The impact of the Challenging Economic Times on Local Governments: Strategies for coping with the economic crisis (Reflections from India) Dr Rajiv Sharma Director General Centre for Good Governance Road No. 25, Jubilee Hills Hyderabad 500 033 INDIA Ph: +91-40-23541952; Fax: +91-40-23541953 rsharma.ias@gmail.com www.cgg.gov.in (Presentation on Oct. 22,2009) 1
Structure of Presentation Impact of economic crisis Impact of economic Crisis in India Impact of economic downturn on urban local bodies Strategies for coping with the challenges of economic downturn Reform process Use of ICT and e-governance Lessons 2
The Impacts of Economic Crisis on the National Governments Reduced economic growth estimates Several currencies weakened due to decline in demand Reduced credit flows due to liquidity problems Fiscal pressures due to widening of resource gap Source: The Economist 3
Impact of Economic Crisis on developing countries Inter connected global economy Reduced exports adversely affecting income of work force Reduced demand for services hotel, tourism, IT and Software industry Reduced off-shore employment 4
Decline in Remittances to Mexico Source: The Economist 5
The Impact of Economic Crisis in India Several companies shutdown or reduced their operations Domestic demand for economic goods and services fell due to job losses in finance, real estate, retail, travel, hospitality etc. Large number of migrant workers returned jobless Reduced remittances from abroad Newly created Special Economic Zones (SEZs) developed for export promotion became unviable Growth tumbled from near 9% to 6% per annum 6
Urban population and urban local bodies Urban Population 27.8 % Total Urban Population 285 Million Population of India 1.02 Billion As per 2001 Census - No. of Census towns 4368 No. of Class I towns 393 Growth rate 3.42 % Annual growth rate 2.73 % 7
Indian cities with population of more than 5 million (2001 Census) 1. Mumbai (12 million) 2. Delhi (10 million) 3. Kolkata (8 million) 4. Chennai (6 million) 5. Bangalore (5.5 million) 6. Hyderabad (5.5 million) No. of cities with population of more than 1 Million : 35 8
The Impact of economic Crisis on the Local Governments Decline in the revenues of local governments due to low economic activity other tax collections decline Capital works involving outlays under risk of large expenditure abandonment of work by contractors project cost and time escalation Decline in demand for housing finance real estate employment local businesses Source: The Economist 9
Property Tax Yields in Urban Local Bodies - Indian Case Low tax base Dependence on state and federal fiscal transfers Total Amount of property tax revenue (Billion Dollors) Percentage of GDP Average for Transitional economies Low Estimate 1.25 0.15% High Estimate 1.88 0.22 0.68% Source: Study commissioned by 13 th finance Commission of India on Urban Property Tax Potential in India (NIPFP July 2009) 10
Impact of economic downturn on urban local bodies Inflationary pressure on urban infrastructure projects Reduced availability of financial capital and credit crunch Reduced investments into new infrastructure creation Reduced resources for revenue and capital expenditure In Hyderabad Municipal Corporation the capital account deficit has increased from Rs. 22 million in 2005-06 to 645 million in 2006-07 In Mumbai Municipal Corporation revenue account deficit has increased from Rs. 1246 million 2007-08 to 5510 million in 2008-09 11
Strategies for urban local bodies to cope with economic downturn Urban Governance Reform Mandatory Reforms Implementing scheme of devolution of powers to local bodies Public disclosure and community participation laws Introducing accrual based accounting Property tax reform Optional Reforms Property title certification system Improving building permit system Administrative reforms 12
Strategies to cope with economic downturn Targeted use of International Development Assistance (IDA) in priority areas like Health Education Capacity building Livelihood programmes Self-help groups of poor Achieving Millennium Development Goals (MDGs) 13
Strategies for urban local bodies to cope with economic downturn Creation of Mission Mode Projects with Government of India funding like Jawaharlal Nehru National Urban Renewal Mission (JNNURM) with two sub-missions Basic Services for the Urban Poor (BSUP) Urban Infrastructure and Governance (UIG) Other Central Government Schemes Integrated Development of Small and Medium Towns (IDSMMT) Integrated Housing and Slum Development Programme (IHSDP) 14
How does down-turn affect the urban poor? local body s 15
Strategies for urban local bodies to cope with economic downturn Creation of Special Purpose Vehicles for attracting private and institutional finance State Urban Finance and Infrastructure Development Corporations at State level such as TUFIDCO (Tamil Nadu) KUIDFC (Karnataka) APUFIDC (Andhra Pradesh) Urban Development Fund Tamil Nadu Urban Development Fund Water & Sanitation Pooled Fund 16
About JNNURM (Jawaharlal Nehru National Urban Renewal Mission) JNNURM is a novel programme with reforms as investment catalyst for development for 63 mission cities It has a total investment outlay of over Rs 150,000 crores ($30 billion) spread over 2005-2012 JNNURM focuses on Governance reforms Infrastructure improvement Basic services to the poor JNNURM provides Central funding together with the State & Local Body contribution (10% to 50%) envisaged under City Development Plan Detailed Project Report 17
How reforms improve infrastructure and service delivery to the Poor? Reforms at urban local body level can lead to: Improved access to physical infrastructure Improved access to social infrastructure Improved financial position for: Better service delivery performance More investment on capital assets Equitable distribution of resources local governments, nearer to people, can do better 18
Dimensions of Reforms Capacity Building R E F O R M S Technology Better Service Delivery Improved Resources Efficiency & Effectiveness in resource utilization 19
Strategies for urban local bodies to cope with economic downturn Attracting private partnership through innovative PPP models Level playing field for private players through user charges/ toll fees for cost recovery Service contracts for operating a particular service Navi Mumbai Municipal Corporation Joint Venture Development Projects Metro rail development in Bangalore and Delhi Land leasing & sale as infrastructure financing option Auction of land by Hyderabad Urban Development Authority 20
Strategies for urban local bodies to cope with economic downturn Pro-poor approach to service delivery Pro-poor budgeting (or, P-budgeting) through internal earmarking of 25% of municipal funds for urban poor Internal earmarking of land and housing units for urban poor Providing subsidized credit to urban poor Pavala vaddi (3% interest loans) scheme in Andhra Pradesh Bringing poor under comprehensive health insurance Aarogyasri scheme of Andhra Pradesh 21
What can e-governance do? 1. IMPROVED EFFICIENCY 2. BETTER CITIZEN INTERFACE 3. REDUCING WASTAGE 4. PRO POOR APPROACH 5. FACILITATING HEALTH CARE Improved collection of arrears of Taxes Improved grievance redress and user satisfaction Better tax compliance and cooperation from citizens Use of GPS based technologies Better Water Management Improved waste disposal Matching labour demand with skill set Better targeting of subsidized programmes like Housing, Public Distribution System, Food and education subsidy, etc. Better management of emergency health care services Tele Medicine Comprehensive health care : Health Insurance Scheme with GPS managed Ambulance service with a common Call Centre in the State of Andhra Pradesh 22
Why ICT in Urban Local Bodies? Facility to pay taxes through citizen centers across the state Transparency in Tax levying - self assessment of property tax Issue of Birth & Death certificates through citizen serves centers Redressal of Grievances through a call centre Switching over to Double entry accounting system Digital Record of Slum profiles periodical surveys and analysis Trends and projections for planning Planning and Management of Poverty alleviation schemes Improving energy efficiency street lighting Improving efficiency in thorough better project management Online Access by citizens themselves Digitized data on demand 23
IT based strategies for improvements in Urban Local Bodies Case studies from India Pune Goa Grievance Redress System, Property Tax, e-procurement House Tax collection, Lease rent collection etc. Haryana Urban Development Authority Property and financial Management ULBs of Andhra Pradesh Citizen Service Centers (e-seva), Online Grievance Redressal Tracking System (OGRTS) Mumbai Enterprise Resource Planning for most of the Municipal functions Delhi, Hyderabad, IT enabled Solid Waste Management 24
Some more case studies Municipal Corporation of Pune: Grievance Redressal System, self assessment of property tax, and e-tendering catering to 3.5 million people. Municipal Administration System in Goa: Transactions pertaining to house tax collection, lease rent collection, occupation licenses are performed online. Transaction time reduced drastically from a few days to 20 minutes Improved revenue collection 25
e HUDA Case of initiative by Haryana Development Authority Property Management system Financial and accounting system Provides online services to users of property and maintains payment data, delays, penalties, etc., 100,000 users can log on simultaneously Improved management of services and increased revenues 26
eseva IT enabled Citizen Service Centers in Andhra Pradesh, India About 300 centers across state Number of transactions upto 120 thousand per day collections up to of Rs.200 million Many services under single roof 8.00 AM to 8.00 PM Maximum 20 to 30 minutes of transaction time Serene atmosphere No corruption 27
eseva IT Enabled Citizen Service Centers of Andhra Pradesh 28
Call Centre design to handle citizen grievances in urban local bodies Classify Complaints Area-wise Subject-wise Functionary-wise Multiple Channels Telephone email Web-based application Post Fixing Responsibility & Accountability Citizen charter Automatic Escalation Online Tracking Status 29
IT - enabled management of grievances for improved municipal services HOW TO REGISTER GRIEVANCES Multiple Channels 1 2 HOW TO FORWARD SMS, Web HOW TO TRACK STATUS 4 3 HOW TO RECORD ACTION SMS, Web SMS, Web 30
Online Grievances Redressal Tracking System - Network Diagram Internet Media All level Functionaries Dial Up Web Appln./ SMS INTERNET Leased Line ISDN SMS Media Citizens/ All level functionaries Functionary Level 3rd Tier Router GSM Phone LAN 1 Central Server Level 2nd Tier Apln Server DB Server Data Centre LAN 1 Call Centre Operator Level 1st Tier LAN 1 31 Operator Terminals With Printers
Using Technology for Solid Waste Management : Case of Delhi (2008) Daily generation of Solid Waste - 6000 Tonnes Electronic Monitoring of Refuse Removal Trucks (RRTs), Loaders and Bulldozers to drag Weigh and move GPS based Solid Waste Transport Management System Proper event-logging and alerts on performance Improved profitability of waste collection by private operators and increased revenues for the local government Improved public health, control of disease vectors and reduced disease burden 32
IT - enabled services in Municipal Corporation of Greater Mumbai Covers 70% of functions ERP based IT Services: Health Services Shops and Establishments Licenses Building and Factory Garden and Trees Maintenance Water Works Market Department Check Application Status Complaints Handles more than $ 4 billion worth financial transactions per year 33
Green initiatives Energy generation from sewage Surat Municipal Corporation Energy Audit: Surat Municipal Corporation saved 1.54 million kwh/year by changing to FL lamp 60% recovery of investment in the same year Gas storage system Bangalore Municipal Corporation Energy saving measures in street lighting using an Energy Services Company (ESCO) 34
Lessons for future Ring fencing of the poor by adequate resource allocation to take care of their vulnerability Special emphasis on affordable housing to reduce the risk of mortgage crisis Efficient resource mobilization and creation of specific funds to take care of vulnerable sections Constant reforms to improve services, efficiency and engaging citizens in participatory governance Improving resource base and assets management Upgradation of technology and consolidating e-governance Help to Local bodies from federal government in a substantial manner with incentives for governance and economic reforms 35
Thank You 36