Lesson 36 of 76 7 min Premium

Urban Local Bodies and the 74th Amendment

Background

Urban local government in India began in Madras in 1687, when a municipal corporation was set up. Lord Mayo's resolution (1870) on financial decentralisation encouraged local bodies, and Lord Ripon's resolution of 1882 – the "Magna Carta of local self-government" – made Ripon the "father of local self-government in India". Under the GoI Act 1919, local self-government became a "transferred subject" under provincial ministers, and the 1935 Act made it a provincial subject.

After independence, urban bodies were run under state laws, often superseded for long periods and starved of funds. The Nagarpalika Bill (65th Amendment Bill, 1989) failed in the Rajya Sabha. The 74th Amendment Act, 1992 came into force on 1 June 1993.

The 74th Amendment Act, 1992

It added Part IXA ("The Municipalities", Articles 243P to 243ZG) and the Twelfth Schedule with 18 functional items.

Three cards describing nagar panchayats, municipal councils and municipal corporations — The Governor classifies areas using population, density, revenue, non-farm employment and economic importance.

Three types of municipalities (Article 243Q):

Nagar panchayat – for a transitional area (an area in transition from rural to urban);
Municipal council – for a smaller urban area;
Municipal corporation – for a larger urban area.

The Governor specifies the areas based on population, density, revenue generated, percentage of employment in non-agricultural activities and economic importance. Industrial townships can be exempted if the industrial establishment provides municipal services.

Key provisions (largely parallel to the 73rd Amendment):

Composition: members directly elected from wards; the state legislature may provide for representation of persons with special knowledge (without voting rights), MPs and MLAs, and chairpersons of ward committees. The manner of electing the chairperson is left to the state – some states have directly elected mayors, most elect them indirectly.
Ward committees (Article 243S) – for a municipality with a population of three lakh or more.
Reservation: for SCs and STs in proportion to population; not less than one-third for women; reservation of chairperson posts as the state decides; backward classes reservation is voluntary.
Term: five years; fresh elections before expiry, or within six months of dissolution.
State Election Commission (Article 243ZA) conducts elections; State Finance Commission (Article 243Y) reviews municipal finances.
Powers and functions (Article 243W): the state may endow municipalities with powers to prepare plans for economic development and social justice and implement schemes, including the 18 Twelfth Schedule items.
Finances (Article 243X): the state may authorise municipalities to levy taxes, duties, tolls and fees, assign state taxes, and provide grants.
District Planning Committee (Article 243ZD): at the district level, to consolidate plans prepared by panchayats and municipalities into a draft development plan for the district. At least four-fifths of its members are elected by and from the elected members of the district panchayat and municipalities, in proportion to the rural and urban population.
Metropolitan Planning Committee (Article 243ZE): for every metropolitan area (population of 10 lakh or more), to prepare a draft development plan for the whole area. Two-thirds of its members are elected by and from the elected members of municipalities and chairpersons of panchayats in the area.
Part IXA does not apply to Scheduled Areas and tribal areas (Parliament may extend it, but has not passed a law like PESA for urban areas).

The Twelfth Schedule – 18 subjects

Urban planning including town planning; regulation of land use and construction of buildings; planning for economic and social development; roads and bridges; water supply for domestic, industrial and commercial purposes; public health, sanitation, conservancy and solid waste management; fire services; urban forestry, protection of the environment and ecology; safeguarding the interests of weaker sections, including the handicapped and mentally retarded (original wording); slum improvement and upgradation; urban poverty alleviation; provision of urban amenities such as parks, gardens and playgrounds; promotion of cultural, educational and aesthetic aspects; burials, burial grounds, cremations and electric crematoriums; cattle pounds and prevention of cruelty to animals; vital statistics including registration of births and deaths; public amenities including street lighting, parking lots, bus stops and public conveniences; and regulation of slaughterhouses and tanneries.

Types of urban governments

Besides municipalities under Part IXA, there are eight types of urban bodies: municipal corporation, municipality, notified area committee, town area committee, cantonment board (under the Cantonments Act, 2006, administered by the Ministry of Defence; there are 61 cantonments, some being excised and merged with municipalities since 2023), township (by large public enterprises for staff colonies), port trusts and special purpose agencies (development authorities, water boards, housing boards and others that perform functions of municipalities but are outside their control – a source of fragmentation).

Challenges of urban local governance

India's urban population is about 35% and rising. Yet urban local bodies (ULBs) remain weak:

Finances: municipal revenues are under 1% of GDP (compared with about 7% in Brazil and 6% in South Africa, as RBI's 2022 report on municipal finances noted). Property tax – their main own source – is poorly assessed and collected. GST subsumed octroi and entry taxes, increasing dependence on state transfers.
Functions: many Twelfth Schedule functions are with parastatals and development authorities; urban planning is often done by state agencies.
Leadership: mayors in most cities are indirectly elected with short (often one-year or 2.5-year) terms and limited executive power; real authority lies with state-appointed municipal commissioners.
Capacity: shortage of skilled staff, outdated master plans, and weak data.
Elections: delayed in several states despite the six-month rule; the Supreme Court has repeatedly directed timely elections (for example, in Maharashtra in 2025).

Bar chart comparing municipal revenue as a share of GDP: about 0.7% in India against about 6% in South Africa and about 7.4% in Brazil — Weak own revenue is the core reason why urban local bodies depend on state and central transfers.

Missions and reforms: JNNURM (2005), AMRUT (2015; AMRUT 2.0 in 2021) for water and sewerage, Smart Cities Mission (2015), Swachh Bharat Mission–Urban (2014; 2.0 in 2021), PMAY–Urban (2015; 2.0 in 2024), municipal bonds (Pune 2017, Ahmedabad and others; green bonds by Indore and Ghaziabad), DAY–NULM for urban livelihoods, and the 15th Finance Commission's conditions linking grants to property tax floors and published accounts.

Suggested reforms: directly elected mayors with a five-year term and real executive powers (as recommended by the Second ARC); empowered municipal cadres; transfer of planning functions; better property-tax administration using GIS; city-level climate action plans; and participation through ward committees and area sabhas.

Practice: Mains question

*"Three decades after the 74th Amendment, urban local bodies remain financially and functionally weak." Discuss and suggest measures. (250 words)* Use the data on municipal revenues, examples of parastatal control, the Second ARC's recommendations on mayors, and the role of State Finance Commissions; propose fiscal and functional devolution.

Common traps

74th Amendment: Part IXA, Articles 243P–243ZG, Twelfth Schedule (18 subjects), in force 1 June 1993.
Nagar panchayat – transitional area; municipal council – smaller urban area; municipal corporation – larger urban area.
Ward committees for population ≥ 3 lakh; Metropolitan Planning Committee for ≥ 10 lakh.
The District Planning Committee (243ZD) is in Part IXA, though it covers rural areas too.
Lord Ripon (1882) – father of local self-government.

Practice: check your understanding

*Who decides whether an area is a nagar panchayat, municipal council or corporation?* The Governor, by public notification, using the criteria in Article 243Q.
*Why are directly elected mayors recommended?* A mayor with a direct mandate and a five-year term can provide accountable city leadership instead of leaving real power with a state-appointed commissioner.

⚡ Quick revision

Madras corporation 1687; Mayo 1870; Ripon 1882 (Magna Carta of local government)
74th Amdt 1992: Part IXA (243P–243ZG), 12th Schedule (18 subjects), in force 1 June 1993
Nagar panchayat (transitional), municipal council (smaller), corporation (larger)
Ward committees ≥ 3 lakh; DPC (243ZD, 4/5 elected); MPC (243ZE, ≥10 lakh, 2/3 elected)
1/3 women; SEC (243ZA); SFC (243Y)
Challenges: revenue < 1% of GDP, parastatals, weak mayors; AMRUT, Smart Cities, SBM-U, PMAY-U

The Council of States, the upper house of Parliament (Article 80), a permanent body representing the states and Union Territories, chaired by the Vice-President of India.Three-tier rural local self-government given constitutional status by the 73rd Amendment (1992), Part IX. Full coverage: Panchayati Raj and the 73rd Amendment.India's system of affirmative action that sets aside a share of seats in legislatures, government jobs and educational institutions for historically disadvantaged groups such as Scheduled Castes, Scheduled Tribes, Other Backward Classes and economically weaker sections.Constitutional body (Article 324) that conducts elections to Parliament, state legislatures and the offices of President and Vice-President. Full coverage: The Election Commission of India.A quasi-judicial body that the President must set up under Article 280 at least once every five years to recommend how central tax revenue is shared with the states and how grants-in-aid are given.The market value of all final goods and services produced within a country's borders in a given period. This hub page shows where GDP turns up across the syllabus as a yardstick; the measurement methods are covered in the linked lesson.India's central bank, set up on 1 April 1935 under the RBI Act 1934 and nationalised in 1949, which runs monetary policy, issues currency, regulates banks and payment systems and manages foreign exchange.A comprehensive, destination-based indirect tax on the supply of goods and services, introduced in India on 1 July 2017, that replaced most central and state levies with a single system in which tax paid on inputs is credited against tax on outputs.India's apex court under Articles 124–147; guardian of the Constitution and final court of appeal. Full coverage: The Supreme Court: Composition, Appointment and Jurisdiction.A commission set up by the Government of India in 2005 to suggest a blueprint for reforming public administration; its 15 reports, on topics from ethics to e-governance, remain a standard reference for governance reform.The Monetary Policy Committee (MPC) is a six-member statutory body of the Reserve Bank of India, created in 2016 under an amended RBI Act, that sets the policy repo rate to achieve the inflation target of 4% CPI inflation, within a band of 2% to 6%, while keeping growth in mind.A central urban mission launched in June 2015 to give households in about 500 cities basic services such as tap water and sewerage, with green spaces and urban reforms; its second phase, AMRUT 2.0 (2021), aims for universal water supply in all statutory towns and sewerage in the original AMRUT cities.A national sanitation campaign launched on 2 October 2014 to end open defecation and improve solid waste management, run in two parts: SBM-Gramin for villages under the Jal Shakti ministry and SBM-Urban for towns under the Housing and Urban Affairs ministry.

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