Fixing municipal capacity and capital for cleaner cities

Following the Supreme Court of India’s recent direction to states and urban local bodies to tighten compliance with solid waste management rules, and the Union Budget’s push for urban infrastructure financing and municipal bond incentives, the fundamentals of city governance and capacity needs renewed attention. India will need nearly USD 840 billion in urban infrastructure investment over the next 15 years. Yet Indian cities raise less than 0.6 per cent of GDP in own-source revenues, compared to 2-4 per cent mobilised by cities in developed OECD countries. The mismatch between ambition and capacity may now be too large to ignore. 

India’s cities occupy under 3 per cent of the country’s land but generate about 60 per cent of the GDP. They are engines of productivity, innovation and employment. Yet urban flooding, intensifying heat waves, rising air pollution, deteriorating water quality, broken footpaths and unmanaged waste now define everyday urban life. Waste, in particular, cuts across systems: it reduces walkability on footpaths; worsens flooding by clogging drains; compounds already elevated levels of air pollution when burnt in the open. As per analysis by the Council on Energy, Environment and Water (CEEW), cities with a million-plus population generate nearly 50 per cent of total municipal waste, and with over 4,000 expanding cities, waste generation could reach about 435 million tonnes by 2050. If this is not managed effectively, the waste sector could become a major source of pollution in the coming decade.

Governments have long tried to strengthen city governance and infrastructure, yet weak financing, accountability and administrative capacity continue to constrain performance. The recent Economic Survey also highlighted that urban cleanliness is as much an institutional issue as a behavioural one. If India’s urban transition is to succeed, reforms must focus on the three Fs: funds, functions and functionaries.

Funds: Cities need money to run what they build 

Municipal revenues and expenditures have hovered at a minuscule 1 per cent of GDP for over a decade, compared to 7.4 per cent in Brazil and 6 per cent in South Africa. Urban Local Bodies remain heavily dependent on state and central transfers, leaving limited fiscal room for operations and maintenance. Schemes such as the Smart Cities Mission, Million Plus Cities Challenge Fund, Swachh Bharat Mission (SBM) and National Clean Air Programme have financed infrastructure, but fewer mechanisms support ongoing operations. This capex-opex imbalance leaves cities struggling to maintain what they build. Even where dedicated funds exist, utilisation is uneven. For example, cities and states have yet to utilise more than two-thirds of the funds released under SBM Urban 2.0, pointing to the need for more structured, time-bound operational support and sustained institutional handholding in the early years of implementation.

Over the medium term, public services must rely on stronger local revenue. Cities need to boost own-source revenues through property tax reform, clearly priced user charges, and mechanisms to recover land value gains from public investments, so that operations and maintenance are adequately funded. Some cities are already experimenting: Pimpri-Chinchwad’s Industrial Facilitation Cell acts as a single-window platform to resolve industrial bottlenecks and attract investment, strengthening its fiscal base. Municipal bonds are also gaining traction in the urban finance conversation. The Union Budget 2026-27’s INR 100 crore incentive for bond issuances above INR 1,000 crore signals a push towards market financing, but only fiscally disciplined cities with credible projects and strong revenues can access such capital.

Functions: Empowering mayors and ward councillors with clear roles

 Even with finances in place, cities can perform effectively only when functions are clearly defined, powers are genuinely devolved, and accountability to citizens is ensured. Mayors and ward councillors sit at the frontline of this citizen-state interface, yet their authority is often diluted. According to a 2024 CAG report, mayors in Indian cities lack control over nearly 75 per cent of the powers envisaged under the 74th Constitutional Amendment. This weak mandate directly affects core services such as sanitation and waste management, which demand daily oversight and public trust.

Indore shows how empowering local leadership, transparency in contracting, technology-enabled monitoring and citizen support can significantly improve waste management. The mayor helped manage citizen resistance to behavioural reforms, including segregation of waste or revisions to user fees for collection that enabled the municipal corporation to focus on operational improvements. Even after engaging private concessionaires and local NGOs, the municipality retained oversight across the waste value chain. Municipal staff also accompany collection vehicles to ensure quality, and the entire supply chain is tracked digitally. Citizens reinforce accountability through platforms such as the IMC 311 app to report grievances.

Functionaries: Building local municipal capacity and formalising the workforce

Urban governance ultimately depends on staff availability, motivation and capabilities of personnel involved. Yet many ULBs struggle to fill sanctioned posts, train personnel and build technical expertise. Mission Karmayogi aims to build a more citizen-centric workforce through role-based training. Cities such as Rajkot have advanced this through annual capacity-building plans, including refresher courses on waste management rules, conducting workshops on emerging waste technologies, and stronger Public-Private Partnerships. 

There is also a workforce of informal waste collectors who often receive limited attention and recognition. Cities like Ambikapur have organised women waste pickers into self-help groups and federations, moving them into formal municipal roles with fixed wages, performance bonuses and dignity. The National Action for Mechanised Sanitation Ecosystem (NAMASTE) scheme is also creating a digital database of sanitation workers and linking them to social security benefits, including Ayushman Bharat.

India’s urban future will be shaped by how well cities finance and govern everyday services. When basic systems such as waste management, sanitation and water fail, the consequences ripple through productivity, public health and investor confidence. Cleaner, more resilient cities require stronger municipal finances, clearer functions and a capable urban workforce, not as local fixes but as an economic necessity.

Adeel Khan is a Programme Associate and Aishwarya Tiwari is a Research Analyst at the Council on Energy, Environment and Water (CEEW). Views are personal.