Urban Local Bodies — Why Cities Lack Power in India

India is urbanising rapidly — the 2011 census counted 377 million urban residents; projections suggest 600 million by 2030. This urbanisation is producing cities and towns that generate the bulk of India's GDP, attract most of its investment, and account for a disproportionate share of its tax revenue. And yet India's cities are governed by some of the weakest urban governments in the world. Municipal corporations in cities of 5 to 15 million people — Delhi, Mumbai, Bengaluru, Hyderabad, Chennai, Kolkata — have elected mayors and councils with formal jurisdiction over 18 functions listed in the Twelfth Schedule of the Constitution (inserted by the 74th Amendment in 1992), but exercise real authority over very few of them. 

Representational Image: Urban Local Bodies — Why Cities Lack Power in India

Water supply in Delhi is handled by the Delhi Jal Board; in Mumbai by BMC (which is an exception); in Bengaluru by the BWSSB — all state agencies accountable to state governments, not to elected mayors. Urban planning in Delhi involves the Delhi Development Authority (DDA); in Mumbai, the MMRDA; in Bengaluru, the BDA — again, state agencies. The elected mayor of a major Indian city typically has less real authority than the mayor of a modestly sized American or European city.

The 74th Constitutional Amendment intended to change this. It gave constitutional recognition to urban local bodies, required regular elections, mandated reservations, and listed 18 functions for potential transfer to municipalities. But like the 73rd Amendment for rural bodies, it left the actual transfer of functions to state discretion — and states have almost universally chosen to retain functional authority with state departments and parastatals rather than genuinely empowering city governments. PubAdmin.Institute research (2025) identified the central problem: "mayors and councillors in India have limited power over funds and functionaries, which results in urban local bodies remaining just another civic service agency rather than an empowered local form of self-government." CSR Education research (2025) found that "dependence on transfers accounts for about seventy to eighty percent of total municipal income" — making cities financially dependent on state governments rather than genuinely autonomous.

What You Need to Know

• The 74th Constitutional Amendment (1992) added Part IXA (Articles 243P–243ZG) to the Constitution, giving constitutional status to Urban Local Bodies; the Twelfth Schedule listed 18 functions for potential devolution including urban planning, land use regulation, public health, sanitation, solid waste management, and urban forestry.
• Three types of ULBs exist: Municipal Corporations for large urban areas (population typically above 1 million in a state); Municipal Councils for smaller urban areas (population typically 100,000–1 million); and Nagar Panchayats for transitional areas (rapidly urbanising rural areas); their total number exceeds 4,000 across India.
• State Finance Commissions under Article 243Y are mandated to recommend devolution of funds to ULBs; in practice, CSR Education research found that 70–80% of municipal income in most cities comes from state government transfers rather than own revenues; property tax — the primary potential own-revenue source — is significantly under-collected across India's cities, partly due to outdated property registers and weak administrative capacity.
• PRS analysis of Bengaluru found that crucial urban functions including water supply (BWSSB), urban planning (BDA), transport (BMTC and BMRCL), and housing (KSCB) are all handled by state parastatals rather than the BBMP (Bruhat Bengaluru Mahanagara Palike, the municipal corporation); the BBMP is responsible for roads, waste management, and public health — but not for the strategic urban functions that most determine city character.
• ORF analysis (2024) found that mayors and councillors have "limited power over funds and functionaries" and that without a reform to the model municipal act making mayors genuine urban executives with control over city staff, planning, and finance, the 74th Amendment will remain formally significant but operationally weak.

How It Works in Practice

1. The parastatal fragmentation problem: The defining structural challenge of urban governance in India is the proliferation of state agencies that perform city functions. A metropolitan area typically has: a municipal corporation (for roads and waste); a development authority (for land use planning and major residential developments); a water and sewerage board (for water supply and sewerage); a transport authority or metro corporation (for public transit); a housing board (for public housing); and multiple other agencies for slum rehabilitation, industrial areas, heritage, and so on. Each is accountable to a different state ministry. The elected municipal government has no authority over these agencies; the mayor cannot integrate urban planning with transport, or sanitation with water supply, across institutional boundaries.

2. The fiscal problem: Indian cities are severely under-financed for their functions. Municipal revenue — primarily from property tax, advertisement tax, building plan fees, and state transfers — is inadequate to maintain existing infrastructure, let alone invest in the new infrastructure required for urbanising populations. Property tax collections are chronically below potential: property registers are outdated, assessment is political, and collection is inefficient. Some cities (Surat, Pune, Ahmedabad) have professionalised their property tax systems and showed significantly higher collection; most have not.

3. The elected vs bureaucratic authority tension: Municipal corporations have elected mayors and councils, but state-level IAS officers are often posted as Municipal Commissioners with authority over the municipal administration. The Commissioner — who may be more powerful in practice than the elected mayor — is accountable to the state government that appointed them, not to the municipal electorate. This creates a structural accountability mismatch: voters elect mayors, but the effective chief executive answers to the state government.

4. Metropolitan planning gaps: The 74th Amendment provided for Metropolitan Planning Committees (MPCs) for cities with populations exceeding one million to plan for urban agglomerations across municipal boundaries. MPCs have been constituted in very few cities and function effectively in fewer still; urban agglomerations continue to grow across administrative boundaries without coordinated governance or infrastructure planning.

5. Where ULBs work better: Surat (Gujarat) has transformed its civic governance through strong municipal commissioner leadership, effective property tax reform, and sustained investment in public services — making it one of the most-cited examples of effective Indian municipal governance. Ahmedabad's success in issuing municipal bonds (AA+ rated) demonstrates that financially disciplined ULBs can access capital markets. These exceptions confirm the rule: when political will and administrative capacity align, ULBs can deliver significantly better than the national average.

What People Often Misunderstand

• The 74th Amendment did not transfer powers to cities — it required states to do so: Like the 73rd Amendment, the 74th placed the devolution obligation on states, not on the Centre; states have largely chosen to retain urban governance authority; the constitutional mandate has not been self-executing.
• Mayors in India are not like mayors in comparable countries: A major Indian city mayor has no authority over water supply, urban planning, mass transit, or housing — the strategic urban functions; they oversee roads, waste, and street lighting; this is qualitatively less authority than mayors in cities of comparable size in the US, UK, Brazil, or China.
• Smart Cities Mission is not empowering urban local bodies: The Smart Cities Mission (launched 2015) bypasses municipal corporations in many cases — creating Special Purpose Vehicles (SPVs) for smart city infrastructure that are accountable to state and central governments rather than to elected urban local bodies; critics characterise this as further fragmenting urban governance rather than empowering it.
• GST has hurt municipal finances: Pre-GST, octroi — a tax on goods entering city limits — was a significant revenue source for some municipal corporations (notably Mumbai BMC); GST absorbed octroi and entry tax into the state GST; urban local bodies have not been fully compensated for this revenue loss.
• Urbanisation without good governance is already a crisis: India's infrastructure deficit — in housing, water, sanitation, transport, and public space — is primarily an urban governance failure; the costs of under-governed rapid urbanisation are already visible in the quality of life in most Indian cities.

What Changes Over Time

The 16th Finance Commission allocation for local bodies for 2026–31 includes urban local body grants with conditions tied to own-revenue generation and fiscal management — creating incentives for property tax reform and revenue mobilisation. 

The push for municipal bonds as a financing instrument — following Ahmedabad's success — is gaining momentum in states with better-governed cities. The model municipal act reform — proposed by multiple governance commissions and ORF — that would make mayors genuine urban executives with authority over key urban functions and the municipal administration remains unimplemented but represents the most significant potential reform in urban governance.

Sources and Further Reading

• BA Notes — Urban Local Bodies Governance Assessment: https://banotes.org/governance-issues-challenges/urban-local-bodies-governance-assessment-india/
• ORF — The role of central government in strengthening urban local self-governance: https://www.orfonline.org/expert-speak/the-role-of-the-central-government-in-strengthening-urban-local-self-governance
• PRS Legislative Research — Urban Local Bodies, Bengaluru: https://prsindia.org/theprsblog/examining-urban-local-governance-in-india-through-the-case-of-bengalurua
• PubAdmin.Institute — 74th Constitutional Amendment implementation: https://pubadmin.institute/urban-local-governance/evaluating-74th-constitutional-amendment
• CSR Education — Challenges of urban governance in India: https://csr.education/local-self-governance-development/challenges-urban-governance-india/

(This series is part of a long-term editorial project to explain the structures, institutions, and practical realities of governance in India for a global audience. Designed as a 25-article briefing cluster on Federalism, States & Centre–State Relations, this vertical examines how power, money, and authority are distributed between New Delhi and India's states — from the Seventh Schedule, fiscal federalism, GST, Governors, and central agencies to Centre–state disputes, regional parties, and the evolving balance of the Indian Union. Written in an accessible format for diplomats, investors, researchers, academics, journalists, students, policymakers, civil society organisations, and international observers, the series seeks to explain both the constitutional design of Indian federalism and the political realities through which it operates in practice. This is Vertical 4 of a larger 20-vertical knowledge architecture being developed by IndianRepublic.in under the editorial direction of Saket Suman. All articles are protected under applicable copyright laws. All Rights Reserved.)