India’s urban population has grown by 32% from 2001 to 2011 as compared to 18% growth in total population of the country.[1] As per Census 2011, 31% of the country’s population (377 million people) live in cities, and contribute to 63% of the country’s GDP.[2] The urban population is projected to grow up to 600 million by 2031.2 With increasing urban population, the need for providing better infrastructure and services in cities is increasing.[3] The government has introduced several schemes to address different urban issues. These include the Atal Mission for Rejuvenation and Urban Transformation (AMRUT), Smart Cities Mission, Heritage City Development and Augmentation Yojana (HRIDAY), Pradhan Mantri Awas Yojana – Housing for All (Urban) (PMAY-U), and Swachh Bharat Mission (Urban).
Last week the Ministry of Urban Development released the next batch of winners under the Smart Cities Mission.[4] This takes the number of smart cities to 90. The government has also announced a few policies and released data indicators to help with the implementation of the urban schemes. In light of all this, we discuss how the new schemes are changing the mandate of urban development, the fiscal challenge of implementing such schemes, and the policies that are trying to address some of these challenges.
Urbanisation in India
The Jawaharlal Nehru National Urban Renewal Mission (JnNURM), launched in 2005, was one of the first urban development schemes implemented by the central government. Under JnNURM, the central government specified certain mandatory and optional reforms for cities, and provided assistance to the state governments and cities that were linked to the implementation of these reforms. JnNURM focused on improving urban infrastructure and service delivery, community participation, and accountability of city governments towards citizens.
In comparison, the new urban schemes move beyond the mandate that was set by JnNURM. While AMRUT captures most of the objectives under JnNURM, the other schemes seek to address issues around sanitation (through Swachh Bharat), affordable housing (through PMAY-U), and technology innovation (through Smart Cities). Further, the new schemes seek to decentralize the planning process to the city and state level, by giving them more decision making powers.2 So, while earlier, majority of the funding came from the central and state governments, now, a significant share of the funding needs to be raised by the cities themselves.
For example, under the Smart Cities Mission, the total cost of projects proposed by the 60 smart cities (winners from the earlier rounds) is Rs 1.3 lakh crore.[5] About 42% of this amount will come from central and state funding towards the Mission, and the rest will be raised by the cities.[6]
The new schemes suggest that cities may raise these funds through: (i) their own resources such as collection of user fees, land monetization, property taxes, etc., (ii) finance mechanisms such as municipal bonds, (iii) leveraging borrowings from financial institutions, and (iv) the private sector through Public Private Partnerships (PPPs).[7]
In 2011, an Expert Committee on Indian Urban Infrastructure and Services (HPEC) had projected that creation of the required urban infrastructure would translate into an investment of Rs 97,500 crore to Rs 1,95,000 crore annually.[8] The current urban schemes are investing around Rs 32,500 crore annually.
Financial capacity of cities
Currently, the different sources of revenue that municipal corporations have access to include: (i) tax revenue (property tax, tax on electricity, toll tax, entertainment tax), (ii) non-tax revenue (user charges, building permission fees, sale and hire charges), (iii) grants-in-aid (from state and central governments), and (iv) debt (loans borrowed from financial institutions and banks, and municipal bonds).
While cities are now required to raise more financing for urban projects, they do not have the required fiscal and technical capacity.8,[9] The HPEC had observed that cities in India are among the weakest in the world, both in terms of capacity to raise resources and financial autonomy. Even though cities have been getting higher allocations from the centre and states, their own tax bases are narrow.8 Further, several taxes that cities can levy are still mandated by the state government. Because of their poor governance and financial situation, cities also find it difficult to access external financing.8,7
In order to help cities improve their finances, the government has introduced a few policies, and released a few indicators. Some of these are discussed below:
Policy proposals and data indicators
Value Capture Financing (VCF): The VCF policy framework was introduced by the Ministry of Urban Development in February 2017.[10] VCF is a principle that states that people benefiting from public investments in infrastructure should pay for it. Currently when governments invest in roads, airports and industries in an area, private property owners in that area benefit from it. However, governments recover only a limited value from such investments, constraining their ability to make further public investments elsewhere. VCF helps in capturing a part of the increment in the value of land due to such investments, and use it to fund new infrastructure projects.
The different instruments of VCF include: land value tax, fee for changing land use, betterment levy, development charges, transfer of development rights, and land pooling systems.10 For example, Karnataka uses certain value capture methods to fund its mass transit projects. The Mumbai Metropolitan Region Development Authority (MMRDA), and City and Industrial Development Corporation Limited (CIDCO) have used betterment levy (tax levied on land that has gained in value because of public infrastructure investments) to finance infrastructure projects.
Municipal bonds: Municipal bonds are bonds issued by urban local bodies (municipal corporations or entities owned by municipal bodies) to raise money for financing specific projects such as infrastructure projects. The Securities and Exchange Board of India regulations (2015) regarding municipal bonds provide that, to issue such bonds, municipalities must: (i) not have negative net worth in any of the three preceding financial years, and (ii) not have defaulted in any loan repayments in the last one year.[11] Therefore, a city’s performance in the bond market depends on its fiscal performance. One of the ways to determine a city’s financial health is through credit ratings.
Credit rating of cities: In September 2016, the Ministry of Urban Development started assigning cities with credit ratings.[12] These credit ratings were assigned based on assets and liabilities of the cities, revenue streams, resources available for capital investments, accounting practices, and other governance practices.
Of the total 20 ratings ranging from AAA to D, BBB– is the ‘Investment Grade’ rating and cities rated below BBB– need to undertake necessary interventions to improve their ratings for obtaining positive response to the Municipal Bonds to be issued. By March 2017, 94 cities were assigned credit ratings, 55 of which got ‘investment grade’ ratings.[13]
Credit ratings indicate what projects might be more lucrative for investments. This, in turn, helps investors decide where to invest and determine the terms of such investments (based on the expected returns).
Earlier this month, the Pune Municipal Corporation raised Rs 200 crore through the sale of municipal bonds, to finance water supply projects under the Smart Cities Mission.[14] The city had received an AA+ credit rating (second highest rating) in the recent credit rankings assigned by the central government.
Other than credit ratings, the Ministry of Urban Development has also come up with other data indicators around cities such as the Swachh Bharat rankings, and the City Liveability Index (measuring mobility, access to healthcare and education, employment opportunities, etc). These rankings seek to foster a sense of competition across cities, and also help them map their performances year on year.
Some financing mechanisms, such as municipal bonds, have been around in India for the last two decades, but cities haven’t been able to make much use of them. It remains to be seen whether the introduction of indicators such as credit ratings helps the municipal bond market take off. While these mechanisms may improve the finances of cities, the question is would more funding solve the cities’ problems. Or would it require municipal government to take a different approach to problem solving.
[1] Census of India, 2011.
[2] Mission Statement and Guidelines, Smart Cities, Ministry of Urban Development, June 2015, http://smartcities.gov.in/writereaddata/SmartCityGuidelines.pdf.
[3] Report on Indian Urban Infrastructure and Services, March, 2011, The High Powered Expert Committee for estimating the investment requirements for urban infrastructure services, http://icrier.org/pdf/FinalReport-hpec.pdf.
[4] “30 more smart cities announced; takes the total to 90 so far”, Press Information Bureau, Ministry of Urban Development, June 23, 2017.
[5] Smart Cities Mission, Ministry of Urban Development, last accessed on June 30, 2017, http://smartcities.gov.in/content/.
[6] Smart City Plans, Last accessed in June 2017.
[7] “Financing of Smart Cities”, Smart Cities Mission, Ministry of Urban Development, http://smartcities.gov.in/upload/uploadfiles/files/Financing%20of%20Smart%20Cities.pdf.
[8] “Report on Indian Urban Infrastructure and Services”, March, 2011, The High Powered Expert Committee for estimating the investment requirements for urban infrastructure services, http://icrier.org/pdf/FinalReport-hpec.pdf.
[9] Fourteenth Finance Commission, Ministry of Finance, February 2015, http://finmin.nic.in/14fincomm/14fcrengVol1.pdf.
[10] Value Capture Finance Policy Framework, Ministry of Urban Development, February 2017, http://smartcities.gov.in/upload/5901982d9e461VCFPolicyFrameworkFINAL.pdf.
[11] Securities and Exchange Board of India (Issue and Listing of Debt Securities by Municipalities) Regulations, 2015, Securities and Exchange Board of India, July 15, 2015, http://www.sebi.gov.in/sebi_data/attachdocs/1436964571729.pdf.
[12] “Credit rating of cities under urban reforms begins”, Press Information Bureau, Ministry of Urban Development, September 6, 2016.
[13] “Credit Rating of Urban Local Bodies gain Momentum”, Press Information Bureau, Ministry of Urban Development, March 26, 2017.
[14] “Pune civic body raises Rs200 crore via municipal bonds”, LiveMint, June 19, 2017, http://www.livemint.com/Money/JOOzaSTKnC6k1EZGeFh8LJ/Pune-civic-body-raises-Rs200-crore-via-municipal-bonds.html.
India has been in lockdown since March 25, 2020. During this time, activities not contributing to the production and supply of essential goods and services were completely or partially suspended. Passenger trains and flights were halted. The lockdown has severely impacted migrants, several of whom lost their jobs due to shutting of industries and were stranded outside their native places wanting to get back. Since then, the government has announced relief measures for migrants, and made arrangements for migrants to return to their native place. The Supreme Court of India, recognising the problems faced by migrants stranded in different parts of the country, reviewed transportation and relief arrangements made by the government. On June 9, the Court directed central and state governments to complete transportation of remaining stranded migrants and expand focus of relief measures to facilitate employment for returning migrants. In this blog, we highlight some facts about migration in India, summarise key relief measures announced by the government and directives issued by the Supreme Court for the migrant population in relation to the lockdown.
Overview of Migration
Migration is the movement of people away from their usual place of residence, across either internal (within country) or international (across countries) borders. The latest government data on migration comes from the 2011 Census. As per the Census, India had 45.6 crore migrants in 2011 (38% of the population) compared to 31.5 crore migrants in 2001 (31% of the population). Between 2001 and 2011, while population grew by 18%, the number of migrants increased by 45%. In 2011, 99% of total migration was internal and immigrants (international migrants) comprised 1%.[1]
Patterns of migration
Internal migrant flows can be classified on the basis of origin and destination. One kind of classification is: i) rural-rural, ii) rural-urban, iii) urban-rural and iv) urban-urban. As per the 2011 census, there were 21 crore rural-rural migrants which formed 54% of classifiable internal migration (the Census did not classify 5.3 crore people as originating from either rural or urban areas). Rural-urban and urban-urban movement accounted for around 8 crore migrants each. There were around 3 crore urban-rural migrants (7% of classifiable internal migration).
Another way to classify migration is: (i) intra-state, and (ii) inter-state. In 2011, intra-state movement accounted for almost 88% of all internal migration (39.6 crore persons).1
There is variation across states in terms of inter-state migration flows. According to the 2011 Census, there were 5.4 crore inter-state migrants. As of 2011, Uttar Pradesh and Bihar were the largest source of inter-state migrants while Maharashtra and Delhi were the largest receiver states. Around 83 lakh residents of Uttar Pradesh and 63 lakh residents of Bihar had moved either temporarily or permanently to other states. Around 60 lakh people from across India had migrated to Maharashtra by 2011.
Figure 1: Inter-state Migration (in lakh)
Note: A net out-migrant state is one where more people migrate out of the state than those that migrate into the state. Net in-migration is the excess of incoming migrants over out-going migrants.
Sources: Census 2011; PRS.
Reasons for internal migration and size of migrant labour force
As of 2011, majority (70%) of intra-state migration was due to reasons of marriage and family with variation between male and female migrants. While 83% of females moved for marriage and family, the corresponding figure for males was 39%. Overall, 8% of people moved within a state for work (21% of male migrants and 2% of female migrants).
Movement for work was higher among inter-state migrants- 50% of male and 5% of female inter-state migrants. As per the Census, there were 4.5 crore migrant workers in 2011. However, according to the Working Group Report on Migration, the Census underestimates the migrant worker population. Female migration is recorded as movement due to family since that is the primary reason. However, many women take up employment after migrating which is not reflected in the number of women moving for work-related reasons. [2]
According to the Economic Survey, 2016-17, Census data also underestimates temporary migrant labour movement. In 2007-08, the NSSO estimated the size of India’s migrant labour at seven crore (29% of the workforce). The Economic Survey, 2016-17, estimated six crore inter-state labour migrants between 2001-2011. The Economic Survey also estimated that in each year between 2011-2016, on average 90 lakh people travelled for work.
Figure 2: Reasons for intra-state migration
Sources: Census 2011; PRS.
Figure 3:Reasons for inter-state migration
Sources: Census 2011; PRS.
Issues faced by migrant labour
Article 19(1)(e) of the Constitution, guarantees all Indian citizens the right to reside and settle in any part of the territory of India, subject to reasonable restrictions in the interest of the general public or protection of any scheduled tribe. However, people migrating for work face key challenges including: i) lack of social security and health benefits and poor implementation of minimum safety standards law, ii) lack of portability of state-provided benefits especially food provided through the public distribution system (PDS) and iii) lack of access to affordable housing and basic amenities in urban areas. 2
Poor implementation of protections under the Inter-State Migrant Workmen Act, 1979 (ISMW Act)
The ISMW Act provides certain protections for inter-state migrant workers. Labour contractors recruiting migrants are required to: (i) be licensed, (ii) register migrant workers with the government authorities, and (iii) arrange for the worker to be issued a passbook recording their identity. Guidelines regarding wages and protections (including accommodation, free medical facilities, protective clothing) to be provided by the contractor are also outlined in the law.
In December 2011, a report by the Standing Committee on Labour observed that registration of workers under the ISMW Act was low and implementation of protections outlined in the Act was poor. The report concluded that the Central government had not made any concrete and fruitful efforts to ensure that contractors and employers mandatorily register the workers employed with them enabling access to benefits under the Act.
Lack of portability of benefits
Migrants registered to claim access to benefits at one location lose access upon migration to a different location. This is especially true of access to entitlements under the PDS. Ration card required to access benefits under the PDS is issued by state governments and is not portable across states. This system excludes inter-state migrants from the PDS unless they surrender their card from the home state and get a new one from the host state.
Lack of affordable housing and basic amenities in urban areas
The proportion of migrants in urban population is 47%.1 In 2015, the Ministry of Housing and Urban Affairs identified migrants in urban areas as the largest population needing housing in cities. There is inadequate supply of low-income ownership and rental housing options. This leads to the spread of informal settlements and slums. The Prime Minister Awaas Yojana (PMAY) is a central government scheme to help the economically weaker section and low-income group access housing. Assistance under the scheme includes: i) slum rehabilitation, ii) subsidised credit for home loans, iii) subsidies up to Rs 1.5 lakh to either construct a new house or enhance existing houses on their own and iv) increasing availability of affordable housing units in partnership with the private sector. Since housing is a state subject, there is variation in approach of States towards affordable housing.2
Steps taken by the government with regard to migrant labour during the lockdown
During the lockdown, several inter-state migrant workers tried to return to their home state. Due to the suspension public transport facilities, migrants started walking towards their home state on foot. Subsequently, buses and Shramik special trains were permitted by the central government subject to coordination between states.[3],[4] Between May 1 and June 3, more than 58 lakh migrants were transported through specially operated trains and 41 lakh were transported by road. Measures taken by the government to aid migrants include-
Transport: On March 28, the central government authorised states to use the State Disaster Response Fund to provide accommodation to traveling migrants. States were advised to set up relief camps along highways with medical facilities to ensure people stay in these camps while the lockdown is in place.
In an order issued on April 29, the Ministry of Home Affairs allowed states to co-ordinate individually to transport migrants using buses. On May 1, the Indian Railways resumed passenger movement (for the first time since March 22) with Shramik Special trains to facilitate movement of migrants stranded outside their home state. Between May 1 and June 3, Indian Railways operated 4,197 Shramik trains transporting more than 58 lakh migrants. Top states from where Shramik trains originated are Gujarat and Maharashtra and states where the trains terminated are Uttar Pradesh and Bihar.[5] Note that these trends largely correspond to the migration patterns seen in the 2011 census data.
Food distribution: On April 1, the Ministry of Health and Family Affairs directed state governments to operate relief camps for migrant workers with arrangements for food, sanitation and medical services. On May 14, under the second tranche of the Aatma Nirbhar Bharat Abhiyaan, the Finance Minister announced that free food grains would be provided to migrant workers who do not have a ration card for two months. The measure is expected to benefit eight crore migrant workers and their families. The Finance Minister also announced that One Nation One Ration card will be implemented by March 2021, to provide portable benefits under the PDS. This will allow access to ration from any Fair Price Shop in India.
Housing: The Aatma Nirbhar Bharat Abhiyaan also launched a scheme for Affordable Rental Housing Complexes for Migrant Workers and Urban Poor to provide affordable rental housing units under PMAY. The scheme proposes to use existing housing stock under the Jawaharlal Nehru National Urban Housing Mission (JnNURM) as well as incentivise public and private agencies to construct new affordable units for rent. Further, additional funds have been allocated for the credit linked subsidy scheme under PMAY for middle income group.
Financial aid: Some state governments (like Bihar, Rajasthan and Madhya Pradesh) announced one-time cash transfers for returning migrant workers. UP government announced the provision of maintenance allowance of Rs 1,000 for returning migrants who are required to quarantine.
Directions by the Supreme Court
The Supreme Court reviewed the situation of migrant labourers stranded in different parts of the country, noting inadequacies and lapses in government response to the situation.
[1] Census, 2011, Office of the Registrar General & Census Commissioner, Ministry of Home Affairs.
[2] Report of Working Group on Migration, Ministry of Housing and Urban Poverty Alleviation, January 2017, http://mohua.gov.in/upload/uploadfiles/files/1566.pdf.
[3] Order No. 40-3/2020-DM-I (A), Ministry of Home Affairs, April 29, 2020, https://prsindia.org/files/covid19/notifications/4233.IND_Movement_of_Persons_April_29.pdf.
[4] Order No. 40-3/2020-DM-I (A), Ministry of Home Affairs, May 1, 2020, https://prsindia.org/files/covid19/notifications/IND_Special_Trains_May_1.jpeg.
[5] “Indian Railways operationalizes 4197 “Shramik Special” trains till 3rd June, 2020 (0900hrs) across the country and transports more than 58 lacs passengers to their home states through “Shramik Special” trains since May 1”, Press Information Bureau, Ministry of Railways, June 3, 2020, https://pib.gov.in/PressReleseDetail.aspx?PRID=1629043.
