Om Prakash Mathur: Moving forward with the JNNURM reforms

This is the biggest change that has taken place in India at the sub-national level.

On June 15, 2007, the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) will complete one-fourth of its tenure. At no time in post-independence India have we seen "cities" rushing in at such a pace as they have over the past 18 months, to access the JNNURM funds by following the procedures laid down, that is, preparing City Development Plans (CDPs), formulating projects that would help meet the CDP goals, and signing up with the Government of India a time-frame for undertaking reforms. The result of the activities of the past 18 months is there for everyone to see: CDPs have been prepared for all JNNURM cities; over 370 projects with an approximate cost of Rs 31,300 crore have been approved, and 51 cities have formally committed themselves to implementing the reform agenda, in accordance with a time-frame incorporated in what are called the Memorandums of Agreement (MOAs).

The signing of the MOA containing the time-frame for undertaking reforms is a milestone development. Who would have thought that the state governments, on their part, will come forward to repeal the Urban Land (Ceiling and Regulation) Act, 1976, or to amend the rent control laws, or reduce stamp duty rates, unless they saw that the benefits accruing from these measures would exceed the costs involved in maintaining the status quo? Or, for that matter, who would have imagined that the urban local bodies (ULBs) who have historically lived under the shadow of the state governments, would begin to think in terms of changing the age-old property tax system and rationalising the mechanism of pricing the services that they offer, or putting in place an accounting system that would inform citizens where their tax money is being spent, or even ringfencing certain expenditures to ensure that the urban poor are not neglected in their access to services, unless they saw that these steps would bring them closer to their acquiring legitimacy in India's federal polity? Agreeing to implement the JNNURM reforms represents perhaps the most dramatic change that has come about in India at sub-national levels. One would like to believe that the state governments and cities were looking for a trigger to move away from the past, and the JNNURM provided that trigger.

Be that as it may, this phase of the JNNURM is coming to a close. The task of preparing the first generation CDPs has been completed. Projects have found a rhythm, and will continue to flow in at their pace. The signing of the MOAs with the remaining states and cities will hopefully be accomplished soon.

The question that arises is: what strategy should be in place such that at the end of the Mission period, cities in India acquire the level of inclusiveness, efficiency and transparency that the JNNURM envisages? In what way should the balance of the Mission tenure be organised?

Two complementary strategies seem urgent and indispensable at this crucial stage:

Putting synergy into the reform agenda: Reforms, it must be reiterated, are the core of the JNNURM. Without the complement of reforms, the JNNURM is no different from the erstwhile central government initiatives in the urban sphere, such as the Mega-Cities Project, or the Integrated Development of Small and Medium Towns, or programmes such the Urban Basic Services for the Poor. The JNNURM reforms rest on the premise that investment in urban infrastructure and low-income housing and services and even heritage conservation is unlikely to achieve long-run sustainability without being accompanied by reforms, nor are the cities likely be able to be responsive and participatory without the support of reforms.

The JNNURM reforms have, thus far, been planned on the basis of the capacity of the state governments and ULBs to be able to implement them. The time-schedule that the state governments have committed to for implementing reforms, takes into account (I assume so) the steps that are involved in putting reforms on the ground, the time that is needed to build consensus and secure political acceptance, and complete the legislative processes, wherever required, and of course, the short-term impact that the implementation of reforms may have on the different sections of the population. It is a serious exercise.

Time is now ripe to bring the different reforms in conjunction with each other rather than to see them being implemented on a stand-alone basis. The repealment of Urban Land (Ceiling and Regulation) Act, 1976, amendment to rent control laws, reduction of stamp duty, property titling, and revision of bye-laws, when taken together have the potential of changing the land and housing market dramatically. Likewise, the prospects of the ULBs acquiring viability are undoubtedly higher if the state governments design the concerned reforms, such as the implementation of the Constitution (seventy-fourth) Amendment Act, 1976, professionalisation of the State Finance Commissions, and reform of property taxation and user charge systems in a coordinated manner. It is this synergy that is now to be explored and put in use. There is enough evidence in the country of worthwhile missions and initiatives coming to a nought when implemented in an uncoordinated manner.

Using projects to trigger reforms: A typical function of a project, be it an urban renewal project or a rapid bus transit system or a water supply scheme, is to bridge the demand-supply gap, and occasionally to create additional capacities for meeting likely future demand. Projects under the JNNURM, however, have a role that runs far beyond their traditional function of fulfilling the unmet demand. These projects are meant to serve two additional functions: (a) trigger reforms, and (b) stimulate public-private partnership and private investment into urban infrastructure and services. An urban renewal project, for instance, needs to be designed in a manner that it leads to an amendment of the rent control laws, and preferably a change in the building bye-laws. Without these reforms, an urban renewal project can hardly be expected to move forward. Similarly, an urban water supply project needs to be so structured as to result in the plugging of leakages, managing and regulating demand via rainwater harvesting and water recycling, and an appropriate water charge. These are a pre-requisite for the sustainability of a water-supply project. Although many of the urban infrastructure services supported by JNNURM have the characteristics of natural monopolies, there are activities within each of them that allows for competition. An important task is to separate out the natural monopoly component from activities where competition is possible, and promote public-private partnership.

The JNNURM is a very unique programme. While incentive-driven urban sector programmes are commonly observed in several parts of the globe, there are few examples where developing countries have tried to use a system of grants to eliminate urban market distortions, reduce waste and corruption, and impart transparency. It places upon the central government and its partners at the state and sub-state levels, a special responsibility of ensuring that it moves forward to make cities efficient, inclusive and responsive.

The author is Professor, NIPFP. The views expressed here are personal