Impact of Urban financing Reforms on Cities and Beyond

A conference on Sustainable Cities was concluded today, June 18, 2013, at Bharati Vidyapeeth’s Institute for Environment, Education and Research, a joint initiative between BVIEER and The Urban Team of ICRIER ( headed by Dr Mrs. Isher Judge Ahluwalia. As a part of this seminar, a summary was presented of the High Powered Executive Committee Report, popularly known as the Ahluwalia Report. This report focuses on multiple level of reforms for financial independence of Municipal authorities, a premise, already identified, that can enable better delivery of Urban Services in cities of India.

Amongst many reforms, the Report suggests that municipal authorities should raise their own finances, independent of the State Governments, thereby gaining a level of authority, accountability and thus offer better civic services to its citizens. When financial autonomy comes, it is estimated that Municipal authorities will also become more accountable, much like when we teach children to manage money, thus making them grown-up and responsible. In order to raise these municipal finances, the Report outlines numerous measures such as a ‘Local Body Tax’, surcharges of varying kinds, road taxes, congestion charges etc.

While listening to this, I felt that these reforms are really important to make our municipal authorities grow-up and be responsible! So far, State Governments are controlling all finances and thereby keeping the ‘younger brothers’ shielded and thus irresponsible. When the State Government funds projects, it seeks control in every municipal project, making systems more drawn out and lengthy.

However, almost all the reforms suggested for raising municipal finance will raise the cost of living in cities. Be it the LBT or congestion charges, each citizen will have to pay more and thus can expect a rise in the already high cost of living. Just a few months back, the first reform – the LBT was introduced and Pune’s traders raised a tremendous outcry against it. So, as I listened to the lecture by Dr. Ahluwalia, I wondered how and when can these reforms be actually implemented if for every reform we see massive public outrage?

And, while we are streamlining urban services and their delivery through better municipal financing, are we automatically disincentiving urban growth in cities by raising the cost of living in cities? If, we disincentivize cities, will we need other counter strategies to grow beyond cities’ boundaries? Will urban fringes gain more prominence and see more growth than cities, with people choosing to stay at the borders of cities, keeping costs lower yet enjoying the benefits of the city? Will these reforms to build municipal finances, actually end up pressurizing the ‘fringe’ of cities? And who then will be responsible to plan for, budget and provide urban services in the fringes of cities, just outside city’s jurisdiction?

We also had planners from Gujarat speak about Town Planning Schemes and their implementation. Can Town Planning Schemes be an answer to planning urban fringes? Once again, I have more questions than answers from where I started out, but I think, it will be relevant to understand the spatial impact of financial reforms in municipal governments. Or else, once again, we may have solved one problem to make way for another one!

‘It’s happened … the tax free municipal bonds are now heavily taxed.’

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