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

Inaugural Address by Mr Ghulam Nabi Azad, Union Minister for Urban Development & Poverty Alleviation, Govt of India

I am extremely happy to be present here today at this important convention on "Agenda for Urban Infrastructure Reforms" organized by Ministry of Urban Development and Federation of Indian Chamber of Commerce & Industry. It is widely recognized that urban infrastructure services are the lifeline of cities & urban settlement. Urban infrastructure plays immense role in providing basic and ancillary urban services to citizens to ensure their quality of life. However, lack of long term development strategy, paucity of resources, weak managerial structure and operational deficiencies continue to hinder growth of efficient & environment friendly urban habitats. Burdened with all the problems of growth, cities are increasingly subject to dramatic crisis, especially in developing countries. Unemployment, environmental degradation and lack of urban services, deterioration of existing infrastructure and lack of access to land, finance and adequate shelter are among the main areas of concern.

For better or for worse, the development of contemporary societies will depend largely on understanding and managing the growth of cities. The cities will increasingly become the test bed for the adequacy of political institutions, for the performance of government agencies and for the effectiveness of programmes to combat social exclusion, to protect and preserve the environment and to promote human development.

India is a part of the global trend towards increasing urbanization. As per 2001 census 27.8 per cent of India's population (285 million) lives in urban areas making India's urban system the second largest in the world.

Percentage of urban population having access to safe drinking water supply has increased from 82% in 1991 to 90% as of today. However, only 63% have access to potable water within their premises. The coverage of sanitation facilities is around 63% with sewerage system and low cost sanitation facilities in various cities/towns in the country. On an average, 60% of the solid waste generated is being collected everyday. This reflects inadequacy of core urban infrastructure and its impact on the environment and public health. This evident inadequacy in urban infrastructure has its impact on the environment and public health entailing an enormous economic cost.

It is apparent that Urban India faces daunting challenges. What is required is that the stakeholders in the urban sector must re-engineer themselves to face these challenges. It envisages improving quality of life in cities through improved local governance by reinventing a city as an inclusive city. Such a city provides space and voice to all its stakeholders through inclusive decision making.

It is also no secret that India's rapid urbanization has resulted in an unprecedented urbanization of poverty. There has been significant migration of rural poor to selected urban locations in search of employment and livelihood. While India has made a significant dent on levels of poverty, urban poverty has proved more stubborn in its decline. It is evident that if cities fail to deal constructively with poverty, poverty would seriously undermine the sustainability of cities.

India Infrastructure Report 1996 assessed the total annual investment needs for water and sanitation sector at Rs. 22051 crore during 1996-2006. As against this, the flow of plan funds is estimated to Rs. 5000 crore per annum during the above period leaving a gap of Rs. 17051 crore. Based on the information received from various State Governments/UTs, Ministry of Urban Development & Poverty Alleviation has also assessed requirement of funds for the period 2000-2005 to the tune of Rs. 53190 crores for operation and maintenance of core municipal services.

Going by the availability of actual funds, the resources may not be available to the extent required to meet the expectation of urban population. It will also not be possible for Urban Local Bodies to mobilize resources of such high order within their existing resource generation capacity.

To overcome these constraints and challenges, Ministry of Urban Development has initiated institutional, fiscal and financial reforms. In order to give constitutional status to the local bodies, two Constitutional Amendments commonly known as 73rd and 74th Amendments were made.

These Constitutional Amendments provide for political, administrative and financial independence of local authorities, which is regarded as a touch stone of genuine democracy. The Constitutional Amendment specifies the need for a Constitutional/legal foundation for local self-government. It also ensures that Urban Local Bodies have adequate access to resources to match the task assigned to them on terms which do not impair their basic autonomy.

The first generation urban sector reform is the enactment of Seventy Fourth Constitutional Amendment Act, which recognizes principles of local self government and their empowerment with adequate financial resources. Following various provisions of the above Act, all States have amended their municipal laws to devolve requisite financial powers to Urban Local Bodies to enable them to function as effective, democratic and self-governing institutions of the Government. Subsequently, to strengthen these bodies, second generation reforms have also been initiated.

To improve the governance and management of our cities, we need to adopt new concepts, unconventional methods and novel tools in management of urban areas and embark upon drastic reforms in the urban sector. Good governance is the key to the success of achieving the target of well managed cities in the country. Developing commercially viable urban infrastructure projects, financing by accessing capital market, credit rating of municipal and urban infrastructure entities, forging public private partnership in the provision of urban infrastructure are some of the new approaches that need to be adopted by city planners and managers to improve urban situation in the country. Further, we need to develop capacities of urban local bodies and bring in the use of Information Technology (I.T.) in urban governance and management.

The urban areas in the country being the centres of production of goods and services have acquired an important role in the globalization regime. Augmentation of basic services and urban infrastructure to improve quality of life of urban inhabitants as well as to facilitate economic growth requires huge investment of funds. Soft options for financing urban infrastructure and services available in the past will have to give way to new fiscal instruments which envisage reduction in subsidies, reduction in plan allocation and improved pricing and cost recovery instrument. Therefore, innovative strategies are required to be developed by the Urban Local Bodies to finance urban infrastructure and services.

In recent years, Central Government has provided several fiscal incentives to help mobilize resources for urban infrastructure. These include permitting the issuance of tax free Municipal Bonds, broadening the definition of infrastructure to include urban infrastructure such as water supply and sanitation, removing restrictions in Foreign Direct Investment in Urban Infrastructure and encouraging externally assisted urban infrastructure projects. However, many more such steps are required and implementation of the reforms needs to be expedited by various levels of the governments to meet the financial requirement.

For strengthening of urban Infrastructure, this Ministry operates the Centrally Sponsored Schemes of Infrastructure Development in Mega Cities and Integrated Development of Small and Medium Towns (IDSMT).

My Ministry is now considering bringing these two schemes under one umbrella and extending its coverage to all the towns and cities of the country as per the 2001 census. The unified scheme will push forward the reform agenda of the Ministry. State Governments desirous of accessing funds under the scheme will have to enter into a Memorandum of Agreement (MoA) with the Centre. The MoA will consist of a basket of reforms, some of which will have to be implemented by the ULBs. The scheme will also help incentivise preparation of DPRs, capacity building, bringing in project efficiencies and adoption of innovative and proven technology. A similar scheme exclusively for water supply and sanitation is being considered. With a view to having alternate sources of funding, this Ministry is considering a scheme to enhance the bankability of projects undertaken by ULBs and allow them access to capital market.

Further, to provide an additional incentive for urban- local bodies to become credit worthy and to invest in urban infrastructure, provision has been made for issue of tax free municipal bonds upto Rs. 300 crores in the financial year 2004-05. So far eight city governments have accessed capital market to raise funds for urban infrastructure financing by issue of Tax Free Municipal Bonds. Taken together, they have raised Rs. 532.50 crores from the debt market. Accessing the capital market by the cities has brought about a perceptible change in the mind set of policy makers as also the city managers. There now exists a consensus on the need for structuring commercially viable/bankable projects that could become an instrument for developing a long term debt market in India.

The issues relating to public private partnerships in urban infrastructure have been raised time and again and we understand the concerns of the industry. It facilitates the financing of urban services, augments level of services, enhances efficiency of service delivery system and brings in new technology. In order to enhance efficiency
and effectiveness of the system, the municipal governments and the urban infrastructure agencies are going for management contract. However, private-public partnership has not yet materialized on a scale as required in the sector.

We shall have to get together to put the urban legislation in place, which have been the main hindrance in the urban development process. It is important that all the States adopt the Urban Land (Ceiling and Regulation) Repeal Act, 1999 to initiate developmental activities in their States. It is high time for States to amend their rent laws in the light of the model rent control legislation prepared by the Ministry of Urban Development.

Of course some of the States have already brought into force revised rent laws. Stamp duty and Registration Act also need due attention by States.

I hope this Convention will deliberate the issues in the urban development sector and come out with concrete suggestions and plan of action to implement the agenda of urban sector reforms and funding options, which would in turn strengthen the urban infrastructure.

With these words, I wish the Convention a grand success.

JAI HIND