The Union government’s practice of organizing schemes and regulations based on rural-urban categories has created high stakes in these labels. As a result, the categorization of settlements can become something of a game. For instance, between 2004 and 2006, 561 “Town Panchayats” in Tamil Nadu were converted to “Special Village Panchayats”, and back again to “Town Panchayats”. They converted the first time apparently to receive more rural funds from the government, and when these expectations were not met, they reverted.
When places that are urban in nature are governed as rural, and vice versa, this can lead to gross misallocations and inappropriate regulations. It would be prudent to reduce our dependence on such categories.
For the constitutionally mandated third tier of government, a settlement is urban if it has some form of municipal administration. The Census calls such settlements Statutory Towns. The conditions for determining Statutory Town status are decided by states. The Census defines as urban all Statutory Towns; their outgrowths, which form part of the urban system but are beyond urban administrative boundaries; and Census Towns, which are categorized using the guidelines of at least 5,000 inhabitants, a density of at least 400 people per sq km, and at least 75% of the male main working population engaged in non-agricultural pursuits. So the Census’ conceptualization of an urban area recognizes that what is urban in nature may be different from what is governed as urban.
Hence, we may be faced with dangerous situations wherein Census Towns have safety requirements of urban areas, but are unable to provide them. Amending the 74th amendment to set a high minimum threshold beyond which a settlement must be administered by an urban local body could mitigate this problem.
Opposition to urban classification may come from many fronts: voters evading higher taxes, panchayats wanting to preserve power, construction industries avoiding stricter building norms, stakeholders seeking earmarked rural funds, and state governments opposing formation of municipalities in places where different parties enjoy local support.