Given the primacy of municipal finances and the importance of public service delivery for cities to become engines of economic growth, we make an attempt to answer two questions: Does finance, or more specifically, low expenditures (when compared with available and generally accepted norms) explain the state of poor public service delivery? If the answer to the first question is yes, how can ULBs have access to greater resources to enable them to improve their public service delivery? Specifically, we examine the role of land as a revenue generating source in selected India’s urban local bodies (ULBs), when we compare to the ULB’s total revenue, own source revenue, and property tax revenue being generated. We examine the two questions by taking the cases of Ahmedabad, Kolkata, Jaipur and Bangalore. This sample of cities is geographically far flung enough to be representative of several regions in the country. They are also from a variety of states experiencing different stages of economic growth. This set of cities also represents a variety of institutional arrangements for provision of important public services such as water supply. Finally, this sample also represents a variety of fiscal arrangements in cities used by them for financing their expenditures.

With respect to the first question, we find that spending on various local public services and cost recovery from them in the cities of study is below the national average for other metropolitan cities, as well as when compared with widely accepted norms, and the service level measured in terms of population coverage, is also worse in the selected cities than for other metropolitan cities in the country with respect to water supply and sewerage, with the exception of Ahmedabad. Even with respect to labor intensive services like solid waste and sanitation, we find a direct relationship between spending and service delivery in all the cities of study. With respect to roads, we find the lack of adequate spending along with other institutional factors lead to poor service delivery such as too many vehicles on roads (which could be an issue of regulation as much as infrastructure) or poor quality of roads. Street lights are the only service where spending and service levels are not directly related. Rather they are inversely related. All the selected cities of the study were spending less than nationally required norms on street lights, but were able to provide more than acceptable level of the service, even judged by international norms.

With respect to the second question, our findings indicate that if revenues from land leasing and sales by the urban development authorities (UDAs) were to accrue to municipal corporations, there could be an increase in municipality’s total revenues to the extent of 33 percent, own source revenues to the extent of 90 percent, and property tax revenues to the extent of nearly 930 percent (in nominal terms). Hence transfer of funds and functions from the UDAs to the municipal corporations is much recommended for orderly growth of cities, doing away with the multiplicity of agencies with respect to land use, and respecting the financial autonomy and decentralization spirit of the 74^th Constitutional Amendment Act.

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