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Local Government Organization and Finance: Urban India
T A B L E 5 . 6 Criteria Used by the Central Finance Commission for Determining the Allocation of Grants to States for Urban Local Bodies Weight (as % total allocation)
Criterion
Urban population Geographic area Difference from highest average per capita gross state domestic product Own-source revenue efforts of the municipalities in a state, using state’s own-source revenue as an indicator Own-source revenue efforts of the municipalities in a state, using gross state domestic product as an indicator Index of decentralization
40 10 20 5 5 20
Enactment of state municipal legislation in conformity with the 74th amendment
Intervention or restriction in the functioning of the municipal bodies
Assignment of functions to municipalities in the state municipal legislation according to schedule 12
Transfer of functions to municipalities by way of rules or notifications
Orders of state government Assignment of taxation powers to municipalities according to state municipal acts
Levy of taxes by municipalities Constitution of the state finance commissions and submission of “action taken” reports
Action taken on the major recommendations of the state finance commission
Elections to municipalities Constitution of district planning committees Source: Finance Commission 2000, appendix VIII.2, paragraph 8.24, pp. 312–13.
envisioned in the 74th amendment. An index has been proposed by the 11th Central Finance Commission for measuring decentralization. The 74th amendment has simultaneously altered the fiscal arrangement between the states and municipalities. Under the new fiscal arrangement, once every five years every state government is required to constitute a state finance commission and entrust it with two tasks: reviewing the financial position of municipalities and making recommendations on the principles that should govern (a) the distribution between the state and the municipalities of the net
