Everyone wants urban infrastructure. But there isn?t enough government money. From 1988 onwards, urban municipalities have been allowed to raise money from the market. But there have been just 13 floats. So, hopefully, recent proposals raising the limit of one-project market financing to Rs 600 crore and allowing 100% debt financing will put some life into municipalities? market ventures. India?s 3,273 urban local bodies are hemmed in by constitutional provisions that provide for few resource raising choices. One statistic should make things clear: municipal revenues are just about 0.75% of the GDP and 2% of the revenue of the central and state governments. Of course, highly urbanised countries have higher figures for urban local body revenues. In Denmark, municipal revenues are 15.9% of GDP and 32.9% of total government revenues. But India?s figures compare poorly even with a comparable set of nations, for example, OECD?s calculation of average urban revenue for federal nations. India is a rapidly urbanising country. Credible estimates show that in about five years? time, by 2013-14, urban India will need Rs 6,28,210 crore (at 2004-05 prices) just for providing the infrastructure for urban services. This is a sum municipalities will find impossible to raise unless the markets help them.
Also, some reform of the urban local body spending structure is overdue. A perverse outcome of the current structure is that while local bodies are underfunded as far as providing urban services is concerned they run revenue account surpluses. They can?t raise supplementary funds for meeting lumpy capital expenditures thanks to statutory obligations and debt limits laid down by states. A recent RBI study put the extent of underfunding in core services at 76%. Clearly, state governments must change the revenue powers of urban local bodies if India?s cities livability quotient has to improve. The other reform is the old but important chestnut?increasing user charges?which is currently at an unacceptably low level of just about a fourth of the expenditure incurred by local bodies. None of this will happen unless politics changes. Cities are the orphans of Indian politics. Just witness how unimportantly the Congress treats the fact that in 2004 general elections it won most of the urban seats. Effective urban governance first needs powerful city politicians.
