.
Sanitation
Urbanisation is posing enormous challenge to urban sanitation service
delivery. While at the national level over 78 per cent have access to personal
or public toilets, in Jharkhand, Chhattisgarh and Odisha 31 per cent, 34.4
per cent and 33.2 per cent, respectively have no access to toilets and defecate
in the open. Similar is the case with states like Bihar (28.9%), Madhya
Pradesh (22.5%) and Tamil Nadu (16.2%). The prevalence of open
defecation still exists in urban India is a matter of grave concern. Though
many a village eliminated open defecation in rural India, it is not so with
urban areas.17
Drainage
Only 45 per cent households have closed drains, 37 per cent open
drains and others release waste water into the open areas. Only eight states/
UTs have more than 50 per cent closed drains and in Kerala, Assam, Odisha,
Tripura and Lakshadweep open drains constitute more than 40 per cent.
Chandigarh and Delhi with four per cent have lowest percentage of open
drains (Table 2).
Access is computed based on SLB definitions and Census of India 2011data.
Malkapur received an award for providing continuous water supply under Prime
Ministers Excellence in Public Administration Scheme in 2009-10. See Government of
India, Ministry of Personnel, Public Grievances and Pensions, Department of
Administrative Reforms and Public Grievances, Success Story of Malkapur 24X7 Water
Supply Scheme, in Prime Ministers Excellence in Public Administration Scheme in 200910, New Delhi, pp.3-4. See, http://darpg.gov.in/darpgwebsite_cms/Document/file/
pmawards_brochure.pdf; Accessed on 27th October, 2013.
17
Under National Urban Sanitation Policy, the MoUD evaluated sanitation status in 423
Class I cities as per 2001 Census in 2009-10 and rated them based on output, process and
outcome indicators. The cities were classified as green (healthy and clean city with more
than 91 marks), blue (recovering city with 67-90 marks), black (needing considerable
improvement with 34-66 marks) and red (less than 33 marks needing immediate remedial
action). No city was in green category and four cities viz., Chandigarh, Mysore, Surat and
NDMC were in blue and the rest are in black or red category. See http://
www.urbanindia.nic.in/programme/uwss/FlyerRating.pdf. Accessed on 27th October, 2013.
Recently it is reported that Sikkim has achieved 100% sanitation both in rural and urban
areas. See Times of India, February 9, 2014.
15
16

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D. RAVINDRA PRASAD AND V. SRINIVAS CHARY

Sewerage
Less than one-third households have sewerage connection18 and others
leave toilet waste water into septic tanks or open drains. Chandigarh has
85.9 per cent coverage while the lowest is in Andaman and Nicobar Islands.
Punjab (63.7%), Delhi (60.5%), Gujarat (60.4%), Haryana (54.8%) and
Karnataka (53.3%) have better coverage of sewer lines (Table 2).
Solid Waste Management
Urban India daily generates over a lakh metric ton waste with 200-600
gms per capita. In larger ULBs, solid waste collection efficiency ranges
between 70 per cent to 90 per cent and in small ULBs it is less than 50 per
cent. The ULBs spend Rs. 500 to Rs.1500 on solid waste management per
ton, of which 60-70 per cent is on street sweeping and collection, 20-30
per cent on transportation and less than five per cent on disposal. This
highlights the priority accorded to disposal. Projections indicate that in
the next 50 years waste generation would almost double. Unless efforts
are made to address this problem, there exists a serious threat to public
health and environment.
Service Level Benchmarks (SLBs)
The 13th FC endorsed the SLBs published by MoUD in 2008 and
recommended that the ULBs notify the status of services and targets for
the next fiscal year in the state gazette and made it conditional to access
the performance grant of about Rs.8, 000 crore it recommended.19 In 201011, thirteen states notified the status of four services and targets for the
next fiscal. The data gives a dismal picture of urban services (Table 3).
The national average20 of water connections within the premises is 53.6
per centabout half the benchmark of 100 per cent coverage. In Gujarat
and Himachal Pradesh the coverage is better with 77 per cent and 74.4
per cent, respectively and lowest is in Bihar with only 17 per cent.
The per capita water supply benchmark is 135 lpcd whereas the average
supply is 76 lpcd. Highest supply is in Himachal Pradesh and Odisha
with over 110 lpcd but in Bihar supply is less than 30 lpcd.
The non-revenue water should be less than 20 per cent and Gujarat is
the only state which is close to the benchmark with 20.6 per cent. The
18
Connection of latrine waste water to sewer pipelines is taken as sewerage coverage.
See, http://censusmp.nic.in/censusmp/All-PDF/4.Latrine%20Facility.pdf. Accessed on 27th
October, 2013.
19
Government of India, Ministry of Finance, Thirteenth Finance Commission-20102015, New Delhi, chapter 10, 2009.
20
National average refers to 1405 ULBs constituting 35 per cent of the total ULBs in
2011from 13 states that notified the benchmarks.

100%

53.6

37.6

17.0

25.8

77.0

74.4

64.5

36.9

45.7

67.8

25.7

66.4

27.9

37.3

Benchmark

Average

Andhra Pradesh

Bihar

Chhattisgarh

Gujarat

Himachal Pradesh

Karnataka

Kerala

Madhya Pradesh

Maharashtra

Odisha

Rajasthan

Tripura

Uttar Pradesh

60.3

71.3

68.7

110.7

80.8

56.9

64.1

94.1

110.3

97.3

45.2

29.2

68.9

76.6

135

Per capita
supply
LPCD

SOURCE: Administrative Staff College of India 2011.

Water Connection
in premises

Indicator

26.7

72.7

27.1

54.6

32.1

45.1

29.1

30.9

29.4

20.6

64.9

48.1

41.2

34.1

20%

NRW

71.8

62.4

68.4

56.2

66.6

73.7

84.5

70.7

87.6

77.4

69.2

49.0

77.2

71.1

100%

Coverage
of toilets

31.2

0.0

42.4

18.3

54.5

17.6

17.5

50.6

41.1

61.5

9.7

25.0

30.7

49.5

100%

Sewage
network
coverage

26.1

52.8

26.8

45.6

66.3

26.0

16.0

49.9

23.7

79.2

20.1

23.8

72.7

57.2

100%

Household
level SWM
coverage

TABLE 3: URBAN SERVICES SERVICE LEVEL BENCHMARKS

93.5

80.7

76.1

68.9

76.2

71.0

60.4

72.1

70.8

81.3

76.2

42.8

87.1

77.2

100%

Collection
efficiency
of solid waste

52.6

2.2

60.5

12.6

63.5

55.2

16.3

52.7

19.8

47.8

33.4

33.8

69.3

52.9

100%

Coverage
of SWD
network

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242 / VOL. LX, NO. 2, APRIL-JUNE 2014

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D. RAVINDRA PRASAD AND V. SRINIVAS CHARY

national average is 34 per cent and in Tripura and Chhattisgarh more

than two-thirds of water produced goes waste.
Only 71 per cent households have toilets in the premises. Himachal
Pradesh and Kerala are better placed with 87.6 per cent and 84.5 per cent
respectively while Bihar with about 50 per cent has lowest coverage.
No state has 100 per cent sewerage network. Gujarat with over 61 per
cent stands better while Tripura has no sewage system and Chhattisgarh
has less than 10 per cent coverage.
The door-to-door collection of solid waste stands at 57 per cent against
100 per cent benchmark. Gujarat has about four-fifths coverage and all
other states are far behind. Uttar Pradesh with over 93.5 per cent solid
waste collection efficiency is closer to the benchmark while Bihar with
43 per cent collection efficiency is way behind.
Only 53 per cent have a network of storm water drains. Andhra Pradesh
has about 70 per cent coverage while Tripura with two per cent has
lowest coverage followed by Odisha with over 12 per cent.
The foregoing data clearly bring out the less than satisfactory
performance of ULBs vis--vis the benchmarks and road to achieve them
appear to be long and arduous.
Service to the Poor
Despite poors contribution to national economy, poverty continues to
be a major problem in our cities and towns and no comprehensive and
authentic data on slums and the poor peoples access to basic services is
available. As per Census 2011, there are 137.49 lakh slum households in
India.21 But a study by Participatory Research in Asia and Indicus Analytics
put the figure at 240 lakh households and they contribute 7.53 per cent of
the countrys urban GDP.22 As per Census 2011, three-fourths slum
21
Primary Census Abstract for Slums. See, http://www.censusindia.gov.in/2011Documents/Slum-26-09-13.pdf. Accessed on 27th October, 2013; Housing Stock, Amenities
& Assets in Slums; See, http://www.censusindia.gov.in/2011census/hlo/Slum_Table/
Slum_Table.html Accessed on 27th October, 2013, House Listing and Houses Census Data
Highlights, Assets in Slums. See, http://www.censusindia.gov.in/2011census/hlo/
hlo_highlights.html Accessed on 27th October, 2013; House Listing and Houses Census
Data Highlights, Assets in Slums. See, http://www.censusindia.gov.in/2011census/hlo/
hlo_highlights.html Accessed on 27th October, 2013.
22
The Society for Participatory Research in Asia (PRIA) and Indicus Analytics undertook
a survey on Economic Contributions of Urban Poor in India in 50 cities in which a 5, 353
households and 24,445 individuals were covered. See, The Economic Times, 16th October,
2013. See, http://economictimes.indiatimes.com/news/economy/indicators/slums-contributeover-7-5-to-gdp-study/articleshow/24217724.cms. Accessed on 27th October, 2013.

244 / INDIAN JOURNAL OF PUBLIC ADMINISTRATION

244 / VOL. LX, NO. 2, APRIL-JUNE 2014

households have domestic tap connection but only two-third among these
get treated water; about three-fourths have safe sanitation facilities, onefourth connected latrines to sewer lines and about one-fifth households
defecate in the open with variations between states (Table 4). Tap
connections within the premises appear to be high with more than 90 per
cent in several states/UTs. But the coverage is poor in Bihar (15.6%),
Jharkhand (27.48%) and Odisha (40.69%). Open defecation is very high
TABLE 4: STATUS ON ACCESS TO SERVICES TO SLUM POPULATION
Sl.No. State /UT

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36

INDIA
Jammu & Kashmir
Himachal Pradesh
Punjab
Chandigarh
Uttarakhand
Haryana
NCT of Delhi
Rajasthan
Uttar Pradesh
Bihar
Sikkim
Arunachal Pradesh
Nagaland
Manipur
Mizoram
Tripura
Meghalaya
Assam
West Bengal
Jharkhand
Odisha
Chhattisgarh
Madhya Pradesh
Gujarat
Daman & Diu
D & N Haveli
Maharashtra
Andhra Pradesh
Karnataka
Goa
Lakshadweep
Kerala
Tamil Nadu
Puducherry
A & N Islands

Tap
Type of Latrine Piped
Drainage
Coverage Treated Safe Others OD Sewers Closed Open No
system
74.0
91.0
94.0
69.8
93.1
73.8
73.2
84.3
83.0
45.4
15.6
92.6
48.4
35.9

65.3
63.8
92.5
60.4
72.6
68.2
63.9
73.3
76.0
38.6
11.7
71.6
11.1
4.1

72.8
58.0
82.2
80.0
79.5
85.3
70.3
85.3
61.9
74.4
51.3
91.4
53.2
23.0

8.3
32.9
8.4
9.5
1.0
8.7
12.4
2.2
11.8
6.9
6.2
6.0
33.3
75.7

18.9
9.1
9.4
10.5
19.4
6.1
17.3
12.5
26.3
18.8
42.5
2.7
13.5
1.3

24.5
25.9
32.5
58.3
1.6
27.7
45.9
43.0
22.0
20.5
4.4
22.8
6.0
4.4

37.0
26.9
57.9
49.9
15.6
29.8
38.4
48.7
26.6
21.5
19.3
35.3
4.2
5.0

44.3
54.2
31.6
38.8
56.8
64.4
52.1
45.6
56.6
70.7
39.5
59.8
33.5
80.0

18.8
18.9
10.5
11.3
27.6
5.8
9.6
5.7
16.8
7.7
41.3
4.9
62.3
15.0

67.1
58.9
66.4
28.0
63.2
27.5
40.7
60.9
60.9
84.5

56.6
48.4
61.4
25.8
55.7
21.6
35.0
42.6
48.4
72.7

86.1
18.7
88.9
63.3
66.5
55.3
44.1
56.6
64.8
75.6

13.4
79.3
7.4
26.2
22.4
2.8
7.6
1.8
3.5
3.1

0.5
2.0
3.7
10.5
11.1
41.9
48.3
41.7
31.7
21.3

5.0
4.3
18.9
13.1
14.6
5.9
5.4
3.6
13.6
40.3

23.8
3.9
19.6
12.1
25.0
14.4
9.4
10.2
20.8
50.6

61.4
43.4
61.6
37.8
43.8
41.6
36.7
56.8
57.1
21.9

14.8
52.8
18.9
50.1
31.3
44.0
53.9
33.1
22.1
27.6

90.3
84.0
83.6
97.5

86.6
77.8
67.5
93.6

86.5 3.8
9.8
40.8 44.4 14.8
59.8 15.2 25.0
92.1 0.5 7.4

23.0
29.7
33.3
29.6

57.5
43.2
34.9
61.5

34.8
44.3
49.0
23.8

7.7
12.4
16.1
14.7

58.0
80.6
98.2
95.8

53.2
67.1
91.1
95.7

74.9 21.8 3.3

71.7 5.2 23.1
73.6 1.5 24.9
20.2 65.9 14.0

15.6
30.7
11.5
4.1

31.7
42.1
20.9
10.3

30.7
29.0
53.2
82.1

37.6
28.9
25.9
7.7

SOURCE: Compiled from the Census of India, 2011 Reports.

THE FOURTEENTH FINANCE COMMISSION AND URBAN SERVICES / 245

D. RAVINDRA PRASAD AND V. SRINIVAS CHARY

in Bihar, Jharkhand, Odisha and Chhattisgarh with over 40 per cent of

urban poor defecating in open. Sewer connections are very limited in most
states except in Punjab and Gujarat where it is 58 per cent and 40 per cent
respectively. The problem gets compounded when slums are not notified
or regularised as local governments extend services mostly to notified
slums.23 The NSSO survey in 2002 clearly brings out the variations in
access to water and sanitation services to slum households between notified
and non-notified slums (Table 5). No doubt, in some states the non- notified
slums have better access than the notified which can be attributed to the
pressures exerted by local councillors. The cumulative impact of lack of
access to basic services is insecurity, unhygienic living conditions, poor
health and nutrition and above all disempowerment.
TABLE 5: ACCESS TO SERVICES IN SLUMS (IN %)

Sl.No. Service

Notified Slums

Non-notified Slums

Access to tap water

84

71

Access to sewerage

30

15

Without drainage

15

44

Without latrine

17

51

SOURCE: India Infrastructure Report, 2006.

Access to Services in City and Slums

Status on access to services in the city and slums in 2011 is presented
in Table 6. Access to tap water appears to be better in slums vis-a-vis other
households in the city.24
This may mainly be because the slum households have access through
house or public tap, whereas the general households have access mostly
through house tap. Most slum households access water from outside the
Census of India, 2011 classified slums into three categories viz., notified (under slum
Acts), recognized (not formally notified under Slum Act) and identified (compact areas
with 60-70 households of poorly built congested tenements in unhygienic environment
with inadequate infrastructure and lacking in sanitation and water facilities). Details of
access to services category-wise are not yet available.
24
As per Census of India, 2011, only 2543 of 4041 ULBs or 63 per cent reported slums.
It is possible that slum reporting may have better access to services. See C. Chandramouli,
Housing Stock, Amenities and Assets in Slums Census 2011. See censusindia.gov.in/
2011-Documents/On_Slums-2011Final.ppt. Accessed on 27th October, 2013.
23

246 / INDIAN JOURNAL OF PUBLIC ADMINISTRATION

246 / VOL. LX, NO. 2, APRIL-JUNE 2014
TABLE 6: ACCESS TO SERVICES IN CITY AND SLUMSA COMPARISON

Sl.No.

Service

Urban

Slum

70.6

74.0

Source of Drinking Water

1

Tap

Treated Source

62.0

65.3

Untreated Source

8.6

8.7

Well

6.2

3.0

Hand pump

11.9

12.7

Tube well

8.9

7.6

Other sources

2.5

2.8

Location of Source
8

Within the premises

71.2

56.7

Outside the premises

28.8

43.3

Drainage Connectivity
10

Closed drainage

44.5

36.9

11

Open drainage

37.3

44.3

12

No drainage

18.2

18.8

Latrine
13

Latrine within premises

81.4

66.0

14

Water closet

72.6

57.7

15

Pit latrine

7.1

6.2

16

Other

1.7

2.2

No Latrine in premises

18.6

34.0

17

Public latrine

6.0

15.1

18

Open defecation

12.6

18.9

SOURCE: C. Chandramouli.

premises indicating their dependence on public tap. In slums households

closed drains are less, use of public latrines and open defecation is higher.
Absence of safe sanitation increases the vulnerability to diarrhea and other
water borne diseases. As Girish and Nitin noted about 3.8 crore people are
affected by waterborne diseases every year losing 7.30 crore working days

THE FOURTEENTH FINANCE COMMISSION AND URBAN SERVICES / 247

D. RAVINDRA PRASAD AND V. SRINIVAS CHARY

and about 15 lakh children lose their lives due to diarrhea every year (both
urban and rural) is a matter of grave concern.25
Service Delivery Gap in City and Slums
The service delivery gap26 is very high both in cities and slums. Treated
water is not reaching 38 per cent of urban population, latrines are not
available to 21.4 per cent urbaniites and 67 per cent do not have sewerage
system (Table 7). In slums there is about 35 per cent deficiency in treated
water supply, over 27 per cent have no access to latrine, 18.8 per cent do
not have drainage facility, and 75 per cent do not have access to sewerage.
In Bihar, Lakshadweep, and Nagaland treated water is not accessible to 80
per cent slum households. Over 40 per cent households do not have latrines
in their premises in several states including J&K, Bihar, Nagaland,
Jharkhand, Odisha, Andhra Pradesh, Chhattisgarh, etc. Gap in sewerage
coverage is very high in most states and drainage deficiency is over 50 per
cent in states like Assam, Odisha, etc. Commenting on the service delivery
gap, the HPEC noted that the urban service delivery is far too poorer than
is desirable for Indias income levels .. Floods, traffic jams,
accumulated wastes on road sides and people queuing up for water from
stand posts and tankers across cities and towns all drive home the urgent
need to address the challenges of delivering urban services in India.27
Long neglect, inadequate investments, poor O&M, fragmented institutional
responsibility, absence of regulatory mechanism, poor governance and
capacity constraints seriously affect service delivery.
Costing Urban Infrastructure Needs
There were few efforts in the past to estimate the urban infrastructure
investment requirements. The HPEC estimated costs of asset creation,
renewal and redevelopment of slums and capacity building, but excluding
land acquisition over a 20 year period2012 to 2031 at Rs.39.2 lakh crore
at 2009-10 prices.28 It also estimated a requirement of Rs. 19.9 lakh crore
to meet O&M costs of existing infrastructure and new infrastructure to be
provided over the next 20 years.29 The McKinsey Global Institute, however,

25
Kumar, S. Girish, and Joseph, Nitin, Drainage and Sewerage System in Urban
India: Need for Action, Indian Journal of Occupational Medicine, 16 (3): pp150-151.
See http://www.ncbi.nlm.nih.gov/pmc/articles/PMC3683187/. Accessed on 27th October,
2013.
26
Gap is the difference between the benchmark and the actual status as per Census of
India, 2011.
27
Report on Indian Urban Infrastructure and Services,op.cit., para. 2.1.1.
28
Report on Indian Urban Infrastructure and Services,op.cit., para. 3.4.1.
29
Ibid. para. 3.5.3

248 / INDIAN JOURNAL OF PUBLIC ADMINISTRATION

248 / VOL. LX, NO. 2, APRIL-JUNE 2014

put the requirement at a much higher level.30 The Working Group on

Financing Urban Infrastructure estimated the need for Rs. 78,274, Rs.1.62
and Rs. 3.3 lakh crore during the 12th Plan period from the Government of
India under different scenarios to meet the infrastructure backlog in 20, 15
and 10 years respectively.31
Financing Services
Studies on municipal finances by Mathur, Mohanty, Mukesh, Oommen,
Ramakrishna and others, as noted earlier, brought out the poor status of
municipal revenues and wide gap between revenues and expenditure
inadequate to provide basic services. The local bodies spend far less than
needed to provide minimum services to their citizens. The reasons for such
unsatisfactory state are attributed to ULB management of finances as well
as state policies. Total municipal revenues in India are a mere 0.76 per
cent of countrys GDP while it is 4.5 per cent in Poland, five per cent in
Brazil and six per cent in South Africa. McKinsey Global Institute estimated
that in India ULBs invest a mere $ 17 on infrastructure whereas in other
countries it is far higher $ 116 in China, $ 127 in South Africa and $ 391
in UK.32 The Working Group noted that the 11th Plan outlay on urban
development including housing and poverty alleviation is a mere Rs.68,
080 crore while the investments in rural sector are in the range of Rs.5.5
lakh crore at 2006-07 prices. 33 Urban sector investments are little over 12
per cent of rural investments while the urban population is over 31 per
cent of the total population explaining the poor status of urban
infrastructure. It noted the need for predicable and timely fiscal transfers
and the GoIs fiscal support to manage the process of urbanisation.34 As
per the World Wild Life Fund study India spends one-sixth of rural spending
on urban areas and there is a need to change this bias. 35 This clearly indicates
the inability or unwillingness of the local bodies to exercise their powers
to mobilise revenues. To meet the projected requirement, ULBs need to
30
McKinsey Global Institute, Indias Urban Awakening: Building Inclusive Cities,
Sustaining Economic Growth, The Report estimated that about $2.2 trillion is required at
2008 prices. p.63, 2010.
31
Report of the Working Group on Financing Urban Infrastructure, op.cit., para.4.2.
32
Khan, Harun A., (2013), Conference on Financing Strategy for Urban Infrastructure:
Inaugural Address, Center for Advanced Financial Research and Learning, (Mumbai).
See, http://www.cafral.org.in/docs/CHRK230713FD.pdf. Accessed on 27th October, 2013.
33
Report of the Working Group on Financing Urban Infrastructure, op.cit., Para. 1.42.
34
Ibid. para 4.5.
35
In case of urban poor the allocation is one-tenth of rural poor. Sanjeev Sanyal, et al:
The Alternative Urban Futures Report- Urbanisation & Sustainability in India: An
Independent Agenda, p.21. http://assets.wwfindia.org/downloads/urbanisation_report.pdf.
Accessed on 27th October, 2013.

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D. RAVINDRA PRASAD AND V. SRINIVAS CHARY
TABLE 7: SERVICE DELIVERY GAP IN CORE SERVICES IN CITY AND SLUMS
Sl.
No

State /UT

Treated Tap
Water .

Latrine

Piped Sewer

Drainage

City

Slum

City

Slum

City

Slum

City

Slum

INDIA

38.0

34.7

21.4

27.2

67.3

75.5

18.2

18.8

Jammu & Kashmir

29.4

36.2

29.7

42.0

74.7

74.1

16.9

18.9

Himachal Pradesh

6.7

7.5

9.0

17.8

59.3

67.5

6.4

10.5

Punjab

33.9

39.6

13.6

20.0

36.3

41.7

9.1

11.3

Chandigarh

6.2

27.5

3.8

20.5

14.1

98.4

4.0

27.6

Uttarakhand

27.3

31.8

12.4

14.7

68.3

72.3

7.1

5.8

Haryana

29.8

36.1

18.2

29.7

45.2

54.1

7.8

9.6

NCT, Delhi

24.2

26.7

6.9

14.7

39.5

57.0

4.0

5.7

Rajasthan

24.6

24.0

25.0

38.1

74.4

78.0

14.0

16.8

10

Uttar Pradesh

55.3

61.4

20.7

25.7

71.7

79.5

6.6

7.7

11

Bihar

84.9

88.3

34.4

48.7

92.8

95.6

28.6

41.3

12

Sikkim

30.0

28.4

5.6

8.6

65.6

77.2

7.9

4.9

13

Arunachal Pradesh

53.5

88.9

21.3

46.8

86.2

94.0

33.8

62.3

14

Nagaland

94.0

95.9

17.7

77.0

95.5

95.6

23.5

15.0

15

Manipur

49.1

16

Mizoram

38.2

43.4

18.5

13.9

94.9

95.0

20.5

14.8

17

Tripura

56.5

51.6

49.2

81.3

93.3

95.7

46.6

52.8

18

Meghalaya

31.9

38.6

15.2

11.1

90.3

81.1

19.7

18.9

19

Assam

72.6

74.2

27.7

36.7

85.0

86.9

43.7

50.1

20

West Bengal

50.0

44.3

34.7

33.5

86.4

85.4

33.2

31.3

21

Jharkhand

65.3

78.4

33.5

44.7

86.0

94.1

29.2

44.0

22

Odisha

57.9

65.0

39.2

56.0

88.5

94.6

41.0

53.9

23

Chhattisgarh

55.8

57.5

35.9

43.4

90.9

96.4

31.1

33.1

24

Madhya Pradesh

49.4

51.6

25.2

35.2

79.8

86.4

17.7

22.1

25

Gujarat

31.2

27.3

11.2

24.4

39.6

59.7

17.4

27.6

26

Daman & Diu

51.3

27

D & N Haveli

64.3

28

Maharashtra

14.3

13.4

11.7

13.5

62.2

77.0

8.8

7.7

29

Andhra Pradesh

24.5

22.2

18.6

59.2

66.3

70.3

11.7

12.4

30

Karnataka

31.6

32.5

24.0

40.2

46.7

66.7

12.4

16.1

31

Goa

12.2

6.4

14.2

7.9

81.4

70.4

22.0

14.7

32

Lakshadweep

88.3

33

Kerala

69.6

46.8

34

Tamil Nadu

33.7

32.9

24.9

28.3

72.6

69.3

25.1

28.9

35

Puducherry

8.2

8.9

13.1

26.4

80.1

88.6

17.4

25.9

36

A & N Islands

7.3

4.3

8.1

79.8

97.0

95.9

14.0

7.7

34.4

92.6

5.3

93.7

12.1

SOURCE: Compiled from Census of India, 2011 Reports.

22.8

92.0

2.4
23.8

29.6

37.3

97.1
25.1

85.7

74.1
84.4

45.5

37.6

250 / INDIAN JOURNAL OF PUBLIC ADMINISTRATION

250 / VOL. LX, NO. 2, APRIL-JUNE 2014

identify robust revenue schemes and both Central and state governments
have to increase their commitment to urban sector. The HPEC suggested
phased investments15 per cent during the 12th Plan, 12 per cent during
the 13th Plan and eight per cent during 14th and 15th Plans.36 It also suggested
that the states should share 25 per cent of GST with urban and rural local
bodies and this should be enforced through a constitutional mechanism. It
further suggested that the urban infrastructure investments should be
increased from 0.7 per cent of GDP in 2011-12 to 1.1 per cent by 203031.37 The 12th Plan emphasised the need to strengthen municipal finances
and make them predictable through suitable reforms already initiated under
JNNURM (Para18.62).38 It suggested a separate Local Bodies Finance
List in the Constitution through amendment.
Lukewarm attitude of the state governments to financially empower
ULBs to deliver constitutionally devolved functions is a matter of grave
concern. Similarly, unwillingness of ULBs to levy and collect taxes in
their domain like property tax to meet increasing cost of services is
becoming critical. This is compounded by the state governments usurping
their taxation powers and deciding postponement of property tax revision,
exemption of penalty for delayed payment, etc. Non-revision of property
tax for years clearly indicates that this is against the intent of the 74th CAA
and recommendations of the 13th FC. Another problem is the unwillingness
of ULBs to levy and collect user charges to meet at least the O&M cost of
services they provide despite JNNURM reform agenda which was
reinforced by the 13th and earlier FCs. The Second Administrative Reforms
Commission felt that levy and collection of appropriate user charges must
be encouraged and grants to the municipalities may be linked to their own
efforts at resource rising.39
The 13th FC recognised the need to increase devolutions to local bodies
as they are being asked to meet many a challenge including provision of
services. It also recognised the reluctance of state governments to implement
the recommendations of the previous FCs to strengthen local finances which
were taken as more indicative than imperative.40 It is in this context that
the 13th FC while increasing the grants to ULBs from Rs.5,000 crore
Report on Indian Urban Infrastructure and Services,op.cit., Para. 3.4.4.
Ibid.
38
The Twelfth Five Year Plan, 2012-13 to 2017, Economic Sectors, Vol. II, op.cit., para.
18.62
39
Government of India, the Second Administrative Reforms Commission, Local
Governance: An Inspiring Journey into the Future, Sixth Report, New Delhi, Para. 5.3.6.4.,
2007.
40
The Thirteenth Finance Commission, op.cit.,para. 10.106..
36
37

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D. RAVINDRA PRASAD AND V. SRINIVAS CHARY

recommended by the 12th FC to over Rs. 23,000 crore, linked one-third of

the grant to performance and made release of these grants conditional to
compliance to the nine conditions.41 This is a measure towards improving
urban governance and empowering the local bodies.
Governance
In the context of India becoming an urban majority country by 2050,
urban centric policy and governance becomes critical. Good urban
governance is a pre-condition for efficient financial management, effective
service delivery, O&M of infrastructure, transparency and citizen-friendly
administration, etc. But absence of professionalism and weak capacities
of even the existing staff plague the ULBs. Increased FC allocations or
devolutions by state governments would be of no avail unless
professionalism and increased capacities are brought into municipal
governance and performance. The inability of the ULBs to draw their full
share of the FC grants, not all states fulfilling 13th FC conditionalities so
far to access the performance grant and poor implementation of
infrastructure projects and agreed reform agenda under JNNURM as
pointed by the C&AG42 are pointers to the governance deficit at local
level and the need to strengthen it.
FCs on Urban Infrastructure and Financing
State Finance Commissions adopted different methodologies to
strengthen ULB finances. Several SFCs lamented the weak financial
position of ULBs and suggested reforms. The Tamil Nadu, Karnataka and
Madhya Pradesh SFCs suggested global sharing, whereas others like
Odisha, Gujarat and Assam made ad hoc grants-in-aid. There is high
dependenc on non-plan transfers from state governments. For example:

The Bihar Fourth SFC noted that none of the ULBs maintained
asset registers. It noted that the poor contribute substantially
to the economy, but do not enjoy the urban benefits and
suggested to suitably develop infrastructure facilities in slums.
It made ad hoc grants to be invested on solid waste
management, governance improvement, parks and roads.43

The Kerala Fourth SFC too lamented the lack of asset

management planning. The database is not proper though it is

Ibid.
Comptroller and Auditor General of India: Performance Audit on Jawaharlal Nehru
National Urban Renewal Mission: Report No.15 of 2012-13, New Delhi. See, http://
saiindia.gov.in/english/home/Our_Products/Audit_report/Government_Wise/union_audit/
recent_reports/union_performance/2012_2013/commercial/Report_15/Report_15.html.
Accessed on 27th October, 2013.
43
Government of Bihar, Report of the State Finance Commission 2010, Patna.
41
42

252 / INDIAN JOURNAL OF PUBLIC ADMINISTRATION

252 / VOL. LX, NO. 2, APRIL-JUNE 2014

used to determine maintenance requirements. The SFC

underpinned on the poor state of roads in local bodies which
is raising the demand for transferring them to PWD.44

The Karnataka Third SFC lamented about the paucity of urban

infrastructure like roads, toilets, waste management,
underground drainage, streetlights, water, etc., and proposed
an incentivisation scheme.45

A study undertaken by the Administrative Staff College of India

for the Chhattisgarh Second SFC adopted the per capita cost
norms prescribed by the HPEC to estimate the infrastructure
gap for different categories of ULBs and arrived at the financial
requirements during the award period based on ULB efforts
and state devolutions.46

Tenth to Twelfth FCs recommended ad hoc grants to ULBs and the

13 FC recommended sharing divisible pool of central taxes. The 10th FC
noted that urbanisation, particularly increase of slum population, is strong
and with meager resources, the ULBs find it difficult to provide even the
basic services. It felt that the outbreak of epidemics is a reminder of the
cost of neglect of civic services in urban areas.47 It recommended Rs.1,000
crore ad hoc grant to ULBs and stipulated conditions like ULBs matching
contribution and use of funds for identified projects, particularly O&M of
core services. The 11th FC felt O&M of urban infrastructure did not receive
adequate attention and desired that the capital cost of infrastructure should
be provided by states from the budgetary heads and O&M costs should be
met by raising tax revenues and user charges or state devolutions. It
allocated Rs.2,000 crore untied grants to be utilised for provision of civic
services.48 The transfer of these grants is conditional which inter alia
includes withholding 25 per cent grants for not devolving powers as per
SFCs recommendations, ULBs making 50 per cent matching grant and
entrusting control and supervision of accounts and audit to the C&AG.
The 12th FC recommended Rs.5,000 crore to ULBs and desired that 50
per cent of the grants be spent on solid waste management. It noted investing
th

Government of Kerala, Report of the Fourth Finance Commission, para 10.10.

Government of Karnataka, Report of the Third State Finance Commission, 2008,
Bangalore.
46
Administrative Staff College of India, Municipal Finances and Service Delivery in
Chhattisgarh, Hyderabad, 2012.
47
Government of India, Ministry of Finance, Tenth Finance Commission, New Delhi,
Chapter 10, 1994.
48
Government of India, Ministry of Finance, Report of the Eleventh Finance Commission,
New Delhi, Chapter 8, 2000.
44
45

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D. RAVINDRA PRASAD AND V. SRINIVAS CHARY

in capital infrastructure without addressing the issues of labour productivity

would turn out to be wasteful.49 The 13th FC felt the need for a predictable
and buoyant source of revenues and other flows to local governments and
recommended sharing divisible pool of central tax revenues1.5 per cent
General Basic Grant and one per cent General Performance Grant to urban
and rural local bodies. It laid down conditions to access Performance Grantbudgeting, accounting and audit reforms, electronic transfer of funds, levy
of property tax by ULBs without hindrance, constitution of property tax
board, etc. to improve service delivery and governance.50
An Agenda for the 14th FC
The foregoing discussion brings out the imperative need to strengthen
infrastructure and streamline service delivery for cities to attract investments
and to become generators of economic momentum. The 14th FC need to
address a comprehensive agenda like infrastructure provision, improved
service delivery, strengthening ULB resources and improving governance.
Empowering state finance commissions is also the need of the hour. The
agenda includes:

prioritise core serviceswater supply, sewerage, sanitation

and storm water drainsand provide grants-in-aid to ULBs
to ensure their provision in two decades;

include access to services to the poor as one of the indicators

under SLB;

institutionalise SLB notification by all ULBs;

work out a formula for estimation of ULB finance needs based

on service delivery gaps vis--vis benchmarks, transfers of state
governments and revenue mobilising efforts of ULBs;

substantially increase grant-in-aid as well as percentage of

performance grant to improve service delivery by ULBs;

review, deepen and take forward the incentive based grants

initiated by the 13th FC to improve municipal performance;
service delivery in particular. It should consider increasing
the incentive based grants. Die-hards would argue that it makes
inroads into local autonomy, but looking at the lackadaisical
attitude of state and local governments over years, it looks
imperative; and

other reforms include service delivery regulation to protect

the interests of consumers including the poor and service
49
Government of India, Ministry of Finance, Report of the Twelfth Finance Commission,
New Delhi, Chapter 8, 2004.
50
Thirteenth Finance Commission-2010-2015, op.cit., Chapter 10.

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254 / VOL. LX, NO. 2, APRIL-JUNE 2014

providers and to ensure sustainable services with equity,

reforms in accounting and audit systems being recommended
by FCs and SFCs, development and updation of urban data on
different dimension of municipal performance including
services, finances, governance and other performance
indicators to provide a basis to FCs and SFCs to assess the
service and resource gap, strengthen organisation and working
of the SFCs, developing norms for the constitution of ULBs.

Introduce strong monitoring and evaluation system to measure

the efficiency and efficacy of investments.
CONCLUSION

The ULBs have been getting ad hoc grants-in-aid from FCs and SFCs
which do not meet growing urban infrastructure and service delivery needs.
There are many reasons for this including weak SFCs, absence of
benchmarks and data base on services, lack of professionalism and weak
municipal capacities, etc. With benchmarks in place for core services and
availability of data from Census and SLB notifications, ad hoc approach
should give way to need and formula based approach. This paradigm shift
is essential to address the changing demographic challenges. The 14th FC
need to work out grants-in-aid formula based on cost of services which
should also include ULB and state efforts. The 13th FC approach of
performance based incentives to the local bodies should be taken forward
and the conditionalities should be reviewed and deepened along with
improving the capacities of municipal functionaries to bring professionalism
into municipal governance. The SFCs need to be strengthened and they
should also adopt performance based than ad hoc approach to allocate
grants. Effective service delivery is part of wider urban governance reforms.
Only such measures enable the local bodies to improve their finances,
strengthen governance, and deepen the democratic decentralisation. This
is an opportunity which 14th FC would miss with consequences to urban
development and Indias urban future.