Revision summary
The 74th Amendment and the Twelfth Schedule create municipalities but leave devolution to State law. Parastatals and State-appointed commissioners keep functions out of the elected council. Property tax is constrained; GST ended octroi and sent compensation to States, not cities. Late State Finance Commissions and approval for borrowing keep cities fiscally dependent. The statement is correct: functional and financial empowerment is still a State choice.
Model answer
Copper italics in this answer — like this — are the key facts. Each one is unpacked in the Facts & figures rail.
Introduction
The Constitution (Seventy-fourth Amendment) Act, 1992, made municipalities a third tier of government and listed 18 functions in the Twelfth Schedule. A comment on State reluctance must show how States still hold those functions, staff, and taxes.
Body
Functional reluctance
- Article 243W leaves it to the State legislature to endow municipalities with Twelfth Schedule functions; the Union cannot force devolution of urban planning, water, fire services, or slum improvement.
- Many States keep parastatal bodies for water, transport, and development authorities, so the elected council does not control the function that the Schedule names.
- Mayor-in-council or a weak ceremonial mayor, plus a State-appointed municipal commissioner, splits political authority from administrative control.
- The State Election Commission and State Finance Commission exist in the text, yet delayed elections, prolonged administrator rule, and delayed SFC reports are common.
- Building-plan, land-use, and police powers remain with State departments even in million-plus cities, which is functional reluctance in daily governance.
Financial reluctance
- Article 243X allows States to assign taxes, duties, tolls and fees; property tax is still the main own tax, and States cap rates, grant exemptions, and delay revision of guidance values.
- Goods and Services Tax absorbed octroi, entry tax, and local surcharges; GST compensation went to State governments, not automatically to city budgets.
- State Finance Commissions under Article 243Y are often late, and State governments do not always accept or notify the award in full.
- Central Finance Commission grants to urban local bodies (Fourteenth and Fifteenth Finance Commissions) are tied to reforms, but they cannot replace a State’s refusal to share stamp duty, entertainment tax residue, or a predictable share of GST.
- Municipal borrowing and municipal bonds need State guarantee or approval, so even a solvent city cannot raise debt on its own balance sheet.
Why the reluctance persists
- MLAs and State ministers treat cities as vote and patronage territory; a strong municipality is a rival power centre.
- The 74th Amendment constitutionalised the form of local government; it did not constitutionalise a minimum share of State tax or a list of exclusive municipal functions.
- A fair comment therefore agrees with the statement: devolution is discretionary, and both function and finance still sit with the State.
Flow diagram
Conclusion
States remain reluctant because the 74th Amendment leaves functions and taxes to State legislatures, and because parastatals and GST have concentrated money above the ward. Urban local bodies will be empowered only when SFCs, property-tax freedom, and Twelfth Schedule functions are actually transferred, not only listed.
Quick related
Students also ask
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Discuss the role of Presiding Officers of state legislatures in maintaining order and impartiality in conducting legislative work and in facilitating best democratic practices.
Next question on this syllabus topic (2023 · Q5). View answer →
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Did GST abolish municipal taxation entirely?
No. Property tax, some user charges, and a few local taxes remain. Octroi and entry tax, which funded many cities, did go into GST.
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Can the Union devolve Twelfth Schedule functions by itself?
No. Article 243W is addressed to the State legislature. Union grants can only incentivise devolution.
Same topic · past papers
UPSC has asked this before
These previous-year questions sit on the same topic. Open one to practise the earlier ask.
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2024 · Q5 · GS II · 10 marks
Analyse the role of local bodies in providing good governance at local level and bring out the pros and cons of merging the rural local bodies with the urban local bodies. -
2026 · Q2 · GS II · 10 marks
"Women as a class neither belong to a minority group nor are they regarded as forming a backward class." In the light of this statement, discuss the evolution of women's reservation from local bodies to Parliament. -
2015 · Q13 · GS II · 12 marks
Though there have been several different estimates of poverty in India, all indicate reduction in poverty over time. Do you agree. Critically examine with reference to urban and rural poverty indicators.
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