The Hindu Business Line : Urban infrastructure: Only devolution will work

Cities are the most deprived of allocations by State or Union Budgets; witness the largely abysmal condition of their basic infrastructure such as roads, water, sewerage and power, that are the States' responsibility. One solution is to implement the 74th Amendment, enabling the devolution of powers to the urban local bodies, which have more leeway to raise the kind of resources needed to make the difference, says ASHOAK UPADHYAY.

LAST YEAR'S deluge, which brought Mumbai to its knees, highlighted the crying need for a complete overhaul of the city's infrastructure. — Shashi Ashiwal

Presenting the Budget for 2005-06, the Finance Minister, Mr P. Chidambaram, noted that he had been struck by the equidistance of Mumbai to London and Tokyo, a location that made the city an eminent candidate for a world financial hub. The Reserve Bank of India, he said, had been asked to look into the modalities of setting the city up for global trading on a 24-hour cycle.

As if in response, five months later, Nature unleashed its heaviest downpour over the city continuously for two days and turned the financial hub-to-be into a stinking mix of trapped sewage and rainwater that brought Mumbai to its knees. As if to drive home the point about the callous and unplanned development of urban India, one metro after another — in fact, almost every metro that symbolises India's race to prosperity — came in for a severe lashing — Bangalore, Ahmedabad, Vadodara (Baroda), and Chennai.

URBAN IRONIES

The deluge that hit one city after another last year underlines one of the more tragic and unstated ironies of Indian policy-making; the complete lack of planning in that part of economic activity that needs it most — the urban centre.

While economic ministries have been busy devising ways to get various sectors of the economy cranked up with policy incentives, the cities have been left to collapse under the weight of mindless commercial expansion and callous official neglect. By virtue of their contribution to GDP, the cities should have reflected that growth in the only way they can — by delivering better civic amenities and enabling a quality of life that matches the increasing purchasing power. But the development of the metros seems to be in inverse proportion to GDP growth.

NURM: Right objectives

Urban renewal has now, however, acquired an urgency that was reiterated by the Prime Minster, Dr Manmohan Singh, last December, when he announced the Jawaharlal Nehru National Urban Renewal Mission (NURM), a gigantic scheme for urban development, and restated by the Finance Minister in his latest Budget speech.

The aim is to improve basic services in over 60 cities with a population of over a million, all State capitals and select cities of religious, historical and tourist importance. The scheme envisages a combined investment of Rs 1 lakh crore by the Centre, the State Governments and the urban local bodies over the next seven years. This year's Budget has already made a provision of Rs 5,000 crore by way of grants, against the estimated outlay of Rs 6,250 crore.

The urban renewal mission has it right in terms of objectives. That is the easy part.But there are some glaring lacunae and stumbling blocks to the renewal process, such as archaic land and rent laws, over-dependence on too few taxes for revenues.

States have not performed

Urban renewal requires more than Budget-fixing exercises by the Finance Ministry or calculations of the funds required by the State Governments; it requires a radically different dynamic in the Governance process, such that the prime responsibility and the powers for the execution of tasks is assigned to a single and competent authority that can be held accountable. So far, the responsibility for urban infrastructure has been constitutionally left to the State Governments, which are responsible for creating the legal framework for the provision of civic amenities on their own, through urban local bodies, the public or private sector, or through partnerships.

Almost 60 years later it is clear that this arrangement has never worked to the advantage of cities. State ministers have to provide for the entire State; their concerns are too general and, at worst, too self-centred to consider the city anything more than a cash cow.

Cities remain the most deprived of all allocations, by the State or Union Budgets; nothing shows this up more than the high quality of infrastructure provided by the private sector — telecommunications and banking facilities, that are the new drivers of growth — compared to such basic infrastructure as roads, water, sewage and power, that are the constitutional responsibility of the States.

Long overdue devolution

In 1992, the 74th Constitutional Amendment attempted a long-overdue devolution of powers and responsibility to the municipality by evolving a framework for the States to transfer some 18 functions to the urban local bodies (ULBs) — areas that are vital to the growth of cities, from urban planning to regulation of land use, etc. The States were also empowered to pass on the authority to raise revenues through taxes.

The experience with the 74th Amendment, needless to say, has not been a happy one; to date, all the powers to legislate the provision of urban infrastructure are still vested with the States, as is the resource-raising authority, evident in the usual urban taxes, from stamp duty to entertainment tax. The only levy left to the municipalities is property tax. But here, too, the State decides the tax base, rates and modes of assessment. Contrary to the federal practices of modern democracies, India fares poorly in its record of devolution to local bodies. Civic government expenditure in India is just 0.6 per cent of national GDP, compared with 5 per cent in Brazil and 6 per cent in South Africa.

Local self-government is a pitiable reflection of democracy at work in governance, and nothing mirrors this more than the demonisation of the local corporator as an opportunist and the mayor as a mere passing shadow. Never has a mayor been summoned to Delhi for discussions on civic issues of national importance, such as floods or riots. Admittedly, the urban renewal mission does pay lip-service to the concept of devolution to local governments, but the onus of transferring authority is, again, vested in the States.

Better placed to raise funds

The authority and power to legislate urban renewal must lie mainly with the local bodies, the municipality. Sadly, with barely a glance at devolution, the NURM stays with the traditional order of governance — the top-down perspective. In the most critical function of the mission — fund-raising — the local bodies have been left out entirely. Thus, of the projected Rs 1 lakh crore to be raised over the next seven years, the Centre will provide 35 per cent, the States 15 per cent, and the financial institutions the remaining 50 per cent.

It can be argued that urban local bodies are currently powerless to raise resources. But that need not be the case if the States are pressured into implementing the 74th Amendment provisions so as to empower the ULBs with added responsibilities and resource-raising powers. Constitutionally, the municipality is not barred from tapping global sources for funds; the States are. Similarly, the ULBs can borrow from banks and raise bonds, as Bangalore and Ahmedabad have done; States are limited in their access to such sources.

The 74th Amendment has been with us since 1992; the Ministry of Urban Development has a model Municipal Law that can assist States reform their extant statute and give civic bodies more teeth. The Ministry has even recommended a State Municipal Regulatory Commission to determine user charges and standards of services and suggest options for private sector participation. So far, however, it remains just that — a model.