Evaluate the role of Finance Commissions and urban missions such as AMRUT in strengthening municipal finances in India.

Under Art. 243X, municipalities can levy taxes only as state law allows. Art. 280(3)(c) asks the Finance Commission to recommend ways to supplement their resources. Even so, municipal corporations still depend on transfers from higher governments, and property tax is their only major tax [1]. Finance Commissions (FCs) and AMRUT have improved municipal finances, but only partly.

Finance Commissions: Strengths

• Size of grants: the 15th FC recommended ₹1.2 lakh crore for urban local bodies (ULBs) out of ₹4.36 lakh crore for all local bodies (2021-26) [2].
• Grants tied to results: to receive grants, states had to notify minimum floor rates of property tax and improve collections [2]. Earlier reforms only asked cities to adopt systems. This one asks for revenue actually collected.
• Evidence base: the 15th FC commissioned a study on the State of Municipal Finances in India [3].

Finance Commissions: Limitations

• Grants do not build own revenue: the RBI found that municipal corporations still lack financial autonomy [1].
• The state holds control: a CAG audit found that state governments, not ULBs, fix property tax rates, revisions and exemptions [4].
• Conditions can be met on paper: a floor rate can be set very low. Collections can also grow by charging existing payers more, while unregistered properties stay outside the tax net.

AMRUT: Strengths

• Reforms with incentives: AMRUT's 11 reforms and 54 milestones include online services and credit rating of cities [5].
• Access to markets: incentives for issuing municipal bonds encourage cities to borrow on their own credit [5].

AMRUT: Limitations

• Platforms over people: missions funded GIS and e-payment systems. But the CAG found too few tax collectors, which left a large part of the tax demand unpaid [4].
• Own revenue still small: in the ULBs the CAG audited, own revenue was only 10.27–13.60% of total funds [4].

Verdict FCs and AMRUT have helped start reform, but they have not made cities fiscally self-reliant. Their incentives reward adopting systems and growing collections more than wider tax coverage and stronger revenue staff.

Overall, FCs have increased transfers and AMRUT has introduced reform incentives, but cities still depend on grants. The 16th Finance Commission could also measure coverage, meaning the share of properties on the tax register. AMRUT 2.0 could pay for revenue staff and training, not only software. States could let ULBs revise rates within a band they set. Together, these steps would give the 74th Amendment's promise of financial autonomy for cities real effect.