Minister of Urban Development Shri M.Venkaiah Naidu has favoured a share of GST(Goods and Services Tax) revenue for the municipalities across the country to ensure predictable and guaranteed flow of funds to enable them take up urban reconstruction initiatives. He expressed concern over the huge urban fiscal gap while addressing a ‘National Workshop on Governance, Administrative Reforms and Capacity Building’ here today. The Workshop was organized by the Indian Council for Research in International Economic Relations (ICRIER) with the support of the Ministry of Urban Development.

Shri Venkaiah Naidu said that the country’s municipalities are the weakest in the world in terms of access to resources, financial autonomy and revenue raising capability. Quoting from a report of the McKinsey Global Institute, he noted that annual per capita income of all municipalities was only ₹ 1,430 as against the expenditure commitment of ₹ 6,030. Stressing on the need for predictable and guaranteed resource flows to urban local bodies, Shri Naidu said that he will explore the possibility of earmarking a share of revenues from the proposed GST with the Finance Minister Shri Arun Jaitely.

PPP model may have not done well but it shall succeed for effective urban interventions, says Shri Naidu

Huge urban fiscal gap with annual per capita income of ULBs-Rs.1,430, expenditure-Rs.6,030

Shri Naidu expressed concern over substantial share of revenues of municipal bodies going towards payment of salaries leaving only a little for mandated functions and development activities.

The Minister emphasized that Public-Private-Partnership model is a crucial vehicle for mobilizing huge order of resources required for building smart cities and bridging the huge infrastructure deficit in other urban areas. Shri Naidu observed that the success of PPP in India is associated with projects that are technically simple, have small gestation periods and allow easy estimation of costs but PPP is needed more in the more complex infrastructure projects and this shall be made a success through good governance and institutional framework.

Expressing concern over inadequate capacities of urban local bodies, Shri Naidu informed that the Government is giving priority to enhance required capacities through spending a specific share of cost of each scheme on capacity building, sharing of knowledge and information about best practices, promoting regional hubs for supporting capacity building of urban bodies.

Shri Venkaiah Naidu said that for the success of the new urban initiatives, a set of urban reforms will be promoted under the new initiatives. These include: e-governance, creation of a professional municipal cadre, integrated long term urban planning through City Development Plans, devolution of funds and functionaries to urban local bodies, double entry accounting, revision of Building Bye-laws, improving revenue collections, credit rating of municipalities, energy and water audits and 100% collection, transportation and scientific disposal of municipal waste.

The Minister observed that smart cities to be developed will be based on India specific context and needs focusing on bridging infrastructure deficit to enable inclusive and more livable cities. The smart cities seek to ensure efficient utilization of human and physical resources for cities to drive economic growth.

GST revenue share for urban local bodies to ensure predictable funding and enable urban infrastructure and capacity reforms. Shri M. Venkaiah Naidu proposes earmarking a share of GST revenue for urban local bodies to ensure predictable, guaranteed funding to bridge a large municipal fiscal gap and free resources for mandated functions. He also advocates using PPPs with improved governance for urban infrastructure, prioritized capacity building funded through scheme allocations, and a package of urban reforms including e governance, a professional municipal cadre, City Development Plans, devolution of funds and functionaries, double entry accounting, revised building bye laws, improved revenue collection and municipal credit ratings, and scientific waste management.