Urban local bodies told to up fund mobilisation

The Centre has directed all urban local bodies (ULBs) to abandon their archaic financial practices and work towards strengthening their resource mobilisation capacities to finance fast-track urban infrastructure development under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) scheduled to end by 2012.

The missive comes in the backdrop of the preliminary findings of a credit assessment study conducted on ULBs by rating agencies that were recently engaged by the Union Urban Development Ministry, which is propelling the JNNURM programme in 63 cities across the country.

Urban Development Secretary M Ramachandran, during a seminar on 'Financial Leveraging for Urban Infrastructure Investments' organised by the Union Bank of India here last week, said: "The credit rating exercise has been completed in 43 ULBs. Of these, only two have reached the AA level. There is tremendous potential for the cities to be converted into dynamic centres of growth. This change can be expedited only if the ULBs streamline their finances."

The complete report of the rating agencies will be made public after feedback is received from the respective ULBs.

Exhorting the ULBs to become more vibrant by taking up e-governance initiatives, Ramachandran said: "Cities have to go for additional resources instead of depending only on the coffers of central and state governments. Changes can be ushered in by them by streamlining collection of property taxes, shifting to double entry book keeping system and by levying user charges. Only when the ULBs are financially sound, will they be able to attract investments from banking and private sectors."

According to Ramachandran's projections, the 63 JNNURM cities will need around Rs 54,000 crore towards improving water supply, Rs 53,000 crore for sewerage and sanitation, Rs 20,000 crore for drainage upgrade and Rs 2,000 crore for solid waste management.

So far, a total of 314 projects worth Rs 26,000 crore have been approved and of these, 90 projects are expected to be completed by December 2008. The government plans to raise Rs 20,000 crore from institutional and multilateral agencies and another Rs 2,000 crore from the private sector.

"The ULBs can chip in by raising funds through municipal bonds. Bangalore city corporation had done it sometime ago, such exercises should be taken up on a regular basis,'' Ramachandran said. In the transport sector, he said funds to the tune of Rs 1,33,000 crore will be required to take urban mobility to higher levels.

On the role of banks in financial leveraging for urban development, Ramachandran said JNNURM provides a good platform for banks to press their expansion plans into action.

Pointing to the Planning Commission's projections on the growth of urban population from the present 28 per cent to 40 per cent by 2021, he said banks should take note of the fact that around 60 per cent of the GDP will be contributed by cities in future. Moreover, banks can structure a scheme for the use of ULBs' vacant lands, which otherwise are auctioned.

Speaking on the occasion, Union Bank of India chairman M V Nair said the bank had conducted a study on the business growth opportunities in Visakhapatnam city, which is part of the JNNURM.

The bank is identifying scope for financing projects under JNNURM and is working on plans to leverage the technology platform of ULBs by facilitating collection of user charges and taxes, he added.