M Rajamani Presentation

8/13/2019 M Rajamani Presentation

1/21

1

Financing Municipalities and

Sub-national Governments in India

M Rajamani

Joint Secretary to Government of India

Ministry of Urban Development

Regional Round Table on Asia

2nd Conference on FinancingMunicipalities and Sub-NationalGovernments, Washington, DC

30 September 2004


2/21

2

Urbanisation in India

Indias urban population, as per its 2001

Census, was 285 million (27.8% of its total

population of 1.03 billion)

The number of towns and cities was 5,161

In the world context, the countrys current

urban population is almost equal to the

combined urban population of United States,UK and France


3/21


4/21

4

Contribution to National

Economy

Urban areas are contributing about 60 per

cent to Indias Gross Domestic Product

(GDP) estimated at US $ 486 billion in

the fiscal year 2002-03


5/21

5

Urban Infrastructure in India

The provision of urban infrastructure in Indian

cities is lagging far behind the pace of

urbanisation

Though about 90 percent of urban population

is covered by treated water supply, the water is

supplied only for a few hours per day


6/21

6

Urban Infrastructure in India

52% of urban population does not haveaccess to sanitation facilities

30 to 50% of solid waste remainsuncollected

City roads are inadequate to meet the traffic

requirements (vehicle pop in India increased80-fold in last 40 years but road lengthincreased by only 5 per cent)


7/21

7

Legal and Institutional

Impediments Legal frameworks relating to urban infrastructure

development and land and housing market requireamendments to facilitate public private partnershipand improve functioning and efficiency of thegovernments

There is multiplicity of urban local agencies andtheir revenue raising and financial managementcapacities are inadequate (poor credit-worthiness,weak management systems, limited revenueraising powers)


8/21

8

Availability and Gap in Investment

Requirements

There is a huge gap in the availability and requirements

of funds for urban infrastructure development

In the next ten years, the requirement of funds for key

urban infrastructure of water supply, sewerage, solidwaste management and urban roads is about US$ 90

billion and the availability is just about US$ 10 billion

Projected gap for just the O&M of basic services in cities

for the next five years alone has been estimated as US$17 billion

If urban mass rapid transit systems are also included, the

gap would be much higher


9/21

9

Investment Requirements Driven By

Past under-investment

Rapid urbanisation

Rapid economic growth Increasing trade and globalisation of the Indian

economy

Demand from public and business for better

infrastructure Infrastructure required for international

competitiveness


10/21

10

Financial Support to Sub-national

Governments and Local Bodies

Central financial devolution to states to supplement the

resources of municipalities: As per recommendations

of Central Finance Commission

Devolution of financial resources to local bodies as perrecommendation of the State Finance Commissions

Grants-in-aid to local bodies by the States

Integrated Development of Small and Medium Towns

Scheme

To develop infrastructure in small and medium

towns capable of generating economic growth


11/21

11

Financial Support to Sub-national

Governments and Local Bodies

Mega City Scheme- To undertake development of infrastructure in five megacities (Mumbai, Chennai, Kolkata, Hyderabad, and Bangalorein the country

Financial Support for National Urban Information SystemScheme

- To develop urban management and spatial informationsystems by using GIS, GPS and GPR

Accelerated Urban Water Supply Scheme

-To extend financial support to state govern-ments/municipalities to provide water supply facilities insmall/medium towns

Support for desalinisation plants where water source is a

problem


12/21

12

Proposed Urban Infrastructure

Development Scheme (UIDS)

A new scheme (UIDS) is under consideration to

Improve infrastructural facilities and help createdurable public assets in cities & towns

Enhance public-private-partnership ininfrastructural development

Decentralize urbanisation and promote planneddevelopment of towns, cities and metros

The components for assistance under the schemewill include all urban infrastructure development

projects excluding water supply and sewerage


13/21

13

Decentralisation and Empowerment

of Urban Local Bodies

In order to decentralise local governance, the

Constitution of India has been amended to:

recognise urban local governments as third tier ofgovernment after central and state

empower the urban local bodies through functional

and financial devolution

facilitate peoples participation in local governance

enable integration of plans prepared by the local

bodies.


14/21

14

Support Through Urban Sector

Reforms

Thrust on Public-Private Partnership

Hitherto public sector has been responsible forurban infrastructure provision but now there isthrust on partnership with private sector andattracting foreign investment

It is realised that public sector has neither the

finances nor the capacities to manageinfrastructure development

Public policies are being developed to attractprivate sector investment


15/21

15

Incentives for Urban Sector Reforms

Urban sector reforms initiated in a major way

Government of India has issued guidelines for 100% FDI

in development of integrated townships (of 2000dwelling units/100acres)

An Urban Reform Incentive Fund (URIF) has been set

up to provide reform linked assistance to the states in the

country (reforms such as amendment of rent control act,repeal of urban land ceiling act, reduction in duty for

land and property transaction, improvement in

accounting system, computerisation of land records)


16/21

16


A City Challenge Fund (CCF) is proposed to facilitate city-

level reforms by funding the transition costs of moving

towards sustainable systems of municipal management and

service delivery A Pooled Finance Development Scheme (PFDS) has been

designed to facilitate access to capital market by smaller

urban local bodies

Tax-free status has been granted to Bonds issued by urbanlocal bodies (so far about 15 local bodies have raised

resources using this financial instrument)


17/21

17


Government of India has provided fiscalincentives for urban infrastructure in the form of:

Tax holiday for solid waste management and watertreatment systems

Custom duty exemption for import of equipmentsfor water, sanitation and solid waste management

projects

Enlargement of the definition of infrastructure fortax benefits to include urban infrastructure such aswater supply and sanitation

Definition of infrastructure for tax benefitsmodified to include urban reforms such as water

supply and sanitation


18/21

18

Urban Poverty Alleviation

Targetted subsidies to Urban Poor

SJSRY (Swaran Jayanti Shahari Rozgar Yojana)Urban self employment and wage employment

programme VAMBAY (Valmiki Ambedkar Awas Yojana) forproviding shelter and upgraded shelter to urbanpoor/slum dwellers below poverty line

NSDP (National Slum Development Programme)now converted to Additional Central Assistance tostates for development of slums with community

participation


19/21

19

Investment Environment

Improvement Legal provisions are being made to facilitate

private sector and foreign direct investment

Municipal Acts being modified to enable urbanlocal bodies partnership with private sector and toimprove municipal governance and management

Systems being introduced for efficient urban

management and good urban governance Reforms being initiated in developing

regulatory systems


20/21

20


Improvement Major thrust on improving credit-

worthiness of urban local bodies

Development of capital market for urbaninfrastructure financing

Improvements in services delivery andmanagement taking place through public-private partnerships and introduction of e-governance in municipalities


21/21

21


Improvement Improvements in revenue-raising capabilities

through

Rationalisation of user-charges to recover at leastthe cost of operations and management of services

improvements in tax assessment and

administration particularly in property tax

Changes in municipal accounting and financial

reporting systems from single-entry cash based to

double-entry accrual based systems

M Rajamani Presentation

Documents