India is a part of the global trend towards increasing urbanisation in which more than half of world's population is living in cities and towns. 31.16 per cent of India's population (377 million) live in urban areas as per 2011 Census.
Enhancing the productivity of urban areas is central to the policy pronouncements of the Ministry of Urban Development. Cities hold tremendous potential as engines of economic and social development, creating jobs and generating wealth through economies of scale. They need to be sustained and augmented through the high urban productivity for country's economic growth. National economic growth and poverty reduction efforts will be increasingly determined by the productivity of these cities and towns. For Indian cities to become growth oriented and productive, it is essential to achieve a world class urban system. This in turn depends on attaining efficiency and equity in the delivery and financing of urban infrastructure.
The Thirteenth Finance Commission has, for the first time in the history of Finance Commissions, brought in an element of performance based grant in addition to basic grant, in which the onus is placed on the State Governments to empower and build capacity in the local bodies through carrying out nine identified reforms.
According to the High Powered Expert Committee (HPEC) appointed by the Ministry of Urban Development, which gave its recommendations to the Government in the year 2011, there is a requirement of investment in urban infrastructure to the tune of ₹ 39 Billion (₹ 39.2 lakh crore at 2009-2010 prices) over the next 20 years.
To overcome constraints and challenges, the Ministry of Urban Development has initiated institutional, fiscal and financial reforms.
The 74th Constitutional Amendment Act of 1992, recognised the importance of local self governments in the process of service delivery in the urban sector.
In August, 1996, the Central Government guidelines entitled 'Urban Development Plans Formulation and Implementation (UDPFI)' were circulated to all State Governments for adoption. These guidelines, apart from other issues, suggest innovative approaches for fiscal resource mobilisation. In the backdrop of the New Economic Policy in the nineteen nineties, it was suggested that the traditional system of funding based on Plan and budgetary allocations be reduced and ultimately withdrawn due to fiscal deficit. Subsidies need to be rationalised and urban development plans and projects need to be placed on a commercial format by designing commercially viable urban infrastructure services and area development projects. This was sought to be achieved by restoring a proper match between functions and source of revenue by giving additional tax measures. Other innovative resource mobilisation measures include using land as resource, increase in the non-property taxes and using Public-Private Partnership in service delivery.
Reforms through decades
Municipal Accounting System
The Task Force constituted by the O/o C&AG of India had recommended for introduction of accrual basis of accounting system for the urban local bodies (ULBs) and suggested model budgeting and accounting formats for that purpose. The Task Force Report was circulated to all States/UTs for adoption of accrual basis of accounting system as well as the budget and accounting formats. Further to provide a simplified tool kit to the ULBs for recording the accounting entries, Ministry of Urban Development in cooperation with the Office of C&AG of India has prepared a National Municipal Accounting Manual (NMAM) and circulated to all States/UTs in January, 2005. The Manual comprehensively details the accounting policies, procedures, guidelines designed to ensure correct, complete and timely recording of municipal transactions and produce accurate and relevant financial reports. The NMAM would help the States prepare their state-level accounting manuals in accordance with their own requirements for use by the ULBs. This initiative is expected not only to enhance the capacities of ULBs in municipal accounting leading to increased transparency and accountability of utilization of public funds for the development of urban sector but also will help in creating an environment in which urban local bodies can play their role more effectively and ensure better service - delivery.
Service Level Benchmarks
Ministry of Urban Development has laid down Service Level Benchmarks for urban services like water supply , sanitation and urban transport. Working towards achieving these Benchmarks would bring about a paradigm shift in working of the urban local bodies to provide world class urban services.
Public-Private Participation Guidelines
Central Government will develop guidelines for involvement of the private sector in infrastructure, which will ensure competitive biding process in a transparent manner. These guidelines will not only protect the consumers but also ensure integrity of the process. This would support municipalities in designing the PPP process on the lines of the BOT Centre in Philippines or the PPP in the Ministry of Finance in South Africa.
Push to Reforms through Jawaharlal Nehru National Urban Renewal Mission(JNNURM)
When the 7 year JNNURM was launched in December 2005, release of Additional Central Assistance (ACA) under the Mission was made conditional to the States and Urban Local Bodies carrying out urban reforms. The reforms include:
Implementation of 73rd and 74th Constitutional Amendments for decentralisation
Repeal of /Urban Land Ceilings and Regulation Act
Reform in Rent Control Laws
Rationalisation of Stamp Duty
Enactment of Public Disclosure law
Enactment of Community Participation Law
Assigning/associating urban local bodies in planning function
Accrual based double entry system of accounting
Property Tax calibration with GIS
Recovery of User Charge
Internal earmarking of budget for basic service to urban poor
Provision of basic services to urban poor
Revision of bylaws for streamlining approval process for building construction
Simplification of law for change in land use
Introducing property title certification
Earmarking developed land or housing for the economically weaker sections
Computerisation of registration of land and property
Revision of byelaws for rain water harvesting and water conservation
Bylaws for recycled water
Administrative reforms like reduction in establishment cost
Encouraging private public partnership