Context: Without delegation of funds, functions and functionaries, local governments are unable to respond to pressure from citizens who demand greater efficiency.
Issue

• There is a significant need to reform the 7th Schedule to deliver more powers to local bodies. 
• The 7th  Schedule should also incorporate a local body list apart from the Union list, Central list & the concurrent list.

Need of Reform

• Obsolete: The principles of 7th schedule were taken from the Government of India Act of 1935 and today’s Seventh Schedule is identical to the one in 1950.
• Greater centralisation: Items have moved from the state list to the concurrent list and from the concurrent list to the union list. Rather than progressing towards decentralization of power.
• Optimum delivery of services: Every public good is optimally delivered at a certain level of government. Delivery becomes suboptimal both above that level and below that level. Most public goods people will think of are efficiently delivered at the local government level, not Union or state level. Most public goods are efficiently delivered at the local government level, not Union or state level.
• Effective delivery of services: Citizens increasingly demand efficient delivery of such public goods. But without delegation of funds, functions, and functionaries, presently left to the discretion of state governments, local governments are unable to respond.

Reasons for the greater centralisation of Power
State’s ineffectiveness in implementation of laws

• For instance, states have been reluctant in implementing the 2006 Supreme Court ruling in the Prakash Singh case. This may be the reason why states frequently ask for Central police forces to enforce law and order.
• This is similar to state highways being converted to national highways so that they are taken care of better.

What are the supportive arguments to bring reforms in the 7th schedule?

• Constituent Assembly debates: B Das (former chief minister of Odisha) stated the need for having general principles involved in the selection of Items under Union, Concurrent, and State lists. Such principles will help us to understand the lists much better. However, it was not accepted.
• Recently, the Vidhi Centre for Legal Policy brought out a report on how the Seventh Schedule might be cleaned up. N K Singh, Chairman of the 15th Finance Commission, has also often made this point.
• Rajamannar Committee was set up by a state government to address the issue of greater centralisation.
• However, the 1983 Sarkaria Commission and the 2002 National Commission to Review the Working of the Constitution avoided this issue.