It would be tempting to see the garbage-dumping protest by sanitation workers of the East Delhi municipal corporation over not being paid their salaries as just a manifestation of the confrontation between Delhi’s Aam Aadmi Party (AAP) government and the Bharatiya Janata Party (BJP), which controls the Capital’s municipal corporations as well as the central government, and one that Delhi-ites will have to live with till the municipal elections next year. But it is actually a reflection of a much deeper, and country-wide, problem – the financial state of local governments and the attitude of state governments towards them.

Just last week, chief minister Arvind Kejriwal mocked the BJP – if you can’t run the municipal corporations, he said, hand them over to us, we will run them. This came when the three municipal corporations approached the Delhi government for funds.

Did the statement come from Kejriwal’s belief that he is above all proprieties or from ignorance about the status of municipal corporations? If he was just being sarcastic and flippant – he has used both to good effect during election campaigns – someone needs to tell him that as chief minister every word he utters will be weighed for its import.

Municipal corporations – or any rural or urban local body – are not departments that state and central governments can play passing the parcel with. Local bodies have been given the status of third tier of government by the 73rd and 74th constitution amendments in 1993 and 1994 and a state government asking for a local body to be given to it is as unlawful and undemocratic as the central government seeking to take over a state government using Article 356 of the Constitution on flimsy grounds.

The situation that Delhi is facing today – cash-strapped municipal bodies unable to provide services and a state government that is unable or unwilling to bail them out – is not of AAP’s making. It predates the formation of the AAP government. But Kejriwal can take a step towards solving the problem by simply tabling the report of the fourth State Finance Commission of Delhi.



Just like the financial sharing between the centre and the states is set out by the Finance Commission, that between states and local bodies are set out by State Finance Commissions (SFCs). In Delhi, the recommendations of the third are currently being implemented. The fourth SFC was set up in 2009 to make recommendations for the 2011-16 period. According to the Delhi state BJP, this SFC submitted its report in April 2013 to the Shiela Dixit government but this was not even tabled in the state assembly, let alone being implemented. The BJP claims the fourth SFC increased the share of local bodies in state government tax revenues from 4 percent to 12.5 per cent and that is why the Dixit government sat on the report.

This too is not peculiar to Delhi. The Fourteenth Finance Commission report lamented the fact that states were lax in setting up SFCs; the number of SFCs varied from two to five. (State governments were to set up SFCs within one year of the 73rd and 74th constitutional amendments coming into force.) Many SFCs, it said, were still to submit their reports (the fourth Delhi SFC submitted its report three years after it was mandated to), state governments took their own time in deciding on reports or rejected the recommendations without assigning reasons.

Can the central government dare to do the same with the recommendations of the national Finance Commissions? No central government has ever rejected the core recommendations of successive Finance Commissions relating to financial devolution to the states and local bodies for fear of incurring the wrath of the states. States, however, clearly do not have any such trepidations.

Local governments are important not just because of the constitutional status they enjoy but because they are the cutting edge of government. Basic services – primary education, primary health, drinking water, sanitation, street lighting, roads – are all in the jurisdiction of local governments. Much is being made about the huge allocations for physical infrastructure in the budget and how this will transform the country. But the Fourteenth Finance Commission gives local bodies Rs 2.87 lakh crore. The transformative potential of spending this money on the provision of basic services will equal, if not exceed, that of spending on highways, ports and smart cities. Can Narendra Modi’s Swachch Bharat Abhiyan go anywhere at all without the involvement of the local bodies?

But state governments just do not want to do unto local governments what they want the centre to do unto them. Indeed, the devolution of functions, funds and finances, which the constitutional amendments envisaged, is still patchy. Rajesh Tandon, president of Participatory Research in Asia, points out that nothing reaches local bodies without the blessings of the state governments.

The Fourteenth Finance Commission has tried to ensure that at least the grants it provides reaches the states promptly. It has said the grants will be released in two instalments and the state government should release the money to the local governments within 15 days of receiving it. Any delay will mean the state government should pay interest for each day from its own pocket. But this does not cover devolution of other funds from the state to the local bodies. Clearly, pressure needs to be brought on states to play fair towards local governments. Kejriwal kind of statements and attitude just will not do.

Such confrontations, however, are bound to happen when the state and local governments are ruled by different parties. The answer, then, lies in local governments taking steps to augment their resources, something that often becomes a victim of laziness. It is so much easier to demand money from another tier of government than generate it on one’s own.

The Fourteenth Finance Commission reports lists several areas that can generate resources for local bodies – property tax reform, land-based instruments, taxes on advertisements, entertainment, professions and trades, municipal bonds, among other things. Often state governments will have to take steps to ensure this can happen and they may need to be pushed to do this. This has to come on to the discourse agenda. Cooperative federalism cannot just be a centre and states issue. The local bodies have to be as much part of this process.

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AAP-BJP standoff on Delhi municipalities is a symptom of a much larger problem