The President addressed the Parliament after the 2009 Lok Sabha Elections on 4th June 2009. She also addressed Parliament on 22nd February 2010, as well as on 21st February 2011. The tables below highlight some items from the agenda of the central government as outlined in these speeches, as well as the initiatives undertaken with respect to these agenda items. Table 1: Some Items from the President’s Address to Parliament on 4th June 2009
| Agenda Items outlined in the President’s Speech | Current Status |
| Establishment of National Counter-Terrorism Centre | Proposed launch of NCTC in March 2011 on hold |
| Enactment of legislation for prevention of communal violence | Communal Violence Bill 2005 pending in Parliament. New bill drafted by NAC but not introduced in Parliament |
| Unique Identity Card scheme to be implemented in three years | Unique Identification Authority of India created under Planning Commission on 28 January 2009. Bill to give statutory status pending in Parliament |
| Establishment of a regulator for the pension sector | Bill introduced in Lok Sabha on 24 March 2011 |
| Convergence of NREGA with other programs; expansion of works permitted; independent monitoring and grievance redressal | |
| Rashtriya Swasthya Bima Yojana to cover all families below the poverty line in five years | |
| Enactment of Right to Free and Compulsory Education Bill | Bill passed in 2009 and brought into force on 1 April 2009 |
| Madhyamik Shiksha Abhiyan to universalize access to secondary education | Rashtriya Madhyamik Shiksha Abhiyan launched in March 2009 |
| National Mission for Female Literacy to make every woman literate in five years | National Literacy Mission recast in 2009 to focus on female literacy |
| Construction of 1.2 crore rural houses under Indira Awas Yojana in five years | |
| Introduction of Rajiv Awas Yojana for slum dwellers and urban poor | Phase I approved by Cabinet on 2 June 2011 |
| Enactment of National Food Security Act | Introduced in Lok Sabha on 22 December 2011 |
| Enactment of Amendment Bill to Land Acquisition Act and Rehabilitation and Resettlement Bill | Land Acquisition, Rehabilitation and Resettlement Bill 2011 introduced in Lok Sabha on 7 September 2011 |
| Enactment of Women’s Reservation Bill | Passed by Rajya Sabha, pending in Lok Sabha |
| Constitutional Amendment for 50 percent reservation for women in panchayats and urban local bodies | Two Bills introduced in Lok Sabha in November 2009; both pending in Parliament |
| Amendment of RTI to provide for disclosure by government in all non-strategic areas | |
| Model Public Services Law to be drawn up in consultation with states | Right of Citizens for Time Bound Delivery of Goods and Services and Redressal of their Grievance Bill, 2011 introduced in Lok Sabha on 20 December 2011 |
| Introduction of Goods and Services Tax | Constitutional Amendment Bill introduced in Lok Sabha on 22 March 2011 |
| National Council for Human Resources in Health | Introduced in Rajya Sabha on 22 December 2011 |
| National Council for Higher Education | Bill introduced in Rajya Sabha on 28 December 2011 |
*Note: Blank cells indicate that PRS has not been able to find official information in the public domain. Table 2: Some Items from the President’s speech to Parliament on 22nd February 2010
| Agenda Items outlined in the President’s Speech | Current Status |
| Introduction of legislation to ensure food security | Introduced in Lok Sabha on 22 December 2011 |
| Rural teledensity of 40 percent by 2014 | Rural teledensity of 33% as of February 2011 |
| Introduction of Rajiv Awas Yojana for urban poor and slum dwellers | Phase I approved by Cabinet on 2 June 2011 |
| Disposal of remaining claims under the Scheduled Tribes and Other Traditional Forest Dwellers Act | |
| Introduction of amendment to the Wakf Act | Passed by Lok Sabha; pending in Rajya Sabha |
| Enactment of Communal Violence (Prevention, Control and Rehabilitation of Victims) Bill, 2005 | Pending in Rajya Sabha since 2005 |
| Enactment of Women’s Reservation Bill | Passed by Rajya Sabha; pending in Lok Sabha |
| Constitutional amendments for 50 percent reservation for women in panchayats and urban local bodies | Two Bills introduced in Lok Sabha in November 2009; both pending in Parliament |
| Establishment of National Council for Higher Education and Research | Higher Education and Research Bill, 2011 introduced in Rajya Sabha on 28 December 2011 |
| Legislation for facilitating participation of foreign academic institutions in the education sector | Foreign Educational Institutions Bill, 2010 introduced in Lok Sabha on 3 May 2010 |
| Voting rights for Indian citizens living abroad | Bill passed. NRIs can vote at the place of residence that is mentioned in their passport |
Table 3: Some Items from the President’s speech to Parliament on 21st February 2011
| Agenda Items outlined in the President’s Speech | Current Status |
| Enactment of Food Security Law | Introduced in Lok Sabha on 22 December 2011 |
| Whistleblower Bill | Bill passed by Lok Sabha; pending in Rajya Sabha |
| Enactment of Judicial Standards and Accountability Bill | Introduced in Lok Sabha on 1 December 2010 |
| Enactment of new Mines and Minerals Bill | Introduced in Lok Sabha on 12 December 2011 |
| Rural teledensity of 40 percent by 2014 | Rural teledensity of 33% as of February 2011 |
| Construction of 1.2 crore rural houses during 2009-14 | |
| Enactment of Women’s Reservation Bill | Passed by Rajya Sabha; pending in Lok Sabha |
| Introduction of Bill regarding protection of children from sexual offences | Introduced in Rajya Sabha on 23 March 2011 |
| Introduction of Biotechnology Regulatory Authority of India Bill | Not introduced till date |
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.
