"Cityscapes 2004": A Global Convention on Agenda for Urban Infrastructure Reforms
November 1-2, 2004, New Delhi

Welcome Address by Dr A C Muthiah, Past President, FICCI

Shri Ghulam Nabi Azad ji, Hon'ble Union Minister for Urban Development & Poverty Alleviation
Shri Babu Jacob, Chief Secretary, Govt of Kerala
Shri Anil Baijal, Secretary, Ministry of Urban Development & Poverty Alleviation
Mr Pradeep Singh, Chairman, Urban Development Committee, FICCI
Friends,
It gives me great pleasure in welcoming you all today at this Convention. I am extremely thankful to the Ministry of Urban Development & Poverty Alleviation and the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry for extending support in making this event happen. In particular the Ministry of Urban Development has been a proactive partner in this endeavour and we are grateful for their encouragement and continuous guidance.

I am thankful to international speakers and delegates who have come from USA, Sweden, Australia and Thailand to share their country experiences at this convention. We have a national representation of people from Ahmedabad, Gwalior, Hyderabad, Shimla, Punjab, Kolkata, Kerala, Bangalore, urban development authorities and municipalities in the audience.

I would like to thank the partners and sponsors for their support to this event. Partner states Kerala and Punjab. Partner organizations USAID, Sida and HUDCO and IL&FS.

India's cities and towns represent the world's second largest urban system, house 285 million people (or 28% of our population), 70 million of which are estimated to be poor. Already contributing over 50% of the country's GDP, urban India needs to change and reform if it is to contribute to higher rates of economic growth and poverty reduction by providing infrastructure and amenities to support a growing inflow of people from rural areas. Although the urban sector contributes more than 90% of total government revenues, yet only a fraction of this is ploughed back.

The result is that despite their growing importance in the economy, Indian cities woefully lack in infrastructure facilities. Most of our cities and towns face serious shortage of power, water supply, sewerage, transportation and other civic facilities. Two critical factors have led to this sorry state of affairs:

• Dearth of funds with the civic bodies
  
• Lack of proper service orientation among civic managers

The panacea for the two problems could be found through intensive private-public partnerships. The private sector can bring in the much-needed efficiency and supplement the government's effort in development of infrastructure and in ensuring adequacy and efficiency of urban services. But there are a number of hurdles towards that goal:

The biggest hurdle in promoting public private partnership (PPP) is the absence of suitable provisions in the State Municipal Laws. The laws require that such services are to be provided by either municipal bodies themselves or their agencies. Our municipal laws lack provisions that permit private sector to provide municipal services.

Also missing is a regulatory framework that encompasses service standards, quality and tariff issues and balances the interests of industry and consumer.

Due to lack of strong regulatory framework, risk management becomes critical. An assessment of risks, mitigation measures and appropriate allocation through standardized documentation are lacking in the system.

It needs to be recognized that considerable rigor is required in project development through PPP. There is lack of necessary project development funding backed by appropriate technical assistance and process management.

Many private sector initiatives have been abandoned due to lack of political support or ad hoc changes in policy.

Under PPPs, the role of consumers and communities has to become more important, especially in influencing initial design decision through articulation of local demand, better services as well as in monitoring contractual performance. In case of Tirupur, the local industrialists association, a critical user group, has been a major force in project development.

With the enactment of the 74th Amendment of the Constitution - known as the first generation of urban sector reforms, urban local bodies in the country have acquired a statutory status. However, it has been observed that while implementing many of the provisions of the 74th Amendment Act, the spirit of the Act i.e. "decentralisation" has not been fully implemented by State Governments. Urban local bodies in many States are still functioning as residuary agencies. As a result, they are not able to fulfill their assigned functions, particularly those, where financial implications are involved. Probably the representatives of the various states present here today would be able to throw some light on this.

In spite of various hurdles, different forms of public private partnership in urban infrastructure provision are now being practised in India. Contracting out, convergence of resources and raising funds from primary capital market are the key innovations that have been taken by various cities in different parts of the country. However, such examples are few and need to be replicated in many more cities.

Therefore, a radical reform of the framework that governs urban infrastructure services is required to meet the urban challenge. This has to be a departure from traditional dependence on government as policy-maker, regulator, financier and service provider, to one in which the government creates the policy and regulatory framework through a greater reliance on the private sector.

The Ministry of Urban Development and Poverty Alleviation has provided the Guidelines for successful public private partnerships in urban water and sanitation services for States to approve and adopt. Having said that, the reform-linked incentive funds, namely the Urban Reform Incentive Fund to support state level reforms, the City Challenge Fund to fund part of the transition costs for a city government have not been able to provide enough incentives to the States and cities.

Hopefully we shall be able to deliberate on some of these issues in detail in these two days and find some solutions. We will have the advantage of listening to speakers who have come from abroad for this event and learn from them about international best practices and their relevance for India. I am sure the deliberations and discussions would help us lay out a clear road map for the next set of urban infrastructure reforms.

Thank you