Financial Daily from THE HINDU group of publications
Monday, Feb 23, 2004
Columns - Vision 2020
PURA and quality of life
P. V. Indiresan
AT A recent seminar, a senior official of the Urban Development Ministry vehemently criticised the concept of PURA (Providing Urban amenities in Rural Areas) with the argument that infrastructure alone will not lead to development. There is some truth in what he said.
Some others have adversely commented that starting straight away with as many as 4,000 PURAs without preparation exhibits more ambition than wisdom. They are also sceptical of the decision to confine the scheme strictly to the most backward rural areas, and excluding the politically influential richer rural areas.
According to this view, the PURA scheme, as devised by the Planning Commission, is but the latest of a failed series to target the poor directly. As Rajiv Gandhi ruefully admitted once, a major part of the largesse granted directly is liable to be siphoned away by unworthy persons. Such diversion is inevitable for several reasons.
Consider for example a subsidy of, say, Rs 200 a month, given to very poor families whose income is less than Rs 1,000 a month. Then, those whose income is currently between Rs 1,001 and Rs 1,999 become poorer than those who were earlier earning less. That reversal of economic status will naturally cause resentment. We see that in the prevailing bitterness of the Most Backward Castes against the Scheduled Castes.
Even among those whose incomes are much higher, a scheme of this nature leads to temptation. Those earning as much as Rs 2,000 a month are not directly affected by this scheme, but Rs 200 is too big a temptation to resist. If they could, they will grab that benefit for themselves, and deny the same to the poor.
Hence, direct targeting faces a double jeopardy the poor may be denied their due, and the rich may be tempted to become corrupt. However, in the present instance, such diversion is not easy: An influential MP or minister may want to divert the PURA funds to unintended richer constituencies but that is not easy.
Even if the scheme causes no resentment, and leads to no corruption, it could still fail if the recipients are not competent enough. Recently, there was a passionate plea urging the Centre to make bigger allocations to Bihar in keeping with its population size and its poverty.
Unfortunately, Bihar has not been able to absorb even existing allocations. For instance, under the Prime Minister's Gram Sadak Yojana (a major scheme for connecting backward villages), Bihar was sanctioned Rs 451.6 crore; Rs 300 crore has already been released but the utilisation is zero. Exactly zero!
Another scheme, the Accelerated Power Development and Reform Project, allocated Rs 358.79 crore to Bihar but the State has so far used only Rs 48 lakh. Thus, allocations are not enough; there should be a capacity to absorb as well. There is no point in giving sweets to a diabetic. More money is not always the best cure for poverty.
There is a widely held view that rural schemes should be as cheap as possible. That theory overlooks an important principle: What is crucial is not how cheap a project is but how much Return on Investment it offers. Further, the urban areas attract private investment but the rural areas do not.
It can, therefore, be argued that the former deserve more public investment than the latter. Hence, the moot question is: Will PURA match the Return on Investment that cities offer, and also attract private funds as well as cities do?
In calculating the Return on Investment, we should take into account both positive and negative externalities, in particular the deterioration that occurs when cities expand. Incidentally, the faster one wants to travel, the farther one should see ahead. Hence, the issue is not immediate Return on Investment but long-term Return on Investment, not merely the gross return but net of negative externalities.
Our government operates generally in watertight compartments forcing many top administrators to adopt a blinkered view. Hence, rural and urban developments are seen by most administrators as distinct and separate. On the other hand, both cities and villages can develop faster, and prosper better by treating rural and urban development in complimentary terms, letting each one enhance the other's Quality of Life.
There is another view, prevalent among urban planners that development means larger size. In nature, children do grow in size, but after a point they continue to grow not in size but in capability. Similarly, up to a point, potential for quality increases with habitation size.
Thereafter, the Law of Diminishing Returns takes over; further increase in size decreases, not increases quality. For instance, Delhi has already a population of 14 million. It is unable to provide enough water to drink; enough houses to reside, neither enough transport to convey commuters nor enough roads to handle the traffic. Yet, it is very expensive.
In recent auctions, the Delhi Development Authority set as minimum price Rs 60,000 ($1250) a square yard for commercial plots. Delhi (and most other Indian cities) will be better off if they stop growing, even shrink in size, the way London, New York and many other cities in the West have.
That is where PURA comes in. There is a possibility that a well-designed PURA could curb, even reverse, the mindless growth of our already overcrowded cities. That way it can promote simultaneously both urban and rural development, raise the quality of life in both areas.
Then, the scheme of PURA the Planning Commission has devised may be supplemented by another that is located not in the most backward parts of the country but adjacent to large cities. In the former case, the input may have to be in the form of grant, and hence small. In the latter case, the input should be bankable investment, and hence can be much larger.
PURA starts with four steps: One, acquiring land for constructing a ring road (now itself enough land for future expansion too); two, the construction of a good quality ring road about 30 km long to link a loop of villages; three, constructing an equally good quality link road to a nearby large city, and four, running frequent and fast bus services on both the ring road and the link road.
These preliminary steps may cost as much as Rs 50 crore. That may appear huge but is no more than what a couple of flyovers (that are mushrooming in all our cities) cost. In any case, on a per capita basis, a rural development block should be getting as much as Rs 100 crore of public investment and a similar amount of private investment.
Considered as a rural development project, PURA is unacceptably costly. On the other hand, if it is treated as an alternative to urban development, the same investment fades into insignificance. However, cities attract private investment; PURA will succeed if it too does the same. Cities are growing like cancer causing excruciating pain. They are becoming unreasonably expensive. PURA will be justified if it offers a better Quality of Life and at a lower cost.
At the seminar, the Urban Development Ministry official pooh-poohed the idea of PURA and asserted that nothing can be done to alter the nature of urban growth, and that slums are inevitable. Our urban administrators should give up the fatalism that urban cancer is incurable.
Likewise, the Rural Development Ministry should learn to think big, be unafraid of large investments, the same way as the Urban Development Ministry. The Rural Development Ministry should also learn to attract private investment as well as the Urban Development Ministry does. Rural developers will mature better if they borrow useful mindsets, and learn profitable skills from their urban counterparts.
In that case, an alternative to the PURA of the Planning Commission may be conceived not as rural development in isolation but as a substitute for undesirable forms of urban development. Such a PURA will have urban levels of investment, and for that reason will be expected to attract private investment as well as cities do. Such a PURA can be allocated even more than Rs 50 crore as seed money, but on condition it attracts even larger amounts from private investors. This form of PURA calls for matching grants, not free funds.
This form of PURA may be seeded the same way the Golden Quadrilateral has been by the cess on diesel. A cess on congestion of the cities may therefore be levied to fund a PURA in their vicinity. That cess is justified because every potential rural-urban migrant PURA attracts is a decrease on the burden of the city.
A revenue stream of Rs 3 crore a year can fund one PURA, and curtail the city's population growth by any where between 30,000 to 300,000 persons. That comes to between Rs 100 and Rs 1000 per person. Surely, that is a reasonable price to pay to improve urban quality of life!
This is 117th in the Vision 2020 series. The previous article was published on February 9.
(The author is former Director, IIT Madras. Response may be sent to email@example.com)
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