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Prasanna K. Mohanty: ‘Over the years the sources of revenue for a municipality have shrunk’

‘Give cities a share of GST to make them viable’

Civil Society News, Hyderabad

India’s long-term economic prosperity will be closely linked to how its cities perform. Can they emerge from decades of neglect to become vibrant hubs of skills, technology and empowerment?

Helping municipalities acquire the authority and expertise they need to deal with backlogs and meet the rapidly increasing demands on them is a complex task. Money is needed in dollops for infrastructure, but more important is a change in perception. Though municipalities are the third tier of government, can mayors and councillors be given a context in which they feel more empowered?

Prasanna K. Mohanty says that a national consensus is needed on the role of municipalities so that they can be better funded and provided with the space to raise resources through innovative taxes and user charges.

Mohanty should know because as a bureaucrat he has been closely involved with urban governance. Now, as a scholar and Chair Professor of Economics at the University of Hyderabad, he is a student of cities and what makes them tick. Dr Mohanty is the author of the recently published book, Financing Cities in India. Excerpts from an interview:

In the drafting of the Goods and Services (GST) law, as we know it today, have the finances of the municipalities been taken into account?

Municipal finances have not been taken into account because policymakers think that state governments should sort out the issues of municipalities. But the point is that after the 74th Amendment Act recognised municipalities as the third tier, they need financial strengthening to perform. We gave them 18 functions through the 12th Schedule. But their finances are left to the state governments. And, over the years, the sources of revenue for a municipality have shrunk. Octroi was abolished but it was not replaced with an alternative source of revenue for municipalities. ...

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