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.
On March 19, Gujarat reported its first two cases of COVID-19. Since then, the number of cases have risen steadily. As of May 2, Gujarat has 4,721 confirmed cases (second highest in the country, after Maharashtra) of COVID-19. Of this 3,750 are active cases and 236 have died. The state government has responded with various actions to contain the spread and impact of COVID-19. In this blog, we look at the key measures taken by the Gujarat Government till May 1, 2020.
Initial phase
As COVID-19 cases were rising in other parts of the country, the Gujarat government notified the Gujarat Epidemic Diseases, COVID-19 Regulations, 2020 on March 14,. These regulations detail the responsibilities of hospitals and individuals, and the powers of officials with regards to COVID-19. These include: (i) flu corners in all hospitals for screening purposes, (ii) mandatory collection of travel history of people during screenings in all hospitals, (iii) mandating people with travel history to COVID-affected countries to be isolated /quarantined based on symptoms, (iv) forced detention and isolation of suspected patients who refuse voluntary isolation, and (v) containment measures in an area once positive cases are detected. Some of the other early measures are summarised below:
Health measures
The COVID-19 regulations were immediately supplemented with the n-COVID-19 Guidelines. These guidelines cover: (i) case definitions, (ii) basic infection prevention control measures, and (iii) standard precautions to be followed during the care and treatment of suspected patients.
On March 15, the government instructed all higher education institutions and other educational institutions including schools, polytechnics, anganwadis, to shut down till March 29. However, examinations of class X, XII, and universities were permitted to continue. Further, spitting in public was made a punishable offence.
On March 19, the government ordered the closure of gyms, amusement parks, wedding halls, till March 31. Additionally, all private doctors, practising modern as well as traditional systems of medicine, were instructed to report suspect cases to the government.
A Fever Helpline 104 was launched on March 20 for reporting of suspect cases of COVID-19. Further, guidelines were also issued on the reporting of cases of Severe Acute Respiratory Illnesses (SARI) to the government. These include: (i) preparation of travel history and contact lists of reported suspect cases, (ii) nodal officer to decide on steps and treatment protocol for such cases, (iii) relevant authorities to initiate follow up and contact tracing for the patient for last 14 days, and (iv) initiating cluster management guidelines when new cases emerge.
Essential goods and services
On March 20, a committee was formed by the government for daily monitoring of the availability, supplies, and manufacturing of medicines, masks, and sanitisers. On March 21, a Khas Kharid Committee was set up to ensure procurement of necessary medicines, equipments, and human resources during emergencies, bypassing existing purchase guidelines, if necessary.
Between March 21 and March 22, the government announced a partial lockdown and released a list of essential services and businesses that were allowed to operate till March 25 in the cities of Ahmedabad, Surat, Vadodara,Rajkot, Kutch and Gandhinagar. These include: (i) government and municipal departments, (ii) shops selling essential goods, (iii) various medical facilities such as hospitals, clinics, and pharmacies, (iv) public utilities, (v) railways and transportation facilities, (vi) media, telecom, IT services, and (vii) banks and insurance firms.
The government also invited NGOs to collaborate in the fight against COVID-19, by arranging for the supply of masks, sanitisers, and infrared thermometers, and running awareness campaigns.
Administrative measures
On March 18, the government issued guidelines specifying preventive measures to be taken in all government offices and employees. Recommendations inlcude: (i) avoiding face-to-face meetings and non-essential travel, (ii) closure of gyms and yoga centres in the Secretariat, (iii) home quarantine for officials exhibiting any symptoms, and (iv) mandatory leave to be given to such persons going on quarantine.
On March 21, the government released the terms of reference of Regional Nodal Officers appointed to work towards preventing the spread of COVID-19.
On March 23, the Gujarat Legislative Assembly decided to indefinitely postpone the Rajya Sabha elections that were originally to be held on March 26.
Other measures
An advisory was issued requesting private firms to not lay off workers (even if they fall sick to COVID-19) or reduce their salaries.
During the lockdown
On March 23, the state government extended and expanded the partial lockdown announced in select cities to the entire state. The lockdown was to be in place from March 23 to March 31. In addition to the exemptions announced in the partial lockdown orders, services such as (i) cattle feeding and veterinary services, (ii) stock broking, (iii) postal and courier services, and (iv) operation of industries where workers are available on site, were permitted. The state-wide lockdown has been followed by a nation-wide lockdown since March 25 . This has been further extended until May 17. Some of the key measures undertaken during the lockdown period are:
Health measures
On March 27, all private clinics and hospitals in the state were directed to utilise the Dr. TeCHO mobile app developed by the government. The app can be used for uploading information related to: (i) sample collection and (ii) reporting and surveillance of all SARI cases. Another app was launched to keep track of home quarantined people.
On March 30, COVID-19 was included as a notified disaster under the State Disaster Response Fund (SDRF). Thus, all expenditure related to relief measures for displaced / homeless people, migrant labour or other stranded persons due to the lockdown, will be made out of the SDRF.
On March 31, the government released new guidelines for the clinical management of COVID-19. These cover: (i) triage activities, (ii) case definitions and classification, (iii) infection and prevention control measures, (iii) specimen collection and handling, (iv) management and prevention of medical complications, (v) clinical management for COVID-19, (vi) discharge policy for patients, and (vii) dead body management.
To exclusively cater to COVID-19 cases, four government hospitals and three private hospitals were declared as designated COVID-19 treatment facilities. Further, the government instructed all COVID-19 hospitals to provide treatment to the people free of cost. On May 1, 26 hospitals were additionally designated as COVID-19 facilities.
Resource Management: Between March 31 and April 7, the government initiated multiple measures to address the shortage of medical practitioners in government hospitals. These include: (i) extending tenures of retiring medical personnel, (ii) ad-hoc recruitment of teachers in medical colleges, (iii) contract-based appointments of class-1 specialist and class-2 medical officers from private sector, (iv) additional responsibilities to select class-1 doctors from the epidemiologist department, and (v) temporary shifting of Ayurvedic medical officers to various locations.
On March 28, the state released guidelines for Human Resource management (HRM) in COVID-19 facilities. These include: (i) creation of district level task forces, (ii) patient flow algorithm, (iii) deployment and rotation of HR, including residents and nursing staff, and (iv) pooling of HR from various institutes and cadres.
The state has also allowed the use of AYUSH remedies and medicines, particularly for persons quarantined through contact tracing and to frontline personnel. Teams of corona warriors have been formed to assist people with preventive care. In addition, local officials have been asked to utilise the services of important stakeholders such as teachers, priests, and others, who can influence the social behaviour of people to deal with COVID-19.
A new State Health System Resource Centre has been established as the nodal agency in the state for all COVID-19 related research. Further, a COVID-19 research activity committee has been set up to lead this endeavour.
Welfare measures
On March 25, the state government decided to provide ration to 60 lakh poor families who live on daily wages. Further, on March 28, to minimise the adverse effects of lockdown on casual labour, autorickshaw drivers, and street vendors, the government announced free wheat, rice, pulses, sugar, and iodised salt for the month of April 2020.
A Vadil Vandana scheme was launched to provide free of cost meals to the elderly and the aged living alone in various cities of the state.
The state also announced that electricity bills from March 1 to April 30, can be paid by May 15.
The government announced compensatory packages worth Rs 25 lakh for each frontline worker who may lose life on COVID-19 duty. Such workers include: (i) police personnel and (ii) other government employees under the state government, panchayats, and nagar palikas .
Other measures
Industry: Relaxations from the lockdown were announced for factories and IT/ITES firms, from April 20 onwards. For factories, the conditions specified that adult workers shall be allowed to work for not more than 12 hours per day (six hours at a time) or 72 hours per week. Female workers are not allowed to work between 7 pm and 6 am. Wages are to be proportional to the existing wage structure. IT/ITES firms are allowed operate in non-containment zones at 50% strength and social distancing norms will be required to be followed.
Administrative: On March 30, the government issued an order to continue paying full wages to all fixed-pay government employees who are on leave or working from home during the lockdown. However, the employees are required to report to work whenever required by the government during the lockdown.
On April 15, nodal officers were appointed and given additional financial powers to take control of infectious disease control hospitals.
For more information on the spread of COVID-19 and the central and state government response to the pandemic, please see here.
