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Steering the growth

Steering the growth

India's urban infrastructure is growing at a phenomenal pace, but due to improper urban planning in the past, growth is not able to match the pace of economic activities in the urban areas, says Kumar Ramesh.
Urban infrastructure comprises drinking water, sanitation, sewage systems, urban trans­porta­tion, primary healthcare services, electricity, solid waste management, and environmental services. Increasing urbanisation around the world has not spared India either.  

The huge influx of rural population into urban spaces has congested the cities of India. India's urban infra­structure is growing at a phenomenal pace, but due to improper urban planning in the past, growth is not able to match the pace of economic activities in the urban areas. The Indian government has recognised the need to focus on urban infrastructure in the past decade, in order to keep pace with the economic growth at the global as well as national level. 

The government is now focusing more on creating additional capacity, and in improving the efficiencies of the urban utilities. Growing urban population and the absence of effective planning in infrastructure to acco­mmodate the growing populace is deteriorating the defi­ciencies in the infrastructure. The biggest cha­llenges faced in improving urban infrastructure are: funding, effective planning and implementation.

The state government and local bodies, such as municipalities and corporations, are unable to raise the requisite finances to implement large-scale projects to improve infrastructure. Inefficient project planning cap­abilities and inability to execute very large scale projects have limited their experience in handling the pressure created by growing urbanisation. Public-private part­nership (PPP) methods have been adopted to overcome the challenges, and a few have been succe­ssfully imp­lemented in segments such as urban transport, water, sanitation, and solid waste management.

Thrust from 11th  Five Year Plan 

Poor financial health of urban local bodies (ULBs) has deterred the growth of urban infrastructure in the past. The 11th Five Year Plan is accelerating the pace of growth in urban infrastructure, partly enabled by the Jawaharlal Nehru National Urban Renewal Mission (JNNURM), a reform linked incentive project. The emergence of the JNNURM is regarded as a key step in bridging the resource gap. That said, empowerment of ULBs remains an issue that JNNURM plans to take up based on a recent High Powered Expert Committee (HPEC) report.
The objective of the JNNURM is to improve the autonomy of ULBs, and make them more accountable, through incentives like the urban reform incentive fund. The government has earmarked Rs 500 billion for the urban development process. This will be spent from the total budget for this programme, amounting to Rs 1,200 billion, the remaining is expected to be funded by private investors. There are about 63 cities covered under the JNNURM and financial assistance will be available to the ULBs and agencies that deploy these funds for implementing the projects themselves or through special purpose vehicles (SPVs).
Cash flows to urban infrastructure projects with long gestation periods are vulnerable to deviation in cash flows, making projects non-bankable. So PPP can only be adopted in limited areas of urban infrastructure like water, solid waste management, and the dev­elop­ment of metro rails or the mass rapid transport system, where the cash flow is relatively consistent. According to a World Bank study, the PPP mode in urban infra­structure has been limited to less than one per cent of estimated requirements globally.
Sub-segments of Urban Infrastructure 

Water and Sanitation: Government est­imates indicate that almost 91 per cent of the total population has access to potable water. Only 58 per cent have water connections inside their premises. About 54 per cent of the water is wasted due to poorly maintained pipelines, showcasing the poor quality of water supply and the wastage of resources due to sub-standard maintenance and operation. The biggest challenge in the water sector in India is the tariffs charged for water by many municipalities that do not cover even the cost of production. A few municipalities are reporting 60 per cent of water distributed as non-revenue water. Such low tariffs and high costs of production lead to inefficiencies in project planning and management. To overcome these, there should be a reform in the existing legal and institutional framework that supports proper management. 
Solid waste management: Over 60 per cent of the cities in India witness poor infrastructure in collecting, transporting and disposing solid waste. ULBs currently handle only municipal solid waste (MSW), and biomedical waste is handled by the hospitals that discharge them. However, due to ineffective regulatory structure in waste management, India's urban waste is improperly managed. Though there is a lack of strong institutional framework, this is considered one of the lucrative areas for private sector investment. With a rise in private sector participation in project imp­lementation and funding, there will be an increase in the use of scientific methods in waste management, which will improve the efficiencies of waste manage­ment. Areas like waste-to-energy that were earlier considered unviable are now being explored by private participants. 

Urban Transport: Increasing urbanisation, coupled with economic activities, has congested most of the cities in India. In the last 20 years, the non-motorised population has plummeted, adding pressure on trans­portation facilities. Accelerated efforts are in place to address the challenges, like the metro rails planned in several cities such as Chennai, Mumbai, Bengaluru and Hyderabad. The existing mass rapid transport systems (MRTS) need to improve their efficiency to bridge the demand supply gap.   
Way forward
Opportunities are abundant in the urban infra­structure sector, as the concepts of satellite cities and mega cities come into play. Urbanisation, being a global trend, has attracted a lot of attention in India as well, and the funding patterns are becoming dynamic. There is increased participation from the private sector, with due credit to various reforms from the government. This sector is also attracting the attention of global financial institutions like the Asian Development Bank, World Bank and Japan Bank for International Cooperation. There is a growing willingness from other institutional investors to be a part of this economic process that is soon expected to define the future of India.
Funding pattern under jnnurm

City Classification    No. of Cities    Funding pattern (%) of the total project cost
        Central Govt.    State

Govt.    ULBs
More than 4 million                                          7    35    15    50
More than 1 million and less than 4 million    28    50    20    30
Selected cities with less than 1 million            28            
Cities in the North East and J&K                             90    10    0
Others                                                                       80    10    0
Desalination plants (any city)                                   80    10    10
Source: JNNURM

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