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Investment needs and Budgeting for Infrastructure and Service in Metro towns - Printable Version

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Investment needs and Budgeting for Infrastructure and Service in Metro towns - FDArchitects - 12-08-2016

The physical infrastructure supports economic activity but weak resource base constrain the ULBs to provide, maintain and renew infrastructure and they do not have the creditworthiness to borrow and invest.

Despite urban areas contributing about two-thirds of nation’s GDP, there is a wide infrastructure gap affecting the economic productivity of cities and urban quality of life.
Investment in Infrastructure and services is critical to economic progress. Local Government do not invest enough in infrastructure, hampering growth prospects and deferring an ever increasing burden to the years ahead.

Governments can prioritize Infrastructure Projects in following steps

1.       understanding the current infrastructure situation


2.       formulating a long-term vision and medium-term goals


3.       preparing a list of infrastructure & services deficiencies that need to be rectified and identifying potential solutions to  address these deficiencies

4.       Considering social and environmental issues in identifying potential solution

5.       deciding who should pay for the infrastructure – users or taxpayers

6.       finalizing the prioritization of projects based on available cash resources and need of community.

7.       moving from planning to action - publishing and marketing the plan, ensuring that the necessary policy changes are enacted and, for the selected projects, finalizing the detailed project preparation process so that value for money “bankable” projects can be tendered.

Understanding the current infrastructure & services situation


In 2008 the MoUD published benchmarks for water supply, sewerage and sanitation, solid waste management and storm water drains with 28 indicators. Select eight indicators are given in Table


SERVICE LEVEL BENCHMARKS
   

The 13th FC endorsed the SLBs published by MoUD in 2008 and recommended that the ULBs notify the status of services and targets for the next fiscal year in the state gazette and made it conditional to access the performance grant of about Rs.8, 000 crore it recommended. In 2010-11, thirteen states notified the status of four services and targets for the next fiscal. The data gives a dismal picture of urban services.

• The national average of water connections within the premises is 53.6%—about half the benchmark of 100 per cent coverage. In Gujarat and Himachal Pradesh the coverage is better with 77 % and 74.4 per cent, respectively and lowest is in Bihar with only 17%.

• The per capita water supply benchmark is 135 lpcd whereas the average supply is 76 lpcd. Highest supply is in Himachal Pradesh and Odisha with over 110 lpcd but in Bihar supply is less than 30 lpcd.

• The non-revenue water should be less than 20% and Gujarat is the only state which is close to the benchmark with 20.6%. The national average is 34% and in Tripura and Chhattisgarh more than two-thirds of water produced goes waste.

• Only 71 % households have toilets in the premises. Himachal Pradesh and Kerala are better placed with 87.6% and 84.5% respectively while Bihar with about 50 per cent has lowest coverage.

• No state has 100% sewerage network. Gujarat with over 61% stands better while   Tripura has no sewage system and Chhattisgarh has less than 10 per cent coverage.

• The door-to-door collection of solid waste stands at 57% .  Gujarat has about four-fifths coverage and all other states are far behind. Uttar Pradesh with over 93.5 per cent solid waste collection efficiency is closer to the benchmark while Bihar with 43 per cent collection efficiency is way behind.

• Only 53% have a network of storm water drains. Andhra Pradesh has about 70 per cent coverage while Tripura with two per cent has lowest coverage followed by Odisha with over 12%.


Costing Urban Infrastructure Needs
There were few efforts in the past to estimate the urban infrastructure investment requirements. The HPEC estimated costs of asset creation, renewal and redevelopment of slums and capacity building, but excluding land acquisition over a 20 year period—2012 to 2031 at Rs.39.2 lakh crore at 2009-10 prices. It also estimated a requirement of Rs. 19.9 lakh crore  to meet O&M costs of existing infrastructure and new infrastructure to be provided over the next 20 years.


Financing Services
Studies on municipal finances brought out the poor status of municipal revenues and wide gap between revenues and expenditure inadequate to provide basic services. The local bodies spend far less than needed to provide minimum services to their citizens. The reasons for such unsatisfactory state are attributed to ULB management of finances as well as state policies. Total municipal revenues in India are a mere 0.76 % of country’s GDP


The HPEC suggested
·         phased investments—15 %during the 12th Plan, 12% during the 13th Plan and eight per cent during 14th and 15th Plans.
·         It also suggested that the states should share 25 % of GST with urban and rural local bodies and this should be enforced through a constitutional mechanism.
·         It further suggested that the urban infrastructure investments should be increased from 0.7 % of GDP in 2011-12 to 1.1 per cent by 2030- 31.
·         The 12th Plan emphasised the need to “strengthen municipal finances and make them predictable through suitable reforms already initiated under JNNURM”.
·         It suggested a separate Local Bodies Finance List in the Constitution through amendment.


Recent Initiatives in Financing Urban Infrastructure


Smart Cities Mission: Its main purpose is to provide core infrastructure (including adequate water supply); assured electricity supply; sanitation (including solid waste management); health, education etc. to these cities . The Mission will cover 100 cities (distributed among the states and UTs) and is a centrally sponsored scheme. The central government proposes to give it financial support to the extent of Rs. 48,000 Cr. over five years, i.e. an average of Rs. 100 Cr. per city per year. An equal amount, on a matching basis, will have to be contributed by the state/ULB; therefore, nearly Rs. one lakh Cr. of government/ULB funds will be available for the development of smart cities.

Solid Waste Management: Another Mission launched by the new government is known as Swachh Bharat Mission (SBM). It aims at making India free from open defecation and achieving 100 percent scientific management of municipal solid waste in 4041 statutory towns/ cities in the country. The targets set for the mission that have to be achieved by 2 October 2019 are: construction of 1.04 Cr. individual household latrines (IHHL), 2.52 lakh community toilet (CT) seats and 2.56 lakh public toilet (PT) seats; and the achieving of 100 percent door-to-door collection and scientific management of municipal solid waste (MSW).

National Heritage City Development and Augmentation Yojana (HRIDAY): The HRIDAY scheme aims at preserving and revitalizing the soul and unique character of heritage cities in India. In the first phase, with a total outlay of R500 Cr. fully funded by the central government, twelve cities have been identified for development.

Atal Mission for Rejuvenation and Urban Transformation (AMRUT): AMRUT was launched on June 25, 2015 with the objective of improving basic urban infrastructure in 500 cities/ towns. The total outlay for AMRUT, a Centrally Sponsored Scheme (CSS), is Rs. 50,000 Cr. for five years from the financial year 2015-16 to 2019-20. Cities with a population of 10 lakh or above are entitled to central assistance of one-third of the project cost and all the other cities get assistance for one half of the project cost. Balance funding is to be arranged by state governments/ urban local bodies (ULB) and will be inclusive of private investment.