Mumbai’s governance and fiscal path forward: A roadmap from National Urban Convention 2024 reports

Praja Foundation released the `Fiscal Empowerment of City Governments, Praja`s Urban Governance Index 2024, and Spatial Planning Index 2024` report on Friday, September 27. Pic/Praja

As Mumbai grapples with pressing governance and fiscal challenges, the findings from the National Urban Convention 2024 offer a crucial roadmap for reform.

The convention underscored the importance of strengthening the city's fiscal autonomy, improving governance structures, and ensuring efficient coordination between planning agencies as the key steps towards securing Mumbai's future as a vibrant, resilient, and financially empowered metropolis.

Organised by the Praja Foundation on Friday, September 27, the convention saw the release of three key reports: Fiscal Empowerment of City Governments, Praja's Urban Governance Index 2024, and Spatial Planning Index 2024 by Urban Design Research Institute (UDRI).

These reports, released in collaboration with the National Institute of Urban Affairs (NIUA), provide insights into the state of governance, fiscal health, and spatial planning across 43 cities in 28 states and two Union Territories. Mumbai, India's financial capital, was a focal point of the reports, which spotlighted its unique challenges and called for urgent reforms to boost municipal governance, fiscal autonomy, and urban planning.

By bolstering fiscal autonomy, empowering governance structures, and fostering better coordination between agencies, Mumbai can secure its place as a financially independent, well-governed city that is prepared to meet future demands, experts emphasised.

Highlighting the event, Milind Mhaske, CEO of Praja Foundation, took to X (formerly Twitter) on Saturday afternoon and wrote: "Engaging in the pursuit of improving urban governance has been a passion for the @Prajafoundation team & I enjoy every moment of it. But one initiative stands out for its sheer scale, our flagship report, 'Urban Governance Index 2024'."

Key points from the three reports

Mumbai's fiscal struggles

Impact of GST and decline in revenue: Mumbai's fiscal health has faced significant setbacks, notably after the implementation of the Goods and Services Tax (GST) in 2017, which eliminated the Octroi Tax - previously a major revenue source for the city. The loss of this tax has severely impacted the city's financial autonomy, with the following trends outlined in the Fiscal Empowerment Report:

- Own-source revenue grew at a nominal 6.93% CAGR, but when adjusted for inflation, this growth reduced to just 3.09%.

- Mumbai's tax revenue saw a sharp decline, with a -10.58% nominal CAGR and -13.80% real CAGR, highlighting the struggle to maintain revenue streams post-Octroi.

- Despite having a relatively high Per Capita Own Source Revenue of ₹17,807.05, the city has become increasingly dependent on state and central government grants, indicating a worrying decline in fiscal self-reliance.

Moreover, the stagnation in property tax growth - a crucial revenue source - was another red flag. Mumbai's per capita property tax revenue was reported at ₹1,071.73, far below other major cities such as Hyderabad (₹3,639.63). The report found little growth in property tax between 2016 and 2022, calling for urgent reforms in revenue collection methods.

Governance challenges: Weak executive power and fragmented planning

The Urban Governance Index painted a less-than-ideal picture of Mumbai's governance structure. The report emphasised the ceremonial role of the city's mayor, whose powers remain limited by state laws.

- The report highlights how the Mumbai Mayor lacks the authority to appoint committee chairpersons, undermining their influence over city governance.

- While councillors are salaried, the city council does not have the power to pass a no-confidence motion against the mayor, limiting checks and balances on executive power.

The governance report also raised concerns over financial autonomy. Although Mumbai can raise and revise taxes, the city council lacks the authority to approve its own budget - a key limitation that hampers fiscal independence. Additionally, multiple agencies, such as the Municipal Corporation of Greater Mumbai (MCGM) and the Mumbai Metropolitan Region Development Authority (MMRDA), manage core city functions like sanitation and public health, leading to fragmented control and ineffective governance.

Spatial Planning: Strong framework, but coordination needed

Mumbai's spatial planning system, however, showed promise. The UDRI Spatial Planning Index 2024 commended the city for its robust legislative framework, which enables regional and zonal planning, aligning well with the 74th Constitutional Amendment. The city's development plans are well-matched to administrative boundaries, ensuring smoother governance.

Yet, issues of coordination between multiple planning agencies remain a significant challenge. The fragmentation between the MCGM and MMRDA creates inefficiencies in plan implementation. The report also pointed out that while Mumbai boasts an in-house team of planners and has established partnerships with educational institutes, on-ground implementation often lags behind the legislative framework.

Recommendations: Reforms for a resilient future

The three reports collectively call for comprehensive reforms across fiscal and governance structures, offering a roadmap for Mumbai's future, which includes recommendations such as:

- Revenue diversification: To reduce dependence on state and central grants, the city needs to explore new financing methods and optimise property tax collection.

- Enhanced coordination: A more integrated approach between the various planning agencies, especially MCGM and MMRDA, is essential for smoother governance and more effective implementation of spatial plans.

- Empowering the mayor's office: Strengthening the mayor's role with greater executive powers and forming functional committees could lead to more effective city governance.

- Stronger fiscal autonomy: Granting the city council the authority to approve budgets would improve fiscal independence and enable more efficient financial management.