‘Another important aspect of urban infrastructure relates to urban governance, which is in a dismal state in most parts of the country.’ The picture is from Chennai. Photo credit: The Hindu
A World Bank report, released in November last year on financing India’s urban infrastructure needs, focuses on private investment to address urban problems. The push to attract private capital since the 1990s, followed by urban reforms under the United Progressive Alliance I regime, the Smart City Mission, and now this report, continues to influence India’s policy paradigm in the urban sector.
So, has the reform process really been able to attract private capital towards urban infrastructure?
After three decades of reforms, urban finance comes mainly from the government. Of the finance required to fund urban capital expenditure, 48%, 24% and 15% come from the central, state and city governments, respectively. Public-private partnership projects contributed 3% and commercial loans 2%.
Over the years, various reports have projected huge demand for urban infrastructure financing; For example, the Isher Judge Ahluwalia report says that by 2030, about ₹39.2 lakh crore would be required. Similarly, the 11th Plan has estimated Rs 1,29,337 crore for four basic services, Rs 1,32,590 crore for urban transport and Rs 1,32,590 crore for housing. A McKinsey report on urbanization puts the figure at $1.2 trillion or ₹90 lakh crore.
World Bank Estimates
The World Bank estimates that around $840 billion (₹70 lakh crore) of investment in urban India will be needed to meet the growing demands of the population, and $55 billion will be required annually. The flagship programs of the government, Smart City Mission, Atal Mission for Rejuvenation and Urban Transformation (AMRUT), Pradhan Mantri Awas Yojana (PMAY), etc., do not exceed 2 lakh crores (that too for a period of five years) . So, how to match such a gap between demand and supply?
The core ideas and suggested solutions of the report include “Improving the fiscal base and creditworthiness of Indian cities”. Cities should establish a buoyant revenue base and be able to recover the cost of providing their services”. In simple terms, this means increasing property taxes, user fees and service charges.
This report already states that around 85% of government revenue is from cities. This means that urban citizens are contributing to the larger revenue, even though the World Bank report is stressing on levying more burden in the form of user charges on utilities etc. Meet the growing demands of urban infrastructure in cities?
The answer is that it will not.
search for alternate routes
The fundamental problem with this report and other similarly prepared reports is that they are made using a top-down approach, with too much focus on technical solutions using very capital-intensive techniques.
For the urban context, plans must be made from the bottom up by engaging with people and identifying their needs.
Empowering city governments and the people at large is another point. The National Task Force, headed by KC Sivaramakrishnan, which reviewed the 74th Constitutional Amendment, made several suggestions such as empowering people, devolution of subjects to city governments, suggesting that 10% of the income tax collected from cities be returned Let it be done them and ensuring that this corpus fund was used only for building infrastructure. This would ensure that city governments would benefit in ensuring rapid transformation.
Another important aspect of urban infrastructure relates to urban governance, which is in shambles in most parts of the country. There should be regular elections in the cities and there should be empowerment through the three F’s: finance, work and transfer of office bearers.
Editorial | Urban vision: on the need for policy reform
Cities are mainly run by parastates and city governments hardly have any role in smooth functioning of such parastatals.
The World Bank in its report (p. 69) states: “For example, state-level management of urban water and sewerage works could be developed in a time-bound manner. An improved urban legal framework that includes a stable and fixed financial transfer regime, devolves financial powers to ULBs [urban local bodies] along with the attendant rules/regulations… will determine the medium to long term scale of investment flows for urban infrastructure.”
Example of Shimla
However, quite the opposite is happening. Shimla water story is an example of this. Shimla Water Works was converted into a single utility named Greater Shimla Water Supply and Sewage Circle (GSWSSC) under Shimla Municipal Corporation in 2016-17. The bank provided assistance in the form of soft loans, ensuring adequate supply of water and proper distribution by utilities, but subject to the Shimla Municipal Corporation. However, in 2017-18, it changed the character of GSWSSC to a company and formed the Shimla Jal Prabandhan Nigam Limited, which is now under a Board of Directors but outside the purview of the municipality.
Such conspiracies will not serve the purpose and will be dangerous for the entire cause of urbanization in India. The World Bank report is yet another reminder of the tragedy Indian urbanization is witnessing – “policy paralysis from above”.
Tikendra Singh Panwar is a former deputy mayor of Shimla and an urban expert