Enormous scope to raise funds through municipal bonds. Rs 65 lakh crore required as capital investment and services in Indian cities over a 20-year period.
Union housing and urban affairs minister Hardeep Singh Puri today pointed to the financial state of municipalities and lamented the slow pace of reforms.
“Compared to certain other areas of reform, we have been relatively slower in municipal finance reforms, and the financial position of our municipalities is a cause for concern,” Puri said at the inaugural address of Niti Aayog workshop on Municipal Finance & Effective and Accelerated Implementation of Smart Cities held in the capital.
He, however, said there was enormous appetite for fundraising for municipalities: as much as Rs 65 lakh crore will be required as capital investment and services in Indian cities over a 20-year period.
The combined receipts of all municipalities in India is estimated to be less than Rs 1.5 lakh crore, the minister added.
Puri said that municipalities need to lay a strong foundation of robust financial management for enhancing own revenues as well as tapping the capital market through municipal bonds.
He noted that relatively less urbanised states like Rajasthan, Jharkhand and Odisha have been impressive in ushering municipal finance reforms. Jharkhand is possibly the only state that is boldly experimenting with outsourcing of property tax collections.
“I have asked my team at the ministry to undertake concrete steps to support states and cities in municipal finance reforms through model laws and policies on next generation financial management, through a national fiscal database for credible financial information and through certification-based capacity building support,” he told the audience.
The municipal finance market faces many challenges. These include lack of timely disclosure, weak administration, and political interference by way of waivers. Moreover, revenue of urban local bodies is declining in percentage terms and they are becoming increasingly dependent on Central and state government.
He also said that reforms for management of cities should be implemented. “The time has come to adopt the recommendations of the Second Administrative Reforms Commission and merge the functions of the person chairing the municipal council, and the individual exercising executive authority. The position of chairperson/mayor duly created must be filled via a direct electoral process, and should have a fixed five-year tenure. The Mayor should also be given the power to appoint his/her cabinet consisting of councilors selected from the elected members,” he said.
Quoting the McKinsey Global Institute report, he said that as many as 40,000 planners across cities will be required and that at present there are only one-tenth of them available. “A critical component of financial management is human resources. Across India, there is a severe shortage of talent and institutions to aid the urban transition taking place in our country…We need 200-300 planning professionals such as planners, geographers, economists, architects, and digital experts, per Tier 1 and 2 city,” he said.“I urge all state governments, and municipal governments, to look beyond the Indian Administrative Service, and leverage the enormous talent available in Indian society, particularly in the field of finance. Lateral entrance, particularly at the municipal level should be become the norm and not the exception,” he added.