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.
Today, the National Medical Commission Bill, 2019 was passed by Lok Sabha. It seeks to regulate medical education and practice in India. In 2017, a similar Bill had been introduced in Lok Sabha. It was examined by the Standing Committee on Health and Family Welfare, which recommended several changes to the Bill. However, the 2017 Bill lapsed with the dissolution of the 16th Lok Sabha. In this post, we analyse the 2019 Bill.
How is medical education and practice regulated currently?
The Medical Council of India (MCI) is responsible for regulating medical education and practice. Over the years, there have been several issues with the functioning of the MCI with respect to its regulatory role, composition, allegations of corruption, and lack of accountability. For example, MCI is an elected body where its members are elected by medical practitioners themselves, i.e., the regulator is elected by the regulated. Experts have recommended nomination based constitution of the MCI instead of election, and separating the regulation of medical education and medical practice. They suggested that legislative changes should be brought in to overhaul the functioning of the MCI.
To meet this objective, the Bill repeals the Indian Medical Council Act, 1956 and dissolves the current MCI.
The 2019 Bill sets up the National Medical Commission (NMC) as an umbrella regulatory body with certain other bodies under it. The NMC will subsume the MCI and will regulate medical education and practice in India. Under the Bill, states will establish their respective State Medical Councils within three years. These Councils will have a role similar to the NMC, at the state level.
Functions of the NMC include: (i) laying down policies for regulating medical institutions and medical professionals, (ii) assessing the requirements of human resources and infrastructure in healthcare, (iii) ensuring compliance by the State Medical Councils with the regulations made under the Bill, and (iv) framing guidelines for determination of fee for up to 50% of the seats in the private medical institutions.
Who will be a part of the NMC?
The Bill replaces the MCI with the NMC, whose members will be nominated. The NMC will consist of 25 members, including: (i) Director Generals of the Directorate General of Health Services and the Indian Council of Medical Research, (ii) Director of any of the AIIMS, (iii) five members (part-time) to be elected by the registered medical practitioners, and (iv) six members appointed on rotational basis from amongst the nominees of the states in the Medical Advisory Council.
Of these 25 members, at least 15 (60%) are medical practitioners. The MCI has been noted to be non-diverse and consists mostly of doctors who look out for their own self-interest over public interest. In order to reduce the monopoly of doctors, it has been recommended by experts that the MCI should include diverse stakeholders such as public health experts, social scientists, and health economists. For example, in the United Kingdom, the General Medical Council which is responsible for regulating medical education and practice consists of 12 medical practitioners and 12 lay members (such as community health members, administrators from local government).
What are the regulatory bodies being set up under the NMC?
The Bill sets up four autonomous boards under the supervision of the NMC. Each board will consist of a President and four members (of which two members will be part-time), appointed by the central government (on the recommendation of a search committee). These bodies are:
How is the Bill changing the eligibility guidelines for doctors to practice medicine?
There will be a uniform National Eligibility-cum-Entrance Test for admission to under-graduate and post-graduate super-speciality medical education in all medical institutions regulated under the Bill. Further, the Bill introduces a common final year undergraduate examination called the National Exit Test for students graduating from medical institutions to obtain the license for practice. This test will also serve as the basis for admission into post-graduate courses at medical institutions under this Bill. Foreign medical practitioners may be permitted temporary registration to practice in India.
However, the Bill does not specify the validity period of this license to practice. In other countries such as the United Kingdom and Australia, a license to practice needs to be periodically renewed. For example, in the UK the license has to be renewed every five years, and in Australia it has to renewed annually.
How will the issues of medical misconduct be addressed?
The State Medical Council will receive complaints relating to professional or ethical misconduct against a registered medical practitioner. If the medical practitioner is aggrieved of a decision of the State Medical Council, he may appeal to the Ethics and Medical Registration Board. If the medical practitioner is aggrieved of the decision of the Board, he can approach the NMC to appeal against the decision. It is unclear why the NMC is an appellate authority with regard to matters related to professional or ethical misconduct of medical practitioners.
It may be argued that disputes related to ethics and misconduct in medical practice may require judicial expertise. For example, in the UK, the regulator for medical education and practice – the General Medical Council (GMC) receives complaints with regard to ethical misconduct and is required to do an initial documentary investigation in the matter and then forwards the complaint to a Tribunal. This Tribunal is a judicial body independent of the GMC. The adjudication decision and final disciplinary action is decided by the Tribunal.
How does the Bill regulate community health providers?
As of January 2018, the doctor to population ratio in India was 1:1655 compared to the World Health Organisation standard of 1:1000. To fill in the gaps of availability of medical professionals, the Bill provides for the NMC to grant limited license to certain mid-level practitioners called community health providers, connected with the modern medical profession to practice medicine. These mid-level medical practitioners may prescribe specified medicines in primary and preventive healthcare. However, in any other cases, these practitioners may only prescribe medicine under the supervision of a registered medical practitioner.
This is similar to other countries where medical professionals other than doctors are allowed to prescribe allopathic medicine. For example, Nurse Practitioners in the USA provide a full range of primary, acute, and specialty health care services, including ordering and performing diagnostic tests, and prescribing medications. For this purpose, Nurse Practitioners must complete a master's or doctoral degree program, advanced clinical training, and obtain a national certification.
