Finances of Urban Local Bodies in Jharkhand: Some Issues and Comparisons

The paper brings together the information on different components of revenues and expenditures of the urban local bodies (ULBs) in Jharkhand and analyses their growth over a recent period. The performances of the ULBs are evaluated by estimating some indicators based on actual revenues and expenditures. The expenditures are also compared with the financial norms estimated for different urban services for Indian cities according to different size classes. An attempt to estimate the gross city product of each ULB in Jharkhand is also made. A broad comparison on finances and service delivery indicators of these ULBs with those in the ULBs of the eight adjacent districts of West Bengal is also attempted. We find that the revenue capacities estimated on an average can generate additional revenues of 77 per cent for the ULBs in Jharkhand. The increase in total revenues would be the highest (184 per cent) for the 1 lakh plus cities and the lowest (30 per cent) for the smallest size class of cities. We also find that on an average Jharkhand cities generate only 0.17 per cent of their Gross City Products as own revenues. The bigger cities are found to be relatively more constrained than the smaller ones. An overall analysis of finances on the basis of actuals in the ULBs of the two states reveals that West Bengal is in a comparatively better position than Jharkhand as far as the performance according to indicators related to finances are concerned. Out of eight indicators selected, the performance on an average is better in West Bengal in almost all of them. A close look at the dependency ratio on the higher tiers of the government as a percentage of transfers to total revenues reveal that on an average 91 per cent of the revenues in the ULBs of Jharkhand comes from transfers where transfers constitute grants in different forms of assistance. Whereas in West Bengal the average ratio is 61 per cent which also includes assigned revenues. While only 6 per cent of the expenditures can be covered by own revenues in Jharkhand, the ratio is about 37 per cent in West Bnegal. Own revenues can cover 19 per cent of revenue expenditures in Jharkhand whereas in West Bengal the ratio is 43 per cent. While Jharkhand covers 41 per cent of the revenue expenditure norms by their actual revenue expenditure, West Bengal on an average can only cover 36 per cent. A brief analysis in terms of some coverage indicators of municipal services, infrastructure, employment, socio-demographic indicators and some standard of living indicators show that the urban service delivery, in terms of some of the coverage indicators, are relatively better in most of the size classes and also on an average as a whole in West Bengal. We can generally conclude that the relatively better indicator in terms of finances and expenditure management in the ULBs of West Bengal has a somewhat positive impact on municipal service delivery too.