Audit report: BBMP, other Urban Local Bodies powerless and cash-strapped

Implementation of 74th Amendment in Karnataka's ULBs

BBMP Building
Urban Local Bodies suffer on account of several institutional inadequacies such as failure to hold elections on time, the short tenure of the Mayor, among other reasons. BBMP building. Pic courtesy: BBMP

Most of us would not know who the Mayor of Bengaluru is. However, the name of the chief commissioner of the municipal corporation would probably be familiar to a few. This complete failure to recognise and identify the mayors of our cities is symptomatic of a deep malaise: the relative unimportance of the political executive in the running of Urban Local Bodies (ULBs).

One way to be aware of issues of impropriety and poor performance in local government bodies and departments is to track the audit reports from agencies like the Comptroller and Auditor General of India (CAG). This article is the eighth in the Series: Understanding Public Project Audits, by experts from the Indian Accounts and Audit Service.


Read more: How citizens can use audit reports to be effective watchdogs


A related issue, which is extremely critical, is the fact that the Urban Local Body itself, of which the Mayor is the head, is virtually powerless and severely handicapped. This is in complete contrast to the situation in first-world countries where Mayors play an active role in the city’s governance.

Photographs of past mayors of BBMP
The lack of attention paid to mayors shows the relative unimportance of the political executive in the running of Urban Local Governments. File pic.

74th amendment was meant to devolve powers to ULBs, but…

The principle of “subsidiarity” implies that functions which impact citizens directly and in their daily life must be executed by the level of government which is closest to them – in cities, this would refer to the city government or municipalities. This is also enshrined in the Constitution vide the 74th Amendment.

However, almost 30 years down the line, the reality is very different. Out of 18 functions that have been earmarked for the local government i.e. Urban Local Bodies, they have full jurisdiction only in respect of three i.e., “burial and cremation grounds”, “cattle pounds”, and “regulation of slaughterhouses/tanneries”.


Read more: It’s official: Bangalore Mayor has no role in planning the city


The ULBs have no role to play in two extremely critical functions, namely, “urban/town planning” and “slum improvement and upgradation”. They are mere implementing agencies in respect of functions such as planning for “economic and social development”, “safeguarding the interests of the weaker sections of society” and “urban poverty alleviation”. The role of the ULB is minimal in functions such as “water supply”, “regulation of land use”, “public health and sanitation, and solid waste management” because of overlapping jurisdictions with other organisations like development authorities, water supply and sanitation boards, departments of the state government etc.

These observations emerge from a performance audit of “Implementation of the 74th Constitutional Amendment” in Namma Karnataka (Ref: Report No. 2 of the Comptroller and Auditor General of India for the year 2020 in respect of the Government of Karnataka).

Institutional challenges of ULBs

Other than the half-hearted transfer of functions, the ULBs suffer on account of several institutional inadequacies such as failure to hold elections on time, the short tenure of the Mayor, which prevents him/her from making any meaningful contribution, the ineffectiveness of ward committees, the district planning committees and metropolitan planning committee.

Other issues adversely affecting the effective functioning of ULBs are the delays in setting up State Finance Commissions (SFCs) and incomplete implementation of its recommendations and the establishment of parastatal organisations such as Urban Development Authorities, Slum Development Boards, Water supply and drainage Boards which are powerful but lacking in political representation.


Read more: BBMP, a puppet with no power to rule Bangalore


Why cash-strapped ULBs are the norm

The second area in which the ULBs are severely handicapped is finances. ULBs are highly dependent on grants from the Central and State government. Their “Own Revenue” as a percentage of overall revenue ranged from 31% to 41%. Given the importance of grants, it is essential that transfers be timely and full. 

However, the actual transfers were both delayed and incomplete. The loss on account of delays in the constitution and implementation of recommendations of the 4th State Finance Commission alone was Rs 2,415.78 crore during 2016-17 to 2018-19. Further, the transfers recommended by the SFCs were not fully implemented. During 2014-15 to 2018-19, actual devolution was short of the mandated devolution by 20% (during 2017-18) and 53% during 2014-15.

Article 243-I of the Constitution of India makes it mandatory for the State Government to constitute a Finance Commission within one year of the commencement of the Constitution Amendment Act and thereafter on expiry of every five years. The mandate of the State Finance Commission (SFC) is to review the financial position of the local bodies and to make recommendations to the Governor for the devolution of funds.

ULB shortcomings affect revenue

The audit revealed many shortcomings that adversely affected revenue collection:

  • Property tax is the main source of revenue for the ULBs. Audit noticed lacunae in the online calculator, such as the absence of a provision to collect service charges on exempt properties, levy of a uniform rate irrespective of use, inadequate survey, adoption of dated guidance values and humongous arrears in the collection. In addition, the report pointed out laxity in the collection of Advertisement tax.
  • The user charges recovered in respect of water supply ranged from 42 to 60% of the Operations & Maintenance (O&M) cost implying the lack of sufficient funds for discharging O&M function in a satisfactory manner.
  • The collection mechanism for Solid Waste Management cess too was flawed since it did not provide for charging properties such as educational institutions, places of worship, government buildings etc though they are beneficiaries of the service.
  • The system of levying and collecting rent on commercial properties too lacked a standard protocol on agreements with tenants for periodic revision of rents. A robust mechanism to monitor the timely renewal of trade licences was lacking. On the expenditure side, we observed that the ULBs have never undertaken an exercise to determine the cost of delivery of services in a scientific manner.

The capital expenditure was a mere 4% of the total expenditure. This combination of low fiscal autonomy, low-cost recovery and poor quality of expenditure severely marred the quality of service delivery. While lack of autonomy in financial decision-making and dependence on external entities such as the District Collectors/Director of Municipal Administration and State Government contributed to the delay in decision-making. 


Read more: Webinar takeaways: How can CAG reports be made actionable?


Human resource issues

The third major handicap the ULBs suffer from is in terms of quantity and quality of human resources. They are neither vested with the powers to assess staff requirements nor to recruit staff, decide their conditions of service, pay and allowances, initiate disciplinary action etc.

The audit revealed that there were huge vacancies in crucial technical posts, which had a negative impact on service delivery. There was no evidence of the adoption of any norms for determining the ideal staff strength. Many posts were staffed by people who are not trained for the job, for example, personnel trained in Administration were discharging the function of Senior Health Inspectors.

In several ULBs, the persons discharging the function of chief officer/municipal commissioners were either too junior or not trained in municipal administration. On the other hand, officials trained in municipal administration were posted in other organisations. The training was sub-optimal. 

Audit recommendations to empower local governments

We made a total of 12 recommendations, the prominent ones being:

  • Delimitation of constituencies be conducted by a statutory/constitutional body, the State Election Commission, in order to ensure timely elections.
  • Constitution of ward committees and nurturing them
  • Timely constitution and implementation of recommendations of State Finance Commissions
  • Fully involving the ULBs in planning, regulation, slum development and other functions
  • Removal of limitations on the ability of ULBs to raise their own revenues
  • Revising the delegation of powers relating to works and other expenditures, and
  • Delegation of powers over manpower resources

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About E P Nivedita 10 Articles
Nivedita is a civil servant in Indian Audit and Accounts Service (IAAS) – Batch of 1993. Over the past 3 decades, she has served Government of India in several capacities at various levels. She is the recipient of CAG’s Award for Excellence and Innovation in Audit for the Performance Audit Report on Management of Storm water in Bengaluru As a Director in the Ministry of Urban Development, Nivedita was involved in policy initiatives such as the National Urban Sanitation Policy, Service Level Benchmarks for the Water and Sanitation (WSS) sector and the Capacity Building Programme for Urban Local Bodies. During her stint at the Unique Identification Authority of India, she was involved in the enrolment of all the residents of Tamil Nadu (7. 2 crores) in partnership with the Registrar General of India. In free time, you would find her with a kindle and a coffee mug. Nivedita is currently an Executive Director at National e-Governance Services Limited, Bengaluru

1 Comment

  1. the recommendations are directed to the same people who have violated the norms…How will this work….Need another approach

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