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Chapter # 39. Modernizing City Governance For Urban Transformation


City Governance For Urban Transformation

  • To transform our cities into economically vibrant and environmentally sustainable habitats that provide equitable access to basic infrastructure, public services and opportunities to all citizens and platforms for democratic participation.

Current Situation

Global experience indicates that cities are central to raising economic productivity, enhancing job creation and improving public finance at all levels. Successful and long-lasting urban transformation critically depends on reforming the way our cities are governed. Hence, city governance is a key enabler for urban transformation, and sustained economic growth and job creation.

India is urbanizing at a fast pace and it is expected that by 2050, close to 50 per cent of India’s population would be residing in urban areas, requiring the availability of sustainable infrastructure and services for a better quality of life.1 Such infrastructure and services can only be ensured through modern urban governance. Indian cities are in the process of modernizing their governance structures.

The government has undertaken various initiatives focusing on tourism (HRIDAY – Heritage City Development and Augmentation Yojana), infrastructure (Housing for All, Smart Cities Mission, AMRUT – Atal Mission for Rejuvenation and Urban Transformation) and sanitation (Swachh Bharat Mission), among others. The current status of urban governance can be assessed through an analysis of its constraints.


The key challenges plaguing urban governance in India include the following.

  • The absence of a modern spatial planning framework, public utility design standards and land titling in cities takes a huge toll on economic growth and productivity, environmental sustainability and living conditions in cities.
  • There is lack of human resource capacities in the urban sphere at all levels, especially in urban local bodies (ULBs). The municipalities are heavily under-staffed and there are significant gaps in the skills required for urban management.
  • Indian ULBs have huge scope to improve their financial autonomy and capacity to raise resources.2 Some of the key reasons behind the poor state of municipal finances are the narrow, inflexible and non-buoyant tax base, broken financial accounting and audit systems, and the inability of municipalities to levy and recover taxes and user charges.
  • Multiple institutions like parastatals, development authorities, public works departments, and ULBs themselves report to different departments of the state government and have been entrusted with overlapping responsibilities.
  • The distribution of power between elected officials at the city level (mayors and councillors) and central administrative service cadres at the city/ district levels are highly tilted towards the latter. The 74th Constitutional Amendment (CAA) to decentralise urban governance has not translated into reality, affecting citizen participation in cities.

Way Forward 

The following strategies are proposed to improve urban governance in India by 2022-23.

  1. Leveraging city economy
  • Each city needs to be recognized as a distinct unit of the economy. In larger cities, City Economic Councils can serve as a clearinghouse between business and governments to hasten the progress of specific projects, improve the ease of doing business and catalyse investments into the city.
  • Concomitantly, a quarterly city dashboard capturing city-level investments, GDP and employment growth, financial position and financial performance, and status of infrastructure projects can provide a framework for data-driven decisions.
  • This will measure transformation and encourage competition among cities. For this, the Ministry of Housing and Urban Affairs (MoHUA), the Ministry of Finance and the Ministry of Statistics and Programme Implementation may create frameworks for a dashboard subsuming scheme-specific performance MIS.
  1. Decentralization and metropolitan governance 
  • The multiplicity of agencies with overlapping jurisdictions and fragmented roles and responsibilities is common in Indian cities. This leads to delays in implementation of projects and inefficient service delivery. To achieve the decentralization goals of 74th CAA, there is an urgent need for articulating a framework for governance of cities that includes development authorities, other parastatals, special purpose vehicles (SPVs) and Census Towns.
  • Metropolitan governance systems are also needed in million-plus cities. There is a strong case for having a two-tier governance structure where all local functions are transferred to the ward committees and citywide services, such as transportation, water supply, sewerage, etc., are vested with the city council or regional authorities.
  • Moreover, state governments can be encouraged to transfer 12th Schedule funds, functions and functionaries to the ULBs. At the same time, governance should be devolved to the ward and area levels to enhance downstream accountability mechanisms. States can learn from innovative governance frameworks involving the ULB and the state government as seen in models like the Greater Shimla Water Supply and Sewerage Circle.
  1. Spatial planning and land titling
  • There is urgent need for a synchronous and modern national framework for the spatial planning of cities that replaces the current Urban Development Plans Formulation and Implementation (UDPFI) guidelines. This framework should factor in plan preparation, implementation and enforcement at metropolitan, municipal and ward levels. It should also include congruent endpoints, pre-defined success measures and a transparent mechanism for consultative modification.
  • Guaranteed land titling may also be evaluated to foster a transparent land market. In this regard, cities should lay out their own action plans to provide infrastructure and formalize existing settlements of the underprivileged.
  1. Strengthening finances of ulbs and civic agencies
  • Cities require a financial sustainability roadmap to be financially self-sufficient to support high-quality infrastructure and the delivery of services.
  • This comprises fiscal decentralization, medium-term fiscal plans, innovative models to improve revenue collection, optimizing return on assets especially land and buildings, value capture methods, market-oriented revenue models, PPPs in urban infrastructure and services, and financial accountability through audited balance sheets and performance MIS reports.
  • MoHUA, in consultation with the Ministry of Finance, may draw up model provisions for consideration by states in their municipal and civic agency acts.
  1. Capacity building by skilling for municipal jobs and strengthening institutions
  • There is huge potential for the creation of direct and indirect skilled jobs in ULBs to improve the quality of infrastructure and services and the management of ULBs. MoHUA will develop model municipal talent and in/outsourcing guidelines to leverage efficiencies generated by technology and outsourcing.
  • The National Skill Development Corporation (NSDC) should be leveraged to improve understanding of municipal jobs including job definitions, technical competencies and key result areas, which can be considered for inclusion in recruitment rules at the state level and for performance standards/accreditation for training institutes to foster a functional platform for knowledge sharing. A separate sector skill council for municipal services may be considered.
  1. Citizen participation
  • Enhanced citizen participation is needed for greater trust between citizens and governments, improved sustainability, better service delivery and accountability. Ward committees and area sabhas should be activated with a technology- enabled ‘Open Cities Framework’ and the use of digital tools for feedback and reporting.
  • ULBs should also encourage the participation of all community associations, including settlements of the underprivileged and civil society organizations. ULBs should engage with them frequently through city watch groups, public hearings and city consultations to create a framework for formal partnerships.

Rules and procedures need to be simplified for faster implementation of constructive recommendations.

NITI AYOG - New India @ 75