Computing city finances for effective spatial planning

A planned hierarchy of cities and their economic potential need to be computed soon to enable India to meet its SDG commitments made globally, says Hitesh Vaidya, Director, National Institute of Urban Affairs.

By Hitesh Vaidya

The 2020s are conceived of as the decade for action in urban India. Without structured planning of finances, projects cannot make the leap from master plans to execution on the ground. A planned hierarchy of cities and their economic potential need to be computed soon to enable India to meet its SDG commitments made globally, says Hitesh Vaidya, Director, National Institute of Urban Affairs.

The Economic Survey 2021-22 talks about climate and sustainability for the first time in the history of the survey. It also talks about the different missions that the Government of India has initiated to address climate issues. In the Finance Minister’s Budget 2022 speech, for the first time, much time and space were devoted to a structural issue – urban planning.

Urban planning has to come along with financing.

  • The Finance Minister’s speech has to be related to sources of revenue, which in turn has to be related to the 15th Finance Commission report.
  • For the proposed National Infrastructure Pipeline to happen, planned capital expenditure must take place in cities.
  • To reach the target of a USD 5-trillion Indian economy by 2025, USD 1.4 trillion has to be spent on infrastructure.
  • Sectors such as energy (24percent), roads (19percent), urban (16percent), and railways (13percent) amount to around 70 percent of the projected capital expenditure in infrastructure in India

These policy directions call for the need for structural changes to be embedded in the financial empowerment of Urban Local Bodies (ULBs). Do they own resources? What are the issues they have to solve? All this has to be computed clearly. Right now, the only own source of ULB revenue is property tax and some small user charges. In many cases, even property surveys have not been done and collections are weak, with no buoyancy in their own source revenue.

So, three things have to be looked at –

  • Reliance on grants from Central sources has to be reduced;
  • Inter-state transfers have to be improved;
  • Own-source revenues of cities have to be strengthened.

Credit Worthiness: Alternate credit can be raised only when cities improve their creditworthiness. Only if cities have the capacity to return the funds borrowed, will anybody invest in the municipality. ULBs need to be financially empowered to make them credit-worthy.

The Ministry of Housing and Urban Affairs (MoHUA) in 2016 did a credit rating of 500 Urban Local Bodies, before the launch of the Smart Cities Mission. So, what are the steps taken to improve creditworthiness based on which the credit rating takes place?

Master Plans & Finance: Integrating the availability of finance with city master plans sets them up for success. After all, projects take place on the ground-based on the availability of finance. How can a master plan be made financially viable? The city’s aspirations can be as good as they get, but unless it is looped into financing, they cannot be executed.

Once a ULB estimates its financial position, It can plan how to finance projects and proposals. The planning and financing paradigms have to talk to each other. Plans should lead to projects and that should lead to financing. The interlinking of planning, project and financing, then execution on the ground, has to be ensured.

O&M Provisions: When projects are planned, cities have to start thinking how their operation and maintenance will take place. That has to be built in to achieve self-sustainability, with clear plans of how the cost recovery will happen.

Integrated Vision: Cities should stop looking at siled approaches. It has to be an integrated vision with each city actually speaking to others in the state. Every city should develop its own plan and submit that to the state. The state then looks at all the plans and considers how to match the needs with the finances available. The missions need to work within that framework. Then states and cities should compete for the national mission money, rather than take for granted that the money will come anyway. It is also important to make sure that the central pot of money is demand-based rather than supply-based.

SDG Commitments & Indicators: The Center should turn the whole thing around – draw up global commitments and see how these goals can be met. The Center should look at the Sustainable Development Goals (SDGs) and the broad set of indicators that the government has already committed to at the global level. Now indicators at the state level should be assessed, based on inputs from the cities. That has to be linked with each other and then the city’s indicators should be arrived at. So, all planning should be indicator-based, right up to the Centre.

The Prime Minister has committed to Net Zero 2070 at the 26th Conference of Parties (COP26) in Glasgow in November 2021. The need now is to look at what cities can do to reach the target. Break those indicators into their components and then start working on a common indicator and monitoring framework. Otherwise, tomorrow India may make its own SDG index, Singapore its own, and so on. How then will you compare the two without the same set of indicators?

Spatial Planning & Indicators: Unless cities know the amount of money coming in, and organize spends accordingly, planning cannot take place effectively. Think of the city as a whole and plan finances accordingly. Cities think in silos, different departments think of the city differently. How do you start looking at the city as a spatial unit at an indicator level? Every city in the hierarchy should be planned according to its carrying capacity. How many people can live in that space? How do you manage food security, etc.? It is important to plan how many people can be accommodated in a particular city between 2022 and 2050.

Land Mass Utilization: Already urban land mass utilization has risen from 3 per cent in 1991 to house a population of 20 crore to 6.5-7 per cent to house 48 crore in 2021. By the time it reaches 50 per cent urban population in 2030, 9-10 per cent land mass of India would be urban. But the growth rate of urban centers has been extremely unequal. About half of the 7,933 towns that are counted as urban continue to be governed as rural entities, according to the NITI Aayog report on urban planning. As a result, there is no structured planning or allocation of resources.

India needs to put its best foot forward to marry financial management with structured urban planning to compute city finances and plan for their growth. Only then can the country’s Net Zero solutions be localized and computed.

(The author is Director, National Institute of Urban Affairs. Views are personal)


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