Current practices make for poor planning and management, and reduce transparency and accountability

Rapid urbanisation presents India with a major governance and management challenge. According to the 2001 Census, 27% of 1.13 billion Indians live in urban areas. They contribute disproportionately to GDP (nearly three-fifths) and to new employment generation (about four-fifths). It is projected that in a little over a decade, i.e. by 2021, the urban population will be 40% of the total, and by 2035 majority of the population will be urban.

The trend towards urbanisation in India is pervasive, with the following characteristics widely accepted, but not yet fully reflected in political, economic and civic behaviour and norms.

* Most urban agglomerations are characterized by inadequate infrastructure and poor civic services and amenities.

* Huge investments in urban areas are required for roads, water supply and drainage, waste management systems, public transport systems, hospitals, parks, schools, and all other facilities that are necessary for building cities which permit good quality of life to persons from all economic classes.

* Urban local bodies, especially municipal corporations, are under greater pressure to plan, finance and manage urban development in an efficient and professional manner. There is however a mismatch between their authority and resources on one hand, and their capabilities on the other.

In 2001-02, municipal own-revenue and expenditure were only 2.3% and 2.2% of combined State and Central government respective totals. Even this low average hides wide variations around the country.

Also, urban areas lack an accountable chief executive such as an elected mayor, with a cabinet composed of professionals with requisite skills in urban management. The Second Administrative Reform Commission has made suggestions along these lines. It is time to implement them.  

The urban development ministry has announced plans to introduce Service Level Benchmarking in five key areas (water supply, sewerage, solid waste management, storm water drainage system and urban transport services) for project support under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM), and for their monitoring and implementation. But, this requires robust databases involving various aspects of urban finances and management, which are currently lacking.

Many cities do not maintain budgetary and service provision records which would enable a realistic assessment of the funds required for providing urban services; the resulting resource gap; and the fiscal transfers required to address the gap. As a result, successive Finance Commissions at both the Centre and in the States have struggled to allocate resources to urban local bodies on the basis of sound empirical data and analysis.

The Twelfth Finance Commission (2005-10) noted that the previous Commission had allocated Rs 200 crore for constructing databases by local bodies and Rs 483 crore for their maintenance. However, the amounts utilised were only Rs 93 crore and Rs 113 crore respectively. The reasons for underutilisation have not been explained, and the accountability for this deficiency not fixed. The implication is that recordkeeping and maintenance of accounts is not accorded the deserved priority by local bodies or their respective state governments. It is essential that responsibility for such neglect be fixed and those continuing such neglect are made to face electoral consequences.

Limitations of the current databases are also observed in projections of investments required for urban infrastructure. The Eleventh Five Year Plan estimated that total funds required for implementation of targets in respect of urban water supply, sewerage and sanitation, drainage and solid waste management was Rs 1,27,025 crore at 2006-07 prices over plan period of 2007-12; equivalent to about Rs 25,405 crore annually. In contrast, JNNURM has estimated annual investment needs for similar sectors at Rs 17,219 crore. The Planning Commission estimate is about 50% higher than the JNNURM estimate.  

The wide range of investment projections used is likely to lead to poor urban planning and management, while reducing transparency and accountability. In mid-2008, the Central Government set up a High Powered Expert Committee (HPEC) to estimate investment requirements for urban services during the next 20 years, and provide financing options. It is hoped that the HPEC will suggest standardised methodology, and reconcile different investment projections.

The National Development Council (NDC), which includes all Planning Commission members and Chief Ministers, is reportedly set to discuss India’s urbanisation challenges in September 2008. It is strongly urged that the NDC explicitly recognise the need for constructing and maintaining robust databases on India’s urbanisation, and set up the requisite accountability and transparency structures.

Four measures merit serious consideration:

- An agency with requisite resources and expertise should be made responsible for developing and monitoring urban databases as a public good to be easily accessible to all stakeholders. This agency should liaise with the ministry of statistics and programme implementation. A restructured National Institute of Urban Affairs, the think-tank of the ministry of urban development, could be a possible agency.

- Municipal accounting and budgeting reforms should be given high priority. Such reforms are also essential for developing the municipal bond market and accessing unconventional financing sources such as carbon credits. This will assist in bringing about greater appreciation of the linkages between operating (maintenance) and capital expenditure to obtain requisite efficiencies in asset utilisation over its lifetime. The emphasis should be on economic costs of resources and not just the financial costs.

The Thirteenth Finance Commission (2010-15) provides an important Constitutional forum for developing a more coherent fiscal framework for India’s urban and local bodies. The State Finance Commissions must also play a much more constructive role and demonstrate a sense of urgency in ensuring more informed urban management and decision making.

- The profession of urban planning and management needs to be given much greater impetus in the country. This can be done through expanding the urban planning departments at the universities, and encouraging internationally recognised professional qualifications in this area. Policy-relevant, rigorous research on India’s urbanisation and its management should be encouraged.

- Greater capacity building in urban project planning and financial management for the officials of the urban local bodies should be undertaken.

Building more robust databases is an essential element of better urban management. As C K Prahalad and M S Krishnan note in their book, The New Age of Innovation, “Managers with access to a shared database and solid analytics will outperform human intuition most of the time.”

© 2005-2008 Diligent Media Corporation Ltd.