Introduction
Article 243X explains the financial powers of municipalities in India. It gives State Legislatures the authority to regulate how urban local bodies raise, manage, and use funds. This article forms part of Part IXA of the Constitution, which was added by the 74th Constitutional Amendment Act, 1992. The main objective of Article 243X is to ensure that municipalities have sufficient financial resources to govern urban areas effectively while remaining under the supervision of the state government. It strengthens local self-government by giving municipalities a legal and constitutional framework for revenue generation.
Why Was Article 243X Introduced?
Before the 74th Constitutional Amendment, municipalities depended heavily on state governments for funds. This dependence weakened urban governance and limited the ability of local bodies to deliver services efficiently. Article 243X was introduced to correct this imbalance. It empowers states to grant financial authority to municipalities so they can perform their duties independently. At the same time, it preserves state control to maintain financial discipline and uniformity. This article reflects the idea of democratic decentralisation by bringing governance closer to citizens.
How Does Article 243X Give Financial Powers to Municipalities?
Article 243X allows State Legislatures to pass laws that authorise municipalities to levy, collect, and use local taxes. These may include property tax, local duties, tolls, and fees. Municipalities can retain the money they collect, but they must follow procedures and limits set by state law. This system promotes fiscal autonomy while ensuring accountability. Municipalities gain the power to manage their own finances, but they do not operate outside the legal framework of the state.
Can State Governments Share Their Taxes with Municipalities?
Article 243X also allows states to assign certain taxes collected by the state government to municipalities. These may include portions of land revenue or motor vehicle taxes. The state decides the purpose, conditions, and limits of such assignments. This arrangement helps municipalities expand their revenue base beyond local taxes. It also reduces financial stress on urban local bodies and encourages cooperation between state and municipal governments.
What Is the Role of Grants-in-Aid Under Article 243X?
Another important feature of Article 243X is the provision for grants-in-aid. State governments can provide financial assistance to municipalities from the Consolidated Fund of the State. These grants are especially important for municipalities with limited income-generating capacity. Grants help fund development projects, infrastructure, and essential civic services. States may also link grants to performance or compliance with legal standards. This approach improves efficiency and strengthens financial responsibility at the local level.
Why Are Municipal Funds Mandatory Under Article 243X?
Article 243X requires the creation of municipal funds for every municipality. All money received by or on behalf of a municipality must be credited to these funds. Withdrawals from the funds must follow procedures laid down by law. This requirement ensures transparency and proper financial management. Municipal funds make budgeting and auditing easier. They also reduce the risk of misuse of public money and improve public confidence in local governance.
How Does Article 243X Support Urban Governance Functions?
Article 243X works closely with Article 243W of the Constitution. Article 243W lists the functions of municipalities under the Twelfth Schedule, such as urban planning, water supply, sanitation, roads, and public health. Financial powers under Article 243X ensure that municipalities have the money needed to perform these functions. Without adequate funds, municipal responsibilities would remain ineffective. Article 243X links financial authority directly with administrative responsibility.
Are There Any Limitations on the Application of Article 243X?
The powers under Article 243X do not apply uniformly across all areas of India. In Scheduled Areas, the application of Part IXA is restricted by Article 243ZC. These areas require parliamentary legislation or a notification by the Governor under the Fifth Schedule. This limitation protects the rights and autonomy of tribal communities. It ensures that municipal laws are not imposed without constitutional safeguards.
What Is the Judicial View on Article 243X?
Courts have consistently upheld the authority of state legislatures under Article 243X. Judicial decisions have clarified that state laws regulating municipal taxation and funds apply unless expressly excluded. In cases such as South-Eastern Coalfields v. State of M.P., courts affirmed that municipalities derive their financial powers from state legislation. These rulings maintain the constitutional balance between municipal autonomy and state oversight.
How Does Article 243X Promote Fiscal Federalism?
Article 243X strengthens fiscal federalism by distributing financial responsibilities among different levels of government. Municipalities receive limited but meaningful financial independence. States retain the power to regulate and supervise municipal finances. This balance improves service delivery in urban areas and encourages citizen participation in local decision-making. It creates a cooperative financial relationship between states and municipalities.
Why Is Article 243X Important for Urban India Today?
India is rapidly urbanising, and cities face growing demands for infrastructure and public services. Article 243X provides a constitutional solution to these challenges by ensuring sustainable municipal finance. It promotes transparency, accountability, and efficiency in urban governance. By aligning financial powers with municipal functions, Article 243X plays a vital role in strengthening urban local bodies and supporting inclusive urban development.
Conclusion
Article 243X is a cornerstone of municipal finance in India. It enables municipalities to raise taxes, receive shared revenues, obtain grants, and manage structured funds. It reflects the vision of the 74th Constitutional Amendment to empower local self-government while preserving state control. Through this balanced framework, Article 243X continues to shape the financial and administrative future of urban governance in India.
