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Urban Renewal Mission

“URBAN RENEWAL MISSION - AN INDIAN EXPERIENCE”

ABSTRACT

Key words: Amendment, Institutional reforms, Efficiency, Accountability, Urban Renewal Mission.

Abbreviations Used

ACA- Additional Central Assistance

ADB- Asian Development Bank

AUWSP - Accelerated Urban Water Supply Program

BSUP - Basic Services for Urban Poor

CAA – Constitutional Amendment Act

CDP - City Development Plan

CFC- Central Finance Commission

CIDCO - City Development Corporation

CMA - Calcutta Metropolitan area

CPL - Community Participation Law

CSMC- Central Sanctioning and Monitoring Committee

CSS - Centrally Sponsored Schemes

DPC - District Planning Committees

DPR - Detailed project report

EAP - Externally Aided Projects

GOI- Government of India

GIS and MIS- Geographcal Information System and Management Information Systems

HUDA - Haryana Urban Development Authority

IDSMT - Integrated Development of Small and Medium Towns

IEC - Information Education and Communication

IHSDP - Integrated Housing and Slum Development Program

ILCS - Integrated Low Cost Sanitation

IIR- Indian Infrastructure Report

JNURRM - Jawaharlal Nehru Urban Renewal Mission

MOA - Memorandum of Agreement

MPC- Metropolitan Planning Committee

MPLAD - Member Parliament Local Area Development

MRTS- Metro Rail Transport System

MPs, MLAs–Member Parliament, Member Legislative Assembly

NIPFP-Nation Institute of Public Finance Policy

NIUA - National Institute of Urban Affairs

NSDP - National Slum Development Program

O&M- Operation and Maintenance

PFDF - Pooled Finance Development Fund

PPP- Public Private Partnership

PWD- Public Works Department

RF - Revolving Fund

SC & ST- Scheduled Castes & Scheduled Tribes

SFC - State Finance Commissions

SLNA - State level nodal agency

SLSC - State Level Steering Committee

TAG - Technical Advisory Group

TOR- Terms of Reference

UIDSSMT - Urban Infrastructure Development for Small and Medium Towns

ULCRA- Urban Land Ceiling Repeal Act

ULB - Urban Local Bodies

UIG – Urban Infrastructure and Governance

VRS - Voluntary Retirement Scheme

VAMBAY- Valmiki Ambedkar Awas Yojna

WC - Ward Committees

Executive Summary

Urban population in India will pass the half billion mark by 2030 which would be 42% of its total population at that time as compared to 28.5% of the urban population in 2001. India has some of the largest and most densely populated cities in Asia, which puts out of context all efforts, made by policy makers and planners in improving civic amenities.

Central ministries of Urban Development and Housing & Poverty Alleviation along with respective state level ministries and parastatal agencies execute programs allocated to the sector. The Constitution of India framed in 1950 on federal principals did not exclusively lay the functions and powers of local governments. State governments conferred these to them. The Seventh Schedule of the Constitution of India provides legislative power to the state with regards to formulating municipal laws and powers of local governments.

Rapid urban growth resulted in poor and inefficient service delivery at the municipal level. Local governments as mere functionaries of the state government faced the impact of weak institutional and financial capability because of lack of devolution of powers and functions to them. A constitutional amendment was brought about in 1992 in the form of 74^th amendment that paved the way for decentralization of powers to local governments. This amendment provides for state legislatures to pass in a statutory manner the functions listed under Schedule 12 of the Indian Constitution to the municipalities.

The 74^th CAA was aimed to effect not only political and financial devolution but also devolution of functions as per the 12^th Schedule in art 243 W of the Indian Constitution. Despite its adoption, there was little improvement in the condition of urban local bodies. Some of the key failures included failure to hold regular elections with reservation for vulnerable sections, states continuing to hold on to functions specified in the 12^th schedule and assigning them by ad-hoc rules and executive orders which could be changed at will, poor and untimely fiscal transfers for assigned functions

This paper examines the points of failure and identifies gaps in provisions to raise local revenues, approaches undertaken by different states, gaps in the transfers from higher level of government to local level and role of Central and State Finance Commissions in streamlining fiscal autonomy of local bodies. In the absence of any comprehensive information or database on the status and issues faced by each city in implementation of the amendment in letter and spirit it is difficult to assess the real impact of the legal framework provided by the 74^th amendment in devolution of authority to local governments. But the mid term report of 10^th plan presented a very grim picture of cities with 21 % of the population living in slums, only 89% covered by water supply with no guarantee of quality, only 46% households connected to sewerage networks and 50% efficiency in collection of solid waste. Apart from those, incidents of plague in the City of Surat and high pollution level all pointed towards total failure of municipal governance.

On the other hand Indian cities contribute 55-60% to the national GDP, which should make improvement in governance and efficiency of city governments an absolute requirement to sustain growth and higher productivity.

In 2005 it was estimated that an investment of $314 billion was needed over a period of seven years to meet the demands of basic infrastructure in some major cities where more than 70% of the urban population lives. It was also realized that improvement in urban infrastructure has to go hand in hand with service delivery and transparency in governance. Learning its lessons from the failure of earlier policy, Government of India in December 2005 launched a new initiative in the form of an “Urban Renewal Mission” with a planned investment of $375 billion spread over seven years in 63 selected cities. The goal of this mission, which is called the Jawaharlal Nehru Urban Renewal Mission (JNURM) is “to encourage reforms and fast track planned development of 63 identified cities. Focus is on developing adequate urban infrastructure and achieving efficiency in service delivery through participatory approaches and institutional reforms. Implementation of reforms would improve the fiscal status of urban local bodies and parastatal agencies and make them accountable towards citizens”. (JNURRM, Overview)

The mission is built on the underpinning of urban infrastructure and governance and basic services for the urban poor. The strategy of implementation demands preparation of comprehensive City Development Plan (CDP) that helps capture a vision of the city and details gaps in infrastructure and any other issues in the city to fulfill its vision . The urban local body based on the CDP then prepares the Detailed Project Report (DPR). The proposals are put to Central Sanctioning and Monitoring Committee through the State Level Nodal Agency (SLNA) and the State Level Steering Committee. Once approved, 25% of the sanctioned grant is released in advance after a tripartite Memorandum of Agreement is signed between the central government, state government and urban local body or agency executing the project. Balance instalments are linked to the progress of the scheme. JNURRM has tried to focus on asset management (O&M) after asset creation. For the purpose it has allocated a percentage of a revolving fund to be maintained by SLNA out of releases of grant-in-aid and state’s share of grant or loans.

JNURM has not only tried to financially facilitate governance and devolution, it has laid out mandatory reforms at the ULB and state level and set up mechanisms for efficient delivery of their functions. It has shifted planning to the local level to determine the economic base of the city through the City Development Plans. It has introduced Community Participation law and brought to fore the Area Sabha (Neighborhood Committee). Apart from subsuming provisions of the 74^th amendment as mandatory state level reforms, it lays great emphasis on transfer of powers and functions to local level for fulfilling local needs.

E-governance, another mandatory reform is aimed at bringing about transparency in the system and breaking the nexus of petty corruption that has plagued public service for years. The program has laid equal emphasis on improving the plight of the urban poor along with improving the infrastructure of the cities. Due recognition has been given to women in this program. Home improvement funds under Basic services for the urban poor component and Integrated Housing and Slum Development Program are available only to those households that have land title in the name of women or are held jointly. Given the fact that the program has been very carefully designed it has a great potential to achieve success.

As of January 01, 2008 a total of 279 projects costing $66.5 billion have been approved to be undertaken in 51 out of 63 identified cities in 26 states. The share of this investment in urban transport is likely to be highest at 51% followed by 14% in water supply, 13% in sewerage, 8% in drainage and only 3% in solid waste management. On the second track of the program front under Basic Services for Urban Poor (BSUP) component, 56 out of 63 cities have put up 300 projects approved cost of Rs 15,379 Crores ($40.47 billion).

Fundamental to the success of the program is community participation in making the planning process localized as well as affecting institutional and fiscal reforms in city governance to make it responsive and accountable to the people. Having got an opportunity to participate in the launch of the program in the country the author has first hand experience of process of preparation of city development plans and detailed project reports as the first steps of implementation. Some of the observations with respect to process of preparing CDPs and DPRs have been highlighted in the paper and questions raised with respect to adequate utilization of funds for the purpose they are granted.

The program would require a strict code of conduct of top management, an efficient MIS and monitoring system to see its success in achieving the conceived outcomes.

Urban Renewal Mission – An Indian experience of policy Implementation

1.0 Background

1.1 Urbanization in India

A country of billion plus people, India hosts more than 285 million (2001 census) people in its cities, which is around 27.8% of its total population. The urban population in India is expected to rise to 550 million by 2030 making it 42% of its total population (Census 2001). Since 1951 (post India’s independence) the total number of cities in India grew from 1827 to 5161 and the annual rates of growth in the urban population have since varied between 2.3% and 3.8% per annum. This level of urbanization is significantly lower than in many other developing countries, specifically other Asian nations such as the People’s Republic of China and Indonesia where it is 4.4% and Thailand where it is 5.3% (ADB, 2006). Never the less, the increase in absolute numbers of urban dwellers from 62.5 million to 285 million in just 5 decades is overwhelming (Census 1901-2001).

India comprises of 28 provinces and 7 union territories. At present there are 5161 cities out of which 35 are metro cities (more than 1 million plus population) while Mumbai, Calcutta, Delhi and Hyderabad have crossed the 10 million mark. Another important fact is that 38% of the total urban population in India lives in million plus cities while 80% of the population lives in 441 class-I cities (above 100,000 population - Datta, 1996). These trends indicate that major growth has taken place in a few cities making them among some of the most densely populated cities in Asia. For example, Mumbai having a density of around 378 persons per hectare (ADB, 2006) can easily put out of context all efforts made by policy makers or planners in improving the plight of city dwellers.

1.2 Skewed Urbanization

Historically it has been established that until the 1990s urban growth in India has been largely due to natural growth and not rural-urban migration. There has been an increase in natural urban growth from 41% in the 1970s to 60% in 80s and a decrease of migration from 39% in the 1970s to 22% in the 1980s (ADB, 2006). The first couple of five-year plans of the country focused largely on improved rural development and mechanized agriculture using improved tools and implements. The outcome was decreased labour-intensive farming and improved access to food markets in the cities. Most of rural poor comprising of landless labour was pushed out of the rural areas. Urban growth in the past has been largely attributed to “rural push” rather than “urban pull” as per Kundu and Datta (Kundu, Datta, }. It was the unskilled, landless poor who migrated to cities in search of domestic low paid jobs transferring their rural poverty to urban misery in the form of slums and informal settlements (ADB, 2006). Urbanization in India thus is poverty induced in few large cities with poor economic base. In other words, there has been skewed urbanization that was poorly supported by policies or planning for existing populations or future urban development.

1.3 Institutional Framework for Urban Governance

The Planning Commission, headed by the Prime Minister of India as its chairperson, prepares five-year plans for each sector and allocates funds for each program. The apex authorities that deal with urban and housing issues at federal level are the Ministry of Urban Development and the Ministry of Urban Housing & Poverty Alleviation with respective state level ministries and parastatal agencies like Development Authorities, Housing Boards, Water Supply & Sewerage Boards and State Public Works Departments to execute the programs. Figure 1.0 shows an overview of functional departments overlooking urban management in India.

Fig 1.0 Federal Urban Institutional Framework

Source: Ministry of Urban Development ((N.D.)

Central Government from time to time undertakes policy and program initiatives in matters that it considers important from the national perspective. It provides financial aid to state-level agencies for poverty reduction programs, including housing for low-income urban households, as well as support for the development of urban infrastructure and urban renewal programs. These policies and programme contents are finalized at the time of formulation of Five Year Plans in the Planning Commission in consultation with the respective Ministry. The indirect effect of the fiscal, economic and industrial location decisions of the Federal Government of India exercise a far more dominant influence on the pattern of urbanisation and real estate investment in the country. Functions at each level of government are defined in the seventh schedule of the Constitution (Contents, Constitution, 1950) in the form of union, state and concurrent lists where in:

Federal government is responsible for maintaining macroeconomic stability, currency and coinage, operation of the central bank of the country, foreign relations, international trade, defence, railways and airports, core and strategic industries and operation of the stock exchanges.

The state governments are responsible for public order, police, public health, education, agriculture, irrigation, land rights, industries and minerals other than those that are in the central Government (union) list. They also have jurisdiction over functions provided in the concurrent list. However, in the event of a conflict, the central Government has overriding powers in respect of such subjects.

Although local governments in India date back to colonial rule when first Municipal Corporation of Madras (Chennai) was constituted followed by Calcutta (Kolkatta) and Bombay (Mumbai) Municipal Corporations. Traditionally (since British rule) municipal bodies were assigned the responsibility to maintain basic amenities of civic life termed under obligatory functions. The local government, for which provision had to be made in the budget, necessarily performed these functions. If the municipal government is not able to deliver, the state governments then take over these functions. A municipality based on its fiscal status could take up discretionary functions. In addition, municipalities performed certain regulatory functions relating to construction of buildings, ensuring public health standards in areas such as eating-places, slaughterhouses, tanneries, etc. Later, due to issues faced by the local governments to raise their own resources, the new act 1935 envisaged a federal constitution. The subject of local self-government was assigned to provinces. After independence, the Indian Constitution adopted the model of the Government of India Act, 1935 and assigned the subject of local self-government to the states. The Constitution of Independent India that was framed on federal principles in 1950 did not lay down either the functions or powers of the local governments. Local government, as per the constitution, was covered under state lists and governed by state statutes.

The functions and powers of the local governments thus depended upon those functional domains that were conferred on them by state statutes. Hence, from within the state list of subjects, municipal acts assigned functions like public health including prevention of diseases and sanitation, water supply, land, etc to municipalities. This created a variation roles and responsibilities of local governments amongst different states and cities. (ADB 2006, pg 137-140) The Municipal Acts that followed were, therefore, creations of state legislatures and the lack of uniformity was inevitable. (Rangarajan, C. 2003)

The size of the cities and the fiscal status of the municipal and state governments also contributed to variation of responsibilities of cities within the states as well as across the states. In one of the Northern states of Haryana broad categories of municipal functions identified by the state are: tax collection, fire management, engineering development works, sanitation, rent collection of municipal property, arrangement for street lighting and horticulture, administration and accounts including solid waste management and maintenance of streetlights. On the other hand, the responsibility for the maintenance of water supply and sewerage services is held by the state department since 1993 due to weak financial position of the local government and shortage of technical staff. On the contrary, in the desert state of Rajasthan the cities are assigned with 25 obligatory and 23 discretionary functions. They are also assigned with functions like arranging to prepare compost manure from night soil & rubbish, promoting family planning, immunization and functions like construction of public toilets and urinals. The Public Health Department maintains water supply facilities and the municipality, Urban Improvement Trust and state Public Works Department maintain roads. Municipal Act of Uttrakhand assigns 36 obligatory and 22 discretionary duties to be performed by local governments in the State. In the states of Maharashtra and Gujarat larger Municipal Corporations have greater functional as well as fiscal domain while in smaller Municipal Councils or Nagar Panchayats the functional domain is smaller. (Aizaz, 2006 )

Prior to the amendment the municipal government, although followed an election process continued to be a functionary of the state government. The legislative powers of the states for formulating municipal laws, establishments, constitution, and functional powers of local governments, allowed them to exercise larger control over local. The Constitution of India did not clearly identify functional and financial powers of the local governments. Until 1990 local governments were known to be “Municipal Corporations”, “Municipal Councils”, “Town Area Committees” and “Notified Area Committees”. Members to these bodies were not necessarily elected nor any regular pattern of election existed. However, after amendment these bodies were known as “Municipal corporations”, “Municipal councils”, and “Nagar Panchayats”(Town Councils)as demonstrated in the Fig 1.0 as per Art 243Q2 of the amendment. The Article states: "a transitional area", "a smaller urban area" or "a larger urban area" means such area as the Governor may, having regard to the population of the area, the density of the  population therein,   the  revenue  generated   for  local   administration,   the percentage  of employment in non-agricultural activities, the economic importance or such other factors as he may deem fit”, (Constitutional Amendment). Therefore typology of the municipality would depend upon the size of the city, population, its density and economic base.

Fig 2.0: Types of Urban Local Bodies (ULBs) before and after the amendment

Source: Art 243 Q2, Constituion of India,1992

2.0 Evolution of 74th Constitutional Amendment

Trends in urban growth as well as inefficiency in service delivery at the local level in the 1990s turned the attention of the national government to city functions. Rise in urban growth from 70 million in 1961 to 217.8 million in 1991 with 40% of this growth in million plus cities put a lot of pressure on the civic services. A backlog of 10.4 million houses led to about 48.8 million persons living in slums in 1990. In 1985, only 28 per cent of the urban population had access to proper sanitation and 27 per cent of the urban population did not have a source of safe water within reasonable distance (Economic Survey, 1990-91). During the same period (1990s) the country was pursuing the structural adjustment program that laid emphasis on restructuring of finances of the Union Government. At that point of time fiscal aspects of the states were totally ignored (Pradhan 2002). State finances deteriorated while demands on basic infrastructure and services increased. The reasons were increased population on one hand and implementation of economic reforms on the other to fulfil new responsibilities as a result of decentralization. Rising expenditure, shrinking tax revenues, a rising debt service burden, very slow growth in non-tax revenue, the rising share of non-development expenditures and the increasing financial losses of state enterprises were the major weaknesses of state finances. An increase in the liabilities of the state governments such as guarantees and large revenue deficits were responsible for the fiscal crisis in the country (Pradhan, 2002).

Local governments that were mere functionaries of the state government faced the impacts of this crisis in the form of the deteriorating condition of the cities and weak institutional and financial capability to cope with it. To look into this dismal urban situation a National Commission on Urbanization was set in 1988. It eloquently pointed out in its report the gross reality of continuing and rapid growth of the urban population as well as the scale and intensity of the critical deficiencies in urban agglomerations. These deficiencies were reflected in terms of poor infrastructure, concentration of vast number of poor and deprived people, acute disparities in the access of shelter and basic services, deteriorating environmental quality and the impact of poor governance on income and productivity of enterprises. It was in 1989 that a bill was introduced in the Parliament that stated : “In many States local bodies have become weak and ineffective on account of a variety of reasons including the failure to hold regular elections, prolonged super sessions and inadequate devolution of powers and functions. As a result, Urban Local Bodies are not able to perform effectively as vibrant democratic units of self-government. Having regard to these inadequacies, it is considered necessary that provisions relating to Urban Local Bodies are incorporated in the constitution, particularly putting on a firmer footing the relationship between the State Government and the Urban Local Bodies with respect to……”.(Constitution of India, pg ) Thus in 1991, a joint parliamentary committee was set up by the then Prime Minister that recognized the fact that the local governments are best equipped to match public services to local preferences using local knowledge and offering cost effective solutions. With fewer levels of hierarchy at the local level, government is likely to be more accountable to citizens.It is with this drive that a constitutional amendment was made in 1992 to Article 243 of the Constitution separately for rural and urban local governments in the form of the 73^rd and 74^th amendments respectively. This paved the way for decentralization of powers to local governments to serve as self-government (Chaudhary 2003).

The objectives of these amendments were to devolve functions and powers to local government in order to:

Provide an enhanced opportunity for people’s participation;

Allow bottom-up planning; and

Ensure effective and efficient delivery of services by enhancing coordination, accountability and responsiveness to users.

The above was to be achieved by working out a relationship between the State and local governments with regard to: (a) the functions and taxation powers; (b) arrangements for revenue sharing; (c) ensuring regular conduct of elections; (d) ensuring timely elections in the case of super session; and (e) providing adequate representation for the economically weaker sections and socially backward classes, like scheduled castes, scheduled tribes and women. (The phrase "Scheduled Castes (SC)" is based on article 341 of the Indian Constitution, which authorizes the President of India to specify, by public notification for each state, certain "castes, races or tribes or parts of or groups within castes, races or tribes with an intent to list those groups that had been treated as "untouchable" in the traditional Hindu socio-economic hierarchy that evolved based on their occupations. Similarly, The Scheduled Tribes (ST) can be analogized to Native Americans in terms of their understood aboriginal status, religious, linguistic and cultural differences, and geographic isolation. Clause 15(14 ) recognized that there were other groups in Indian society who had suffered discrimination in ways comparable to the untouchable castes and tribal peoples, although perhaps not as severe) (Gallanter, 1984) Explain what scheduled casts and tribes are.

2. 1 Salient Features of the Constitutional Amendment (Art 243 (Q- ZE) and (Art 280)

The constitutional amendment was thus one of the first serious attempts to ensure stabilization of democratic municipal government since independence. It proposed a uniform structure of municipal corporations; municipal councils and Nagar panchayats (Town Committees) in transitional areas in all the states. The amendment made a significant beginning of reforms for providing constitutional recognition to municipal governments as institutions of self-governments. The Act under article 243 thus tried to achieve this objective by introducing some fundamental changes in five key areas to affect devolution of powers to city government. It did so by: 1) regulating process of formation of municipalities; 2) identifying functional domain of municipalities; 3) establishing mechanism of fiscal devolution through state finance commissions; 4) introducing fourth tier of local government in the form of ward committees specifically in bigger municipalities; 5) proposing formation of metropolitan planning committees and district planning committees. These can be briefly described as under:

2.1.1) Elections to municipalities were not a regular feature earlier. These were carried out at the discretion of the states and did not extend to Town Committees or Notified areas. The constitutional amendment proposes to hold regular and fair conduct of elections every five years to all three types of municipalities by statutorily constituted State Election Commissions in line with democratic processes at the Centre. In case of dissolution of the local body within five years, it mandates to hold an election within 6 months of the dissolution

2.1.2) For the purpose of identifying a functional domain of the municipalities and holding it responsible for certain basic services, the amendment provides for a framework in the form of the twelfth schedule (Art 243W). The schedule is a list of greater functional responsibilities devolved to urban local bodies by enactment of state legislation. Besides the traditional core functions like provision and maintenance of basic services and regulatory functions (listed in section 1.03 pg 8 & 9), the twelfth schedule has included urban and town planning, regulation of land-use, planning for economic and social development, protecting the rights of women as well as weaker sections of society (as indicated earlier (in para ) including the handicapped and mentally retarded, slum improvement, urban poverty alleviation, and other cultural educational and aesthetic aspects in the municipal functions. (Box 1.0)

Source: Constitution of India Art 243W

2.1.3) The mechanisms established for fiscal devolution are laid out in Art 243 I of the constitution. As per this article, once every five years the states are required to constitute State Finance Commissions (SFCs - Art 243I) through the legislature notified by the Governor of the state. The role of these state level commissions is to recommend mechanisms for improving the fiscal health of municipal bodies in accordance with Art 243Y. According to the article these recommendations should clearly identify:”

Principles governing the distribution of the net proceeds of state and local taxes between the state and local bodies

Taxes that can be levied by the state, village panchayats (rural local body) and municipalities within the state

Rate of taxes, duties, tolls and fees which could be appropriated by the local bodies

Transfer of grants in aid from the consolidated fund of the state to the local bodies

Measures needed to improve the financial position of the panchayats and municipalities

States have to accept recommendations statutorily and submit action taken reports on receiving the recommendation of the SFC’s.” ( Art 243 I)

In order to monitor and facilitate role of State Finance Commissions, the amendment delegated powers to the Central Finance Commission (federal level body) to recommend measures needed to augment state resources to assist the municipal governments. (The Central Finance Commission is a federal body set up in accordance with Article 280 of the constitution. It comprises of a chairperson and four other members of eminence in the field of economics and finance who have a term of five years or less and are nominated by the President of India.) Based on State Finance Commissions recommendations, one of the roles laid out in Art 280 (bb) is that Central Finance Commission is to provide directions to states on redistribution of net proceeds of the states’ share of grants and taxes to local bodies based on the states’ fiscal situation. It could also source this additional funding or propose mechanisms to increase the states’ own resources, exclusively for municipal financing. For example, it could propose to revise tax rates or release central grants for special purpose schemes or programs. The Central Finance Commission directives will be based on State Finance Commission reports.

2.1.4) In order to ensure closer interaction with people for their participation in civic affairs, the amendment made provisions for establishment of ward committees in municipal bodies with a population of three lakhs (0.3 million) or above (population size flexible for smaller cities).

2.1.5) Finally, in order to encourage participation of people in the planning process, the amendment requires that states create Metropolitan Planning Committees (MPC) and District Planning Committees (DPC) for the preparation of development plans that take into account rural-urban integration in addition to long term perspective of multiple-local boundaries and multi-sector domains.( Constitution Art. 243 I to 243 O)

To evaluate impacts of the constitutional amendment on local governance and devolution over the last 13 years (1995-2008) it is important to see how and to what extent it has been implemented in the states. Based on established literature, the following section of this paper analyses and presents the extent of political, functional and political devolution that CAA could affect in different parts of the country.

2.2 Status of Implementation of Provisions of CAA across States and gaps in achieving devolution

Given the broad framework of local governance provided by the 74^th constitutional amendment described in previous sections, its implementation could have made a glaring impact on the political, functional and fiscal efficiency of the cities. But unfortunately, the service delivery and functioning of cities was noticeably deteriorating, although there was neither any data, nor any empirical evaluation of the state of cities and their functioning after the amendment. Review of the literature suggests that there had been only piece-meal studies on effectiveness of the amendment in changing the governance of cities across the country. Most of the studies ((Mathur 2000, Jha 2000, Chaudhary ) focussed on the fiscal status of the local governments and have based their analysis using expenditure statements of ULBs to asses their performance. After passing of the amendment there had been little attempt in making a comprehensive study to understand if the amendment was adequately being adopted by all the states and to what extent the local governments were able to self govern. In 2005, the Ministry of Urban Development sponsored a study on “The Impact of 74th Amendment Act on the Working of Urban Local Bodies,” that was conducted by National Institute of Urban Affairs.” (Mathur M.2005).

While anchoring my basis on the above study, in the following sections I am looking at the extent of implementation of the amendment and analysing the gaps in achieving the basic objectives of the amendment i.e. devolution. If implemented in its spirit, the amendment would have allowed Urban Local Bodies to act as the self governing units. In absence of any primary surveys of the city officials or those involved in enforcement of the amendment, the ideas presented here are based on the literature studied.

I am looking at the implementation of provisions of CAA in light of the five key areas discussed in section 2.1 that were envisaged to bring in political, functional and fiscal devolution (NIUA 2005).

2.2.1. Status and gaps in achieving Political devolution

As indicated in section 2.1 (para-1) political devolution was to be achieved by holding fair elections to one of the three types of municipal bodies based on uniform criteria laid out in the Article 243 Q2 of the CAA. According to this article, the type of municipal body will be known as: (i) a “Municipal Corporation” for a larger urban area (ii) “Municipal Council” for a smaller urban area” and (iii) “Nagar Panchayats”(Town committee) for transitional areas i.e. an area in transition from rural to urban. (Constituition Art. 243Q.2 ) As per the study, all states amended their municipal laws in conformity with the CAA. But criteria for defining small, large cities or even transitional cities varied in some states. Some states used population and percentage of non-agricultural employment and some states used fiscal status of urban body to define the type of municipality.

According to the study (Mathur, 2005), except for two new states (Chattisgarh and Jharkhand), all other states conducted elections for their municipal corporations as late as 1999 or 2000. Reservation for women and weaker sections in the council were also followed in all states. In bigger states like Maharashtra, Gujarat, Karnataka, Madhya Pradesh and Rajasthan elections were held in stages due to the larger number of Urban Local Bodies. According to the study, urban local bodies thus comprised of more than 60 thousand elected representatives, which included women and weaker sections of the society. (Mathur 2005).

But the question is how far these locally elected representatives have been able to have their say in resolving local issues or exercise their power in the current Institutional structure?

The council comprises of elected representatives as well as nominated legislatures from the state government. The constitution does not provide for a minimum number of elected members to the council. Thus, the council could have more number of nominated members as compared to elected members. This is common in smaller municipalities. Members of Legislative Assembly (MLA) (state) and Parliament Members (MP) (center) from these constituencies also have the power to vote in the municipal elections, which allows for intrusion by higher levels of government In such cases there is little opportunity left for elected members to go by the will and priorities of the people in their local constituency. In some cases, it is noted that various committees are formed within a municipality, but the minority of the members which is limited to a one-third majority under reserved category of women, or vulnerable groups have hardly any say in the decision making; only the mighty and politically influential members prevail upon the decisions of the committee. Therefore, even if the poor and women are represented in the municipality, their voice is hardly heard. Invariably local issues are numbed by the MLA s or MPs elected from same constituency.

Even the organization structure and the administrative functioning of a typical municipality (Fig 3.0) has not changed to facilitate authority of elected representatives. The administrative powers continue to be held by the municipal commissioner (a bureaucrat) who is the executive head of the ULB and appointed by state government. Thus, the municipal commissioner or the district magistrate is accountable to state and not to the Mayor. But he/she actually controls the execution of most of the functions of the municipality while the Mayor who is elected by the local people directly or indirectly by councillors, serves only as a ceremonial figure. His tenure is also shorter i.e. one to two and half years than the council members, which is indicated in the state municipal acts.

Further, although it is clearly written in the article 243Q of the amendment, that elections are to be held every five years in all the municipalities and in case of dissolution it is to be held within 6 months of dissolution, but in case of Uttar Pradesh, the terms of all the 11 municipal corporations of the state expired on various dates in January and February 2006 but elections have been deferred and the UP Municipal Act has been amended to enable District Magistrates to function as administrators of these corporations. (Mathur NIUA 2005)

Fig 3.0 A Typical Organization Structure of a Municipal Corporation

2.2.2 Status and Gaps in achieving devolution of Functions as per Twelfth Schedule

As per the CAA the powers and authority necessary to be devolved to the Municipalities had to be made by law. Only 9 states out of a total of 27 have delegated additional functions to municipal corporations (Mathur NIUA 2005) in accordance with the 12^th schedule. Earlier, these functions were transferred through executive orders or sometimes through arbitrary directions from state level agencies or state urban departments without specifying any budget or authority to execute these functions. In the twelfth schedule of the amendment, functions such as urban planning, urban poverty alleviation, urban forestry, environment protection and promotion of ecological aspects, slum improvement and upgrading, have been added (Box1.0) to the core functions⁵ like water supply & sanitation, public health and building regulations etc. As per the amendment these functions were to be statutorily transferred by state governments to municipalities The study indicates that these state governments have amended respective laws listing some of these functions as core functions of the municipalities, some as welfare and some development functions and there is a lot of variation in delegated functions to cities across the states. In states such as Karnataka, Maharashtra, Madhya Pradesh, Orissa, Tamil Nadu, Kerala, Uttar Pradesh and West Bengal amended their municipal laws to incorporate some of the additional functions to their municipalities from those listed in the twelfth schedule of the amendment.(Mathur NIUA 2005) .

One of the reasons for weak authority of the municipalities can be attributed to the anomaly in art 243 W that leaves it to states to change their municipal acts, i.e. transferring additional functions/ activities under these subjects to ULBs other than traditional municipal functions. The amendment did not demarcate the role of parastatal and municipalities separately. Instead, it was expected of states to identify clear activities under each of the subjects listed in the 12^th schedule to be assigned to the municipal bodies. In the process, some of the functions overlapped and multiple agencies were involved while no one was held responsible for non-performance. As an example, generally public health would include water supply, sewerage, sanitation, solid waste management, immunization and managing communicable diseases. However, the twelfth schedule has also identified some other functions like water supply separately. As a result in many states like Haryana, Karnataka and Delhi, provision of water supply and sewerage functions have been taken over by the state governments or transferred to autonomous parastatal agencies like water and sewerage boards.

Almost all cities continue to be governed by a plethora of agencies with weak coordination and very little accountability. It results in fragmented service delivery with multiple entities involved in each service. There is a lot of confusion in sharing of responsibilities between the state government agencies and municipal corporations at city level. There are parallel institutions like state water supply boards for undertaking water supply & sewerage capital projects. These key service providers are often accountable to the state government, as they are parastatal institutions. This compromises the scope for ULBs to pursue their own goals and policies in line with their city needs. In Tamil Nadu, distribution networks and water or sewerage treatment works are undertaken by state level public health engineering department and maintenance of the same is left with the Municipal Corporation. It is a shared responsibility in many states like Delhi. In case of Delhi, remunerative functions like development of residential or commercial sites and building of housing have been undertaken by the state level Delhi Development Authority and water supply is the responsibility of Delhi Jal Board. The municipal body has been left with non-remunerative functions like street lighting, maintenance of inner city roads, maintenance of water supply and drainage distribution lines, registration of births and deaths, maintenance of crematoriums and garbage collection/disposal.

Similarly, Improvement Trusts or city level Development Authorities are responsible for land acquisitions, land records or land development in the city. They transfer the land after development to builders or state level housing boards for construction as per the Master Plans. In the name of poor institutional, professional and financial capacity of ULB’s, these state level agencies continue to construct and provide services to the cities, while transferring maintenance functions to the municipalities along with consequences of “public dissatisfaction” due to deficiency in city services

Due to fragmentation of service delivery responsibility, none of the agencies are held responsible for poor delivery. State service providers are not directly responsible to citizens. In addition, service delivery is not evaluated based on outcome but rather on internal procedures. For example, if an area or household has reported leakage or inadequate water supply, after necessary restoration or repair it is reported as a complaint attended to higher authorities in the hierarchy, without any mechanisms for counter checks by the department or information to ascertain the quality of service provided and the time within which it was provided.

The situation becomes more complex when different political parties at the state and local level come in conflict with one another, as each tries to exercise its assumed control over lower levels of government. Political situations arising out of different political parties at state and local level cause deliberate attempts by state governments to exercise control or favour lower levels of government.

One of the main reasons assigned by the state governments for such a diverse nature of delegated functions across municipalities was inadequate professional and financial capacity of these municipalities to undertake such functions. But neither the state governments nor the municipal corporations have made any efforts in restructuring institutional frameworks of the municipal bodies or the state government agencies to enable them to undertake prescribed functions at the local level. Hence, there is neither any uniformity of municipal acts/by laws nor uniformity of functional domain of the municipalities across the country (Mathur, 2004).

Another area of controversy is devolution of the planning function to ULB’s. The Constitution assigns the prime responsibility of planning for economic development and social justice to the municipality. The twelfth schedule makes this abundantly clear by mentioning in its very first item “Urban planning including town planning” and includes “regulation of land use and construction of buildings” in the second item (Box 1.0).

Recognizing the fact that local plans when prepared at the local level have a greater chance of people’s participation, the Town and Country Planning Department, the technical arm of Ministry of Urban Development, in its model guidelines for spatial planning issued in August 1996 ⁶clearly recognized planning as a statutory function of all municipalities thereby giving it central government endorsement. The rationale behind this endorsement was two fold:

1) If this function is to embrace participatory and socio-economic planning approach, it is the government closest to the people that should prepare land use plans and dove tail them to the master plans involving communities. Do not us ‘with’ repeatedly.

2) The basic responsibility of enforcing urban by-laws primarily rests with the urban local body, which more than often has to bear the wrath of courts and public. In the case of Delhi, the Development Authority (state level agency) allowed some changes in development regulations like addition of floors or allowing change of use in certain areas. This allowance-encouraged people to sometimes go beyond building envelop limits, encroaching upon public lands. As a regulatory body, the Municipal Corporation had to take extreme steps regarding demolitions of these extensions, which led to many demolition disputes that had to be settled in the court and where the Municipal Corporation of Delhi and not the Delhi Development Authority had to defend its actions in the courts.

Contrary to this, another school of thought is not in favour of the transfer of the planning function to municipalities. The basis of such contradiction is on the premise that these bodies do not have requisite technical expertise for preparing land-use plans (Kundu, Kulwant Singh, 2001). In Kundu’s words, “The problem is that the local bodies are simply notyet equipped to take up such responsibilities, especially for capital projects. Indeed, considerable expertise is required to identify the infrastructural and industrial projects appropriate for the growth of a city or town, assess their environmental implications, and mobilize resources for them. Given their difficult financial situation, it is unlikely that these local bodies will be able to strengthen their planning departments by recruiting technical and professional personnel in the immediate future. State government departments face similar constraints and are unlikely to be able to provide the technical assistance needed.”

Rewrite using simple declarative sentences. Simplify language such as ‘The basis of such contradiction is on the premise….

From colonial times, planning was an obligatory function of the municipal governments. The intrusion of the state governments into the basic town-planning domain of the municipalities began with the setting up of Development Authorities in the 1950s (Siva, 2006). In addition to their land acquisition function, the development authorities were empowered to prepare land-use plans (Master Plans). In order to enhance the location value of the acquired land, the state ensured services for development of these lands. This ended up in development authorities adapting essentially a role no different from government sponsored real estate developers. Land being a state subject and land acquisition a mandate of the state level development authority, it is now being used as the pretext for holding on to the powers of planning and supervision at the local level.

Currently, in most of the metropolitans, development authorities like City Development Corporation (CIDCO) of Navi Mumbai, or Haryana Urban Development Authority (HUDA) are using land as a resource to leverage funds from the markets, encouraging the private sector to invest in land development. Combined with the opening of the economy in 1991 to the global market, the multiple effects are that real estate prices are sky- rocketing and unaffordable to the common person. During the British period, planning processes by municipalities usually followed a committee system. That offered some opportunity for discussion with local people. On the contrary, in the current situation, development authorities are far less accessible. During the initial stages of preparation of a Master Plan, there are public hearings soliciting suggestions of different stakeholders, but over a period of time when changes to the land use are made, no such elaborate involvement is encouraged. Normally all changes in the Master Plans are undertaken through executive action or on some board level recommendations, as has been done in case of Delhi cited above. This has resulted in high-level corruption and a nexus between state government, developers and private financers, called the land mafia, which cannot be broken easily.(see sec 3.5 on corruption) This is a critical piece of analysis that requires more than just one sentence. As I mentioned previously, corruption is a major piece of the puzzle in understanding Indian local government, it appears. Because of high prices, urban land is so lucrative that state governments do not want to change their mindset and restore city planning to city governments. In fact, the city land-use caters to speculation, the commercial lobby and any other use but to the needs of local city dwellers’ making it unaffordable for urban middle class and poor. In Sivaramakrishnan words, “When the process of local planning does not remain localized, the opportunity for monitoring and upholding that plan is reduced thereby undermining responsibility and accountability” (Sivaramakrishnan 2005)

2.2.3. Conformity to CAA for Fiscal Devolution and its failure to improve fiscal condition of ULBs

Literature on the subject has established that one of the most critical aspect of devolution is transfer of fiscal powers to local government to exercise its authority and successfully perform its functions (Jha 2003, Mathur 2000). For the purpose CAA in its Art (243I) created a mechanism of setting up State Finance Commissions comprising of state officials and city representatives, to make recommendations on fiscal transfers and tax distribution to enhance the fiscal condition of municipal governments. (Section 2.1.3). The financial sources of the municipal governments are thus dependent on their own revenues and transfers from higher level of governments.

It is a well-known fact that municipalities’ own revenues primarily comprise of a combination of tax and non-tax sources. Tax sources are generally: property taxes; tax on vehicles, parking, professional taxes; entertainment or theatre tax ; tax advertisements, etc. Non-tax sources could be user fees, fines penalties, rents from municipal properties, municipal bonds etc. These are normally termed as internal sources. Local governments can also receive funds from the higher level of the governments in the form of grants-in-aid as well as a share of the taxes collected by the state government, or centrally sponsored schemes of the central government. These are normally called external sources.

As far as setting up of the first set of State Finance Commissions (SFCs) is concerned, they were constituted during the period 1993 - 1996 in 22 states, while in three states they were constituted after 1997, as they were new states⁶. SFCs submitted their reports/ recommendations to their state governments within a time period ranging between 3 to 36 months in accordance with terms of reference stipulated in article 243Y (stated in sec 2.1.3)of the constitution (Mathur NIUA 2005)

States were to submit Action Taken Reports (ATRs) to state legislature after receipt of the recommendations. Most of these ATRs submitted by the state governments indicated that they have accepted the recommendations of the SFCs. To evaluate the recommendations by the states, the study grouped major recommendations into two groups 1) those relating to devolution of “resources” and 2) “others” and were assigned maximum weight age of “2” and “1” respectively. Further a mark of 5, 3 or 0 was assigned to those states who had taken decisions, partial decisions or no decisions respectively on taking actions on those recommendations. Accordingly, the cumulative marks achieved by the states of Haryana, Himachal Pradesh, Tamil Nadu and Uttar Pradesh scored high on the acceptance of recommendations of SFCs while in the case of Andhra Pradesh, Goa, Gujarat, Kerala, Rajas than, Delhi and Pondicherry acceptance was moderate. (Mathur M, 2004) Define high and moderate As above

As per the study, there was a lot of variation in the range of recommendations made by different State Finance Commissions with respect to a) tax jurisdiction b) tax sharing mechanisms and c) transfers from grant in aid.

2.2.3a Assignment of Tax Jurisdiction: SFCs of all the states maintained status quo on tax jurisdiction of the local bodies. This means that the tax base of ULBs would continue to consist of land revenues; taxes on land and buildings; taxes on entry of goods into a local area for consumption, use, or sale therein; taxes on advertisement; and taxes on animals and boats. But there was variation in criterion set up for assessment of taxable value; for example, in case of property tax, SFCs of Karnataka, Kerala, Tamil Nadu and Uttar Pradesh recommended area based or site valuation of property taxes, de-linking them from annual rents. Similarly, Karnataka and Kerala recommended larger autonomy in terms of tax rate setting and coverage while other states identified a range of tax rates to be used by city governments (Mathur 2003).

But the recommendations of SFCs failed to improve internal resources of municipal bodies. One of the reason is that on one hand the amendment has identified additional responsibilities to be transferred to the municipal governments, on the other hand it has maintained the prerogative of the state legislature to decide which taxes, duties, tolls and fees are to be assigned to local bodies and which of these should be shared between the state and local bodies. The powers of the state legislature on the issue of tax assignment have not changed.

Mathur in his report card quotes from the Madhya Pradesh Municipal Corporation Act, that: “the corporation may, at a special meeting, bring forward a resolution to propose the imposition of any tax under section 132 defining the class of persons or description of property to be taxed, the amount or rate of tax to be imposed and the system of assessment to be adopted, provided that no such resolution shall be passed by the Corporation for the imposition of any tax unless the Government shall have first given their approval to the selection of the tax by the Corporation. Such resolutions shall be published for two days in such daily newspapers which are in the approved list of Government". (Mathur, 2003). This is an example of how state municipal acts do not provide for even simple authority to the municipalities to decide their tax rates or tax base to improve their own resources and thus become self sustainable.

Inspite of their contribution of 55-60 % to the national GDP, municipalities are financially very weak, because of the inferior nature of local taxes assigned to them and lower collection efficiency - taxes that are elastic and buoyant like octroi (tax levied on goods and services entering the state/city) have been done away with in most of the states and therefore cities. Because, elasticity of tax is the rate of proportionate change in the tax revenue due to change in GSDP while tax buoyancy is the composite of the change in tax revenue due to change in GSDP and change in tax rate and tax base. In municipal context, Octroi and stamp duty grow with the growth of economy are buoyant and elastic while property tax is not. Explain what you mean by ‘elastic’ and buoyant’.

In the current context, the principal source of revenue for municipalities is property tax. Its collection-to-demand ratio on average is between 40 –45%. Thus, poor administration of tax and other powers by local governments is reflected in low collection-to-demand ratios, their inability to adjust the property valuation, tax rates, and user charges to inflation and the high cost of administration and enforcement (Jha 2003). On the other hand, more buoyant taxes, like octroi that expands with growth of trade, was abolished in some states like Rajasthan resulting in poor revenue income in the cities within the state.

Weak sources of own revenue result in lower municipal expenditures. Thus total municipal expenditures form only a small fraction of the state GDP, and range between a high of 1.82% in Maharashtra to a low of 0.15% in Bihar (Mathur OM 2006, Chapter 5).

As the local governments do not have the authority even to set tax-rates, rate revision, and other spheres of improving the tax base. It has resulted in increasing dependence of local bodies on the state governments and lowering of the quality of services.

b) Tax Sharing Mechanism: Recommendations from various SFCs on tax sharing between states and local bodies were based on following three principles (Mathur 2003)

• Predictable system of tax sharing to allow states to plan their activities

• Measurable criteria for tax sharing that is transparent

• Automatically adjustable to inflation

Four kinds of approaches were recommended:

• Create a distributional pool of state’s resources and share it with local bodies in proportions deemed appropriate

• Share state level taxes with pre-determined provisions

• Transfer fixed sums to local bodies

• Allocate a component for local bodies from the state’s share of central taxes

The State Governments of Andhra Pradesh, Punjab, Rajasthan, Tamil Nadu, Uttar Pradesh, West Bengal and Delhi accepted the recommendations on sharing of state revenues. In Tamil Nadu, the state government has frozen the percentage of states’s share of revenues for all the 5 years owing to a resource crunch. In Goa and Kerala, this recommendation was not accepted because the states own tax resource base was under pressure (NIUA 2005).

Tax sharing becomes important when some of the functions are also transferred to the municipal bodies. Essential services such as roads, street lighting, water supply and sewerage are difficult to deliver without adequate cash flow from tax revenues or other funding sources. Whenever there is an assignment of function to local body, it is not linked to the source of funding that will allow the function to be undertaken by it. For example, in most cases the provision of water supply is the responsibility of state level water board and the board also collects the user charges. But, the maintenance of the distribution network is invariably, assigned to the municipal corporation without allocation of funds. This results in lack of responsibility and poor service delivery. While the fiscal situation of local governments is pathetic, the expectation of the state from the local body to meet such expenditure from its own revenues is unreasonable.

Inefficiencies and unaccountability of local governments towards citizens invariably lead to petty service thefts and corrupt practices that affect the common man and the vulnerable groups. The common citizens whose life is effected by the unavailability of essential services like water supply and sewer blockages, end up paying bribes to municipal plumbers and petty contractors to get their problems addressed and do not feel the necessity to pay user charges for the service not delivered.

c) Grant-in-aid and gaps in fund transfer: As already discussed in section 2.2.3, large part of the sources of revenue of municipal governments is through transfers from state and federal governments in the form of grant-in-aid or sharing of taxes. Seventeen percent of the total municipal revenue receipts comprise of transfers while 12 % are grant in aid. (Mathur M, 2004). split into 2 simpler sentences

The purpose of grant-in-aid could be in the form of general-purpose grants, specific purpose grants like maintenance grants, incentives or compensatory grants. They can also be granted for implementation of priorities of the state or central government in the form of centrally sponsored schemes or in the form of external resources (International Aid) to improve the efficiency of the local government for tax collection and revenue generation.

The response had been very luke warm where states did not accept SFCs recommendations like transfer of a proportion of conversion tax to ULBs; continuance of the existing practice of land revenue recovery from agricultural land and increase in the rate of local and irrigation taxes.( reference)

Intergovernmental fiscal transfers should support local service delivery by synergizing policies and programs that build the capacity of local governments as sustainable service providers, rather than perpetuating dependency on upper-tiers of government for fiscal gap equalization and substitution of inadequate human and technical resources by funding of inefficiencies

Unlike the provisions of transfers, including specific taxes to be shared between the centre and the states, the Municipal Acts do not make any such specifications.(As in case of Madhya Pradesh Act referred above) Moreover, they do not indicate the modus operandi of such transfers with respect to time and conditions of such allocations, thereby leaving the fiscal transfers very ad-hoc, irregular and discretionary in nature. Such ad-hocism and irregularity in transfers results in poor and unrealistic budget allocations for local activities and priorities identified by municipal bodies. In the absence of any systematic approach to fiscal transfers or grant-in-aid, most of the time municipal bodies prefer transfers because they are found to be more convenient to seek than to collect user charges from customers already frustrated by the inadequacy of services. This leads to an unending loop of non-performance and apathy to achieve collection efficiency. Still too convoluted - rewrite and

Another channel of fiscal transfers from the central government to state government for execution at the local level, are the centrally sponsored programs. Inadequate demographic or socio-economic data at local government-level, invariably results in inconsistency between target groups of centrally sponsored schemes (CSS) and those eligible for the grants (IIR 2006) For example, inadequate city-wise data on homeless, land tenure rights or identity of pavement dwellers and land availability to construct night shelters resulted in failure of the schemes designed for homeless or night shelter scheme. This resulted in non-utilization of funds for the intended target group or purpose. As a result, approximately Rs 100 crores ($27.5 million) allocated under UBSP, ILCS, Night Shelter and Nehru Rozgar Yojna went unutilised in the year 2004-2005 (IRR, 2006)

The continuance of the Local Authorities Loans Act 1914 since British Rule restricts local governments to access loans from financial Institutions or markets without approval or sanction of the state government. Explain why an act from several decades before partition is still in force. (I could not trace any reason for not changing this act) then find out how typical it is for municipal, or other legislation in India to date from the Raj. You should plan to note something like it ‘x% of municipal legislation predates independence and only y% has been passed since that time.’(see next paragraph) This entails long procedures with a lot of documentation in addition to fulfilling requirements of financial eligibility in terms of the percentage of annual rate able value, value of municipal properties and assets, own revenues etc. and the general financial position of the municipal body. This is the reason why only municipal corporations (bigger) have been able to access loans from the capital market. Infact, currently relevance of local authorities loan act 1914 is also being questioned in the wake of devolution of powers to local government.

Strangely, many acts enacted during British rule continue to exist with amendments issued from time to time. For example, Bombay, Calcutta and Madras were the first few cities where the British constituted elected bodies after 1882. Bombay Municipal Corporation act 1888 and Madras Municipal Corporation act 1919 are examples of legacy left by British. Similarly Indian Forest act 1927, Land Registration act 1908, Land Acquisition act 1894 continue to exist with amendments issued to clauses as and when questions are raised.

Community contribution or a local government loan component is built into most of the centrally sponsored programs. But these are often ignored, diminishing the net impact of a participatory design of the programs. Invariably grants are seen as free money, local members of legislatures (MLAs) or elected representatives of the constituency do not encourage such contributions. In the absence of adequate data of the actual beneficiaries or socio-economic surveys, the funds could be diverted to projects or people that cater to bigger vote banks or big money for local politicians. This reduces the ability to foster a greater sense of pride and ownership by the community, resulting in lost objectives.

In Andhra Pradesh the suggestion to increase per capita grant to ULBs was accepted in view of the increasing costs of materials required for undertaking development activities. Although recommendation to sanction additional grants for newly constituted municipalities had been accepted, no action was taken. In the state of Gujarat, by whom? a recommendation by the SFC, to discontinue grants-in-aid for motor vehicle tax was accepted in view of delegating powers to ULBs for imposing a lifetime tax on vehicles in consultation with the Transport Department.. Do you mean cease (cess means tax here?

2.3 Failure of Finance Commissions to Raise Resources for the Local Bodies

The fact that recommendations were either not accepted or action taken reports were not submitted implies that states were reluctant to transfer financial jurisdiction. It can also be inferred that the recommendations were vague and did not provide clear directions to states for devolution of financial powers.

Central and State Finance Commissions are constituted as autonomous bodies, principally comprising of experts and officials from within and outside governments. Their role is to systemize and guide fiscal transfers amongst the three tiers of government as well as suggest measures to improve fiscal state of urban local bodies. However, the post amendment experience has not been very encouraging.. Major reasons for such a failure are:

2.3.1Absence of information and database on fiscal situation of local bodies vs states to make any empirical analysis to base their recommendations

Most of these recommendations were not based on any empirical analysis of the actual financial status of a ULB, nor do they indicate any relationship with the functional assignment of ULB or identify the needs of the municipality. (Kundu 2001) Even a sharing formula has not been worked out in many cases for devolution of funds from the state to ULBs. This resulted in vague recommendations and reluctance on the part of states to accept and take the necessary steps for implementation. Apparently, the state authorities dealing with the municipal administration and urban development did not have enough information and insights into the finances of the local bodies to present to the SFCs, in order for them to affirm their recommendations. As per Joshi, from the reports of SFCs studied by him for four states, in the case of West Bengal and Gujarat, no data was available on the status of revenues and expenditure of the local bodies and most of the local bodies within states were dependent on the state transfers (Joshi, 2005).

2.3.2 Absence of uniform guidelines or approach to make recommendations

Inappropriate quality of the report in terms of approach and methodology adopted by them and the shape in which these are produced (Jha 2003) None of the SFCs have come out with actual analyses of the existing financial resources of each tier of government. The SFCs failed to clearly identify the principle behind passing net proceeds from the taxes; tolls and fees that can be levied by the states. They do not even specify approach or methodology of distribution of these taxes or grant-in-aid horizontally between different urban and rural local governments or vertically amongst different tiers of the government. Further, their recommendations completely lacked the clarity about devolving of responsibilities and authority to local bodies. For example, none of the SFCs identified or recommended any sources of funds to be transferred along with the functions assigned by the state government as per the twelfth schedule. There is no mention of whether grant in aid could be utilized for providing services to the poor or during emergencies, or if it could be accessed by city in difficult terrain or vulnerable, backward or remote areas with distant sources of water (Singh, 2001). In real terms there is little evidence that recommendations from SFCs have focused on issues of autonomy, financial management, and auditing procedures. The practice of transferring the burden of asset management to municipalities after asset creation by parastatal agencies are not linked with financial transfers for operation and maintenance

Greater emphasis has been laid on inter-government transfers to bridge the fiscal gaps rather than improving the resources or jurisdiction of spending of the local bodies. Indeed as Mathur puts it, “the absence of attention to the elementary principle that expenditure assignment must precede any tax or revenue assignment has turned most of the SFC exercises, a suspect.” (Mathur 2000).

• Asynchronous establishment of State and Central Finance Commissions (awkward phrasing, rewrite)

Recommendations of SFCs and creation of Central Finance Commission (CFC) to enable it discharge its constitutional obligation as per art 280(3c) are not concurrent activities. The tenth Finance Commission, for instance was constituted in 1993 to recommend revenue distribution for the period 1995-2000⁵, while State Finance Commissions were mostly constituted after 1994 and therefore, were not able to submit their reports before the end of the Central Finance Commission’s term.

As the timings of establishment of the central finance commissions (CFCs) and the functioning of SFCs remained unsynchronised, the result was that arbitrary provisions were made to fulfil their constitutional obligations by the Central Finance Commissions. The Tenth Finance Commission made an ad-hoc allocation of Rs.1000 million ($ 0.26 Billion) for five years, why are you using US dollar values in a Canadian research project? (because this is a universally understood currency and this project relates to India) the Eleventh made it Rs. 2000 Crores ($0.5billion) and currently the Twelfth raised it to Rs.5000 Crores (US $1.3billion). All these have been ad-hoc and have little relationship to service levels, function or gaps in municipal finances (Sivaramakrishnan, 2005). These allocations were arbitrary and made miniscule difference in the fiscal situation of the municipal bodies. As observed by Mathur, “the total impact of central finance commissions on the finances of urban local governments was even less than 3.35 percent of the grant while the transfers made by all the states to urban local bodies under devolution framework on an average amounted to only 4.47 percent of State’s own revenues during 1997 to 2001(IIR 2006, chapter 5)

• Varying time period of constitution of SFCs, submission of their recommendations and apathy of state governments to accept the recommendations through legislature as well as submit action taken reports within fixed time frame

There was also a lack of a prescribed time period for taking action on the recommendations of the SFC by the state governments (Art 280). The state of Gujarat constituted the first SFC in 1994 that submitted its report in 1997, did not submit its Action Taken report until June 2000 (EFC report, page 234 Annexure viii.1). In some states like Andhra Pradesh, the statutory recommendations of the SFC were accepted with modification. It could thus be concluded that this mechanism of instituting SFC s for the purpose of improving financial status of the municipal bodies did not really make substantial difference.

2.4 Status of formation of Ward Committees, District Planning Committees, Metropolitan Planning Committees and reasons of failure

One of the most important features of the CAA (Art 243S, 243ZD and 243ZE) was to offer an enabling environment for local people to participate in development processes at ward, municipal, district, and metropolitan regional level through formation of planning committees at different levels.

The study shows that only 9 states formed ward committees, 10 states formed District Planning Committees and one state formed a Metropolitan Planning Committee. All Ward Committees comprised of elected as well as nominated members from different backgrounds. However, in the states of Karnataka, Kerala and Maharashtra, members from various NGOs and CBO were actively involved. These ward committees were generally assigned to address complaints of maintenance or at best manage tax collection. to fix grammar Unfortunately, except in the cities of Kerala where every town has a ward committee for every 100,000 population, it is only in big cities like Hyderabad in Andhra Pradesh where they are functional. In most other cities they are constituted but are not active, nor do they meet regularly. In fact, they are not even assigned any duties or funds to work with.(Mathur NIUA 2005)

The role of DPCs cannot be underestimated to sustain the hinterlands and establish rural-urban integration. These committees have the potential to address matters of common interest such as hydrological balance or water resource sharing; land use as well as land issues along the boundary, including development of landfill sites on the periphery; mushrooming of slums across the boundaries Its members comprise of the minister-in-charge of the constituency, mayor of the Corporation, chairperson of the Council, chairperson of District Rural Local Body (Panchayats), elected members of local bodies (both rural and urban), special invitee members (MPs, MLAs, MLCs), nominated members, Divisional Commissioner, Deputy Commissioner, additional Deputy Commissioner, District Collector, District Planning Officer, District Statistical Officer, etc. Once again, although DPCs have been constituted in 10 states, it is only in the state of Kerala where they are active and functional. Not creating such bodies would totally miss out on the advantages they would have brought to rural as well as urban agglomerations Rewrite, it is still unclear what you mean by ‘totally delineated advantages…’

Based on all available evidence, it can be clearly inferred that poor performance on this front is due to confusion created by the proportion of membership of the District Planning Committees (DPCs). In accordance with art 243 ZD (2), four fifth members of DPC were to be constituted from elected members of panchayats (rural local body) within the districts, which became a reason for urban local bodies not to take much interest in forming such committees. On the other hand panchayats found that onus of forming such a committee lay with Municipalities. In the process, neither of the local bodies took the necessary steps to formulate these committees. (Sivaramakrishna 2006). The states ignored formulating these committees out of apprehension of the DPC taking control of public investments, thereby weakening the power of state level political leaders and Ministers. Evidence? then you must present this as your own analysis, by saying something like, based on all available evidence it is possible to infer ….

Metropolitan Planning Committee (MPC) is equally important in the sense that across various municipal jurisdictions or district jurisdictions there are various agencies handling railways, transport, telecommunications, power, ports etc that need to be managed at the regional level. These multiple organizations cutting across various rural, district and city jurisdictions require regional vision and planning that can only be supported by a regional level institution like the Metropolitan Planning Committee. According to the CAA, a metropolitan would comprise of one or more districts, consisting of two or more municipalities and have a population not less 1 million. Once again, enabling laws have been passed by all states but only the State of West Bengal out of the 28 eligible states constituted MPC. Consequently, there is again the apprehension of development authorities loosing their control over land acquisition powers and confusion about the purpose and role of the MPC. The lack of political will seems to be the reason for poor adherence.

2.5 Corruption as one of the root cause in poor performance of urban local bodies

The national governance is beleaguered with corruption, which drives the Indian polity and can derail any genuinely framed policy or program of the government. Corruption in the polity of the country is primarily driven by short-term focus of political parties of all shades and hues and their overwhelming desire to remain in power. Corruption can range from kickbacks through high-level international deals to petty bribes of individuals for personal gains. Nepotism, favouring appointments of non-deserving individuals to key positions; leveraging highly remunerative contracts to certain contractors or firms for personal gains; land deals that favour land mafia or builders for personal gains; misuse of foreign aid or program funds; nurturing a particular constituency for short-term personal political gain as against larger interests of the region, state or the country are common occurrences.

Taking cue from the political system in the country, this virus of corruption has infected the entire fabric of India’s society. Expecting bribes from public for providing services that are part of one’s duty is an expected norm. The justice system is not blind and enforcement of laws of the land is often selective. Crime often goes unpunished; money and muscle power can bend rule of the law. Law enforcement agencies are amongst the most corrupt.

Transparency International Report (TI 2005) places India as 13^th most corrupt country in the world. The report focuses on the hardships faced by public primarily due to corruption to access day-to-day services. The report is based on sample survey results from all states of the country. They picked up delivery of 11 services as indicators for this report, which are Police, Judiciary, Land Administration, Municipal Services, Govt. Hospitals, Electricity, Public Distribution System, Income Tax, Water Supply, Schools and Rural Financial Institutions. As estimated in the study, public pays a bribe to the tune of Rs. 21,068 crores ($500M) every year while availing one or more of the eleven listed public services. More than 62 % of the citizens indicated that they have had first hand experience of paying a bribe or “using a contact” to get a job done in a public office. The study ranks police, judiciary and land administration as the most corrupt departments out of eleven. Amongst the states, Kerala is least corrupt while Bihar is the most corrupt state in the country. These figures prove that corruption is one of the hidden issues beyond control of any governance structure, unless civil society movement demands turn of events and is strongly backed by information, law and awareness (TI, 2005).

In context of this paper, I would like to stay focussed on how corruption can prove to be a stumbling block in implementation of a policy that could make living in cities much safer, comfortable and healthier. Since development and planning was assigned to Development Authorities, these authorities were entitled to acquire agricultural land from farmers within or from around the city periphery at subsidized costs for development. For this purpose they were supposed to prepare Master Plans conforming to state town-planning laws in consultation with town planning departments within their respective states. As Master Plans are legal documents, any changes to these documents require statutory procedures and notification to public before changing zones or land use. Land mafia in the country is very strong because its nexus with local politicians, bankers, police officials, beauracrats and officials of Development Authorities as well. They are able to change land-use plans at their will with or without public notification. Sometimes land records are lost or deliberately removed to enable them encroach upon the government land or land under public commons. Many a times registration of land is forged in fictitious names of those who share the booty with this mafia. Any resistance from honest officials within the government bodies is come down upon heavily. There have been instances where some intrepid media reporters had to pay he extreme price of their lives while trying to expose such a racket.

This mafia is operating since 90s in some of the growing cities. One of the articles from a national weekly “India Today” reported one such story in 1997 on the bustling industrial city of Indore in Madhya Pradesh. It reported,” It is fair knowledge in the city that the powerful clique of politicians and builders has violated every conceivable rule relating to building activity and the connections reach up to the top in the state administration. But it was BJP corporator Rajesh Joshi's murder -- his neck was slit by miscreants on August 13 -- which forced the city to sit up and take note of the dangers involved in opposing an increasingly powerful and belligerent mafia. Joshi, it is widely believed, had paid with his life for opposing encroachments on government land by builders in Indore. Before the city could recover from the bandhs and protests that followed the murder, Ishaq, a corporator of Sanwer Municipality adjoining the city, was killed, again over a land-related dispute. "The mafia is in a position to eliminate anybody who comes in its way.” (Desai, 1997)

Many such reports can be produced to validate that land mafia is becoming most powerful and uncontrollable in the wake of economic boom in the country, where land is also being sold to foreign investors and builders who are making huge profits out of the activity. Media reports also bring out how prime land acquired from eviction of slums or squatters in the name of development is converted to commercial use such as five star hotels and sold to builders without providing any alternative to the poor who are evicted from there. The politicians either benefit in terms of increasing their personal holdings or are able to secure their political future through hefty contributions by the mafia to party funds.

The case of Bangalore city is a typical example of how the municipal corporation becomes completely subservient to higher agendas of state and even federal political interests. The nexus between bureaucrats managing the development authorities and politicians at the state and national level creates a mechanism whereby almost 20 to 25% of the development funds are diverted through the party fund route. The “development costs” are thus exorbitant for the vast majority of the supposed beneficiaries of such projects. The gains of a few thus become the liability of many and thus of local people (Solomon, 2000).

On one hand, seasoned politicians are involved and on the other, the custodians of law, the police as well as judiciary are equally entrenched in this quagmire (TI, 2005). There is no redressal and even if there is one, it dies its own death because the process of civil suites bringing justice to the common citizen is very slow and painful. Honest, law abiding citizens who fall prey to this mafia and loose their land, property or investments dread fighting a long, painful and often futile battle unless they have deep resources or strong connections with political masters. Urban land being scarce, the prices have shot-up with increasing demand, more so in metropolitan cities. Land mafia and its illegal operations are so engrained in the system that often times the same property is bought and sold a number of times on fictitious documents thereby defrauding the system of huge registration fees and stamp duty.

Officials of regulatory bodies like municipal corporations are also corrupted by the system to an extent that they allow extensions and encroachments on roads, drainage areas, curbs or even parks and green areas on payment of petty bribes. Zoning and bylaws are invariably flouted.

Many a times the judiciary has tried to intervene. But when the violators of law are also its custodian, how will the rule of law be enforced? A classic example is the case of Delhi Development Authority and the state government of Delhi that changed land-use plan to legitimise encroachments by the rich and the well connected. The Supreme Court of India took exception to the new land-use plan and ordered demolitions. The demolitions were thus initiated but the extended bungalows of the rich, the beauracrats and the politicians were either never touched or condoned off on payment of punitive penalty.

Given the above background, it can be well imagined that buildings and land in cities are a big business in India and a major provider of party funds for political gains. In the last two decades, cost of land has increased 40 to 50 times and land grabbing has become a well organized crime. Devolution to local government under 74^th amendment thus means to break into this organized nexus, which obviously requires strong political will at all levels of government. In the process, affordable land or social housing can only be a distant dream in cities.

3.0 The present state of Indian cities (2007)

Effective decentralization should demonstrate how decision-making and functions are transferred from higher levels of government to the lower levels. Awkward, rewrite But from above analysis it is evident that despite the CAA, ULB’s continue to be puppets of state governments. They still can neither exist nor perform unless functions are assigned to them under municipal acts and funds are transferred by the state governments. CAA has merely given recognition to local governments and their rights to exist.

State of Infrastructure and basic services in the cities continues to deteriorate by the day. The mid-term report of tenth plan (2002-2007) of Planning commission of India highlighted that, around 21% of the urban population lives in slums with poor condition of basic services. Although it is claimed that there is 89% coverage in water supply levels, its quality remains inadequate with unequal distribution across states and cities. Only 36% are actually connected to sewerage network that serve only 46 percent of households. Around 0.4 kg per capita waste is generated per day in cities with population more than 100,000. The collection efficiency is only to the tune of 50% of the total waste generated. In some exceptional cases it was reported as 90%. (Planning commission) It is well recognised that there are challenges in finding a uniform solution to all the issues across the country, given the diversity of culture, climate and therefore needs of the people.

In 1962 Government of India appointed a commission under Justice Zakaria to study per capita cost of providing basic services to all the states. The study was conducted in major cities of all the states to establish quantitative and qualitative norms and standards in each state based on the consumption. The commission studied 5 services: water supply, sewerage, drainage, education and health and submitted its report in 1963 to the Planning Commission. Thereafter, these standards are taken as benchmark norms for reference and the costs are upgraded to current prices for making a comparison with existing expenditure.

As far as fiscal status of the cities is concerned, they continue to be in dismal and unsatisfactory state. In absence of any standardized database on the quality and quantity of services available in each city and its performance, most of the analysts have used expenditure statement of municipalities in each city as an indicator of provided service compared to norms set up by Zakaria Commission. On a per capita basis, the average spending levels of municipalities remained at Rs 577 ($16) per capita on core services at 2001-02 prices. This expenditure is about 130% lower as compared to norms and standards identified by Zakaria Commission in its report upgraded to current prices adding cost of solid waste management (IRR 2006, Chapter 5). This implies that service delivery is much below the norms and standards. Explain these norms and standards more usually if you are 100% below a standard that means there is nothing left. This is indicative of negligible impact of 74^th CAA. Rewrite – you mean ‘lack of’ … Expenditure of municipalities is mainly on its own establishment (salaries and wages) or on operations and maintenance of services. Expenditure on establishment accounts for 54.2 per cent of the total municipal expenditure. In several states, like Madhya Pradesh it is as high as 80.4 per cent. In some states like Himachal Pradesh, Rajasthan, Uttaranchal, Uttar Pradesh, they are not even able to meet their establishment expenditures from their own sources of revenues or taxes. Hence most of these states are dependent on state transfers. More than 85% of total municipal revenues are raised by the cities in the states of Maharashtra, Gujarat, Punjab, Andhra Pradesh, Karnataka, while Maharashtra alone contributes to 49% of these revenues (Mathur 2006)

3.1 Some Key Lessons Learned

Above analysis presents a saga of implementation of a policy in the form of 74th amendment that was seen as a corner stone in the history of urban governance in the country. Firstly, being a legal framework, 74^th amendment calls for strict enforcement and penalties for non-adherence with defined timelines. If implemented in its true spirit it would have brought real change to affect local condition of all the cities in terms of their efficiency in delivery of services as well as fiscal health. It is evident from improvement of health of the citizens achieved in many cities of West Bengal and improvement of fiscal base of local government in case of Ahmedabad in state of Gujarat, that the amendment could have achieved positive results. However, the spirit of the amendment was lost in short-term political, institutional and fiscal goals of different levels of government as well as personal agendas of office bearers. As the objectives of this research is to see how implementation of policy in a democratic country like India is achieved, it is important to draw some lessons from the failures discussed in previous sections. I propose to draw out three key areas of the policy that would have achieved its basic goals of devolution, the transfer of functional jurisdiction, Institutional development and implementation of fiscal devolution.

3.1.1 Lessons to improve functional efficiency of urban local bodies

• One of the objectives of 74^th amendment was to improve accountability and efficiency of the local bodies in service delivery. For the purpose, the amendment listed some of the functions to be transferred to municipal bodies by law as remarked earlier (twelfth schedule). But as indicated (section 3.2) very few states transferred these functions to the municipal corporations completely. Non-adherence could be partly attributed to ambiguity in phrasing of the law. For instance, as discussed in section () in the twelfth schedule, clear demarcation of functional jurisdiction between state and local body could have facilitated implementation. Similar identification exists in seventh schedule of the constitution where union list and state lists of functions are clearly defined. In addition, if state governments were serious in transferring such functions some activity mapping, clearly defining municipal functions should have been undertaken with matching sources of funding for each activity. Transfer of functions without transfer of funds and functionaries is deemed to cause failure in delivery. An effective framework of reforms with uniform guidelines and TORs needs to be formulated and supplemented by effective monitoring by state and federal governments

b) Every policy needs adequate institutional structure and capacity to execute assigned functions. For the purpose, based on the initial demarcation of functions in the union and state list, state governments had instituted sectoral bodies called parastatal agencies within states like water supply and sewerage boards, housing boards and development authorities and state town planning departments within states. Ideally, restructuring of the municipal bodies with transfers/deputation of skilled officials/functionaries to municipalities would have facilitated implementation. It would have helped build the capacity of the municipal functionaries as well as allowed gradual dismantling of the state level bodies transferring power to local bodies. Unfortunately, there is hardly any mention in literature or amendment with regards to fate of technically skilled staff of the state level agencies post 74^th amendment, when functions like development planning, water supply and sewerage management or poverty alleviation are transferred to municipal bodies. Apparently, it seemed to be one of the reasons for states to continue to hold on to the powers and functions even when they were local in nature. In fact, apprehensions of some of the urban experts like Kundu et al. would not have arisen, with respect to appropriate handling planning function by municipal bodies. On the other hand it would have reduced any possibility of fragmentation of service delivery and confusion caused by multiple entities involved in each service with no accountability as indicated in section 3.2

c) Further, as narrated earlier, in section (2.2.1) most of the states resorted to democratic process of forming municipal bodies. But as discussed in section 3.1 (page 23) transferring powers to elected representatives were limited to only maintenance or redressal. Unfortunately, Mayors and elected members did not enjoy financial or functional powers to respond to local area needs. Here elected members only serve as local electoral leaders serving party interests rather than serving the priorities of the people inspite of being answerable to them. It is the municipal commissioner or Executive Officer reporting to state government, who is rested with powers of taking decisions with regard to activities to be undertaken during the financial year. Further in 70% of the municipalities tenure of Mayor is limited to one year, which is too short to make him responsive to people. Therefore one of the key lessons is to restructure municipalities in order to empower elected representatives to an extent that they can respond to local needs. This could be achieved by a) changing reporting structures where the commissioner is accountable to the council and not to the state government b) keeping percentage of elected representatives higher than the nominated members. Further, enforcement of constituting the fourth tier in the form of ward committees have proven to facilitate community involvement in some of the big cities like Hyderabad, Kolkatta, Mumbai, therefore encouraging formation of ward committees would help forming true democratic institution at the local level.

d) Another important aspect of local governance is people’s participation in development planning. Although, 74^th amendment made provisions in the form of District Planning committees and Metropolitan committees, essentially to involve people in the planning process, poor implementation of these provisions speak of top- driven governance that is deeply rooted in the Indian society. So much so, that internationally known tragedies of mass killing by outbreak of plague in the city of Surat or accidents like Bhopal gas tragedy, (a clear cases of non-functional local authority) drew negligible empathy of the government to affect change in its functioning at local level. Lessons learned from these tragedies should have moved the beauracracy to affect change in the local institutional structures that are responsive to people.

e) Developing neighborhood watch committees that can forge partnerships in achieving requisite level and quality of services and allow people’s participation in designing, planning and monitoring implementation of plans as in case of Delhi through Bhagidari (Stakeholder sharing) Scheme or Resident Welfare Associations could help in laying foundations of District planning committees and metropolitan committees that were ignored in most of the cities.

f) As already discussed, total institutional change was required to facilitate implementation. One of the lessons that has been repeatedly highlighted in literature (Mathur, Kundu Chaudhary) is importance of capacity building of municipal functionaries at all levels along with elected representatives for improving institutional structures.

At senior level continuous awareness building on the central schemes and their guidelines; at lower level, improving technical and financial management skills; trades and quality control as well as skills in preparing development plans. Municipal government functionaries should also be trained on participatory approaches utilizing best practices

3.1.2 Lessons to improve fiscal status of municipalities

Taking queue from the discussion in section 3.3, most of the literature on the implementation of 74^th amendment (Mathur 2003, IR 2006), concludes in poor fiscal strength of municipalities to be one of the major causes of an in-effective devolution. The mechanisms laid out in the amendment, were not effective enough to improve fiscal status of the local governments. As iterated earlier (sec 3.3c), poorly articulated recommendations of state finance commissions without empirical basis rendered municipalities bereft of financial powers to perform their functions (Kundu, , Jha, Joshi, 2000). At the same time, State Finance Commissions should have involved state level institutions or experts to conduct studies to analyze fiscal status of each municipality and its potential to raise revenues from various sources. An effective framework for recommendations of State Finance Commissions (for sharing of taxes between different governments, grant in aid transfers and assignment of tax rates) based on adequate data and analysis within a strict time frame could have served as a reference for Central Finance Commissions to make financial allocations to states for next five years. As pointed out by twelfth finance commission, (TFC 2005), SFCs should comprise of people of eminence, economists, experts on municipal and financial management Instead of leaving it to states, central government or central finance commission, should have allocated resources from general pool for urban local bodies to be able to perform their functions using those resources, at least for first few years.

One of the ways of improving the functional and fiscal situation of local government is by improving their own resource base. This can be achieved by broadening the tax base, efficient collection and larger autonomy to borrow from the market or invite private investments and even fixing tax rates. Successful examples of improving local resources from reforming property tax collection in the cities of Patna, Hyderabad and Bangalore could have been taken as demonstration projects to follow suite. In Patna, simplifying procedure and calculation of property tax has led to increase in number of tax payers voluntarily there by substantially increasing local revenue. Similarly, some case examples of raising funds from capital markets through municipal bonds as in Ahmedabad were seen as guiding practices that could improve the local resources. Therefore reforms that could improve the fiscal status of the urban local bodies need to be undertaken as a first step for efficiency of municipal functions.

Institutions can achieve financial stability, if they are able to predict its cash inflow and outflow ahead of time to plan activities during a specific period of time. Before municipalities could improve their own resource base, a flow of funds from transfers or grant in aid in a predictable and timely fashion can help performance of municipalities as per their own priorities. In order to make maximum use of centrally sponsored schemes as well as Member Parliament Local Area Development (MPLAD) schemes, they should feed into the priority areas of the local body and be implemented in consultation with ward committees/ DPC /Metropolitan Planning Committee or Mayor-in-Council.

3.1.3 Lessons to inculcate transparency in municipal functioning

Transparency in local governance is key to eradication of corruption and corrupts practices as also noted by Transparency International study (TI, 2005). Improving information base and using Information and Communication Technologies (ICTs) to infuse transparency and reduce corruption has proven effective in many cities across the world: for example, using GIS maps and e-tools for Internet based evaluation and interaction among service providers and communities through web-based services have been able to remove the need for paying the bribes to middlemen or corrupt officials for getting a service or information across to right place on time. On-line facility (technology) has been able to help common man to make timely payments of bills and dues towards services provided by ULBs. Case examples of Vishakhapatnam, Mirzapur can be replicated with modification to suite local needs.

One of the gaps identified was very poor accounting system and financial records .in municipal accounting systems Many municipalities in India follow the ‘cash-based’, ‘single-entry’ method of accounting. In cash-based accounting systems, revenue is recognized when cash is received and expenses are recognized when they are incurred. In the single entry system every transaction is recorded just once either as an income or expense, an asset or a liability. The system does not record assets, inventory and revenues, except in memorandum form. Although it is simple system to understand it is not dependable in terms of accuracy as all assets and liabilities do not get recorded and there is no ways to counter check the entries leading to thefts and corruption. The reform in accounting system is therefore proposed by most of the financial analysts and economists by moving to accrual based, double entry accounting system. In this system records credit transactions where revenue is recognized for the period it was realized and expenses incurred are recorded in the same period irrespective of actual cash flow. In double entry bookkeeping, each transaction is recorded twice. The same amount is credited to one account and debited from another where common bookkeeping errors are avoided, as the total debit has to match the total credit. It gives an accurate picture of the financial status of the municipality for a particular period as it includes dues payable and revenues accrued. Success stories of Vishakhapatnam, Hyderabad and Mirzapur could be used as pilot cases where such reforms led to better financial management.

Developing a strong implementation, evaluation and monitoring system with built in incentives for efficiency, transparency and people friendly performance of cities

4.0 Need for a New Initiative

As is evident from the literature on urban local bodies viz-a-viz 74^th constitutional amendment, there is little information available on their performance. Most of the literature presents analysis that is based on fiscal status of the municipal bodies or some good practices to asses the effectiveness of the amendment in devolution of powers to local bodies. In the absence of any performance indicators to assess the status and needs of each city or any central information or database, it is very difficult to pin point real impacts of legal framework provided by the 74^th amendment in devolution of powers and functions to the local governments. In fact, most of the analysis presented in the literature attributes major reason of poor performance of municipal governments to poor fiscal status of local bodies. Hence they cannot be held squarely accountable for non-performance (TFC 2005). On the other hand, it is becoming amply clear that cities’ contribution to GDP has gone up to 55-60% (Economic Survey 2005-06). In order to sustain this growth, improvement of governance and efficiency of the city governments is vitally essential. In the booming and vibrant economy of the country, cities need adequate infrastructure to support such growth and higher productivity (Ahluwalia, 2000).

In 2005 it was estimated that an investment of Rs 1,20,536 Crores (CDN $ 318 billion) was required over a period of 7 years to meet the demands of basic infrastructure in some of the major cities where more than 70% of total urban population lived. This investment works out to Rs. 17,219 Crores (CDN $45.31 billion) annually (Overview pg3).

Past experience suggests that while investments in infrastructure are important, mere investment will not meet the challenge of providing quality of life to urbanites without making adequate changes in institutional framework. As argued earlier (sec 3.6), one of the lessons learned from the implementation of 74^th amendment is that engagement of people in planning and decision-making could have helped bringing in some kind of transparency in the functioning of the municipal bodies. By ignoring formation of mechanisms laid out in the form of MPCs and DPCs, the value of public participation was totally lost.. Apart from the need to make large investments in infrastructure services in fast growing cities, economists and national policy advisors on municipal finance (IIR 2006) felt the need to bring in efficiency in service delivery and transparency in governance. Lessons learnt as stipulated in section 3.5 clearly necessitate enforcement of 74^th amendment and implementation of urban reforms to effectively raise resource base of the Urban Local Bodies of the cities. As India was also a signatory to Millennium Development Goals, it is committed to enhance social housing programs and basic services to improve the condition of slum dwellers in major cities. Hence a new initiative in the form of an “Urban Renewal Mission” was launched by the Prime Minister of India in December 2005 with a planned investment of Rs.150, 000 crores (US $375billion) (including state/cities’ share) spread over a period of 7 years in 63 selected cities with one third of the funds coming from federal government.

4.1 About Jawaharlal Nehru Urban Renewal Mission (JNURRM)

“Urban Renewal” in India does not mean revitalisation and densification of city cores as conceived in the West or North. In India it is seen as improvement of the infrastructure like water supply, sewerage, roads, transportation conditions in the cities as well as provision of housing, basic services and land rights to the poor in the cities. It also means to reduce congestion in old city areas as most of the old city areas are mixed-use walled cities normally located at central location, closer to public transportation hubs. They have very narrow and poor circulation space. Due to their proximity to transport service, these city cores have turned into vibrant commercial centres with minimum circulation space to allow motorised vehicle movement. But commercial activity necessitates motorised as well as non-motorised vehicles to enter into narrow lanes causing mixed traffic and congestion. Being very old, services in these areas are also of poor quality with most of the networks dilapidated and are in dire need of replacement.

The word “Mission” is used as a noun that is closer to meaning “a strongly felt aim or calling” as listed in Oxford dictionary. Webster’s dictionary defines it as “an operation that is assigned by higher headquarters; " in military context. However, in context of Indian initiative, it is a goal oriented initiative that is to be accomplished within a time period for public good, requiring the kind of a commitment and dedication that one would attach to a religious mission. Some analogies - “ Mission Nutrition” , a joint nutrition education initiative of Dieticians of Canada and Kellogg Canada or “Mission Katimavik”, which is Canada’s leading national youth volunteer service program for Canadians ages 17 to 21 years old aimed at personal development of younger generation. The difference is that in Indian context government initiates the program while the above programs have been initiated by private or community organisations through fund raising.

The goal of the program therefore is “to encourage reforms and fast track planned development of identified cities. Focus is on efficiency in urban infrastructure and service delivery mechanisms, community participation, and accountability of ULBs/ Parastatal agencies towards citizens.”(JNURRM Overview)

The Mission has identified 63 cities that include Metro cities with million plus population, state capitals, cities with heritage, religious, tourist and historic importance and those with growth potential as conceived by National Steering Committee in consultation with the state governments (Table 1.0). Before accessing the funds, the city must have an elected body in place

Table 1.0 Selection of Mission Cities

Source: JNURRM Overview.pdf

4.1.1. Mission Objectives

Objectives of the JNURM mission are:

• Planned and integrated development of mission cities including peri-urban areas or outgrowths and corridors to allow decongestion

• Raise credit worthiness of the cities and ensure cash inflow to meet the gaps in infrastructure facilities as well as attract private investments

• Provision of basic services to the urban poor including security of tenure at affordable prices, improved housing, water supply and sanitation, and ensuring delivery of other existing universal services of the government for education, health and social security

• Special focus on urban renewal programme for the old city areas to reduce congestion

• Establish mechanisms for sustained asset creation and maintenance through institutional reforms

4.1.2 The mission will be achieved through the following two submissions:

Urban Infrastructure and Governance, where main focus is on building the gaps in provision of city level water supply and sanitation, sewerage, solid waste management, road network, MRTS, expressways for urban transport and redevelopment of old city areas with a view to upgrading infrastructure and shifting of industrial and commercial establishments to conforming areas, development of heritage areas and conservation of heritage buildings and water bodies.

Basic Services for the Urban Poor, where the main thrust is on integrated development of slums through a 7-point charter that comprises of projects for providing 1) land tenure rights to urban poor, 2) provision or upgrading shelter, 3) basic services like water and sanitation within slums with convergence of 4) health, 5) education and 6) social security programs of the government. The projects will ensure that other related civic amenities for the urban poor such as child care centres and community centres are either existing or will be provided within the neighborhood.

Power, telecom, land acquisition (exception of hilly areas) or wage employment programme, staff components and creation of fresh employment opportunities are not covered by any of the sub-missions. There are separate programs/ schemes to cover those areas under respective Ministries

4.1.2 Institutional Framework for Implementation and Monitoring of JNURRM

Given the importance attached to JNURRM, the single largest initiative taken for urban improvement, Government of India has established a dedicated JNURRM cell within the Ministry of Urban Development as well as Ministry of Housing and Poverty Alleviation. It is a three tier framework with clearly identified roles of each agency within the framework as represented in the flow diagram in Fig 4.0.

4.1.3Role of each body/ committee in the Institution

The two tracks (UIG & BSUP) of the Mission has two Central Ministries, Ministry of Urban Development and Ministry of Housing and Poverty Alleviation to steer the program

1. National Steering Group (NSG): As a coordinating arm of the Government of India, NSG will provide policy oversight steer the program towards achieving its goals. It will closely review the progress and monitor implementation of reforms and may add additional reforms

The Minister of Urban Development is to chair this group and Minister of Housing and Poverty Alleviation is the co-chair of this group. It comprises of secretaries from Ministry of Urban Development and Ministry of Housing and Urban Poverty Alleviation, Planning Commission, and a technical advisor as its members.

2. Central Sanctioning and Monitoring Committee (CSMC): There will be two Central sanctioning and monitoring committees headed by respective Secretaries of the two nodal ministries. The CSMCs are entrusted with sanction and monitoring of the projects and associated reforms. They may meet as often as required for review and sanction of the project(s).

CSMC will be chaired by Secretary of nodal ministry with Principal Advisor (Housing and Urban Development) from Planning Commission, Joint Secretary and Financial Advisor, Chief Planner, Town and Country Planning and advisor Central Public Health & Environment Engineering Organisation as members.

Fig 4.0 Institutional Framework for JNURRM

ULB Level

Urban Local Body (ULB)

Administration Section - Urban Local Body

State Level Steering Committee (SLSC)

State Level Nodal Agency (SLNA)

State Level

National Steering Group

Central Sanctioning &

Monitoring Committee

Central Sanctioning &

Monitoring Committee

Sub Mission on Basic Services For Urban Poor

Sub-Mission Directorate

Urban Infrastructure &

Governance

Technical

Advisory

Groups

Support/ advice advance advance advance Advice

Project Proposal Flow

Central Level

Policy Directive Flow

Support & Advise

Funds Flow

Source: JNURRM Toolkit 1

3. State Level Steering Committee (SLSC): An apex body in each State, namely SLSC is constituted to screen and prioritise identified projects. It will also monitor the implementation of the projects and review the progress of urban reforms in the State with assistance from State Level Nodal Agency (SLNA).

It is composed of chief Minister or State Housing or Urban Development Minister as the chairperson and its members are Local MP, MLA, Mayor, Secretaries from municipal administration, state urban development or housing department, department of public health & engineering and finance are the members.

4. State Level Nodal Agency (SLNA): It is a designated nodal agency of the respective state.

The SLNA has a key role in implementing the program. It will assist the ULB’s or parastatal agencies to prepare CDPs and DPRs, conduct project appraisals, obtain sanctions of the projects from SLSC, manage grants from central and state governments, release funds to the local bodies for projects sanctioned, manage revolving fund, monitor physical and financial progress and their completion, implement reforms and submit quarterly reports to MOUD & MHUPA and finally submit completion reports and utilization certificates to state government.

4.1.3. Strategy for Implementation of the Mission

Step 1: City Development Plans (CDPs) will be prepared for each mission city clearly identifying the vision of the city, gaps in infrastructure, issues & concerns of the city and assets to be created and managed. It will also prioritise the projects to be undertaken as per the plan and include a strategy to implement the reforms, city-level improvements along with an investment plan to address the infrastructure needs in a sustainable manner. Most importantly, CDPs will be prepared through participatory approach and stakeholder engagement.

Step2: Based on the projects identified in the CDP, detailed project report (DPRs) will be prepared by the local body for each project to be undertaken with cost estimates, project schedules and outputs and clearly laid out strategy for generation of funds and mechanisms for maintenance of the assets built under the mission. If the funds have to be sourced from the private sector then a program will be put up in the proposal detailing the PPP model being used.

Step 3: Proposals will be put up to federal government for funding (grant -in aid) through a state level nodal agency for sanctions and dispersal based on allocations to the state. However, states and ULB’s could raise additional funds or as part of their own share as additional assistance. Urban local bodies could involve private sector organisations for providing consultancy or execution of the projects. The institutional framework and the flow of proposal as well stages of sanction of funds are highlighted in Fig 4.0 (Toolkit 1 pg 11).

Step 4: Funds will be released after a tripartite Memorandum of Agreement (MOA) is signed between federal government, state government and urban local body or agency executing the project. The MOA would clearly lay out the schedule of implementation of institutional reforms (Box 3.0) and cash flow. It will annex information/bank statement on the matching share of funds/loans raised by state or local body including beneficiary share (to the tune of 10 to 12 % in case of housing for urban poor). Terms of funding and the percentage of central government shares available in the form of grant-in-aid will be decided based on the type of city and the project in accordance with financing pattern presented briefly in Table-2.0.

Step 5: A comprehensive guideline has been laid out for putting up detailed project proposals (DPR) and accessing the funds in the form of a toolkits. The Ministry has also recommended a long list of consultants who could be hired for preparing the City Development Plans and proposals for funding in case a city required doing so. In addition, central government also assigned 5% of grant for capacity building at national, regional and local level for ULB’s staff members as well as elected representatives and 5% of the central grant or actuals (which ever is less) for administrative charges and other expenses incurred by the states.

Step6: The Detailed Project Report (proposal) will be put up to State Level Steering Committee through State Nodal Agency, which will recommend to the Central Government for grants after ascertaining conformity to the requirements of the program guidelines.

Step7: Central Government (Ministry of Urban Development or Ministry of Housing and Poverty Alleviation) would get it appraised from the technical agency and put it up to the Central Steering Committee for approval through SLNA.

Step 8: Once approved, first instalment of 25% of sanctioned grant would be released in advance for undertaking the project while the balance instalments are linked to the progress of the scheme mostly in three or more instalments that are monitored by the state level nodal agency (SLNA) and Central agency.

Table 2.0 Funding pattern in mission cities⁶

Source: JNURRM Toolkit

Step9: A revolving fund will be created and maintained by SLNA, out of releases of grant-in-aid or state’s share or loan to the tune of 25% from UIG projects and 10% from the BSUP projects. This fund will be saved for operation and maintenance of assets created and later contribute to state infrastructure funds.

Box 3.0 Mandatory and Urban Reforms ⁷

Source : JNURRM Overview Pg 7

5.0 JNURRM- designed to incorporate lessons learned from the failures of 74^th amendment

Lessons learned from the implementation of the 74^th amendment, gaps in service delivery as well as poor governance of cities led to a very comprehensive design of the new mission. JNURRM has not only tried to financially facilitate governance and devolution, it has also laid out detailed guidelines, institutional reforms and has set up mechanisms for efficient delivery of functions. Its design has some checks and balances built into the program to incorporate most of the lessons learned that are listed in section 3.5. As a result the new initiative has raised lot of hope of urbanites, planners as well as economists in the country.

As is evident from program design (section 4.1), two aspects are very carefully incorporated in the JNURRM. One relates to planning of cities and community engagement in planning. The other is emphasis on implementation of institutional, fiscal and functional reforms including implementation of 74^th amendment. Clear demarcation of reforms to be undertaken by state government and local government has tried to remove any confusion in delegation of power and assignment of responsibility to each level of government. Further, linking of implementation of reforms, as a pre-condition to access funding from the central government is indicative of seriousness of the federal government in implementation of JNURRM. In the following subsections I have tried to analyse how the new policy (JNURRM) is designed to incorporate lessons learned from implementation of 74^th amendment.

5.1 Improving functional efficiency by localizing planning and identifying local priorities of the city

One of the key lessons learned from implementation of the 74^th amendment was the need for improving functional efficiency and capacity of local governments to be able to take up additional functions like planning through participation of local people. The program has made it compulsory for the city governments to formulate City Development Plans.

Detailed guidelines and funding has been allocated for its preparation by local bodies. They could prepare the plan themselves or by engaging consultants. The City Development Plan (CDP) is a first step in identifying city’s vision, its strengths/weaknesses and issues or constraints to achieve its vision. These issues need to be prioritised through stakeholder consultations. These prioritised issues will finally form the basis of an action plan for the city. The action plan would comprise various activities in the form of projects to be proposed for funding under the aid. It would also help in estimating required investments for these activities over a period of time, clearly identifying internal sources of funding for such an investment. A City development Plan is finalized after various consultations with different stakeholder groups that could be elected representatives, city executives, experts, NGOs or civil society. It would thus offer an opportunity for local participation to identify local issues and offer local solutions including seeking technical advice and consultancy if required. The need for such development planning was recognized earlier in the form of role of the Ward Committees, District Planning Committees and Metropolitan Committees. The seriousness attached to it in JNURRM is evident from the comprehensive reference guidelines and allocation of grants for undertaking this exercise. The detailed activities identified in the plan would enable clear identification of the agencies that will perform the activities and be accountable for the same. It would also indicate the latent potential in involving private sector in the delivery of services.

For instance, the guidelines on preparation of CDP demands for answers to following questions: “What is the de jure and de facto distribution of authority between the three tiers of government and how does it relate to constitutional and legal requirements? What impact does it have on urban administration and delivery of public services? Is there an overlap in the responsibilities and activities of public service agencies? Are their objectives and activities complementary or conflicting? What mechanisms exist for interagency coordination”? (Toolkit 2. pg 14.)

City Development Plans would also require collection of data creating a base line data on the city’s existing state of infrastructure and gaps. Where the city is and where it wishes to go? It would be a medium term plan and would be carved out of existing long term Master Plan if available. It will integrate infrastructure development into the land-use plan.

With the objective of institutionalising citizen participation in municipal functions, e.g. setting priorities, budgeting provisions, etc. JNURRM has introduced the Community Participation Law (CPL) that refers to the appropriate provisions that need to be made in the state-level municipal statute(s) for the establishment of such a 3 or 4 tiered structure as well as introducing the concept of the Area Sabha (Neighborhood Committees) in urban areas (irrespective of the size of the city required for setting up ward committees). Although setting up of Ward Committees, District Planning Committees and MPCs were also intended for similar purpose in the 74^th amendment; apparently, non-compliance to this aspect has been re-emphasized through the current law.

The above sets JNURRM apart from earlier initiatives like 74^th amendment. As described in preceding paragraphs, a comprehensive city development plan would go a long way in setting the agenda for the city, describing its vision; identifying clear activities to be undertaken by each level of government and prioritising them, demarcating the functional domain of each government along with investment planning defining sources of funding for each function all fill in the gaps identified in the 74^th amendment in section 3.2. Further, re-enforcement of localized planning through community participation law point towards emphasis laid in the new initiative on the participatory approaches.

5.2 Institutionalising implementation of 74^th amendment through reforms at state and local level

The fact that the program has subsumed provisions of the 74^th amendment, as a mandatory state level reform is indicative of the importance laid on devolution of powers to local government. JNURRM is thus an umbrella program to financially and institutionally facilitate implementation of 74th amendment in letter and spirit for urban renewal. In addition to subsuming 74^th amendment, there is an emphasis laid on transfer of all those powers and functions to local bodies that are instrumental in fulfilling local needs. For example, some of the mandatory reforms in functioning of cities like a) assigning or associating elected ULBs with “city planning function”, over a period of seven years, b) transferring all special agencies that deliver civic services in urban areas to ULBs and c) creating accountability platforms for all urban civic service providers in transition” (refer Box 3.0), add towards effective enhancement of municipal governments to act as Institutions of local self-government as was envisaged in the amendment.

Seriousness in undertaking the urban reforms is also evident from the fact that a commitment to undertake these within a stipulated time period has been sought within the Memorandum of Agreement (MOA). This MOA is tripartite agreement between Central, State and Local Governments which details out the sources of funding other than central grants, bank statement of States’ share allocated for the project, Urban Local Body’s (ULB’s) own share and beneficiary contribution. It also details out schedule of mandatory and optional reforms to be undertaken during the course of the project proposed. Thus JNURRM has linked financial support not only with the activities to be undertaken but also to the institutional and financial reforms to be undertaken. The local body has to fill out very comprehensive forms detailing milestones as well as steps taken towards implementing the reforms. (Sample,Checklist for reforms Annexure II) Centrally designated technical appraisal agencies like NIUA, NIPFP, IIPA, HUDCO would appraise the above claims (checklists) that will be monitored and followed up by monitoring committees (not identified as yet) during the implementation phase. Signing of MoA will be a necessary condition to access central assistance. This tripartite MoA would be submitted along with Detailed Project Reports (DPRs). The central assistance will be predicated upon the State Governments and the ULBs/Parastatals agreeing to the reforms platform (Box 3.0)(Annexure III)

Financial reforms at city as well as state level are purposely designed to improve the fiscal status of local governments. Apart from setting aside funds to give a push to municipal performance, five out of seven mandatory reforms for ULBs are related to improvement of internal resource base of the ULBs. Thus, this time it is not left to state finance commissions or central finance commissions to recommend measures for improving financial base. The program has used prevalent best practices that have proven results in some cities to be replicated in the form of fiscal reforms. For example, reform in property tax coverage, the single largest means of municipal revenue; recovery of hundred percent charges from water and solid waste cess in the form of mandatory reforms are some of the major contributions towards improving municipal resources.

The fact that it has identified other funding sources like Externally Aided Projects (EAP) or Member Parliament Local Area Development (MPLAD) funds that could be appended as part of states share speaks of the details the program has worked on convergence of funds for similar purposes rather than allowing states or politicians to burden municipalities with centrally sponsored schemes or MPLAD funds for purposes other than the priorities of the city.

5.3 A Bottom up approach and functional domain

Objective of 74^th amendment was to transfer local functions and powers to local bodies to act as self-government in order to serve local priorities and interests of local people. However, inspite of 74^th amendment, as stated earlier (section 3.3.1 ln 26 page 29), municipalities did not possess even general competence powers that allow them to take actions relevant to local needs. They continued to exercise only those powers that were assigned through a state legislation irrespective of the needed actions at the local level. The mechanism laid out in the JNURRM has altered this top-down approach. In the present context, the proposal (Detailed Project Report) has to come from the urban local body (Fig 4.0). Therefore, it is necessary that ULB take a proactive role in project preparation by involving local stakeholders, experts and state government officials. It provides an opportunity to recognise its own strengths and weakness to undertake its role and be accountable to people without seeking directions from state governments.

In order to encourage urban local bodies to formulate project proposals, the central government has provided separate guidelines. It has uploaded a model DPR for different projects on its website and also assigned finances to hire consultants for preparing project proposals if required (Toolkits 7). Around 5% of grant is also assigned for undertaking capacity building or using Information Education and Communication (IEC) component of grant to upgrade skills of the local body functionaries. Under IEC component the urban local bodies can seek funds to purchase computers and software like GIS , its officials can seek training to use these tools as well as hire consultants to develop their Websites, get training on project management, land-use planning, financial management or better accounting management, operation and maintenance or any other skills that can enable them take the responsibility to contribute to efficiency in city governance.

The mandatory reforms for states are mostly focused on devolution of larger functional domain to ULBs (reforms as implementation of 74^th amendment as well as city planning functions) and simplification of procedures to access land for development. Repeal of Urban Land Ceiling Act and reduction of stamp duty are some of the measures attempted at releasing hold of state governments on land governance and land/property registration so that access to land is not so complex and expensive. Such measures are indicative of how the lessons in the past are being incorporated in the program.

As can be seen in the flow diagram fig 4.0 (sec 4.1.3), recognizing the pivotal role of State Government, the program assigns it to be a channel for funding and coordinating between local government, parastatal agencies involved in the program and the central government through a State Level Steering Committee (SLSC). Headed by the Chief Minister, it would comprise of elected members at state level and Mayor of concerned ULB as its members. The State Level steering Committee will be assisted by a State Level Nodal Agency (SLNA) to provide macro-level support to the cities within the state. Its role would include help identify priority projects, recommend the projects for funding and allocate state’s share of resources, coordinate with different agencies across city boundaries within and outside districts, forge networking amongst various cities or panchayats on common issues and priorities like land issues, ecological and transportation corridors etc. While the devolution of functional and fiscal power to local governments is primary agenda of the program, JNURRM has not overlooked importance of state governments. Its authority to approve, co-ordinate and monitor various projects as well as reforms does rest with state governments (Overview). It also has the responsibility to pool in the resources for prioritised projects.

Macro monitoring at centre takes place at the Central Steering and Monitoring Committee level while the detail reporting is the responsibility of the State Level Nodal Agency SLNA Explain what these do. See pg 60 highlighted in grey

5.4 Inducing transparency, responsibility and accountability in local governance

One of the lessons deliberated on the need for inculcating transparency in city functions (section 3.6.3) City level mandatory reforms (Box 3.0) have identified three mandatory functions and 4 optional functions that are specifically introduced to induce transparency in the functioning of the local bodies. For example, accrual based double entry system as explained earlier (sec 3.6.3 pg 45) would take note of all transactions irrespective of receipt of any funds or actual expense incurred at a point of time reducing chances of malfunctioning in accounts. Use of e- technologies and GIS linked property taxation would now make it mandatory to keep track of cities land and property and also allow free access to this information to general public, reducing chances of bungling of land records and corrupt practices at the same time reducing property tax evasion.

These technologies would allow for unmediated Web based interaction with the public for essential services, while at the same time improving collection efficiency by facilitating online payment of user charges. Grammar

On the other hand optional reforms like, simplification of legal and procedural frameworks for conversion of land from agricultural to non-agricultural purposes; introduction of property title certification system in ULBs and computerization of property registration point towards laying out simple ways of developing information systems that are accessible to public.

grammar JNURRM has greatly emphasized asset management over asset creation. It necessitates identification of sources for operation and maintenance in the form of revolving fund or allocations in the proposed estimates itself. These funds would be available with ULBs for maintenance, for which it would require ownership of assets by local government and beneficiaries thereby resting accountability at local level. It is proposed in the guidelines that 25% of central grant or state grant and loan put together is recovered and ploughed into the Revolving Fund (RF) to leverage market funds for financing of further investment in infrastructure projects. Similarly, in case of sub-mission II on Basic Services for Urban Poor (BSUP), at least 10% will be ploughed back into RF. This fund will be utilized to meet operation & maintenance expenses of the assets created under the mission and sub-mission respectively. At the end of the Mission period, the Revolving Fund may be graduated to a State Urban Infrastructure or State Basic Services to the Urban Poor Fund. Therefore, lot of importance unclear has been given to asset management after the project is over and its ownership with accountability of different governments. In order to encourage ownership of beneficiaries, for instance in the case of BSUP, a beneficiary contribution of 10-12 % towards cost of house improvement is necessary for accessing the grants. Emphasis on operation and maintenance and allocation of funds for the same would not leave any option or excuse for not maintaining the service infrastructure (Toolkit 1)

5.5 Program is pro- poor

The program has laid equal emphasis on improving the condition of urban poor along with improving the infrastructure in the cities, which makes it sensitive towards poor. Why is this inclusive? Whose definition of inclusivity are you using? In India normally this term is used whenever poor are included in the program. But yes you are right inclusiveness would require other factors like aged, handicapped to be added as per Canadian or International understanding, I have removed it and replaced by pro-poor. In fact, percentage of projects cost towards central grant-in-aid for these programs is to the tune of 50% for component on Basic Services for Urban Poor (BSUP) as against 35 % for Urban Infrastructure and Governance (UIG)(Table 2.0)

Although the program is focussed on 63 mission cities but provision has also been made for other cities. For the purpose, JNURRM has subsumed some of the earlier programs like Integrated Development of Small and Medium Towns (IDSMT) into Urban Infrastructure Development for Small and Medium Towns (UIDSSMT) in the first track of the program. Similarly Valmiki Ambedkar Awas Yojna (VAMBAY) and National Slum Development Program (NSDP) have been merged into one program called Integrated Housing and Slum Development Program (IHSDP). The purpose is to adopt an integrated approach and simplify monitoring and implementation that may be taken up by one agency thereby minimizing fragmentation of delivery. In this way each scheme compliments advantages Explain why this consolidation is an improvement.

Other very vital aspects of the program is due recognition given to the women. Under the Basic Services for Urban Poor (BSUP) and Integrated Housing and Slum Development Program (IHSDP) component of the program, only those households in the slums would be eligible for funds for home improvement that have land title in the name of the woman or held in joint name

Within 7- point charter of Basic Services for Urban Poor, a component on social security program for urban poor is dovetailed. Funds are not released unless this component is undertaken or addressed. This takes care of senior urban citizens who have no source of formal income or social support and are dependent on the state.

5.6 Key to Success of the program

As already analysed in sections 5.2 through 5.5, JNURRM is an umbrella program that has embraced 74^th amendment as a mandatory reform to achieve results that are intended to improve the condition of cities. As discussed in preceding sections, the failures of earlier policy implementation to devolve functions and powers to the local government helped in the designing and detailing guidelines of JNURRM in order to improve municipal administration through its functional efficiency, fiscal status and make it more transparent as well as accountable to people. One of the components is totally focussed on improving plight of poor through a 7-point charter which was totally missing in the 74^th amendment.

It is apparent from the gaps in implementation of 74^th amendment and lessons learned as elaborated in section 3.7 that success of JNURRM would lie in its response to community, its participation and localizing local actions. In addition, achieving transparency through participation and timely implementation of reforms would offer better administrative control, more dependence on Information Technology and less on human interaction thereby reducing chances of corruption.

Currently, the program is in its third year of implementation and has yet to see its effectiveness in achieving its goals and aspirations. However, having been involved in its initial launch I have had a first hand experience of connecting with agencies and local government officials who are potential executors of the program on ground. Looking at the current status of the program, I propose to touch upon my experiences of interacting with these officials and offer my analysis of the situation.

You need to connect these aspirations more directly to the pitfalls that occurred in previous attempts at reform. You will also need to clarify the degree to which JNURRM is trying to do a better job of implementing the same goals and objectives that were embodied under the 74^th constitutional amendment, and just getting these finally put into practice versus introducing new goals and approaches to urban governance that will supercede the principles embodied in the 74^th constitutional amendment.(This has been discussed in section 5.0 , do you think I need to repeat it here? )

6.0 Current Status of the Program Implementation

6.1 Status of implementation of the program across various states/cities ¹as on Jan 2008

As of January 01, 2008 a total of 279 projects costing Rs. 25,287 Crores ($66.5 billion) have been approved. These are to be undertaken in 51 out of the 63 identified cities in 26 states. The Additional Central Assistance (ACA) admissible for these projects is Rs. 12,223.42 Crores ($32.7 billion) out of which Rs. 2,525.62 Crores ($6.6 billion) has been released. It is proposed that 90 projects will be completed by end of 2008. As per the combined report of CDPs, it is estimated that a total of around Rs. 335,350 Crores ($882.5 billion) will be invested in urban services in the mission cities. The share of this investment in urban transport is likely to be highest at 51% followed by 14% in water supply, 13% in sewerage, 8% in drainage and only 3% in solid waste management (Economic Survey, 2007-2008).

As discussed in section 4.1.2, the first step of implementation is to prepare City Development Plans (CDPs). During first half of 2006 most of the mission cities submitted their CDPs. The first 8 cities to put up their proposals were Hyderabad, Vijay Wada from the State of Andhra Pradesh, Nagpur in Maharashtra, Ahmedabad, Rajkot & Surat from Gujrat and Bhopal and Indore from the state of Madhya Pradesh. Mostly these project proposals were for water supply and drainage that were put up within three months of launch of the program and in March 2006, first release was made for these projects (Progress Report 2006). This was rather quick given the amount of efforts required in preparing CDPs and Detailed Project Reports (DPRs). CDPs of Nagpur and Vijay Wada were found to be most systematic, informative and conforming to the guidelines in objectives and spirit, while most other cities were still struggling to understand the program. It was around middle of 2007 when many-detailed project proposals (DPRs) started pouring in along with signed Memorandum of Agreement with agreed schedule of implementation of reforms annexed to it.

The next most important step was to sign a Memorandum of Agreement (MOA) along with the detailed reform agenda to be undertaken over a period of seven years. In this regard it is seen that MOA has been negotiated and signed with all the 63 mission cities. On the second track of the program front under Basic Services for Urban Poor (BSUP) component, 56 out of 63 cities have put up 300 projects approved cost of Rs 15,379 Crores ($40.47 billion). An amount of Rs 1414 Crores ($3.72 billion) out of admissible grant of Rs 7670 Crores ($20.2 billion) has already been released as on 1^st Jan 2008. As far as the numbers and targeted release of funds are concerned, the project has made a good beginning with creation of a massive institution dedicated to implement the project as per guidelines and make a historic success out of it.

As the program is still at its nascent stage of implementation, it is very difficult to assess its performance at this stage in terms of achievement of its goals and actual deliverables. However, based on participant interactions during the launch of the program in 2006 in a few cities, I wish to offer few observations with respect to actual handling of first few steps towards implementation of JNURRM with respect to:

a) Preparation of CDPs and People’s Participation/Stake holder consultations in planning

b) Proposed agenda for implementation of reforms, particularly 74^th amendment

I looked at the process followed in preparation of the CDPs and DPRs in three cities. These cities were selected to represent each category of mission cities and I had an opportunity to visit them as well during launch of the program for a first hand experience and interaction with city and state officials.

1. Bangalore in Karnataka – a metro city

2. Ahmedabad in Gujarat - state capital

3. Nainital in Uttrakhand – a hill city, tourist destination

6.2 People’s participation and stakeholder consultations in the process of preparing CDPs

The following sections present profiles of these three cities along with observations on the process followed in stakeholder consultations in evolving vision of the city, prioritising of issues and formulating project proposal while preparing CDPs. As already indicated, preparation of CDP is the first step where the vision of the city and planning for the city require stakeholder consultations. It is one of the first opportunities for people’s participation in planning for their city.

During the launch of program in above three cities I had an opportunity to interact with city level officials and some NGOs from these cities. It was revealed that state hired consultants prepared CDPs for these cities without stakeholder consultations. This was a common concern raised in Bangalore, Mumbai, Delhi, and Nainital. In these cases CDPs were presented to some of the civil society organizations or local body officials and requested for their suggestions, if any. In fact, in the case of Nainital it was found that state government hired a consultant in the state capital, Dehradun, called all the data from the cities and parastatal under the mission and transferred this information to the consultants without involving any city officials in the whole process of formulating the vision for the city.

Box 4.0 City of Nainital

Nainital is a beautiful hill town in one of the newly formed northern states of Uttrakhand amidst Himalayan ranges. It is named after Lake Naini that forms a central tourist spot around which the town has developed. The estimated population of Nainital in 2006 was 45320. Being a hill town surrounded by lofty Himalayan ranges and good connectivity by road, rail and air, thousands of tourists visit the city annually, especially during the summer months. The floating tourist population has been seen increasing every year. In 2003 it was recorded as 0.42 million and in 2005 it increased to 0.52 million. It is due to these special characteristics, city’s governance and urban planning needs are distinct from any conventional city that is planned on consistent growth or decline.

The city is located at a distance of 304 Kms from New Delhi and 360 Kms from Dehradun, the state capital. The nearest airport is at Pantnagar (71 km) in the plains and 34 Kms from Kathgodam that has a railway station for the Kumaon region. Major source of income is tourism and tertiary sector while cottage industry like hand made candles; woollen garments and weaving are some of the growing industries. Tertiary sector related to small trade and enterprises, hotel business, transport and such other activities forms the economic base of the town.

The hilly terrain and forests that surround the city around the central lake restrict its spatial expansion. The terrain is ecologically very fragile and seismically sensitive restricting construction to a small area. As a result, congestion and increased tourist population pressurizes infrastructure that leaks and collapses due to very old and worn out distribution network for water supply and sewerage.

The vision of the city is stated as “I want to live in an ecologically sound and beautiful Nainital that is well managed with efficient public services, a healthy economy and a natural and built environment that retains its unique character”

The city has therefore proposed change of old pipes within the city and additional sewerage network and treatment plants in the periphery. Absence of public transport and adequate parking space near the city centre and lake causes chaotic situation during peak tourist season. On the institutional front city faces issues like multiplicity of functional organizations at state level, poor capacity of city officials and negligible authority of the municipality to respond to local needs. For example, responsibility for water supply lies with Uttarpradesh Jal Nigam and Uttrakhand Jal Sansthan

Source: City Development Plan, 2006

Case Study No. 1: Nainital

As can be seen from the city profile, it is a hill station and a popular tourist hub in the north--western part of the country. After disturbance due to terrorist activity in Kashmir, Nainital has become one of the most popular tourist destinations. Due to its proximity, climate, peace loving community and scenic beauty, it has become a popular getaway for people living in and around Delhi and North- western states.

In the absence of any consultations with the grass roots it is doubtful if CDPs are presenting real issues on the ground or even have been able to conceptualise an appropriate vision for the city. This was a concern expressed by many participants during one of the regional consultations on preparation of DPR’s that was held in the city of Nainital.

Another observation in case of Nainital suggests, that there is a disconnect between the vision statement, the issues and priorities identified in the CDP and the project proposals put up in the form of DPRs for the city. The vision statement (Box 4.0) lays emphasis on making it a global tourism destination as its economic base while maintaining the town’s character and ecological balance. To accomplish this vision the city development plan should have highlighted basic issues or bottlenecks that hinder the process of making it a unique eco-tourism destination and how these constraints can be removed. For instance, what kind of gaps exists in the infrastructure to serve as a tourist hub? What kind of investment is required over period of time? How the resources can be raised to fill in these gaps and how and within what time span will the city be able to recover this investment? ( ref Guidelines, toolkits 1)

CDP is a document that must contain these strategic details so that project proposal (DPR) evolves from it. Although a lot of information on existing facilities can be drawn from the tables of information provided in the CDP but the connection, relevance and priorities based on accomplishing the vision are totally missing. For example, access to the city from Delhi (300kms), which is the nearest international airport, is practically by rail or road only (one flight in a week plies on an undeveloped airport at a nearby station that is ill connected to the city). The only access is through national highway to the town that has almost 150 Kms. of road stretch in a deplorable condition. For the city to be an attractive destination for tourists, access to the city has to be one of the priority needs of city planning. At the same time, improving access to various existing stay and entertainment facilities to meet the international standards of hospitality industry should have been taken as its first proposal along with augmenting access to such facilities. Although 66.6 % of total funds have been identified for roads and transportation, the priority attached to it is only 3^rd on the list. (Pg. 13 of CDP).

Another strength of the city is the Naini lake at the center of the city with its boating features that can contribute to achieving the vision of the city. To increase the tourist activity, the lake needs to be cleaned and beautified adding other water activities like surfing and sailing. This could have been one of the forerunner projects under JNURRM. To facilitate these activities, parking facilities near the central mall around the lake are insufficient which need to be adequately enhanced and planned or substituted by public transport. No such proposal has been put up.

A number of water bodies within the city provide a natural opportunity for rainwater harvesting and recycling. Projects to utilize these natural systems for augmentation of water supply should have formed the first few projects. These issues although identified in CDP have not been turned into project proposals with only 3% of total investment planned for them. It appears Nainital lake conservation project is already underway for the purpose but a convergence of such a project contributing to overall city development planning should have been identified along with various activities undertaken under the project.

According to the CDP, existing water supply situation is satisfactory with 85% households having house connections but only 24 % of the total poor households provided through stand posts (Pg. 17&50 of CDP). Strangely, the first proposal (DPR) submitted by the city is on augmentation of water supply, which does not connect directly to the priority needs of the city and its vision.

Above description makes it amply evident that there is a total disconnect between the vision and CDP as well as CDP and the DPR. Apparently, in a rush to access the funds and pressure from central government, the city has pushed up the proposal for water supply for which some data was already available under another water and sanitation project called Sawajal, undertaken by Government of Uttrakhand.

Lack of seriousness attached to consultative process in preparation of CDPs is evident from the inconsistencies in vision of the city, projects prioritised and finally projects proposed through detailed project proposals (DPRs). One of the reasons for such an ordeal could be different consultants engaged for preparation of CDPs and DPRs. While CDPs were to form the basis of all project proposals i.e. from where DPRs evolved, the reforms were to be linked to provide a strategy, mechanisms and timeline for implementation. Linkage is unfortunately missing in CDPs, DPRs and the reform agendas

Case Study 2 – Ahmedabad.

Ahmedabad, the capital city of the economically flourishing state of Gujarat has put up a very comprehensive and well-designed City Development Plan. Its vision is spelt out as “‘Vibrant Ahmedabad – Vibrant Gujarat” and is based on historic background of the city. Ahmedabad is an economically growing city because of its textile and chemical industry, while its ports offer trade corridor to the rest of the country. (CDP, Ahmedabad )

Box 5.0 City profile of Ahmedabad

Like most of the ancient cities, the city of Ahmedabad was also located the banks of a river called Sabarmati. It is seventh largest metropolis in India. The population within the municipal limits of Ahmedabad increased from 2.88 million in 1991 to 3.5 million in 2001. The city has seen rapid growth in the peripheral areas compared to areas within the city limits

The city has an area of 190 square kilometers and spatial expansion of Ahmedabad is largely contiguous and relatively compact. As far as spatial patterns are concerned, the walled city located in the center of the city is most densely populated with large concentration of commercial activities and narrow streets. The eastern part of the city accommodates large and small industries and low-income residential areas, while the western part is largely hosting major institutions and high-income residential areas. It is this part of the city that is expanding fastest

Ahmedabad was known to be an industrial town of Gujarat with large textile industry based in the city. Currently, petrochemical and metallurgical industries are dominating the industrial base of the city. However, the economy of the city is gradually shifting from secondary to tertiary sector absorbing 56 percent of the total main workers of the city (1991 census). In 1995, with 7 percent of the total population, Ahmedabad contributed to 17 percent of the states income.

The state has made large investments in ports, particularly private ports, which are coming up very fast. As a result, the state is geared to become the trade gateway for the entire north and central India, which were earlier served by ports of adjoining state of Maharashtra. Ahmedabad is centrally connected to all ports in Gujarat and is expected to be the main conduit for international trade.

Given the potential for economic growth and emerging education hub, the vision of the city that emerged out of various discussions has been presented in the CDP as “Vibrant, productive, harmonious, sustainable and environmental friendly, clean and livable city having a responsive local government offering its citizens a good quality of life’’

The main issues identified in the CDP are lack of infrastructure, mainly in the peripheral areas that are rapidly growing, lowering of ground water table, pollution of Sabramati river, increasing solid waste congestion in the walled city, developing transportation corridors to growing periphery and improving slums. To give shape to the vision of the city, the city governments have drawn up project plans for different sectors to realize 100% coverage of services until 2012. The CDP has taken into account population projections until 2025 for estimation of its needs. Major investment is planned for roads, flyovers and river front development and lakes conservation

Source: CDP Ahmedabad

It has been indicated in the CDP that the vision has been formulated through stakeholder consultations but it was not clear as to what process was followed and who all were involved in any of these consultations. How views of the stakeholders have been incorporated and what would make the city vibrant is not made very clear because there is no prioritisation of the project/activities in line with its vision of making Ahmedabad a vibrant city.

The CDP of Ahmedabad highlights issues and discusses goals and strategies for each sector and proposes projects. But again in this city too there is disconnect in the proposed projects and the strategies proposed to achieve the vision in some of the sectors. For example, in the water supply sector, while the strategies indicate promoting water recycling, water quality monitoring, water auditing and ground water recharge, no projects have been proposed for these strategies.

Ahmedabad is one of the forward-looking cities and first city that adapted computerization and raised resources from the capital market by issuing Municipal Bonds. It has comparatively one of the best revenue bases amongst the cities of India and one of the best service delivery coverage with transparent records. From the data and the plan, apparently there is very little requirement of core services requiring immediate attention and most of the requirements have been posed for periphery development. But what this periphery development would include is not very clearly identified except for development of 52 lakes. It is not clear as to what kind of development is required and whether adequate land is available for development of these lakes. It is also not clear as to how development of these lakes would contribute to the vision of the city

Similarly, the cultural heritage of the city (Chapter 7) indicates that the inner city needs to be revitalized. But the CDP does not clearly indicate if projects will be proposed for inner city revitalization

Case study 3-Bangalore

In case of Bangalore, it is indicated that more than fifty stakeholder meetings/workshops were held from where vision of the city emerged and strategies were formulated to achieve the vision. But who these stakeholders are is not very clear. As per the records

BMP conducted adhoc consultations in May, which were attended by about 25-30 persons from each range of three to four wards with absence of representation of urban poor (except for a councillor, who claimed that he was there to represent the absent urban poor interests). Going by the perfunctory nature of this consultation, it is not clear how it could ensure that all stakeholders’ views will be adequately taken into consideration? Critics like Kamraj an activist, pointed out that the,” plans are being made without clear process guidance, adequate and up-to-date planning data, advocacy with stakeholders and their capacity building in order that they may participate effectively"(Kamraj, 2006).

Before the launch of JNURRM a CDP was already prepared for the Bangalore Development Authority by a foreign consultants in a top-down manner with no inputs from the people. There is an apprehension within the civil society that once again under JNNURM, millions will be spent again to engage empanelled consultants to put together the new CDPs as per guidelines of JNURRM while the inputs will be either picked up from older documents or provided by the bureaucrats – with supposedly some token suggestions of a handful of residents.

During one of the regional consultations on BSUP and IHSDP projects in Bangalore, one of the key panelists specifically remarked “Although there were funds for hiring consultants for formulating the projects, it should not become a practice to formulate consultant driven projects. City officials should engage citizens and participate themselves in formulating the projects”. However, the actual situation was very different, as indicated above. When the projects for the urban poor were being discussed and presented during the consultation, representation of civil society or urban poor was conspicuous by their absence

There are many CDPs which indicate stakeholder consultations were done through workshops for preparing the CDP, while most of them do not articulate on the methodology used in stakeholder consultations, who participated, what number of community members were represented, whether urban poor, senior citizens or women were adequately represented by the stakeholders, what were the outcomes of such consultations? Were any changes affected in preliminary CDP through these consultations? Barring a couple of CDPs for the cities of Nagpur and Vijay Wada, (ref: CDP 2006), most of them lacked any kind of detail. Apparently, the seriousness of the cities/states in consultative process of formulation of project proposal right from conceptualisation and planning to actual implementation is apparently lacking.

The first round of CDPs so prepared thus lacked real issues, community participation and prioritisation based on importance laid out by individual cities and its people. Once again, it was more of a top-down than bottom- up process. Preparation of CDP is the first opportunity for community participation in planning which seems to have been lost. The first step where a change was anticipated in the process from the implementation of 74^th amendment in devolution did not present a very positive development so far.

6.3 Proposed agenda and status of implementation of reforms

Reforms form a common link between 74^th amendment and JNURRM. There are around 27 reforms to be undertaken by cities and states (box 3.0 section 4.1.3). There are some mandatory reforms and optional reforms to be adapted by Urban Local Bodies and there are reforms that state government has to implement. These reforms are meant to institutionalise devolution, bring in transparency, improve fiscal base of the municipal government and affect community participation as explained above in section 5.0 .

During some of the interactions in Bangalore and Bhopal there was a criticism on the processes adopted for implementation of reforms. The participants were concerned that the states will do only lip service in implementing the reforms by only filling up the extensive formats and put up some timelines without any basis and logic. Although it is very difficult to validate this criticism at this stage but a quick look at the status of implementation of reforms and the commitment made can help identify basis of these concerns. ((see sample checklist for reform - annexure II)

As on Dec 2007, almost all the cities have signed MOA that comes with commitment to undertake reforms (Overall status, annexure III). As far as mandatory reforms for the cities are concerned, so far 7 cities have set up E-governance, 8 cities have shifted to double entry system of accounting, 7 cities have achieved 85% coverage of properties under purview of property taxes and 7 cities (not necessarily) have achieved 90% efficiency in collection of taxes. Only two cities have achieved 100% cost recovery for user charges on water supply, while only one city has made 100% recovery of user charges for solid waste management. It is the city of Vishakhapatnam only which is ahead of all the cities in implementing the municipal level reforms. Around 37 cities have earmarked funds for services for urban poor. As far as optional reforms are concerned, around 16 cities have revised building by-laws mandating inclusion of rainwater harvesting system within buildings and only 6 cities have introduced computerization of registration of land and properties. There is a luke warm effort in implementing other optional reforms so far.

As far as the states are concerned, 9 states have undertaken devolution of functions as per twelfth schedule. Only 14 states have formulated District Planning Committees while formation of Metropolitan Committee is reported by only one state. So far, this situation is no different from situation before launch of JNURRM. Eight states have transferred planning function and nine have transferred water supply and sanitation function to cities. Fourteen states have repealed Urban Land Ceiling Act. There is delay in implementation of other reforms.

To get a sense of how reform related to community participation law is being implemented, (ref ln. 21 pg 31) I looked at some of the filled up checklists submitted by some cities along with their MOAs (Faridabad) Logically, enactment of community participation law should have been the first step to enable public engagement during preparation of the CDP and stakeholder consultation. But time line suggested in checklists of Faridabad indicate that enactment will be undertaken in the 4^th or 5^th year of the program implementation. This defeats the very objective of the law that needs enactment for forming area sabha in the beginning to affect participation.

The documents on overall status show that there is substantial ground yet to be covered with regard to the reforms, at the state as well as city level. Barring a few exceptions, cities, responses seem to be more objective-type to accommodate the requirements of NURM to apparently seek funding rather than really engaging themselves to the challenges of urban governance. (Overall status, 2008, annexure III)

Barring a couple, very few cities have genuinely formulated reform agenda with any degree of seriousness. Only 8 to 10 cities, which constitute only 30% of total number of cities, have proposed to undertake reforms in the first couple of years while most other cities have not shown any urgency in undertaking the reforms. Almost all states proposed to take most of the reforms only in the third or fourth year or may be in the last couple of years of the mission period. For example, the city of Bhopal proposed to take up all the reforms after 3^rd or 4^th year. Table3.0 (Annexure IV) shows the targeted years when most of the reforms will be undertaken by all the four cities would be 3^rd or 4^th year (seven year period starts in Jan 2006)

The reform schedule did not provide the phasing and the strategy for initiating the reform agenda. For example, in case of property taxation, there are four issues that need attention:

(i) Coverage of properties for purposes of taxation, (ii) valuation and its periodic revision, (ii) selection of tax rate within the band, and (iv) collection strategy. It would make a better meaning if the city government were to design property tax reform in the context of the problems faced. Likewise, it is not clear as to how the user charge covering the operation and maintenance cost will be levied - whether operation and maintenance cost will be assessed on the average consumption or will be based on the revision of flat rates. The same holds for the optional reforms.

From the above it is evident that most of the cities have not been able to prepare a very clear vision of the city, its economic base and potential for future development areas. What participatory approaches will be used or are being used are not indicated. Further, cities have been rushed through preparing the proposals, which has led to total disconnect between the proposed vision presented in the CDPs and actual proposals. It seems as if most of the first round of proposals has been put up for those projects for which data was collected for some other externally aided projects. For example, in the case of Bhopal information from an ADB aided project on infrastructure development of 4 cities in Madhya Pradesh seems to have been used. It leads to using readily available data irrespective of the priority of the project identified in the CDP or the projects catering to the vision of the cities. The basis of the preparation of CDP in most cases is not on adequate socio-economic survey but on small survey sample covering miniscule area or stakeholder involvement. In a hurry to access the grant funds, CDPs were pushed through and in many cases have been returned back by the appraisal agency.

Apparently, lead-time for preparation of CDP has been as little as 12 weeks including consultative process with different stakeholders. Clear guidelines were provided with funds for preparation. Barring a couple of cities like Nagpur or Madurai, most of the CDPs were prepared by consultants rarely through stakeholder consultations and even if any consultations were held, this was done at the state level without involving city executives except municipal commissioners or at the most some mayors who were invited to the workshops. These kinds of consultations lacked people’s participation and all stakeholders including grass root city officials who are answerable to the people.

With an objective of having a transparent administration, quick service delivery, effective MIS and general improvement in the service delivery, an E-governance portal has been introduced as mandatory reform. Only seven out of 63 cities have successfully launched E-governance. It is not because there is missing knowledge on use of technology but given the huge population in these cities and poor record keeping, the initial database would require some time to develop. One cannot deny the fact that in some cities there may be deliberate reluctance of the municipal body to go transparent. Building transparency through E-governance would reduce chances of petty corruption and muscle power. A decade ago it was very common practice to hold on to applications with the local body, be it registration of property, birth and death or sanction of building plans, forcing common man to return to the window a number of times to follow up on the status of his application. At the same time, reform on computerization of land and property information is also very slow with only 6 cities have taken up computerization so far. This leaves a scope for playing into the hands of land mafia. Thus another reform related to state governments’ transfer of spatial planning function to the cities is not going to be easily implemented

Taking the case of city of Indore, its reform agenda indicated that E-governance would be set up in the year 2010-2011, while there is no indication of when computerization of registration of Land & Property or introduction of Property Title Certification System will be taken up. These reforms are linked to each other. Unless data on properties is available, reforms with respect to property tax and its collection efficiency cannot be ascertained. But Indore Municipal Corporation has indicated that the latter two reforms will be taken up by 2010 and 2011. One can therefore conclude agenda for the city has not been framed logically and in a phased manner.(Reforms document)

6.5 Conclusion

The program is very well designed, comprehensive and reflects the seriousness of the government. There appears to be a concerted effort in bringing about institutional and fiscal changes through a set of reforms that would capacitate cities to act as self-governments and be accountable to their residents.

However, unless there is strong monitoring of implementation of these reforms and utilization of funds for the targeted purpose and seriousness of state governments to allow a bottom-up approach, the program would again end up as a consultant driven or top driven program without sense of ownership or accountability of the local governments.

An autonomous body in the form of Technical Advisory Group (TAG) has been formed to monitor progress of the cities towards implementation of reforms and adherence to guidelines. However, its mandate and authority is not very clear beyond its advisory capacity. Over and above, given the shear enormity of work, it may not be able to deal with the number of issues arising while moving along the implementation process.

Further, it is very apparent that mere enactment of laws like 74^th amendment in the past and the current Community Participation Law would not create an enabling environment for institutional change. Nor a one-time grant will be able to help raise resource base of the cities unless they are backed up by building the capacity of the professionals within municipalities and develop a strong Management Information System. There is a strong need for research and socio-economic surveys across the country that must form a pre-condition for preparation of CDPs. City officials and grass root level workers as well as communities should be engaged in these surveys and research so that they are able to sustain the plan and see its strategic conclusion as an input for the next plan. This research could be undertaken involving students and universities or state level academies. The state level officials as well as city officials (technocrats) are normally transferable and their tenure may not last till the end of the proposed projects. This poses a constraint of sustainability.

During some of the national consultations dissatisfaction amongst genuinely interested participants from city and state governments was observed. They found these consultations to be no more than awareness raising seminars and conferences meant to inform the participants about the program, available funds, guidelines and the eligibility of the cities rather than participative consultations. As a result, states managed to hire consultants who prepared CDP’s as per the guidelines, undertook few workshops inviting city officials who were not provided enough information on the purpose & expectations from them. Many CDPs, like that of Bangalore and Nainital had to undergo second round after a detailed appraisal was carried out on their CDPs.

After going through some documentation like CDPs, DPRs and checklists for reforms submitted along with MOAs, it is found that there is too much documentation requested in too little a time period before the proposals are sanctioned. In the process, the whole exercise seems to have been reduced to filling up various forms without attaching any logic or understanding the basis of questions posed.

The question is what kind of mechanism will be needed at the central level to check if commitments made by cities, through plethora of questions in the 122 page document (checklists for reforms, ) are fulfilled within the time frame?

Based on past experience of dealing with financing housing and infrastructure, I am concerned about inappropriate use of grants for purposes other than what they are targeted for. The grant in-aid although forms only 35%-50% of the project cost, sums up in huge advance capital, given the size of the projects. What will guarantee that it is used for basic services and not as a seed capital for building more lucrative retail malls and expressways with larger returns, depriving citizens of more pressing basic services? From past experience of state level agencies like Development Authorities adopting the role of real estate developers to become self-sufficient, what would stop municipalities adapting to these roles once in power given the market forces that are already taking precedence over the social welfare cause in the country. What will stop municipal officials from being apart of land mafia and tow the lines of political masters? What would be the fate of the quality of life of common citizen in urban India, which is promised by the JNURRM?

I think civil society has to rise beyond its personnel needs to affect the larger goals of humanity and sustaining the largest democracy. As the above discussed policies have proven that no matter how great the laws of the nation are framed and how well the programs are designed and detailed, unless there is seriousness on the part of political masters and top management, unless these policies are framed with people’s participation and grass root engagement throughout implementation, the desired results would be a distant dream.

Endnotes

ⁱ Urban Land Ceiling Regulation Act (ULCRA) was a law passed in 1976 in order to create social equality with the aim of preventing profiteering and hoarding of urban land available in the market, as well as to avert urban congestion. Urban cities were divided into categories like A, B, and C. The corresponding owners put a ceiling on the highest permissible usage of land and this was fixed as per the provisions in the act. It is assumed that the Repeal of the act would thus release land under litigation and stabilize property prices. There may not be any significant changes in housing prices in the prime areas but the move will affect the prices in other areas. Scrapping of ULCRA is presumably going to usher in an era of mass housing projects and lead to substantial savings on effort and the money spent in order to obtain permission for land

ⁱⁱ Rent Control Act was an attempt by the Government of India to eliminate the exploitation of tenants by landlords. Rent legislation tends to providing payment of fair rent to landlords and protection of tenants against eviction. But the allowances have been very generous and hence tenants residing in rental properties in India since 1947 continue to pay rents fixed then, irrespective of inflation and the realty boom.

The Rent Control Act has led to several adverse situations like languishing investment in rental housing, withdrawing of existing housing stock from the rental market, stagnating municipal property tax revenue and poor maintenance of low rent generating buildings. In 1992, the Central Government proposed a model rent control legislation, which was meant for and circulated to all states. The model Act proposed modification of some of the existing provisions on   inheritance of tenancy and also prescribed a rent level beyond which rent control could not apply It is assumed that there will be more rational use of prime locations and will set off a continuous process of urban renewal.

ⁱⁱⁱ Stamp duty India is a tax, much like the sales tax and income tax that are collected by the Government. It is a notary paper normally produced on a stamp paper that can be produced in the form of a document in the court, for its validity and evidence. The amount of fee in the form of a legal stamp duty that is payable as charges for registration and transfer of property. Each state has prescribed percentage of property value as stamp duty, which is normally varying between 5 to 8 % of property value. Due to higher stamp duty many property transactions are undertaken under power of attorney or illegal ways to avoid high cost and thus don’t get registered for their true value. The program has thus prescribed a reform to bring down stamp duty so that more properties are registered and people declare true value of the property and pay fee. This would increase the domain of properties under property tax and also identify legal owner.

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