The Union ministry of urban development is planning to set up a committee to estimate the investments needed for urban infrastructure in the country, even as flow of grants from its flagship Jawaharlal Nehru National Urban Renewal Mission (JNNURM) scheme for infrastructure development continues to accelerate.
Identifying the quantum of investment that India’s cities need becomes even more important as the urban areas’ share of the population continues to grow. A little less than 30% of population is classified as urban and is spread over seven cities. By 2030, urban areas are expected to house almost 590 million, or 40% of the population, according to a 2007 United Nations Population Fund report.
Analysts say nobody has a clear fix on the amount of investments urban areas need. They vary from Rs6 trillion to as much as Rs11 trillion, depending on who you ask. They, however, agree that the scheme, which has a corpus of Rs50,000 crore and runs from 2005 to 2012, will cover only a fraction of the requirement.
Under the scheme, the Centre provides grants of between 35% to 90% of the cost of approved projects, depending on the size of the city, with the state and local governments, or private investors contributing the rest. The scheme covers 63 large cities with population above 500,000 as well as some 5,098 smaller towns.
“There is no accurate indicator on what the capital requirements are for cities in India and what the operations and management requirements will be,” said O.P. Mathur, municipal finance expert and principal consultant with National Institute for Public Finance and Policy.
“The group is being set up to do precisely this,” said Mathur, who will be a part of the group, which is expected to be headed by Isher Judge Ahluwalia, chairperson, board of governors for Indian Council for Research on International Economic Relations and member, National Manufacturing Competitiveness Council.
“I have estimated the need at $300 billion (Rs11.9 trillion), but in my opinion, this is probably an under estimate,” said Ramesh Ramanathan, national technical adviser for the JNNRUM. “I think, when the committee completes its study, we will be in for a surprise. Right now, we are starving our cities. These are also political issues and to address political issues, we need some kind of a reference point, or a price tag. Only when we have a number will we know what fiscal handles the cities have and what needs to be done,” said Ramanathan, who also writes a weekly column in Mint.
The group will also have members from institutions such as Infrastructure Development Finance Co. Ltd and Infrastructure Leasing and Financial Services Ltd.
“We are setting up a committee for this but it is too early to go into details,” said urban development secretary M. Ramachandran.
“The group will look at norms of services (provided by municipalities), expenditure norms, investment requirements and will also address where the money will come from,” Mathur added.
A recent Reserve Bank of India study of some 35 municipalities found that all, except seven spent more than they earned in tax revenues. Most cities rely heavily on state and central government budgetary support or borrowings from government-owned home loan and urban development companies, Mathur said.