The Sindh government has taken some steps in the right direction to empower local government bodies (LBs), but the proposed measures fall short of the fiscal, administrative and legislative autonomy the civic bodies need to manage their functions efficiently and independently.

Things will become clearer once the Provincial Finance Commission (PFC) announces its award within 180 days from the date of its constitution. It is stated that tax collection has also been included in the provincial financial award formula for the first time.

While the overall arrangement does have notable merit, it remains to be seen how the next PFC award would empower the civic bodies to raise local taxes.

Some experts suggest that district governments should be authorised to collect tax on farm incomes. They argue that since the tax revenue will be spent in the local constituency from where it is raised, the palpable benefits would encourage farmers of the economically backward rural area to pay their due taxes.

Grassroots democracy is inescapable for reducing the gap between the government and the people as well as the state and the society

Notwithstanding its financial support to LBs, implicit in the PFC provisions is that elected representatives would be largely accountable to the provincial government rather than the voters who elect them.

In the past, the provincial finance department’s disbursement of allocated PFC funds was delayed owing to red tape, etc. The process of financial releases of the allocated funds needs to be streamlined to help the third tier of government to improve its performance. A stronger monitoring system may also help faster utilisation of development funds.

The PFC apportions funds for vertical and horizontal distribution from the provincial consolidated fund. After retaining an amount for the provincial government, the remaining sum is earmarked as an allocable amount for LBs.

The last PFC award for horizontal distribution announced in 2007 was based on an estimate that arrived after deducting priority provincial expenditure, Octroi/Zila tax (OZT), federal transfers and grants and provincial tax revenues. The LBs were allocated an OZT sum of Rs21 billion while the amount earmarked from the provincial divisible pool was Rs52.4bn.

The allocable amount was distributed among district governments based on multiple criteria, including fiscal need (55pc), fiscal capacity (35pc), and fiscal effort and performance (10pc).

Fiscal needs comprised of population (40pc), development needs (10pc) and area (5pc). Similarly, fiscal capacity was based on a composite index comprising three indicators reflecting service infrastructure in the health, education and road sectors. The federal fiscal transfers on account of the abolition of the Octroi/Zila tax were distributed in a similar manner.

Now the Karachi Municipal Corporation (KMC) has been authorised to club one or more taxes, rates, tolls, fees etc and collect it through its own means or by any third party by entering into a contract.

A major step is the decision to return administrative control of hospitals and schools — which were taken over by the provincial government in 2007 — to KMC.

According to the Sindh Local Government (Second) Amendment, 2023, mayors or chairmen of city corporations across the province would be heads of development authorities and other civic agencies falling within their respective jurisdictions. Similarly, local body council heads will be chairmen of concerned divisional and district development authorities.

For example, the mayor of Karachi ex-officio will be the chairman of the Karachi Development Authority, Lyari Development Authority, Malir Development Authority, Karachi Water and Sewerage Board (KWSB), Sindh Solid Waste Management Board (SSWMB), as well as other local development authorities. This will help develop an integrated, synchronised approach to resolving the city’s problems.

In the administrative field, there has been a noticeable move towards devolution, though, with restricted authority delegated in such matters as employment and transfers of employees.

The city mayor has been empowered to propose three names each for the slot of Karachi Water and Sewerage Board and Sindh Solid Waste Management Board chief executives. All staff of development authorities would be deemed as employees of the respective LB councils but with a bar on their transfers to other entities or departments.

The provincial government has been empowered to dissolve a municipal corporation — this is centralisation at the cost of democracy

The top-down approach to resolving problems has not proved effective. This is demonstrated by the plight of civic facilities in both urban and rural areas of the province. The ultimate goal should be that problems which can be best managed by empowered district governments should not be retained by the provinces.

The provincial government has been empowered to dissolve a municipal corporation. This is centralisation at the cost of democracy. ‘Democracy erodes from the top’ says American political economist Larry Bartels.

And to quote another well-known political economist Niaz Murtaza, "Egalitarian economics can only come via egalitarian democracy". Grassroots democracy is inescapable for reducing the gap between the government and the people as well as the state and the society.

The over-seven decades of socioeconomic development have also unleashed social forces (especially the youth and the middle class), which are pressing for much-needed change, as evident from the current political and social tensions. That includes the political pressure which Sindh’s PPP government is facing on LB issues from local political parties in Karachi.

Having secured control of the LBs, the PPP has found an opportunity to organise things to extend civic facilities to the public better. The more meaningful reforms — anchored on a bottom-up approach — will, however, remain a long-term challenge.

Published in Dawn, The Business and Finance Weekly, July 31st, 2023