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CAG flags 42% resource-expenditure gap, 37% staff vacancy

Explained | Economics | Mains Paper 3: Infrastructure: Energy, Ports, Roads, Airports, Railways Etc.
Note4Students

From UPSC perspective, the following things are important :

Mains level: Infrastructure issues related to Urban Local Bodies;

Why in the News?

The CAG found that urban local bodies in 18 states, serving 241 million people, face a 42% gap between income and spending, with just 29% used for development work.

What are the key findings of the report?

  • Resource-Expenditure Gap: Urban local bodies (ULBs) in 18 states face a 42% gap between their income and expenditure, with only 29% of spending directed toward development work.
  • Revenue Dependence: ULBs generate only 32% of their revenue independently, relying heavily on Union and state government funds; they collect just 56% of their property tax demand.
  • Staff Shortages and Limited Recruitment Powers: ULBs operate with an average 37% staff vacancy rate, and 16 states provide them with limited or no recruitment autonomy.
  • Incomplete Implementation of the 74th Amendment: While 17 out of 18 functions have been devolved on average, compliance remains weak. Critical areas like urban planning and fire services are the least devolved.

What are the implications of the resource-expenditure gap?

  • Reduced Development Expenditure: With only 29% of expenditure directed toward programmatic and development work, the quality and quantity of essential urban services such as sanitation, housing, and infrastructure suffer.
  • Increased Dependence on Grants: Only 32% of urban local bodies’ (ULBs) revenue comes from their own sources, making them overly reliant on state and Union government transfers. This undermines their fiscal autonomy.
  • Poor Service Delivery: Insufficient resources hinder the ability of ULBs to meet growing urban demands, exacerbating issues like inadequate housing, poor waste management, and insufficient public health services.
  • Impact on Urban Planning: The resource crunch constrains investment in urban planning and critical services like fire safety, leading to unplanned growth and vulnerabilities.

How does the 37% staff vacancy rate impact government operations?

  • Operational Inefficiency: Vacant positions lead to delays in service delivery, poor maintenance of urban infrastructure, and inefficiencies in governance.
  • Overburdened Workforce: Existing staff must take on additional responsibilities, potentially leading to burnout and reduced productivity.
  • Limited Capacity for Resource Mobilization: Staff shortages in tax collection departments result in only 56% of property tax demand being realised, reducing revenue potential.
  • Weak Local Governance: Insufficient personnel to handle devolved functions hampers the implementation of policies and schemes meant for urban development.

What are the Urban Local bodies?

  • The establishment and functioning of ULBs are governed by the 74th Amendment to the Constitution of India, enacted in 1992. 
  • This amendment provides a constitutional framework for urban self-governance and outlines the powers and responsibilities of ULBs, which include various functions related to public health, sanitation, urban planning, and infrastructure development.
  • ULBs are categorized into three main types: Municipal Corporations (for large cities), Municipalities (for smaller towns), and Nagar Panchayats (for transitional areas).

What measures can be taken to improve resource mobilisation and management? (Way forward)

  • Enhancing Own Revenue Generation: ULBs should focus on improving their revenue generation capabilities, particularly in property tax collection where they currently realize only 56% of demand.
    • Implementing technology-driven solutions like GIS for property assessments could enhance collection efficiency.
  • Financial Management Training: Providing training for ULB officials on financial management could improve budgeting practices, ensuring that funds are allocated more effectively towards development projects.
  • Strengthening Autonomy: Empowering ULBs with greater autonomy over recruitment and financial decisions would enable them to respond more effectively to local needs and improve service delivery.
  • Public-Private Partnerships (PPPs): Encouraging partnerships with private entities can help leverage additional resources for urban development projects while sharing risks associated with large-scale investments.
  • Community Engagement Initiatives: Involving citizens in budgetary processes can increase transparency and accountability, potentially leading to better resource allocation aligned with community priorities.

Mains PYQ:

Q Analyse the role of local bodies in providing good governance at local level and bring out the pros and cons merging the rural local bodies with the urban local bodies.  (UPSC IAS/2024)

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