Census documents states that the Urban Population in India had reached 38 crore in 2011. The present trend makes it to reach 47 crore by the census 2021. It has cast upon the need for manifold infrastructural development to cope with the situation of rapid urbanisation in India. With the increasing industrialization and urbanization under the impetus of development and planning, the local authorities form a growing part of the expanding public sector with powers to raise and spend considerable amounts of public funds for development purpose. Local authorities form an important segment of public sector in India. The contribution of the local bodies' income in general and capital formation is of considerable signiicance, in view of their large number and the area with population they cover.
The inancial health of urban local bodies (ULBs) in India is not encouraging. The functions and inances of urban local governments are provided through the Acts passed by the state legislatures and any mismatch or discrepancy between the two is likely to create abnormal condition affecting the development programmes in the urban areas. If we look into the receipts side of inancial resources of urban local bodies generally we ind that adequate revenue do not reach the coffers of the ULBs. There may be many reason suggested by different group of people or researchers from prestigious institutions but it is true that the resources are scarce and unable to meet the expenditure requirements. The local bodies always depend on other two upper tiers of government viz the State Govt. as well as the Union Government for grants and loans for their activities.
The signiicance of inance is too obvious to need any elaboration as no organisation can exist, much less achieve its objectives without at least a minimum of inances. Kautilya, the great philosopher in his compilation “ARTHSHASTRA “has remarked that all undertakings depend upon inance, hence foremost attention should be paid to the treasury. All administrative acts have its inancial implications, either creating a charge or making a contribution to treasury. In fact, inance constitutes the backbone, the life and blood of government; it provides fuel to the administrative machinery. Sound iscal policy is needed and the imprudent inancial management not only brings discredit to the government but also alienates it from the people as well as endanger the existence of the governance.
Financial management differs from inancial administration. Finance Management is provided by the statute and emanates from the law of the land whereas; the inancial administration is carried out through rules and regulations made by the state under the authority provided to the state to make rules. The inancial sector is the centre of economic activity and its health affects the entire economy. Municipal governments are directly linked with the availdability and utilization of inancial resources to extend citizen centric services as well as infrastructure for the constituents of the city. Financial administration is to act scientiically in planning, organizing, implementing and evaluating the inancial resources to ensure their best use for the achievement of the objectives, goals and the targets. We in the irst sight conclude that the urban local bodies in India are confronted with lack of proper decentralization of functions and inances, inadequate revenue generation, expenditure shortfalls leading to poor service delivery.
The revenue available to local governments is a key determinant of a city's ability to provide the services citizens need and to meet other expenditure requirements. In cases where revenue is constrained, infrastructure investments often suffer, and government services are reduced as well as the payments towards establishment are deferred. Simultaneously, the need to diversify, grow, and mobilize revenues is one of the most pressing challenges, the city leaders (Municipal authorities) face in various regions of the developed and developing area of the city. Building a solid revenue base depends on a number of factors, including empowering city leaders to grow and diversify their own-source revenue pool to complement external revenue lows (e.g., inter governmental transfers) over which local government oficials lack direct control.
As per the convention the municipal receipts and resources rest on Tax as well as non tax revenues. The tax revenues comprises mainly of Property tax, Profession tax, Sanitation/Conservancy Tax, Scavenging tax, Drainage tax, Education tax, Entry/Terminal tax, Taxes on vehicles, Advertisement tax, Entertainment tax, Pilgrim tax, Environment tax/Land Revenue, Development tax, Passengers & Goods Tax, Timber tax, Tax/toll on animals, Cable Operator Tax, Toll/Tax on bridges/Vehicles and the Octroi besides the other regional or city speciic tax enacted in the municipal council. The evasion of the tax revenue is very much prevalent in India and the municipal bodies ind it hard to impose punishment except to levy the interest on delayed payments. This tax coupled with interest is normally not paid by the citizens for several years. The conclusion remains as the adverse affect on the developmental works. The Property Tax is the biggest and important tax of revenue generation. The municipal authorities need to improve the assessment component, stressing upon mapping of properties using the Geographic Information System (GIS), making the system capable of self-assessment, rationalizing exemptions and improve collections. For the purpose property surveys and usage of GIS technology should be a complete package to ensure full coverage of the properties, Computerization of property taxes, regular revision of rates, more user friendly tax system and making tax enforcement a priority for improving the inancial health of the municipal bodies.
To mobilize non-tax revenues it is the need to establish a strong foundation for iscal governance. It focuses on a wide variety of non-tax revenues, ranging from charges and fees directly related to citizens' use of a service. The overview of the various sources and types of non-tax including own-source revenues used by municipal bodies may be seen in the levies which comprises mainly of Sanitation/ Conservancy Charges, Water charges, Surcharge on Sales Tax, Birth/Death Registration fees, Betterment fees, Mutation fees, Dangerous and Offensive Trade License Fees, Slaughter house fees, Market fee, Fee for ire services, Fees on dogs, Fees for Registration of animals etc., Parking fees, Fee on building application, Duty on transfer of immovable property, Penalty for late tax payment, Stamp Duty, Rent from Municipal Properties, Receipts from Fines, Receipts from Interest etc. This needs a combination of all municipal revenue sources tax as well as non-tax are important for achieving strong municipal inancial health. This is possible when the oficials who seek to evolve and reform the non-tax own-source revenue components within their jurisdiction. The aim is to highlight the merit of empowering city leaders with strategies that help them harness non-tax own-source revenues appropriately for the maximum beneit of their municipalities.
We easily visualise from the compositions of revenues among the ULBs that expenditures in general fall short of their requirements. Most of the cities generate revenues much lower than their requirements and the appropriation of revenues are also not uniform. Further, the state grants transferred to the municipal bodies are also not used for the purpose they are granted. We also leg behind in assessing relation between size of the city and the quality of management. The performance in revenue generation and expenditure management is at the core of good performance and governance. Good municipal resource generation, utilization and management can bring about a huge change in the inancial health of municipal body.
(Source: AMDA News Bulletien)