The Finance Commission has proposed a targeted push to accelerate and make India’s urban growth more orderly, focusing on strengthening mid-sized cities and bringing rapidly urbanising fringes of cities into municipal corporations.In its recommendations on urban local body (ULB) grants, the 16th Finance Commission has outlined two key priorities: integrating peri-urban areas that have already acquired most characteristics of urban settlements into adjoining municipal bodies, and modernising drainage infrastructure in cities with populations between 10 and 40 lakh.The commission said revamping urban drainage systems is an urgent requirement, particularly in smaller and mid-sized cities that lack the financial capacity to fund large infrastructure projects on their own. While major metropolitan cities are better placed to mobilise resources for such investments, smaller municipalities remain constrained. “Taking into account the availability of limited resources, we have recommended the provision of some fiscal resources for revamping the drainage system in middle-level municipalities on a costsharing basis,” the report said. Accelerating urbanisation, it added, is among the panel’s core focus areas.The commission underscored the role of urbanisation in boosting both rural and urban incomes, noting that mid-sized cities will bear a growing share of population and economic activity in the coming years. Improving infrastructure in these cities, it said, is essential to ensure they are equipped to manage rising urban demand.The report flagged the need to strengthen municipal finances, particularly through reforms in property tax administration. Property tax, it said, remained underutilised across much of the country despite being a critical source of revenue for urban local bodies.The commission said that states need to enact clearer rules and regulations to improve the levy and collection of property tax, including the adoption of GIS-based digital property tax registers. These registers should be linked with GIS-based city master plans ensure automatic updates whenever land-use plans are revised.Such integration, the report said, would ensure that property records reflect current land use, enabling timely revisions in tax assessments. It also called for mandatory periodic enumeration of properties and regular updates to property tax in line with guidance values prescribed under state laws and rules.The panel further suggested the introduction of online self-assessment systems, supported by automated demand notices, reminders, and random scrutiny of returns to improve compliance in urban areas. The use of unique property identification numbers, it added, would facilitate more efficient tax billing and collections. “This property database may be appropriately linked with other databases, like water, sewerage, electricity, trade license and building permissions for automatic verification of property attributes and assessment records,” the report said.Taken together, the commission said, these measures could help stabilise municipal finances and support more sustainable urban expansion.
