ATTRACTING CAPITAL FOR URBAN INFRASTRUCTURE

General Studies Paper 2

Context: A report by the World Bank, released last year, on financing India’s urban infrastructure needs, focuses on private investments ameliorating urban problems.

About

• World Bank Estimates: 
  • The World Bank estimates that nearly $840 billion (?70 lakh crore) would be needed for investment in urban India to meet the growing demands of the population, and $55 billion would be required annually.
• Revenue by Cities:
  • This report already points out that nearly 85% of government revenue is from the cities.
  • This means that urban citizens are contributing large revenues even as the World Bank report emphasises the levying of more burdens in Urban Settlements in India

Urbanization: Urbanisation is the increase in the proportion of people living in towns and cities. 

• Urbanisation occurs because people move from rural areas to urban areas (towns and cities).
  • This usually occurs when a country is still developing.
• Employment Factor:
  • In India, people have been attracted to move from rural to urban areas on account of improved employment opportunities.

India’s Urban Growth: India is witnessing one of the largest urban growth spurts in history.

• This presents Indian cities with an unprecedented opportunity to look at urban planning and development through a long-term strategic lens to enable economic, environmental and social impact.
• Data on Urban Settlements:
  • India is home to 11% of the total global urban population.
  • From a population of 377 million in 2011, Indian cities are projected to house 870 million people by 2050, according to the UN’s projections which is by far the highest among all nations.
  • Delhi is likely to become the world’s most populous urban agglomerationby 2030, surpassing Tokyo.
• Funding patterns:
  • Urban finance predominantly comes from the government in India.
    • Of the finances needed to fund urban capital expenditures, 48%, 24% and 15% are derived from the central, State, and city governments, respectively.
    • Public–private partnership projects contribute 3% and commercial debt 2%.
  • The flagship programmes of the government, the Smart City mission, the Atal Mission for Rejuvenation and Urban Transformation (AMRUT), the Pradhan Mantri Awas Yojana (PMAY), etc., are not more than ?2 lakh crore (that too for a period of five years).

Issues & Challenges faced by Cities

• Affordable Housing: 
  • Inadequate affordable housing has meant that almost one-sixth of the urban population lives in slums.
• Water Supply & Waste Management:
  • Water supply is unreliable.
  • Mountains of solid waste sit on the fringes of our cities.
  • Poor drainage, congested roads and deteriorating air quality are other challenges.
• Poor Urban Planning:
  • The existing urban planning and governance framework is complex, which often leads to ambiguity and a lack of accountability.
  • City planning has become a highly technocratic exercise with long delays and there is a need for the demystification of the master plans.
• Lack of Coordination:
  • Lack of synergy between urban and rural planning and development. The ‘State Town and country planning acts need to be revisited to harmonise the two.
• Funding: 
  • More sources for funding are required like resources other than the public budget need to be tapped. High prices will make services unaffordable.
• Migrant Crisis:
  • Urban dwellers are ignored and unable to live, work and play safely and happily.
  • An urbanisation policy needs to take cognisance of future mobility patterns.
• Connectivity & Congestion:
• Congestion and delays in both passenger and commercial traffic are widespread in Indian cities
• Issues of Urban Slums:
  • Urban Slums are subject to insecure land tenure, lack of access to basic minimum civic services such as safe drinking water, sanitation, storm drainage, solid waste management, internal and approach roads, street lighting, education and health care, and poor quality of shelter.

Suggestions

• World Banks’s Suggestions:
  • The solutions suggested include improving the fiscal base and creditworthiness of the Indian cities.
  • Cities must institute a buoyant revenue base and be able to recover the cost of providing its services.
  • In simpler terms, it means increasing property taxes, user fees and service charges to name a few.
• Bottom-up planning:
  • For the urban context, plans must be made from below by engaging with the people and identifying their needs.
• Empowering the city governments: 
  • National task force chaired by C. Sivaramakrishnan suggested the following:
    • Empowering the people,
    • Transferring subjects to the city governments, suggesting that10% of the income-tax collected from cities be given back to them and
    • Ensuring that this corpus fund was utilised only for infrastructure building.
  • This would ensure that city governments had an advantage in ensuring rapid transformation.
• Urban governance with regular elections:
• Another important aspect of urban infrastructure is linked to urban governance, which is in shambles in most parts of the country.
• Regular elections should be held in cities and there must be empowerment through the transferring of the three Fs: finances, functions, and functionaries.
• Steps for Enhancing the Role of the Private Sector:
• These include the adoption of fair processes for
  • procuring technical consultancy services,
  • strengthening project structuring and management skills in the public sector, and
  • empanelment of private sector consultancies.
• Clarity & expertise:
• There is a need to bring in more institutional clarity and also multi-disciplinary expertise to solve urban challenges.
  • The key aspects that would need to be addressed in this effort are:
    • Clear division of the roles and responsibilities of various authorities, appropriate revision of rules and regulations, etc.
    • Creation of a more dynamic organizational structure,
    • Standardisation of the job descriptions of town planners and other experts,
    • Extensive adoption of technology for enabling public participation and inter-agency coordination.

Way ahead

• Cities should also aim to mainstream the use of spatialised social, economic and environmental data to create robust links across the urban-rural continuum.
• Adequate political will for financial inputs and enforcement of regulations will be essential for often fund-starved urban administrations.