JnNURM REFORMS WITH FOCUS ON URBAN POOR

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1 JnNURM REFORMS WITH FOCUS ON URBAN POOR Dr. Mukesh Mathur Professor and Coordinator- FIRE(D)/ JNNURM National Institute of Urban Affairs March 2012

2 Cities Matter in India s Economy Almost 300 million urban population comprises about 28 % of total population but Accounts for more than 90 per cent of government revenues According to ASSOCHAM, contributes about 60 per cent of India s GDP Their contribution to national GDP is likely to touch 70 per cent by 2011 Key risks Infrastructure is already woefully inadequate roads and public transport, water/sanitation, formalized residential areas Urban poor expected to increase from 100 million to 202 million by 2020 [National Population Policy, 2000; State of World s Cities, 2006/07] Health conditions of urban poor far short of global standards and put entire city populations at risk High non-revenue component due to wastage, pilferage, unaccounted-for losses and free riders Insufficient financial and managerial resources with ULBs / parastatals Poor monitoring and cost recovery High investment needs Quantity and quality of public expenditure should support sustainable, well managed cities

3 Estimated Investment Requirements In Urban Infrastructure Agency Rakesh Mohan ( IIR,1994) 250 Amount (Rs. in thousand crores) ( up to 2006) PM apex committee on Core Infrastructure ( incl. Urban) Deepak Parikh Committee on Infrastructure Financing ( CIF) 1450 ( up to 2012) Reported that these are underestimation particularly in urban,telecom,it sector etc. Estd. Increase would be 4.7% of GDP in to 8% in at current prices Availability as per 9 th & 10 th FYP 25 ( 10% of IIR needs from conventional sources) JNNURM 50+50=100 (50% of IIR needs including 9&10 FYP) Gap In Chinese cities investment in UI 6-7% of GDP as against 0.5% of GDP in India Additional Rs 9 required out of every Rs10 (IIR)

4 Source: HPEC, Report-2010

5 Urban Reforms Cycle 1 st Stage (Early 1990) Getting the Institutions and the Systems work: Economic Reform; Decentralisation ( 74 th CAA) Transformation Stage(After 74 th CAA)- FIRE-D,1994.Departure from budgetary based Financing system to market based system (commercial viable project development, policy promotion, dissemination of GOI reform agenda and capacity building, MML,Accounting Reforms 2 nd Stage (Late 1990s) Moving the Agenda to the States- administrative reforms [Example Andhra Pradesh] 3 rd Stage Focus on Implementation; Making Services Work; Enhancing Responsiveness; Accountability and Transparency in Administration( JNNURM)

6 Need for Reform Initiatives Harnessing the Potential of Reforms in Urban Infrastructure Need for National-Level Reform-linked Investments: Need for Sustainable Infrastructure Development Need for Efficiency Enhancements

7 JNNURM An Incentive Based Reform Measure JNNURM is not a fund it is not a condition It is a catalyst that provides precious resources, removes external hurdles GoI flagship programme of Rs 50,000 crores ( enhanced to 66,000 crore) to be implemented over 7 years period, starting from Dec

8 JNNURM- Two Track Strategy JNNURM Track-I For Selected 63 Cities ( +2)=65 UIDSSMT Track-II For Other Cities Two Sub -Missions Urban Infrastructure Governance BSUP/ IHSDP

9 JNNURM Approach ULB CDP DPR Capital Investments State/ULB Reform Agenda Improved Management Improved municipal services Balancing the need for development with available resources Leveraging the resources to facilitate greater development Integrating existing infrastructure and enhancing its capacity/ life for desired performance and usage Strengthening local bodies with replicable models/ formats/ processes

10 JNNURM- Funding Pattern JNNURM UIDSSMT Category-A/B/C Cities (%) Central Grants 35/50/80 State Govt. 15/20/10 ULB/ MC/ FI 50/30/10 Central Grants 80% State Govt. 10% ULB/ MC/ FI 10% Need based assessment through CDP Allocation based on % of India s Urban Population

11 JNNURM Funding Pattern: Urban Infrastructure Centre Grant State ULB/Parastatals/ Contributions Cities with 4 million plus population 35% 15% 50% Cities with million plus but less than 4 million population 50% 20% 30% Cities in North Eastern States and J&K 90% 10% Other Cities 80% 10% 10% 4 installments; 25 % finance with CDP+MOA+ DPR approval; balance based on project & MoA milestones

12 Mandatory Reforms: State Level Effective implementation of decentralization initiatives as envisaged in the Constitution (seventy-fourth) Amemdment Act, 1992; Repeal of Urban Land (Ceiling and Regulation) Act, 1976*; Reform of Rent Control laws balancing the interests of landlords and tenants* Rationalisation of Stamp duty to bring it down to no more than 5% within next seven years Enactment of Public Disclosure law Enactment of Community Participation law, so as to institutionalise citizen participation in local decision making; and Association of elected municipalities with the city planning function

13 Mandatory Reforms: Municipal Level Adoption of modern accrual based double entry system of Accounting Introduction of system of e-governance using IT applications like GIS and MIS for various urban services Reform of property tax with GIS, and arrangements for its effective implementation so that collection efficiency reaches at least 85% Levy of reasonable user charges by ULBs/Parastatals with the objective that full cost of operation and maintenance or recurring cost is collected within next seven years. Internal Earmarking within local bodies, budgets for basic services to the urban poor;and Provision of basic services to the urban poor including security of tenure at affordable prices,

14 Optional Reforms Revision of Bye-laws to streamline the approval process for construction of buildings, development of site etc. Simplification of legal and procedural frameworks for conversion of land from agricultural to non-agricultural purposes. Introduction of Property title certification system in ULBs Earmarking at least 20-25% of developed land in all housing projects (both public and private agencies) for EWS/LIG category with a system of cross subsidization Introduction of Computerized process of registration of land and property

15 Optional Reforms Revision of byelaws to make rain-water harvesting mandatory in all buildings and adoption of water conservation measures Bye-laws for reuse of recycled water Administrative Reforms including reduction in establishment by introducing voluntary retirement schemes and surrender of posts falling vacant due to retirement; Structural Reforms Encouraging Public Private partnership

16 Reforms Can Be Grouped in to 4 Broad Categories like: Governance related such as 74 CAA, transfer of city planning function to ULBs, administrative and structural reforms, PPP, revision of municipal byelaws, provision of basic services to the poor etc. Process-oriented and Citizens- responsive such as accounting reforms, e-governance, rationalization of stamp duty at 5%, PDL, CPL etc. Land and Property Related such as property tax reforms, earmarking of 20-25% budget to weaker sections, repeal of urban land ceiling act, property titling, amendment in rent control law etc. Financial Sustainability related such as levy of user charges, city wide prop. tax coverage and collection etc.

17 Jawaharlal Nehru National Urban Mission (JNNURM) and Urban Poor JNNURM was launched in December 2005 with aim to cover construction of 1.5 m houses for urban poor during the Mission period ( ). It has two Sub-Missions : Basic Services for the Urban Poor (BSUP) seeks to provide seven entitlements/services - security of tenure, affordable housing, water, sanitation, health, education and social security in low income segments in the 65 Mission Cities. The Integrated Housing and Slum Development Programme (IHSDP) seeks to provide the above mentioned 7 entitlements, services in towns/cities other than the Mission Cities.

18 Jawaharlal Nehru National Urban Mission (JNNURM) contd. Under JNNURM, more than 1.5 million houses have been sanctioned for the poor About 1300 projects have been sanctioned covering urban India These projects involve an outlay of more than Rs.33,860 crore and Central Govt. subsidy of Rs.18,500 crore.

19 Interest Subsidy Scheme for Urban Poor A new Pilot Scheme for providing interest subsidy on housing loans availed by EWS/LIG availed for acquisition/construction of house Encourages poor sections to avail of loan facilities through Banks/HFCs Subsidy will be 5% on the interest charge for EWS/LIG upto Rs.1 lakh for the full period of the loan Loan repayment period permissible 15 to 20 years. Levy of pre-payment charges would not be permitted. Targets to cover 0.31 million households under EWS/LIG segments Total subsidy during 11 th Plan Rs.1100 crore.

20 Interest Subsidy Scheme for Urban Poor cont. Win-Win solution for all players Good for everyone Scheme is biased in favour of banks. All concerns of banks have been incorporated in the scheme. Lot of inbuilt risk mitigants in the scheme like borrower should have a plot Repayment liability of borrowers has been considerably reduced (EMI is less than 20% of monthly household income) Scheme has received positive response from banks and States both.

21 Disbursement of funds linked to the actual provision of amenities. A normative cap per EWS/LIG dwelling unit to be fixed in consultation with the States for the purpose. Affordable Housing in Partnership : Modification in JNNURM Modification in the guidelines of JNNURM (BSUP) to facilitate and incentivize land assembly for affordable housing. Provision of central assistance of 25% for the cost of the provision of civic services for projects for affordable housing at an approximate cost of Rs.5000 crore. The objective of the scheme would be to support the construction of 1 million affordable dwelling units in the first phase, with a minimum of 0.25 million EWS dwelling units.

22 Affordable Housing in Partnership : Modification in JNNURM contd. Criterion for eligible projects: Dwelling units should be a mix of EWS/LIG/MIG categories with the maximum size of a dwelling unit being at 1200 sq.ft super area, with at least 25% of them for EWS of 300 sq. ft. The States would be encouraged to promote projects in the Public Private Partnership (PPP) mode in a manner in which there are competing private sector suppliers in the market for affordable housing. State Governments could also consider seeding new areas for development through their Housing Boards, Development Authorities as well as through the various employee welfare organizations. The scheme will be operated in the same manner as the JNNURM.

23 Task Force on Affordable Housing Ministry set up Task Force headed by Deepak Parekh on Affordable Housing for defining Affordability, suggesting financial instruments and other measure to reach the goal Report submitted in December main recommendations of the Task Force 1 on what can be termed affordable; 1 on the need to gather statistics; 4 on making land available at reasonable cost; 1 addressing rental housing; 1 asking for state Boards to be revived; 2 suggesting how to garner financial resources; 1 on reducing costs of construction by technology innovation; and The important ones pertain to the definition, land issues and financing..

24 Rajiv Awas Yojana (RAY) Pursuance to the announcement made in the address of the President of India to the Joint Session of Parliament on considerable exercise is going on in the Ministry in consultation with Planning Commission for launching Rajiv Awas Yojana aimed at Slum Free India based on whole city approach. Based on the expert committee recommendations, detailed guidelines of RAY circulated by the HUPA in August 2010 to all the concerned ministries for review Comments received being collated and detailed guidelines under slum free city planning scheme have been issued and states are being providing technical and financial assistance to prepare slum free city plans.

25 Rajiv Awas Yojana (RAY) In the preparatory phase commenced from March 2010, Rs. 60 crores have been released to 20 states fro carrying out preparatory tasks for slum free city planning under RAY during Tasks include slum survey, GIS mapping of slums, GIS enabled slum information system, preparation of legal framework fro property rights to slum dwellers, preparation of slum free city and state plans.

26 Rajiv Awas Yojana (RAY) Property Rights to Slum Dwellers: Key Issues Property rights: to be envisaged as assignment of ownership over land/built space with land given on lease or rent preferably to an association of slum dwellers or group housing society. Cut-off-date: suggestion is provision of a moving cut off-date and rental housing for new migrants Lock- in period: suggestion is a reasonable period of time say 7-8 years to enable the banks to make loan recovery. Allotment of property to be inheritable and mortgaeable, but not transferable or alienable during lock in

27 Way Forward Central Government JNNURM and social housing (RAY) to be given stronger boost with reform emphasis, additional funds and new components State Governments State Housing Board to be reactivated with definite purpose and definite targets. Land to be provided at nominal cost for economically weaker sections and controlled prices for LIG and MIG Cooperative Societies to be encouraged Effective partnership between Govt. and private sector in the form of earmarking of land for EWS/LIG

28 JNNURM Review As on March 2011 Source: Jawaharlal Nehru National Urban Renewal Mission (JNNURM), Annual Update, GOI,

29 PROJECT SANCTIONING AND FUNDS RELEASE Status as on January 2011 CDP MOAs CDPs from 65 cities received and 65 appraised 65 MoAs signed DPRS received 1068 Projects approved by CSMC (upto 91st CSMC) Total Value of Projects approved (Upto 87 th CSMC) Additional Central Assistance (ACA) committed Additional Central Assistance (ACA) released 526 Projects Rs crore Rs 27, crore `11, crore (Project) + ` cr (CPF, DPR re ) + ` cr (buses) Total Rs 13, ( ` 25 cr + `1.18 cr to be refunded by State Govt for withdrawn project of AP & Karnataka) Source: Jawaharlal Nehru National Urban Renewal Million (JNNURM), Progress Review, 10 th January 2011

30 PROGRESS DETAILED PROJECT REPORTS (DPR) Status Status as on January 2011 DPR Status No's Received 1068 Approved 526 Under appraisal process 06 Under Consideration in Mission Directorate 05 Referred back to State for clarification/ modification 531 DPRs under appraisal - CPHEEO - 02 DPRs, CPWD - 02 DPRs, UT 02 DPRs, Total - 06 DPRs

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33 State Level Reforms Year 5 Commitments and Accomplishments State Total number to be achieved by Year 5 Total Achieved till date since the start of mission Achieved prior to the Mission Period Achieved during the Mission Achieved since Apr th Functions 74 th DPC 74 th MPC Transfer of City Planning Function s Transfer/ Integratio n of Water Supply & Sanitation Reform in Rent Control Stamo duty rationaliza tion to 5% Repeal of ULCRA Enactment of Community Participatio n Law Enactme nt of Public Disclosur e Law Note: These reforms have been reported to be achieved as per the QPR (Apr June 2010) and Letters received till July 10.

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35 Monitoring and Implementation Reforms ULB reforms Year 5 Commitments and Accomplishments Cities E- Governanc e set-up Target number to achieve by Year 5 Total Achieved till date since the start of mission Achieved prior to the Mission period Achieved During the Mission Achieved Since Apr 10 Shift to Accrual based Double Entry Accountin g Property Tax (85% Coverage) Property Tax (90% Collection efficiency) 100% cost Recove ry (Water Supply) 100% cost Recover y (Solid Waste) Internal Earmarkin g of Funds for Services to Urban Poor Note: These reforms have been reported to be achieved as per the QPR (Apr-June2010) and Letters received till July 10.

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37 Optional Reforms (by cities) Target number to be achieved by Year 5 Achieved till date since the start of mission Achieved prior to the Mission Period During the Mission Achieved since Apr 10 Optional reforms Year 5 Commitments and Accomplishments Introduction of Property Title Certification System Revision of Building Bye laws streamlinin g the Approval Process Revision of Building Bye laws Mandatory Rainwater Harvesting in all buildings Earmarking 25% developed land in all housing projects for EWS/LIG Simplification of Legal framework for conversion of agricultural land for nonagricultural purpose Introduction of computeriz ed process of Registration of land and property Byelaws on Reuse of Recycled Water Administr ative Reforms Structural Reforms Encouragin g Public Private Partnership Note: These reforms have been reported to be achieved as per the QPR (Apr-June2010) and Letters received till July 10.

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39 Performance of Cities/States Well Performed: Hyderabad and Vizag in AP; Amendeabad, Rakkot and Vododara and Surat in Gujarat; Bhopal and Ujjain in M.P.; Pune and Nanded in Maharasthra; Chennai and Coimbatore in Tamilnadu; Kolkata and Asansol in W. Bengal; Allahabad in U.P. etc. Not So Good Cities include Ludhiana, Mathura, Ajmer, Shillong, Jabalpur, Itanagar etc. 39

40 Most Complicated Reforms CPL Rent Control Amendment Transfer of City Planning Function to ULBs Computerization of records & Property Titling Administrative & Structural Reforms 40

41 The Current Story Despite increased infrastructure investment in recent years, service improvements at most marginal Still poor quality and intermittent water, inadequate sanitation and solid waste management Customers invest heavily in coping infrastructure The poor pay the highest price & coping costs Lack of performance standards and monitoring 41

42 Key Typical Issues Faced Process Related Finance Related Reforms Related Procurement of consultants to prepare Detailed Project Reports Reviewing DPRs and linking them with JNNURM requirements Integrating Financial Operating Plans with DPRs Financial structuring of projects to ensure sustainability Integrating private sector participation under appropriate format Contractual framework for private participation & project sustainability Procuring Implementation Consultants Robust monitoring system for project implementation & follow-up 42

43 Key Typical Issues Faced Process Related Finance Related Reforms Related Up front availability of funds for project development Contribution of state and ULBs Share Procuring finances/ debt funding for project Access to capital markets, financial institutions for sustained availability of funds Establishing revolving fund envisaged under JNNURM 43

44 Key Typical Issues Faced Process Related Finance Related Reforms Related Technical and financial capacity Integrating reforms with project development process Adherence to committed time-lines Capacity building to take up reforms Looking beyond JNNURM 44

45 Support required by Cities Process Finance Reforms Project conceptualization/ preparation Project development and structuring Project financing Project monitoring and implementation Handholding of cities in implementation of reform agenda Training and capacity building of employees Information Education and Communication (IEC) 45

46 Way Forward Commitment of the State Government to the city level reforms Commercial Viable Projects should be developed on PPP basis such as: Bus terminals;logistic Hubs;City Bus Services (CBS);Foot Over Bridges (FOB);Real Estate, Housing and Township Projects including Housing for poor;water Front Development;Public Toilets;Commercial Space Development; Regulatory Mechanism needs to be developed Capacity building and HR Issues to be addressed at all the levels Support Urban Local Bodies to deepen reform process and implementation

47 Way Forward Periodic review of reform implementation Development of database Exchange of best practices- PEARL 13th CFC Recommendations

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