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Cities and Union Budget: Urban planning must strengthen need of financial autonomy

By IMPRI Team 

IMPRI Centre for Habitat, Urban and Regional Studies (CHURS), IMPRI Impact and Policy Research Institute conducted a panel discussion on Cities and the Union Budget 2023-24 on 7 February 2023 under the IMPRI 3rd Annual Series of Thematic Deliberations and Analysis of Union Budget 2023-24, as part of IMPRI #WebPolicyTalk. The chair for the discussion was Dr Rumi Aijaz, Senior Fellow and Head, Urban Policy Research Initiative, Observer Research Foundation, India. The session was moderated by Dr Soumyadip Chattopadhyay, Associate Professor, Visva Bharati, Santi Niketan; Visiting Senior Fellow, IMPRI.
The Panelists for the event were Professor Chetan Vaidya, Independent Urban Advisor; Former Director, School of Planning and Architecture (SPA), New Delhi and National Institute of Urban Affairs (NIUA), New Delhi; Professor Vishwa Nath Alok, Professor of Public Finance, Indian Institute of Public Administration (IIPA), New Delhi; Mr T Chakravorty, Urban Economist; Professor Tathagata Chatterji, Professor of Urban Management and Governance, Xavier University, Bhubaneswar; Professor Mahalaya Chatterjee, Professor, Centre for Urban Economic Studies, Department of Economics, University of Calcutta; Professor Kala Seetharam Sridhar, Professor, Centre for Research in Urban Affairs, Institute for Social and Economic Change (ISEC), Bengaluru, and Mr Tarun Sharma, Co-Founder, Nagrika.
The session began with the opening remarks of Dr Saumyadip Chattopadhyay. He commenced by raising the contemporary policy issues that have arisen in the urban development space, most of which got aggravated post covid. He raised the issues of building sustainable urban settlements in the wake of climate change, the deterioration of urban health infrastructure post covid among others. He points to the 2022 World Bank Studies on urban governance reforms that mentions how Indian cities need an investment of $840 Billion along with the need of financial autonomy for city governments.
In the budget announcements, he mentioned that there is an emphasis on building sustainable cities through the provision of setting up a National Urban Infrastructure Development Fund, with an allocation of ₹10000 crore per year, coupled with reforms on Property Tax Governance, improving credit worthiness of city governments among others. But what it means for the common people and how such a roadmap would facilitate further effective transformation is yet to be seen and discussed.
After a prompt introduction, Dr Chattopadhyay handed over the session to Dr Rumi Aijaz. Dr Aijaz began by reiterating Dr Soumyadip’s points and talked about the Importance of Urban Policy Making today. He mentioned the things that he has inferred from this budget: First, an overall increase in the net amount in budgetary allocation, which is around a 3% increase. Second, the percentage increase is the highest for AMRUT (Atal Mission for Rejuvenation and Urban Transformation) and Swachh Bharat Mission (for Urban it has doubled since the previous period). Next is the decrease in budgetary allocation for Smart Cities and Pradhan Mantri Awaas Yojana (Urban). Finally, the share of allocations is the highest for Metro Rail Projects and PMAY whose shares comprise around 60% of the total allocations of the Urban Ministry.
Dr Aijaz infers that there is a larger emphasis on creating sustainable cities, and to transform existing cities to sustainable ones through transit oriented development. He mentions how municipalities and statutory organisations often face a resource crunch and that through the budget, the centre has sent a strong message to mobilise resources more efficiently through the creation of Urban Infrastructure Development Fund and Municipal Bonds which effectively strengthens transit printed development.
He also pointed to the emphasis given on green mobility, artificial intelligence, launch of hydrogen mission, scientific management of solid waste among others which would make cities more resilient and make them financially and technologically strong.
Followed by the Chair’s opening remarks, the first panelist for the day was Professor Kala Sridhar. She talked about the National Gati Shakti Policy and how the issue of urban primacy can be tackled through this newly adopted policy. There’s a resource and infrastructure crunch in smaller cities, and hence firms are more concentrated in larger cities like Bengaluru, Delhi etc. The Gati Shakti policy, she opines, is a good way to prevent primacy of cities by improving logistics. Firms are spending a lot more on operations and maintenance rather than on capital expenditures, which justifies the poor state of logistics and supply chain Infrastructure of our country.
However, all of this is not covered in the budget, since the budget is just a partial reflection of the state of the economy. She pointed to the findings of the ADB which states that South Asia requires higher Infrastructure spending, around 8.8% of GDP, compared to the 3.3% that the government has announced.
Then she talked how a big sum of transport infrastructure aims at coal, oil, fertilizers, which could become a huge hindrance in phasing out fossil fuels, largely used by the urban poor. She further said that some of the most pressing issues that our cities face require solutions of transit oriented development and systematic investment, she mentions. But she reiterates that there is not enough evidence as to how to meet these challenges in the long run.
Continuing further Prof Sridhar mentioned that even though urban development being a state subject with limited role of Centre it can provide resources and skills for a better roadmap to the state for Systematic Investment Planning. She also mentioned how states can leverage their 15th finance commission funds while accessing the Urban Infrastructure Development Fund, which, she opines, is not enough for urban development.
She summarized by mentioning how it is a good budget in terms of its attempts to improve infrastructure investment, yet well below required standards. Another issue she mentioned is the need for periodic availability of data.
The next speaker on the panel was Professor Chetan Vaidya, who mentioned two points that he thinks to need to be emphasized more. First is the National Action Plan for Mechanised Sanitation (NAMASTE) with an allocation of 100 crores, which plans to provide financial support to sewage workers in 500 cities. The fact that the finance minister has at least talked about its importance in the budget speech is a significant moment, he states. This budget has provisions through which the IFSC Authority can allow new units to register just like they can in SEZ through the SEC Act 2019.
About the New Sustainable Cities Fund, Professor Vaidya mentioned how there is already an AMRUT fund in place which can be further utilised, rather than to have a separate fund. He further questions the capability of the National Housing Bank which is set to fund this sustainable infrastructure programme, adding that the NHB has limited access to technical know-how of urban development policy frameworks. In NULM, the allocation has been reduced from ₹50 crores in the revised budget to ₹0.1 crore which according to him is a major reduction. He feels that there should have been a larger focus in incorporating the aspect of climate change into the budget as far as urban development is concerned.
Followed by Chetan Vaidya was Mr T Chakavorty who began by mentioning how logistics can be improved through the PM Gati Shakti Policy. He then mentioned how urban planning must incorporate issues of strengthening financial positions especially by accessing instruments such as the bonds market which is crucial in incentivising production linked development. In this, the re-initiation of municipal bonds is a significant step forward. As far as housing is concerned, the issue of congestion can be tackled through the Pradhan Mantri Awas Yojana Policy initiatives, he mentions.
Professor Tathagata Chatterjee pointed out two policy trends in the budget that he thinks will have repercussions for the urban sector in the future: first is the clear thrust on infrastructure, roads and railways. Second, is the larger reference for green growth, with an allocation of 33000 crore towards energy transition. Prof Chatterjee, while talking about the impetus given to the Urban Infrastructure fund, also noticed programs such as the likes of the Smart cities have been losing out on budget allocations over the years. The next question he put forward was regarding the complexities that exist within the Indian federal framework, where urban development exists in the state list, and hence, politically motivated tussles are imminent. The issue of incentivizing these reforms is equally important.
Professor Alok Verma talked about the provision of the 50 years interest free loans provided to states, which, coupled with its performance based incentives, can be crucial in the years to come. As far as the hike in allocations for Swacch Bharat is concerned, he forecasts a larger spending on advertisements given that the election session is near. He talked about the provision given for establishing the centre for excellence in Artificial Intelligence which is another crucial aspect in improving city infrastructure.
Professor Mahalaya Chakrabarty talked about the total allocations for the Ministry of Housing and Urban Development, where she finds no significant urban project placed in the “core of the core”. For her, urban development should’ve been more than just Infrastructure development, contrary to which, she mentions, it has been overwhelmingly emphasized in the budget.
She talked about the National Urban Policy framework (NUPF) which according to her has lost its relevance ever since its initiation back in 2018. She also pointed out the fact that transit oriented development of cities often has its own set of leakages, in terms of resource loss among others, which needs to be addressed more effectively. In reference to the provision of 75 biogas plants in urban areas, she is of the opinion that the number is too low given that there are 7000 urban areas in India.
Mr. Tarun Sharma started off by mentioning how the Finance Minister’s speech, while spanning 90 minutes, had a time slot of 2 mins or more to talk about urban planning and development. However, he is optimistic about the fact that urban development has been given higher priority in budget documents over the last few years. He mentioned that the capital expenditure of Bombay Municipal Corporation is around 27000 Crores which comes down to around 3 times the total amount allocated under Urban Infrastructure Development Fund.
He reiterates that tier-II and tier-III cities have a lot of potential to come under Urban development programs given that there are around 2000 such cities. Regarding the increase in allocation to Swachh Bharat Programme, he mentions that it might provide additional capacity for city administrations to augment social sector spending. Finally, he remarked on the need for larger discourses on UIDF on setting right the institution arrangements that would allow effective utilization of such a fund. Practical learnings from the implementation of the Rural Infrastructure Development Fund would be crucial in utilizing the UIDF, he stated.
After this, the house was opened for comments from the individual panelists. The panelists reiterated some of the main points that were raised during the discussion. Firstly, the importance of learning from previous experiences from programs such as the National Rural Infrastructure Development Fund, secondly, the need to shift from Mission mode to Program oriented Approach, the balancing of programs and projects.
The Chair Dr Rumi Aijaz concluded by talking about the need for more transparency with data, while arriving at the budgetary numbers for the urban sector. He also mentioned that there is a need to make administrative units more accountable and transparent while implementing new policies and schemes. With these two points, he concluded the webinar for the day and handed over to Dr Saumyadip Chattopadhyay. Dr Chattopadhyay mentioned the operational issues that exist in urban planning coupled with the two major problems of lack of local data and capacity building.
Acknowledgement: Aaswash, a researcher at IMPRI



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