Cities are at the core of the government’s push for infrastructure development, Foreign Direct Investment for supporting Make in India, and expedite their efforts to make India a USD 5-trillion economy. Simultaneously, cities are also looked up to as the major players in achieving climate agenda, Sustainable Development Goals, and New Urban Agenda’s targets, among many other international objectives. There is a need to balance building a prosperous nation and a sustainable ecosystem of urban spaces. Cities will have to up their game and make their systems more efficient, agile, and well-financed to achieve all objectives at a time. For this, the outreach of the central government to international and national agencies must be in coordination with local governments to augment the desired outcomes.
A common belief is that if someone has to do something big in life, he should head to a city. The same is true for governments. Whether a country is planning on reviving its economy or looking for a solution to a crisis, it looks forward to urban institutions for an answer. We have seen this during the COVID-19 Pandemic. Cities were the worst affected, but they were also the ones who came up with ground-breaking solutions to deal with the Pandemic. Cities offered the best possible health care facilities to people. Their institutions worked day and night to develop effective vaccination. Urban institutions are also playing an essential role in distributing vaccine doses in the country and the world. Cities always become a door to the world for countries and give a handy opportunity for international collaborations. That is why every country focuses on making its city-systems robust. India has also planned to revive its urban systems to make life comfortable, prosperous and healthy for its citizenry.
National Infrastructure Pipeline and cities
Studies suggest that by 2050, 70% of the global population will be living in urban centres, some in cities of more than 100 million people. In India, It is estimated, by 2030, the urban population will be approximately 42 percent, up from 31 per cent in 2011. For a country like India’s size, this 11 per cent jump is enormous and will impact the cities’ services and burden their infra further. This will also add more pressure to create adequate employment opportunities in cities.
Estimates from a report by the Ministry of Finance, Government of India, suggest that India’s total workforce will reach 0.64 billion by 2030. Out of which, 0.38 billion will be employed in the rural areas, and 0.26 billion will be employed in the urban areas. The urban regions’ contribution in total employment will increase at a higher rate than rural areas’ contribution during 2018-30. The proportion of the urban areas in total employment will increase from 29% in 2012 to 41% in 2030, while that of the rural areas will decrease from 71% in 2012 to 59% in 2030.
Functioning and reliable infrastructure will determine cities’ quality of life. The government of India also understands this. They have prepared the National Infrastructure Pipeline for the period 2019-25, and the objective is to provide world-class infrastructure to citizens and improve their quality of life. It aims to attract investment from foreign institutions. There are over 7000 projects worth USD 1826 Billion as of now and have been planned in 34 sub-sectors. Though, the NIP is not just limited to the borders of the cities but also aims for building a connecting system that can help cities and augment the pace of their development. A High-Level Task Force, which was constituted under the chairmanship of the Secretary, Department of Economic Affairs (DEA), Ministry of Finance, has submitted its final report.
The report released by the Finance Minister in April 2020 outlined some of the most pressing challenges for the country. The first is the increasing urban population, meeting the growing energy demand sustainably, freshwater availability, and social infrastructure issues. It has taken into account that an increase in natural disasters or unpredictable events will test the resilience of infrastructure, not just in terms of reconstruction but also in supply chain disruptions. The cities had witnessed such challenges during the lockdown amid the health crisis caused by the coronavirus. The task force is of the view that government can plug the deficiency in infrastructure to smoothen urbanisation by promoting ease of living and facilitating economic activities. Hopefully,realisinga growing urban economy’s full potential will help raise cities’ contribution to GDP. As per the task force’s report, the total expenditure on urban services—Atal Mission for Rejuvenation and Urban Transformation (AMRUT), Smart Cities, MRTS, Affordable Housing, Jal Jeevan Mission—will be to the tune of 19,19,267 crores during FY 2020-25. It is to be noted that it is 17 per cent of total expenditure planned for improving a host of services under NIP.
The scope of NIP is larger than improving urban infra and services. It also strives to improve road connectivity, railroad density, the efficiency of train services, airport transport services, airport connectivity, linear shipping connectivity and efficiency of shipping services. Other essential domains on which the government will stress includes industrial infrastructure, social infrastructure, agriculture and food processing, rural infra, irrigation, digital communication, roads, railways, ports, airports, and energy. Though there is no direct linkage between NIP projects and ULBs, it allows Urban Local Bodies to learn from the agencies’ experiences implementing such large projects. They can surely come forward and suggest their requirements for making urban services efficient and to the tune of evolving challenges of urban spaces. Since local governments’ role is of utmost importance in achieving the international agendas linked to urban operations and management practices, their peer-learning experiences with global cities and Local Government Associations (LGAs) can significantly impact their cities’ future development.
Strengthening urban financing
The thrust of the government is to make municipalities financially independent. Right now, most of the municipal financing is dependent on state and central grants. Most of the time, these grants do not fulfil the requirement of the local bodies. Only a few municipalities have a surplus from their revenue-generating resources. A slew of measures has also been taken to improve the financial condition of local bodies, such as ranking cities based on quite a few parameters. For this, local governments have to make their operations efficient and build trust among all stakeholders.
Many urban bodies have also explored the municipal bond market for getting funds for their development requirements. The corporations can utilise the funds generated through municipal bonds, a debt instrument, to implement projects as per their local needs and pay off to the investors after a period of time, ranging between three and ten years. This is in addition to the project financed by the central, state governments and international funding agencies. As many as eight local bodies in India have raised Rs 3,390 crore via municipal bonds. By 2024, fifty cities are expected to issue municipal bonds. The corporations have offered better interest rates than other debt instruments. For example, municipal bonds issued by Pune came with an interest rate of 7.5%. In contrast,the recently listed municipal bonds of Lucknow Municipal Corporation offered 8.5 %, and the Andhra Pradesh Capital Region Development Authority offered an interest rate of 8.9% on their municipal bond funds.
If the cities have to make this successful, cities will have to work on transparency, quality, accountability, sustainability, all at the same time. Municipalities will have to declare their financial statements and make their operations financially sustainable by optimising resource use and creating a new stream of revenue generation. It is an opportunity for ULBs to become more economically well-organised and attract investors’ interest in their cities.
There are specific guidelines from the Securities and Exchange Board of India (SEBI) to issue municipal bonds. 1) The municipal body should not have a history of defaulting at repayments of loans or debt instruments acquired from financial institutions in the past year. 2) It should possess a positive net worth in all the three years preceding the issuance of municipal bonds. 3) Such municipal entity, its Group Company or directors, and promoters shall not be mentioned in the willful defaulters’ list published by the Reserve Bank of India.
Municipalities will have to obtain a credit rating from at least one credit rating agency registered with the Board,which shall bedisclosed in theoffer document orplacement memorandum, as applicable. Many corporations may not be well placed to follow all these regulatory requirements. The corporations must look towards the cities which have already used this instrument for their benefit. Peer learning within the country and other parts of the world could be a starting point to learn the intricacies of this instrument. Asset monetisation can be another possibility for cities to generate funds by selling land or non-operational assets through a long-term lease with a significant upfront lease payment. Such resources can be utilised for the immediate requirement of funds for the projects planned or envisaged.
The government is also reforming the country’s project implementation with the introduction of the National Programme and Project Management Policy Framework. Last year, the NITI Aayog and Quality Council of India launched the NPMPF, which is envisaged to bring radical reforms in the way infrastructure projects are executed.Union Minister Nitin Gadkari, while launching the Framework, said, “NPMPF will help in realising the Prime Minister’s vision of an Aatmanirbhar Bharat by building a stronger India, in which we would need good quality infrastructure; we would need to reduce costs and waste material, without compromising on the environment and ecology. We also need to ensure time-bound and result-oriented delivery of projects.” Cities should also have such quality check and monitoring systems, even for small projects, for improving efficiency. It can only become a possibility when the city leaders inspire their staff and present their road map for future cities.