Local Bodies

Local Government Organization and Finance: Urban India 189

TABLE 5.6 Criteria Used by the Central Finance Commission for Determining the Allocation ofGrants to States for Urban Local Bodies

Weight (as % total Criterion allocation)

Urban population 40 Geographic area 10 Difference from highest average per capita gross state domestic product 20 Own-source revenue efforts ofthe municipalities in a state, using state’s own-source revenue as an indicator 5 Own-source revenue efforts ofthe municipalities in a state, using gross state domestic product as an indicator 5 Index ofdecentralization 20

Enactment ofstate municipal legislation in conformity with the 74th amendment Intervention or restriction in the functioning ofthe municipal bodies Assignment offunctions to municipalities in the state municipal legislation according to schedule 12 Transfer offunctions to municipalities by way ofrules or notifications Orders ofstate government Assignment oftaxation powers to municipalities according to state municipal acts Levy oftaxes by municipalities Constitution ofthe state finance commissions and submission of

“action taken” reports Action taken on the major recommendations ofthe state finance commission Elections to municipalities Constitution ofdistrict 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 ofthe net