COMMENTARY

Finances of Municipalities
Issues before the
Fourteenth Finance Commission
Om Prakash Mathur

The finances of municipalities in
India are in a highly
unsatisfactory state, adversely
affecting, on the one hand, the
productivity of cities and towns
and, on the other, the quality of
life. Moreover, the fiscal
implications of rapid urbanisation
stare us in the face and failure to
take appropriate action on this
front will have adverse
consequences for India’s growth
and development trajectory.
The Finance Commission’s
grants-in-aid over the years have
not been able to bridge the
vertical fiscal gap of
municipalities. How may the
Fourteenth Finance Commission
deal with the fiscal challenge?

Om Prakash Mathur (opmathur@niua.org) is
with the National Institute of Urban Affairs,
New Delhi.
Economic & Political Weekly

EPW

june 1, 2013

1 Introduction

T

he two amendments to the Constitution of India, viz, incorporation
of Part IX A on municipalities
together with Article 243 Y and insertion
of (3)(c) into Article 280 have brought
about a change of far-reaching importance
in intergovernmental fiscal relations,
both between the states and municipalities, and between the centre and
municipalities. Article 243 Y has introduced in India’s federal structure the
institution of a State Finance Commission (SFC) for the purposes of making an
independent assessment of the financial
position of municipalities and making
recommendations on the principles that
should govern the following:1
(i) the distribution of the net proceeds
of the taxes, duties, tolls and fees
leviable by the state between the state
and municipalities;
(ii) the determination of the taxes,
duties, tolls and fees that may be assigned to or devolved on municipalities;
(iii) the grants-in-aid to the municipalities.
Article 243 Y gives to the SFCs a broader
mandate of suggesting measures that
may be needed to improve the financial
position of municipalities.
The amended Article 280 with (3)(c)
requires the Finance Commission (FC) to
make recommendations on “the measures
needed to augment the Consolidated Fund
of a State to supplement the resources of
the municipalities in the State”, with the
proviso that these be based on the recommendations made by the Finance
Commission of the states. This provision
recognises that there may be an unfilled
fiscal gap in the resources of the municipalities after the SFC’s recommendations
have been accounted for. The mandate
of the FC is to take into account this gap
and make appropriate recommendations
in this regard. Article 280(3)(c) opens

vol xlviII no 22

up a fiscal link between the centre
and municipalities, a landmark in intergovernmental fiscal relations. Beginning with the Tenth FC, successive FCs
have made recommendations in pursuance of this mandate. This background
note outlines the approach proposed
by the FCs in addressing the mandate
as envisioned under Article 280(3)(c),
and identifies issues that seem important for consideration of the Fourteenth
Finance Commission.
2 Approach to Article 280(3)(c)
The approach of the successive FCs to
Article 280(3)(c) can be divided into
three parts:
(i) the constitutional provision stipulating that the FCs will make recommendations on supplementing the resources of
the municipalities on the basis of the
recommendations made by the FC of the
state (To what extent has this stipulation
been adhered to?);
(ii) adequacy of the “grants-in-aid” for
municipalities as recommended by the
successive FCs, together with the adequacy of the criteria for allocation of
the recommended grant to states for
municipalities; and
(iii) the non-financial measures for
improving fiscal governance.
2.1 Constitutional Provision
Article 280(3)(c) requires the FC to recommend “measures needed to augment
the Consolidated Fund of a State to
supplement the resources of the Municipalities in the State on the basis of the
recommendations made by the Finance
Commission of the State”. It is important
to note that none of the FCs have been
able to base their recommendations on the
reports made by the SFCs, attributing the
inability to use them to the following:
(i) the non-availability of the reports of
the SFCs;
(ii) the non-conformity of the time period
for which the SFC reports are prepared
with the time period for which the FCs
have made recommendations; and
(iii) the inability of SFCs to provide in their
reports a clear idea of the powers, authority and responsibility actually entrusted
to the local bodies and to indicate the
principles for devolving revenue-raising
23

(iii) the SFCs have no incentive to produce a comprehensive report. with annual grants ranging from Rs 400 crore (Eleventh Finance Commission). The issue is: Are the FC grants-in-aid adequate in bridging the vertical fiscal gap of municipalities? Determining the adequacy of the grants-in-aid requires an estimate of the “gap” between what the municipalities need to deliver services at some “standard” levels and what they are able to generate. The share of municipalities in the pool is 26.93% of the divisible pool together with the projected divisible pool (2009-14) are given in the Annex Table (p 27). “it is necessary that the States constitute SFCs with people of eminence and competence. will perpetuate the present position. making it difficult to assess the state of the finances of municipalities. as the data show. Table 1: Recommended Grants-in Aid for Municipalities (Rs crore) Commission Basic Grant Earmarked or Performanced Linked Eleventh FC (2000-05) 2. and (iv) there is a lack of interest in states to accept the recommendations of SFCs and place the Action Taken Reports (ATR) before the state legislatures in a timely manner. after accounting for the shared revenues and grants-in-aid as recommended by the SFCs. Rs 1.2 Recommended Grants-in-Aid The grants for municipalities as recommended by the previous FCs are as given in Table 1.3 Allocation of Grants An important component of the grantsin-aid is the criteria for its allocation to the different states. “serving government officers are appointed as chairperson and members of the SFCs”. 2. and the normative considerations are broadly comparable across states in order that the FCs are able to apply the same criterion for assessing their requirements. SFCs and municipalities for improving the finances of municipalities? Can a minimum performance for revenue raising be applied? There are several known revenue objects that are barely used. and estimation of the vertical fiscal gap? The FCs cannot continue to remain ad hoc in responding to their constitutional mandate.2 Although the FCs have the flexibility of making their own assessment of the finances of municipalities. the Thirteenth Finance Commission recommended “a percentage of the divisible pool to be given to all states as grant under Article 275 of the Constitution”. are suboptimally used. do not bear any relationship with the fiscal needs of municipalities. the FCs have not made use of the SFC reports for reasons given above.) The Eleventh Finance Commission also points out that in several states. and (ii) in the absence of such reports. It is significant to note at the very outset that the criteria have been undergoing changes with the successive FCs. (ii) there is poor ownership of SFC reports by state governments. which put “limitations on the ability of the SFC to act as an autonomous body to make recommendations in a free and independent manner”.COMMENTARY powers to municipalities as well as sharing of revenues with municipalities. and their revenueraising potential be undertaken. vol xlviII no 22 EPW Economic & Political Weekly . 2. and Thirteenth Finance Commissions. the grants-in-aid as recommended by the FCs. (iii) Can or should an independent assessment of the financial requirements of municipalities.000 Source: Reports of the Finance Commission.000 2. and conform to the established methodology for assessing the finances of municipalities. The issues are: (i) What should be the basis of determining the grants-in-aid? What expenditure and revenue benchmarks should be used for estimating the requirements of municipalities?4 (ii) What kinds of incentives should the FC provide to states. the non-use by the FCs of the SFC reports for formulating their recommendations has been a major impediment to improving the finances of municipalities. a normative approach for assessing municipal revenues and expenditure rather than using forecasts based on historical trends). especially the methodology for determining the “normative gaps”.93 - Thirteenth (2010-15) 15. it must be emphasised.3 The above raises two sets of issues: (i) How to ensure that the reports of the SFCs are qualitatively sound. Aggregate grants to local bodies constituting 1. The Twelfth Finance Commission suggests that in order that a proper approach similar to the one that is followed by the FC is followed by the SFCs (i e. While the Eleventh and Twelfth Finance Commissions preferred to recommend a fixed amount of grant. Most municipalities have a huge backlog of basic infrastructure. Prima facie. and Rs 4. In sum.000 crore (Twelfth Finance Commission). making june 1. The entire exercise of estimating the gaps is also compounded by the fact that municipalities across states are expected to adhere to a “balanced budget criterion”. (The Thirteenth Finance Commission argues that it provides a further disincentive for SFCs to produce good quality reports. None of this has. It presupposes that the gaps so worked out are based on some normative considerations. instead of viewing the formation of SFCs as a mere constitutional formality”.8% of the total amount. The Thirteenth Finance Commission further notes the following: (i) SFCs are hampered by lack of data.110 8. their efforts in this direction have not yielded much. however.662 crore (Thirteenth Finance Commission). Sharing of the pool signals a major step towards establishing the claim of municipalities in the central divisible pool of resources. Table 2 (p 25) gives the criteria for the Eleventh.000 Twelfth FC (2005-10) 5. taking into account some agreed-upon normative considerations? Failure to estimate the gap on normative considerations. what alternative 24 approach should the FC follow in order to be able to make an assessment of the financial position of municipalities. even the existing ones. under-spending by municipalities as assessed by studies carried out for the FCs is estimated to be around 150-180% of the amounts needed to provide services at basic levels. Twelfth. been possible from the databases contained in the reports of the FCs or of the SFCs. 2013 it difficult to ascertain the adequacy of the recommended amounts.

arguing. These are: (i) While urban population and area are universally accepted criteria. (viii) action taken on the major recommendations of the SFC. (iii) assignment of functions to the local bodies by state legislation.116 of the Thirteenth Finance Commission report. The supplement requires urban local bodies to maintain accounts as provided for in Para 10. x . The Comptroller and Auditor General must be given technical guidance and supervision over the audit of all the local bodies in a state at every tier/ category and his Annual Technical Inspection Report as well as the Annual Report of the Director of Local Fund Audit must be placed before the state legislature. storm water drainage. the main difference is that while the Eleventh Finance Commission included an “index of decentralisation” in the allocation criteria. where the intention is to strengthen decentralisation (the 74th amendment). more importantly. (ix) Putting in place a fire hazard response and mitigation plan in all municipal corporations with a population of over one million (2001 Census) for their respective jurisdictions. and solid waste management) provided by local bodies. The formula used is D.percentage of households fetching water from distance.Standard Deviation (least deprived state based on 2001 Census) Source: Reports of the Finance Commissions. (v) Prescribing through an Act the qualifications of persons eligible for appointment as members of the SFC consistent with Article 243I(2) of the Constitution. (ii) intervention/restriction in the functioning of the local bodies. held elections. and. 0.000 crore for allocation to states on the basis of their performance of states in respect of the following: (i) Putting in place a supplement to the budget documents for local bodies. Economic & Political Weekly EPW june 1. These have been used to construct index. and 2007-08. (vi) extent of exercise of taxation powers.for ULBs sub-heads 191. (vii) constitution of the SFCs and the submission of action taken on their reports.= 0.5x+0. to quote from the report: Considering that almost all States have now taken effective steps for the implementation of the 73rd and 74th amendments and have enacted legislations. and constituted the SFCs and taken action on their reports. the extent to which the grants given to municipalities have been utilised as an indicator of devolution. (v) assignment of power of taxation to the local bodies. Drinking water and sanitation are The amount devolved to local bodies in the finance the two core services performed by the local bodies. the population. (iv) Putting in place a system to electronically transfer local body grants provided by this commission to the respective local bodies within five days of their receipt from the central government. For example. most of the factors mentioned as representing decentralisation may not be of much relevance in the present context. We have decided to drop this criterion in this form. (iii) Putting in place a system of independent local body ombudsmen who will look into complaints of corruption and maladministration against the functionaries of local bodies. Likewise. and recommend suitable action. z . (vii) Putting in place a state level Property Tax Board. (iv) actual transfer of functions to these bodies by way of rules. what criteria should be brought in to reflect “decentralisation” Table 2: Criteria for the Allocation of the FCs Grants-in Aid Eleventh FC Twelfth FC Criteria Weight (%) Population Geographical area Distance from highest per capita income Index of decentralisation Revenue effort 40 10 20 Criteria Population Geographical area Distance from highest per capita income Index of deprivation Revenue effort of which (a) with respect to own revenue of states of which (b) with respect to GSDP 20 10 100 The EFC had selected the following 10 parameters for the purpose of arriving at the index of decentralisation: (i) enactment/amendment of the state/panchayats/municipal legislation. 192 and the number of households fetching water from a 193 under applicable major heads in the non-plan distance (over 100 metres in urban areas). i e. (viii) Putting in place (gradually) standards for delivery of all essential services (water supply.25(y+z).percentage of households without latrines. given the existing database. (ix) elections to the local bodies. to apply on account of lack of adequate data. households with no drainage facilities for flow of waste water. y . 2. 2006-07. both elected members and officials. other criteria have proved to be more difficult to agree upon. sewerage.COMMENTARY Between the Eleventh and Twelfth Finance Commission. the Twelfth replaced it with an “index of deprivation”.604 in the non-plan category. Certain issues arise in respect of the criteria for allocation of the grants-in-aid. households category and for other assistance to all local bodies with no latrines within the house premises and under the head 3. The Thirteenth Finance Commission has restored the “index of devolution” but preferred to use utilisation of funds. which will assist all municipalities and municipal corporations in the state for establishing an independent and transparent procedure for assessing property tax. 2013 vol xlviII no 22 25 .Deprivation Index.I. the revenue effort of municipalities (giving higher weightage to those who make greater effort) has not been easy to apply. (ii) Putting in place an audit system for all local bodies. where DI .percentage households without drainage. (vi) Enable local bodies to levy a property tax (including tax on all types of residential and commercial properties).4 Linking Grants to Performance An important point of departure made by the Thirteenth Finance Commission relates to the setting aside of about Rs 8.5 . notification and orders. Thirteenth FC Weight (%) 40 10 20 10 20 Criteria Population Area Distance from highest per capita sectoral income Index of devolution Revenue effort FC local body grants utilisation index Weight 50 10 20 15 5 10 10 100 100 Index of deprivation: Intra-state disparities on the Index of devolution derived from the finance basis of data relating to certain minimum needs of accounts for all years 2005-06. and (x) constitution of the district planning committees as per the letter and spirit of article 243ZD. accounts have been aggregated across the State-wise Census 2001 data is used regarding following head .

and (iv) an institutional arrangement for controlling and supervising the maintenance of accounts and audits. Such levels of expenditure are far below the minimum expenditures that must be incurred in order to provide basic levels of services. on the other.14 Devolution. It is necessary to aim at a long-run improvement in the municipal finance system that would contribute to India’s urban policy agenda. the productivity of cities and towns and.5 3 Non-Financial Measures for Fiscal Governance Successive FCs have been concerned with improving fiscal governance at the level of municipalities. establish a uniform system of assessment and valuation.415 28.929.046 Own tax as % of GSDP 0.871.63 3.18 20.40 1.260.959.26 Expenditure Revenue expenditure 15. In comparison.6 The process of refurbishing the finances of municipalities has been put in motion with the Jawaharlal Nehru National Urban Renewal Mission and the performance-linked system of devolution from the central divisible pool of taxes. it is hardly likely that the states and municipalities alone will be able to assign resources for financing this scale and pace of urbanisation. The issue is: will or should the Fourteenth Finance Commission make an overall assessment of the municipal finance sector in order to devise its strategy of assistance.74%. 2013 almost every sphere of municipal finance. 5 The Urbanisation Challenge The 2011 Census results place India’s urban population at 377.566.431.55 13.135. having risen from 286 million in 2001.833. the effort put in this needs to be deepened and made broad-based.57 2. (ii) The introduction of a “performance grant” is an important departure from the past in ensuring that the states take up reform measures such as the establishment of a Property Tax Board and through the board.2360 0.493 37.34 Own non-tax revenue 4.95. street lighting.64 16.805. The Census decade 2001-11 registered an annual exponential growth of 2.00 Gross state domestic product (GSDP) 19.22 50.24% of the GDP and their revenues are 1.20 44.93 19.06 Capital expenditure 5.361. The issue is: do these ingredients provide a robust fiscal governance portfolio? Should the Fourteenth Finance Commission examine the need for transparency and participation in the planning and management of resources and services for lending additional credibility to fiscal governance? 4 Municipal Finances The finances of municipalities in India are in a highly unsatisfactory state.36 485 262 471 75 27 90 1.16 18. system of transfers. on the one hand. and city-wide roads for its fast growing urban population. further strengthened with additional or new conditions or altered? Clearly the underlying purpose of linking grants to performance is to ensure fiscal viability of municipalities and advance the cause of decentralisation as embodied in the 74th constitutional amendment.38 8. vol xlviII no 22 EPW Economic & Political Weekly .77 Source: Report of the 13th Finance Commission.80.336.92 16.81 13.393.26 556 210 767 21.593.894. adversely affecting. The existing system is just not responding or responding very inadequately to the fiscal challenge that confronts municipalities.48 Central government transfers 304. assignment and grants 5. Given the state of the finances of the states and municipalities. the quality of life.25 864. however.98 Others 1. 26 june 1.16% of the GDP which include transfers from the states and central government (2007-08).815. Studies on municipal finances show inefficiencies in Table 3: The Finances of Municipalities: 21 States Finances 2002-03 Amount Per Capita Rs Crore Rs Revenue income Own tax revenue 8.410 11. A key issue is: should the “nine conditions” that provide eligibility to a state for accessing this grants-in-aid linked to performance be continued.94 Total expenditure 21.93 14.44 Municipal expenditure as % of GSDP 1.08 2007-08 Amount Per Capita Rs Crore Rs CAGR Amount % 314 157 209 11 10 40 741 15.04 2.24 903 590 1.22 Total revenue income 20.09 Finance Commission grants 272. municipalities in South Africa are able to generate resources that are about 6% of GDP and Brazil is able to mobilise as much as 7.4% of GDP. The financial and fiscal implications of urbanisation are phenomenally large. Municipalities in India raise 2.63 25.3% of the publiclyraised revenues.229.1 million.46 46. The unsatisfactory state of their finances is best assessed by the fact that municipal expenditure on services that they provide is just about 1. or the extent of autonomy that municipalities can exercise. One of the most formidable challenges that India faces today is to make provision for such basic municipal services as water supply. it means an annual addition of approximately 10 million persons to its urban population.COMMENTARY are not easy to determine? Which criteria and what underlying processes should the Fourteenth Finance Commission use for allocating the recommended grantsin-aid is the issue. the premise being that a robust municipal finance system is crucially dependent on how good fiscal governance is. sewerage and solid waste system. (ii) an accounting system that can provide a clear picture of transfers to each category of municipalities. be it the internal resource generation.67 25. the fiscal implications of urbanisation will continue to be phenomenally large. Four aspects of fiscal governance have engaged the attention of the FC: (i) a database on the finances of municipalities that can help gauge the fiscal health of municipalities.663. What is important to recognise is that irrespective of how provision of urban infrastructure and services is allocated between the different tiers of government. when applied to a large urban population base.969 12. (iii) a system of independent local body ombudsmen to look into the complaints of corruption and maladministration.

60 16.54 Tamil Nadu 38.202 72.000 4.68 0.40 16.24 0.14 Madhya Pradesh 7.992 20.22 0.62 Karnataka 6.COMMENTARY Although the mandate of the FC is to recommend measures for the augmentation of resources of the states for meeting the requirements of municipalities.86 Jharkhand 19.81 15. It is not known as to how far the SFCs have used the template.98 3.16 0.14 0.20 125. The fiscal implications of urbanisation are phenomenal.08 Total per year 400.40 Tripura 0.778 1.58 10.00 2. are no longer just the responsibility of states.70 2.80 99.80 38.000.30 Arunachal Pradesh 0.84 3.311.35 Meghalaya 0. other FCs ack nowledged the studies but made no use of them in formulating their recommendations.10 Bihar 4.2 50.042 0.00 23.00 50.78 Uttar Pradesh Uttarakhand West Bengal Total 0.883 44.74 3.931 74. however.17 Sikkim 0.72 Rajasthan 4.30 Odisha 7.539 1.1 377. The approach to dealing with the finances of municipalities has been ad hoc.505 82.63 8.10 1.81 Goa 0.38 Gujarat 26.08 1. The 2011 Census registered 3.56 Uttarakhand 6.80 7.927 2.97 4. the Fourteenth Finance Commission cannot shy away from the fiscal challenges of urbanisation. India confronts a formidable challenge of urbanisation. Moreover.779 28. 1 Annex Table 1: Grants-in-Aid for Municipalities Recommended by Successive Finance Commissions Annex Table 2: Per Cent Share of States in the Finance Commissions Recommended Grants-in-Aid States States 11th FC 12th FC 13th FC Andhra Pradesh 32.26 Tripura 0. With the exception of the Thirteenth Finance Commission which commissioned a study on property taxation and used it in formulating its recommendations.44 Haryana 7. have not been accorded the attention they deserve.24 Total for five years 2.964 64.6 286.5 91.46 Jammu & Kashmir 3.20 635. it was pointed out that unless these conditions are incorporated in the state statutes. Table 4: Urban Population Year 1961 1971 1981 1991 2001 2011 Population (Million) Net Population Increase (Million) Level of Urbanisation (%) 78.28 5.46 Kerala 3. Economic & Political Weekly EPW june 1. The Thirteenth Finance Commission provided a template for the SFCs.44 Goa 0.137 0.15 1.40 590.16 For the reason that they are not accorded the statutory (municipal) status.76 1.879 1.9 109.60 16.03 0.22 Punjab 10.16 Karnataka 24. it was one of the terms of reference of the High-Powered Expert Committee (HPEC) on Investment Requirements for Urban Infrastructure.86 Sikkim 0. but continue to be governed by Panchayat Acts. It is in this light that the Fourteenth Finance Commission may consider how best the agenda relating to 280(3)(c) can be taken forward.35 Mizoram 0.80 383.00 100.328 18.96 19. there is a large macro stake in ensuring that cities and towns are efficient in order to help achieve a 8% GDP growth and to contribute to other developmental goals.1 Problem of Census Towns A distinguishing feature of the 2011 Census is the extraordinary rise in the number of “Census Towns”.60 85.19 0.90 23.76 2.80 260.498 78.4 58. The state governments have not assig ned them the statutory status of a municipality.00 100.60 398.60 40.768 2.04 West Bengal 39.72 Bihar 18.41 Nagaland 0.18 Madhya Pradesh 31.86 6.5 217. The issue is: can the Fourteenth Finance Commission suggest an incentive structure that will enable these census towns to control and regulate their growth in accordance with state municipal legislations.1 159.1 68. Census towns – a “unique Indian feature” – are settlements that fulfil the census definition for assigning the urban status to a settlement.132 7.357 1.74 Rajasthan 19.24 12. It is the practice of the FCs to commission studies on the finances of municipalities.62 Manipur 0.38 Kerala 15.20 0.34 12.78 0.049 29.16 0.83 1.01 0.60 323.18 0. failure to adequately appreciate them and to take appropriate action will have adverse consequences for India’s growth and development trajectory.75 Manipur 0.82 1.20 0.20 298.20 86. their total population is not yet in public domain but it is estimated to constitute about 10-12% of the country’s total urban population.662.80 145.32 Assam 4.82 13.22 6. In a recent meeting on financial accounting organised by the CAG.40 5. if their growth and development is not regulated and governed by regulations and by-laws generally applicable to cities and towns.673 114.48 8.35 Gujarat 6.14 Assam 1.16 0.14 Uttar Pradesh 50.00 27 .96 1.34 25.42 2. The need for revising these norms has been underlined for some time.894 such towns. 11th FC 12th FC 13th FC Andhra Pradesh 8.08 2.01 Tamil Nadu 9.71 27.24 6. The Zakaria Committee expenditure norms for municipal services developed in 1963 have been widely used by the SFCs and in the studies commissioned by the FCs.06 Mizoram 0.15 Punjab 2. 5.80 16.92 Himachal Pradesh 0.09 0.945 34.86 Maharashtra 63.1 – 30.326 103.12 0.06 0.20 0.84 8.23 7.52 Chhattisgarh 17. the Fourteenth Finance Commission will not consider their financial requirements as a part Article 280(3)(c) of the Constitution.40 145.60 123.000. Cities and towns.251 158.02 0.00 1. these are places that have the potential of becoming “slums”. in fact.00 5.308 11. the trends indicate.44 10.60 6.20 vol xlviII no 22 2 3 4 5 6 The introduction of the institution of SFC should be seen in conjunction with the Twelfth Schedule which envisages for the municipalities a much larger functional role than in the past.84 Arunachal Pradesh 0. an annual addition of about 10 million people to its urban population.60 11.20 0.00 238.47 Maharashtra 15.67 11.40 474.20 15.87 7. A Sub-Group on Municipal Finance set up as a part of the NDC Sub-Committee on urbanisation has identified a few crucial reform measures that require consensus among states.63 Haryana 1. the states may jettison them as soon as these are delinked from the grants-in-aid.76 0.88 Himachal Pradesh 0.82 9.23 0.00 18. The HPEC.26 Jammu & Kashmir 0.34 Meghalaya 0.99 100.33 Odisha 2. 2013 In Conclusion Notes The two constitutional amendments of 243 Y and 280(3)(c) which are a part of the 74th amendment and which aim at the strengthening of the finances of municipalities.88 Chhattisgarh Jharkhand 1.0 17.81 31.86 Nagaland 0. At the same time. with serious shortcomings both in respect of determining the gaps in resources as well as building up incentive structures for bringing about long-term sustainability in their finances. preferred to use the benchmarks as laid out by the Ministry of Urban Development for developing expenditure norms.803 1.