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.

In response to the COVID-19 pandemic, the central and state governments have implemented several measures to reduce the spread of the disease and provide relief for those affected by the it.  In this blog, we look at some of the key measures taken by the Government of Chhattisgarh with regard to public health, ensuring supply of essential commodities and providing relief to affected persons.  

COVID-19 cases in the State

As of April 21, 2020, Chhattisgarh has 36 confirmed cases of COVID-19.  Of these, 11 are active cases, and 25 patients have been cured or discharged.   This is illustrated below in Figure 1. 

Figure 1: Day wise COVID-19 Cases in Chhattisgarh

 image

Sources: Ministry of Health and Family Welfare, Government of India; PRS.

Key measures taken by the State Government

On March 13, 2020, the Department of Health and Family Welfare notified the Chhattisgarh Epidemic Disease, COVID-19 Regulations, 2020.   Key provisions of the regulations include: 

  • The district collector can take necessary actions such as sealing geographical area of the district and ban vehicular movement, in order to prevent the spread of the epidemic.  Further, the district administration may take measures such as closure of schools, offices and banning public gatherings. 
     
  • In order to avoid rumours and unauthenticated information, no person or institution can use any print or electronic media for information regarding COVID-I9 without prior permission of Health Department.
     
  • All health facilities (including private) should have COVID-19 corners for screening of suspected cases.  Further, they should record travel history of a person if he has travelled to an area affected by COVID-19.  

Movement restrictions:  Following these regulations, the government announced several additional measures to restrict movement of people to contain the spread of COVID-19.

  • On March 19, the Transport department stopped running of all inter-state buses in the state to restrict movement to and from the state.  On March 21, all city bus services in urban areas of the state were suspended. This was followed by stoppage of all transport including auto, taxi and e-rickshaws.
     
  • On March 22, the government announced a lockdown in all urban areas of the state till March 31 during which all offices, institutions and other activities were to remain closed.   Essential services such as medical shops, vegetable shops, petrol pumps, electricity and water supply services were open.    
         
  • On March 25, the central government announced on a 21-day country-wide lockdown till April 14.  On April 14, the lockdown was further extended till May 3, 2020. 

Essential Goods and Services: Following the lockdown, the government notified certain additional essential goods and services that will remain unaffected by the lockdown.   These are noted below:  

  • On March 13, 2020, the central government notified hand sanitisers, surgical masks and N-95 masks as Essential Commodities.  This implies that the government can regulate the product, supply and pricing of these items.   Following this, the state government notified that the district administration should monitor the price of surgical masks, N-95 masks and hand sanitisers in each district of the state.
     
  • On March 24, the state department of Food and Public Distribution notified certain additional essential goods and services under the Essential Commodities Act, 1955.  These include: (i) wheat and rice mills, (ii) operations of items used in acquirement or storage of items under the Public Distribution System, such as fertilisers, (iii) supply of Petrol, Diesel, CNG and LPG, among others.
     
  • On April 15, the Ministry of Home Affairs issued guidelines on the measures to be taken by state governments until May 3.  As per these guidelines, select activities will be permitted in less-affected districts from April 20 onwards to reduce the hardships faced by people.  Permitted activities include: (i) health services such as hospitals, clinics, and vets, (ii) agriculture and related activities such as fisheries and plantations, (iii) MNERGA work, (iv) construction activities, and (v) industrial establishments.

Relief measures:  During the lockdown, the state government announced several measures to provide relief to the affected individuals.  Key measures include: 

  • Rice for two months will be provided in April to all beneficiaries under the Public Distribution System.  Antyodaya & Annapurna ration card holders will also get sugar and salt for two months in April.  Two quintal of rice is allocated to every gram panchayat, which can be utilised for distribution to individuals without ration cards, subject to a maximum of 5 kg for an individual. 
     
  • 4 kg of rice at primary level and 6 kg at upper primary level will be provided to school children under the Mid-day Meal Scheme, on account of closure of schools.  Further, arrangements will be made to provide ready to eat take home rations for undernourished children between the age of 3 to 6 at Aanganwadi centres.  
  • The government approved sanction of MLA funds for corona virus prevention and other necessary arrangements and support.  The Chief Minister announced that there will be no mandatory deduction from salaries of state government officials and employees for pandemic relief. 
     
  • The state’s Labour Department sanctioned Rs 3.8 crore to aid labourers affected due to lockdown. 
     
  • Pending taxes, interest and penalties of bus and truck operators of nearly Rs 331 crore to be waived off.  

Health Measures:  Over the last few weeks, the government issued several guidelines and orders on containment of the virus, patient handling and protection of healthcare workers.  Some of these are noted below:

  • On March 23, the government of Chhattisgarh declared Corona Virus as a "Notified Infectious Disease" under the Chhattisgarh Public Health Act, 1949.  Further, it notified measures to be taken for prevention of spread of COVID-19 at industries and workplaces.  These included restricting the number of employees at workplaces, and ensuring sanitisation at workplace.  
     
  • Guidelines regarding bio-medical waste in quarantine homes and camps were notified.  These guidelines provide that all workers involved in waste collection should be provided with personal protective equipment.  Further, vehicles carrying such waste should be sanitised with 1% hypochlorite after every trip. 
     
  • On April 11, the Department of Health and Family Welfare made it mandatory to wear a mask for all persons while stepping out of their house for any public place. 
     
  • The department also released guidelines for patients cured of COVID-19.  These guidelines provide that such persons should be escorted to their home district from the hospital and regular monitoring and supervision of their health should be ensured by the district administration.   
     
  • Further, the department released guidelines for continuation of other hospital services during COVID-19 outbreak.  The guidelines provide that the patients should be advised on phone as far as possible, and should be given separate timings for in-person appointments to avoid congestion at hospitals.  On April 18, the Chief Minister announced an online health consultation website for patients, through which patients can seek free of cost advice from doctors.   

For more information on the spread of COVID-19 and the central and state government response to the pandemic, please see here.