The Urban Governance Index: A useful Assessment tool to enhance fiscal transparency
Anjana Rajagopalan and Divya Chirayath
Introduction
After almost three decades of constitutionalising city governments, Praja’s Urban Governance Index is timely and serves the dual purpose of assessing the state of urban governance reforms and informing further policy-making in this space. Since urban local bodies play a crucial role in the provision of urban amenities like water supply, drainage, waste management, etc., a tool that monitors the progress of different aspects of urban governance is always useful for urban local bodies (ULBs) to improve their services. The index becomes particularly relevant for ensuring accountability of such bodies and presenting a comparable assessment of performance across ULBs and having a baseline for further assessment in future.
The Urban Governance Index (UGI)
The Urban Governance Index (UGI) was launched by Praja Foundation in 2020 to measure how empowered city governments in India are. This structural empowerment, as enabled by State governments, has been analysed through the extent of empowerment across four aspects of city governance- Empowered City Elected Representatives and Legislative Structure, Empowered City Administration, Empowered Citizens and Fiscal Empowerment. Under each of these 4 heads, using 13 sub-themes and 42 indicators, Indian states have been scored and ranked on the level of empowerment of their city governments. One of the key highlights of this initiative is that it provides an interactive dashboard where users can change weights for different indicators to create their own rankings based on a particular aspect of city governance to assess performance in specific fields.
Assessing Fiscal Empowerment of Urban Local Bodies
Fiscal Empowerment is an essential aspect of urban governance and refers to a city government’s autonomy in raising its own financial resources, along with a vertical devolution of financial resources from the Union and State governments. While the 74th Constitutional Amendment empowers city governments to raise their own revenues, the streams of revenue and the powers to appropriate and collect the revenues have been left with State governments to determine. Depending on the provisions made in different State Municipal legislations, there has been a large variation in the level of fiscal autonomy noticed across city governments in India. The UGI assesses the extent of fiscal empowerment in city governments through the three sub-themes of Devolution of Financial Power, Systemic Financial Transfers, and Financial Accountability. Devolution of Financial powers is reflected through the powers to introduce and determine taxes and tax rates, plan and approve city budgets and raise money from the open market. Systemic Financial Transfers reflect healthy fiscal federalism through an active State Finance Commission and a direct share of Goods and Services Tax (GST) for city governments. Financial accountability, the last sub-theme under fiscal empowerment, is reflected through online publication of city budgets and provision for external auditing of city budgets. While each aspect under this broad parameter is important in its own way, the present article focuses on documenting evidence on enhancing financial and fiscal transparency and accountability for effective city governance in the country.
Financial Accountability
Ensuring adequate financial accountability is considered as the cornerstone of the functioning of a vibrant local government and is an important way for city governments to represent the interests of its citizens. Citizens must have access to reliable, relevant and timely information on how their money is being used to develop their city and financial accountability plays a crucial role in ensuring this. Similarly, a system evaluating the utilisation of public money by the local government must be institutionalised through external audits that are independent of local governments.
In the UGI, Financial Accountability has the following two indicators:
● Provision for publishing city budgets online
● Provision for external audits
Currently, nine states in the country (Andhra Pradesh, Jharkhand, Kerala, Maharashtra, Madhya Pradesh, Mizoram, Punjab, Tamil Nadu and Telangana) have mandatory provisions for online publishing of city budgets and accounts in their respective municipal laws. Similarly, all states except two (Manipur and Meghalaya) have mandatory provisions for conducting external audits. While online availability of city budgets and provisions for external audits does ensure financial accountability, they do not always ensure the engagement of citizens in the fiscal aspects of city governance.
Towards Fiscal Accountability and Transparency
Unlike Union and State governments in India, Municipal Corporations do not produce budgets in a timely manner and lack the level of standardisation recommended in the National Municipal Accounts Manual issued by the Union Government. The expenditure reported in municipal budgets often remains non-disaggregated, with some municipal corporations classifying expenditure into sectors while some others classifying it into functions. Another prevalent issue is the accessibility of municipal budget documents- even though budget documents are uploaded in the public domain, they are often published as scans of hard copies or in non-machine readable formats, making it difficult to access and use. Many municipal corporations also publish budget documents much later than the enactment of the budget, hindering timely availability of fiscal information for effective citizen engagement, which is considered one of the strongest pillars of budget transparency. While publishing and auditing of accounts do ensure financial accountability, making fiscal data available and accessible in a timely manner in multilingual formats will increase its usability and certainly play an important role in advancing financial transparency.
While the UGI is a very useful assessment tool for ranking states on the basis of their relative performance in particular facets of urban governance, a more helpful measure of fiscal empowerment must extend the indicators of financial accountability to fiscal accountability. The first step towards this would be to track citizen participation in fiscal governance issues. While Praja’s UGI does acknowledge the importance of empowering citizens by way of a freely accessible open data portal as well as the existence of mechanisms for their consultation, inclusion of a measure of the extent of citizens’ participation would indicate a more fiscally accountable local government.
For instance, Pune city topped the quality of urban governance in 2018 based on Janaagraha’s ASICS Survey which includes aspects such as urban planning, design, capacities and resources, level of transparency and accountability including participation and empowered political representation. Pune Municipal Corporation promotes active citizen engagement through social media, newsletters and Pune Smart City Ideas Competitions. Pune’s progress on the urban front to a large extent may hence be attributed to its focus on citizens participation at all stages of the budget cycle. Interestingly, India still lags behind in terms of active participation of citizens in its city governance as per surveys. One initiative towards addressing this has been the MyCityMyBudget initiative by Bruhat Bengaluru Mahanagara Palike (BBMP) for instance, wherein citizens from different wards contribute through budget inputs.
Without doubt, Praja’s UGI index is a timely and useful tool to assess fiscal empowerment as well as accountability in urban local governance. The way forward should also envisage greater importance to citizen’s participation through inputs as well as social audits for increased fiscal accountability. Moreover, there is a need to go beyond the binary framework of measuring transparency, i.e., looking beyond the disclosure norms of availability of data and documents. The extent of citizen engagement in the fiscal governance discourse by using available fiscal information to strengthen service delivery mechanisms of local governments is key to enhancing the accountability framework of local governments. By expanding financial accountability to fiscal accountability, performance indicators of urban localities would improve even faster and laggard cities would also become motivated and empowered to perform better.
Authors work with Centre for Budget and Governance Accountability (CBGA), New Delhi. Views expressed are of the authors, and do not necessarily reflect the position of CBGA.
