Business Standard 12.02.2010

No reform, no money: Govt tells states seeking funds.

It was the showcase scheme of the United Progressive Alliance (UPA) that was introduced in 2005 to modernise the cities, provided they changed some archaic rules governing the Indian urban landscape.

But projects under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) are set to come to a screeching halt. No reform, no money — this is the government’s latest mantra for states seeking funds for city modernisation.

A peeved Finance Minister Pranab Mukherjee, at his recent pre-Budget meeting with the Union urban development ministry made it clear that he would not give a penny of the JNNURM money to the states if they failed to fulfil their promises on reform.

Under JNNURM, the states get central assistance for infrastructure projects in select cities only if they carry out major policy reforms.

Urban Development Secretary M Ramachandran told Business Standard he would send letters and urge state governments to expedite pending reforms. “We feel that the states are just sitting on the money and not carrying out the reforms they are bound to do according to the agreements with the Centre. We have to ensure that these are carried out before we release the next instalments.”

According to Ramachandran, this is an even bigger problem than the fact that states are not spending the fund allotted for JNNURM schemes.

A total of 23 reforms are envisaged for JNNURM under two heads — mandatory and optional. The mandatory section contains e-governance, municipal accounting, property tax, rationalization of stamp duty, community participation law, public disclosure law, among others. The optional category includes reforms in introducing computerised registration of land and property, encouraging public-private partnership projects, revision of by-laws to make rainwater harvesting mandatory, reuse of wastewater, etc.

States like West Bengal and Jharkhand are yet to repeal the Urban Land Ceiling and Regulation Act that is necessary for availing of JNNURM grants.

JNNURM also requires certain reforms to be undertaken by states or cities in the levy of user charges on different municipal services, with the objective of securing effective linkages between asset creation and asset maintenance and ultimately leading to self-sustaining delivery of urban services.

According to Ramachandran, the pace of reform at the urban local body level is more encouraging than at the state level. “In many cases, you may say there is a lack of political will, especially where the state needs to raise taxes.” In many cases, two instalments have already been given to the states, but now the finance and urban development ministries want to tighten their grip.