Take money, do reform

If sovereign governments can be given money to push reforms "" a feat that the Fund-Bank combine has managed to do quite successfully "" there is no reason why the same strategy should not succeed at the state and the city level. And that is exactly what is being done through the two-year-old Jawaharlal Nehru National Urban Renewal Mission (JNNURM), under which the central government has set aside Rs 50,000 crore, to be given as grant to urban local bodies for specific city infrastructure projects hungry for investment "" like water supply, sewerage, drainage, mass transport, waste management and slum development. But there is a catch: the funds are available only if a reform agenda, with specific timelines, is committed to. What is the reform agenda? States must commit to repealing the urban land ceiling law, get rid of rent control laws, rationalise stamp duties and enact laws on public disclosure and community participation, while urban local bodies must reform their property tax regime, levy reasonable user charges on services to recover operation and maintenance costs, move to modern accounting (the accrual-based, double entry system), introduce e-governance, and provide basic services to the urban poor.

If the country manages to get these reforms in place for the 63 cities identified under the mission, it would be a tremendous achievement. The good news is that this reform is taking place and there is good progress on projects, which have to be part-funded by state government and urban local bodies. Over 260 projects worth Rs 24,000 crore have been vetted and approved so far. Detailed project reports for another 380 projects are "in process". Some 10 projects have already been completed and 90-odd projects are expected to be completed by December next year. As expected, though, there is a marked skew in the distribution of these projects towards the "progressive" states, like Maharashtra, Gujarat, Karnataka and Andhra Pradesh. Other states are revving to catch up, while some are still at the starting gate and setting up urban local bodies for the first time (in the north-east, for example).

Critics of the scheme say that the money that the JNNURM is pumping in "" Rs 50,000 crore over seven years (2005-2012), which can be leveraged to raise another Rs 50,000 crore, or more "" is not enough to meet the needs of these fast-growing cities. That is true enough, but the scheme is a good start after years of urban neglect and mismanagement of cities. If the urban local bodies are vested with the wherewithal to raise money "" taught to fish, as it were "" the shape of tomorrow's cities will be very different from what the country knows today. Urban local bodies, with strong cash flows, would then be in a position to tap the bond market and, in addition, to structure projects so that they are amenable to public-private partnerships (PPP).

It needs to be conceded that some of the projects have not come back to take the subsequent instalment of funding (disbursement is in tranches), either because a project is not moving as per the committed schedule or because the reform agenda is still pending, and progress on both these fronts is critical to get the subsequent tranches of funding. Given that the country's cities have been neglected for decades, a few months' delay is perhaps to be expected. Overall, the first two years of the programme have given cause for hope that urban management is on the reform track.