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Mirroring the past with an eye on the future

Mumbai : It has been more than 18 months since the new schemes for urban development – Atal Mission for Rejuvenation and Urban Transformation (AMRUT) and the Smart Cities Mission (SCM) were launched. Probably it is too early to say how the two Missions have fared. An assessment of past schemes and an understanding of how far we have come since the launch of Centrally-sponsored schemes in the 1980s, can provide us some insights on the road ahead.

Urban development is a State subject. The Central government has found it critical to supplement the State governments’ efforts to ensure the urban development process is managed well. Through the lure of grant funding, the Central government has played a lead role in shaping the urban development agenda. The first Centrally-sponsored scheme of Integrated Development of Small & Medium Towns (IDSMT) was initiated in the year 1979-80 and was continued till December 2005. This scheme was applicable to towns/cities with population of up to 5 lakh.

This was followed in 1993-94 by the Accelerated Urban Water Supply Programme to provide safe and adequate water supply facilities to the entire population of towns having less than 20,000 people as per 1991 Census. The Ministry of Urban Development (MoUD) and the respective State governments shared the project cost equally between them. At the same time, Mega Cities scheme was initiated to undertake infrastructure development projects of city-wide/regional significance covering a wide range of components like water supply and sewerage, roads and bridges, city transport and solid waste management. The Scheme was applicable to Mumbai, Kolkata, Chennai, Bangalore and Hyderabad. The sharing between the Central and State government was in the ratio of 25 per cent each; the balance 50 per cent was met from institutional finance/capital market.

In order to accelerate and incentivise the process of urban reforms, the Government of India decided to provide reform-linked assistance to states. The 2002-2003 Budget called for setting up of an URIF – Urban Reform and Incentive Fund - with an initial outlay of Rs 500 crore per annum during the 10th Five Year Plan. The URIF provided incentives to State governments to carry out reforms. Each reform area had been assigned a special weightage.

Given the size of the urban population, the amount of funds made available under these schemes were grossly inadequate to make a significant impact on urban infrastructure requirements in the country. Further, of all the initiatives, URIF was the only scheme which linked urban reform outcomes to funding available to the cities.

However, it also left the states with an option to pick and choose the reform areas. Also, the size of funding made available at Rs 500 crore was not big enough to incentivise the states to embrace the reform elements in a comprehensive manner. More importantly, the local government, which was at the core of the reform process, was not directly involved in the reform commitments.

There was, thus, a need for a scheme, which was sizeable enough to make an impact on urban infrastructure investments, brought together all the three key stakeholders – Central government, State government and the urban local body (ULB) to achieve a common purpose, and one which viewed the needs of urban development in a comprehensive manner. The launch of Jawaharlal Nehru National Urban Renewal Mission (JnNURM) was a step in this direction.

The Atal Mission builds on the objectives of JnNURM but makes a significant departure in the design of the scheme. It empowers the State government to decide on the allocations between projects and cities. The Central government only sets the broad guidelines for the Mission, leaving the State governments with significant discretion to shape the urban development agenda tailored to its needs.

The Smart Cities Mission has adopted area-based development approach to improve the quality of life in that area; the Mission has made it mandatory to deploy technological solutions as a pan city initiative. This scheme design is a novel departure from the project-based approach to scheme formulation.

The review of JnNURM suggests that sizeable investment support from the Centre stimulated interest from states and cities to initiate reforms. Cities were unable to utilize full funding available as only 62 per cent of the committed funds were disbursed. The under-utilization is on account of reform milestones not being met and the slow pace of project execution.

Of the 539 projects sanctioned in JnNURM, only 217 are completed and for UIDSSMT, out of the 806 sanctioned, 413 have been completed as of November 2013. This was eight years after the Mission had been launched. Thus, it was found that mere availability of funding did not result in infrastructure spending; absorptive capacity of cities was low.

The AMRUT scheme design devolves considerable powers on states. But states will take time to adjust to this empowered status. AMRUT aims to strengthen local governments while Smart Cities Mission has SPV as an implementation vehicle. Pan-city solutions proposed are not aligned at the level of challenges faced by cities. Solutions aim to monetize demand but may not fulfill need.

AMRUT and Smart Cities Mission provide an opportunity to learn from the past. The Centrally sponsored schemes have tended to provide a direction to the urban development agenda. Going forward, State governments need to gainfully deploy the new found freedom under schemes like AMRUT and Smart Cities Mission and the prevailing spirit of co-operative Federalism ear-marking higher devolutions to states, which are un-tied in nature.

The new drivers of urban development will increasingly be the State governments. The question is not whether the states are ready to take on this role. It is inevitable that in line with democratic decentralization, the power should be devolved below.

Practically speaking, the 74th Constitutional Amendment made a symbolic recognition of the third-tier government; the State government empowerment had not happened then. Today, we have empowered State governments. We will need to wait for some more time before local government empowerment truly happens.

The period 1980-2015 was one of Centrally-directed urban development. We will soon usher an era where State governments will set the terms of engagement with the cities.

The successors to the AMRUT and Smart Cities Mission will be further disengaged and empower the State governments still more. The direction of change is correct. Only when the direction is correct, the benefits can be seen in the long term. The pace of change will be gradual and no overnight miracles can be expected.

Abhay Kantakis Director – Urban, CRISIL Infrastructure Advisory.

(Disclaimer: India Water Review does not take any responsibility for the views expressed in the article. The article published also does not in anyway reflect the opinion of India Water Review.)

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