The Thirteenth Finance Commission ( 13^th FC) recommendations relating to urban local bodies inter alia aim at strengthening municipal finances and urban governance in India. The 13th FC, making a departure from the previous Finance Commissions, divided the grants to be distributed to the states for local bodies into two parts - general basic grant and general performance grant. The performance grant can be accessed only if the state complies with nine conditions, which in other words can be called reforms. They are:

• The State Government must put in place a supplement to the budget documents for local bodies.

• The State Government must put in place Audit System.

• The State Government must put in place  a system of independent local body Ombudsmen.

• The State Government put in place a system to electronically transfer local body grants provided by the Commission.

• The State Government must prescribe through an Act  the qualifications of persons eligible for appointment as a members of the SFC.

• All local bodies should be fully enabled to Levy Property Tax with out hindrance.

• The State Government must put in place a State Property Tax Board.

• The State government must gradually put in place standards for delivery of essential services.

• All municipal corporations with a population of more than one million (2001 census) must put in place a Fire -hazard Response and Mitigation plan for their respective jurisdictions.

States are given one year i.e., 2010-2011 to comply with these conditions before they can access the performance grant from 2011-2012. Complying with these conditions within the stipulated timeframe, require comprehensive understanding and capacity at the State and ULB level.