Category Archives: Infrastructure finance

WB funds for JNNURM to come with reforms for further Impact

WB funds for JNNURM to come with reforms clause
Jyoti Mukul / New Delhi December 26, 2009, 1:08 IST

A fresh $1-billion (nearly 4,600-crore) loan from the World Bank under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM), to be routed through the Union government, would be linked to cities adopting certain efficiency parameters.

These will form part of the second stage of urban reforms which the Centre plans to push in cities that have already shown some progress under JNNURM. These parameters will require them to achieve milestones linked to release of funds.

The Union urban development ministry is working on a concept paper to identify the broad reforms the cities will need to undertake. The paper will be the basis of discussions when a World Bank team arrives in the national capital next month to start negotiations for the loan.

“Projects that will be undertaken through the World Bank funding will be in addition to the ongoing projects under JNNURM. Since the agenda under JNNURM is set, the only thing that could undergo change is the reform agenda, since we want to take up reforms to the next stage,” said urban development secretary M Ramachandran.

The official clarified that these conditions were being designed by his ministry and not the World Bank. Under the first phase of reforms, cities and states are required to adopt certain measures, like rationalisation of stamp duty, repeal of the Urban Land Ceiling and Regulation Act and imposition of user charges, for availing funding under JNNURM.

According to the latest information with the ministry, 56 per cent of state-level reforms and 50 per cent of urban local reforms committed till 2008-09 were achieved. Among the states that have done well are Maharashtra, Gujarat, Tamil Nadu and Andhra Pradesh. There have been capacity constraints in the North-East and Jammu and Kashmir.

The nature of projects to be taken up for funding under the World Bank loan will be the same as that under JNNURM and will include water supply, sanitation and urban transport projects. Besides user charges, the efficiency parameters, for instance in a water project, could include reduction of wastage by specified quantum, achieving energy efficiency in the operation of the system and recycling. It could also include training of staff.

The funding pattern would be the same as for JNNURM. “The project funding could be city-wise and depend on a state’s willingness to take part and fund their part of money, and their commitment to do modification,” said Ramachandran, adding that the scope to increase the number of cities was not there, since the funding was limited.

At present, there are 63 mission cities, including metros like Delhi and Mumbai, besides Allahabad, Bhopal and Patna.

The urban development ministry is looking at additional funds of Rs 50,000 crore for JNNURM. The Planning Commission is likely to take a view on this in the mid-term appraisal of the Eleventh Five-Year Plan (2007-12).

Under JNNURM, the Centre allots grants covering 50 per cent of the project cost for cities with population between one million and four million. For cities with population higher than four million, the Central grant is 35 per cent of the project cost, with the remaining money coming from the state and the urban local bodies.

The states have utilised much of the Rs 1 lakh crore sanctioned for various projects under JNNURM since it was launched in December 2005.

In the case of the North-East, the Centre provides 90 per cent of the project cost as grants, while for Jammu and Kashmir, it contributes 80 per cent.


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India pays penalty for not utilising loans from lending agencies

India pays penalty for not utilising loans from lending agencies
22 Jun 2009, 0415 hrs IST, Pradeep Thakur, TNN

NEW DELHI: While India is negotiating more loans from the World Bank to fund infrastructure development and to upgrade urban transport, an internal assessment of the finance ministry has revealed that many of its past projects are running far behind schedule to the extent that the government has been paying commitment charges of several hundred crores every year.

In 2007-08 and 2008-09 alone, India paid Rs 240 crore as commitment charges for the non-disbursed portion of sanctioned loans to World Bank and other multilateral agencies such as Asian Development Bank (ADB) and some bilateral donors.

In the five years between 2004-05 and 2008-09, the government paid close to Rs 700 crore as commitment charges. An estimate of such expenditure since 1991 puts the figure upwards of Rs 1,400 crore.

Finance ministry sources said that till last year, there were 231 externally aided projects of which more than 40% were paying commitment charges. This indicates lack of coordination among different organs of the government with no check on timely implementation of development schemes.

Review of the ADB portfolio showed undisbursed loan amount having increased from $850 million in 1999 to $3.5 billion at the end of 2006. Fresh loans were negotiated even when the existing basket reflected huge under utilisation.

A finance ministry official said in the six years between 2001 and 2007, the government borrowed Rs 12,800 crore from ADB but on account of slow disbursal, it paid Rs 230 crore to the agency as commitment charges. An estimated 60% of World Bank and ADB loan portfolio are currently paying commitment charges.

It has been observed that many highway and power projects were pushed prematurely for additional World Bank funding even before they were ready, or even before the previous loans had become effective.

Commitment charges are a penalty on the recipient for its failure to utilise the committed aid. It is partly an indicator to assess the recipient government’s bureaucratic capacity of (loan) aid absorption and to measure the pipeline effect of the rate of utilisation of credit.

Questions have also been raised on the way the loans have been negotiated. In many cases, the government had bargained loans with commitment charges as high as 0.75% when the rate of interest in the international market hovered around 1%.

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WB $500 mn for non-JNNURM city

World Bank may lend $500 mn for non-JNNURM city utilities
11 Apr 2009, 0052 hrs IST, Rajat Guha, ET Bureau
NEW DELHI: The government plans to raise $500 million from the World Bank to finance urban facilities in 15 small cities that are not covered

under the Rs 50,000-crore Jawaharlal Nehru National Urban Renewal Mission (JNNURM).

The funds will be used to finance facilities such as public transport, water management and sanitation projects.

“The government is talking to the World Bank for a loan. The loan will, in turn, be advanced to city development authorities after appraising their detailed project reports for infrastructure development,” said an urban development ministry official, requesting anonymity.

Long-term loans advanced by multilateral financial institutions such as the World Bank and the Asian Development Bank (ADB) are usually given at a low rates of interest. The ministry would examine the total transaction cost involved and then extend loans to state governments.

All states have been asked to set up dedicated authorities to focus on infrastructure needs in cities. The government encourages private participation in these projects, which can avail funding on the basis of their credit rating.

Apart from facilitating fund disbursal to states, eligible urban local bodies (ULB) will soon be permitted to access credit directly from multilateral lending agencies such as World Bank and ADB, as opposed to the current practice of funds being routed through the central government.

The ULBs will then be able to seek funding from multilateral lending agencies as the government has already launched an initiative to rate their infrastructure projects.

The urban development ministry is of the view that central allocation of Rs 50,000 crore through JNNURM alone would not be sufficient to meet the requirements of local bodies.

As per the estimates prepared under JNNURM, urban infrastructure investment requirement is Rs 3,35,000 crore for the 63 mission cities alone. Of this, an investment of Rs 57,000 crore is envisaged by 43 cities in the sectors of water supply, sewerage and drainage.

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urban renewal editorial civil society

April 2009 Edition

urban renewal

Umesh Anand

CITIES are meant to be levellers and drivers of opportunities and growth. But our cities are mainly known for their inequalities and inefficiencies. While a few Indians enjoy urban facilities, in some cases equal to the best in the world, tens of millions of others continue to live in appalling conditions. Such disparity makes it necessary to raise questions about our democracy and the real depth of our economy. If so many people do not have access to basic amenities, what good is the progress that we claim?

The Jawaharlal Nehru National Urban Renewal Mission (JNNURM), launched about four years ago, was meant to deal with the backlog in our cities by providing funds and vision and establishing public-private partnerships. But if the Hazards Centre, a feisty little outfit located in Delhi, is to be believed, not all is well with the JNNURM.

You can read about the Hazards Centre’s findings in this issue, and there will be replies from the government for sure, but the question before us is whether we can afford to continue to merely tinker with the problems of our cities.

Real solutions are required. And they are available For instance the task force on affordable housing for all headed by Deepak Parekh of HDFC has made several suggestions with regard to increasing the urban land stock and directly addressing the issue of housing and civic amenities for the poor.

The task force has emphasised the need to regard affordable housing as a core economic activity and place it at the centre of public policy because housing, housing quality and economic development are inextricably linked.

It is necessary to win the confidence of the urban poor so that they become participants and beneficiaries and not mere targets. With that focus, it is even possible to enter the tricky terrain of land acquisitions by making affordable housing one of the declared social objectives and structuring compensation as sustained long-term benefits.

The housing sector as a whole is a major contributor to employment and growth. It will therefore not do to allow it to go into a slump. But the housing sector needs to be more broad-based and inclusive. Both in its own interests and for the larger national good it can’t restrict itself to the wealthy.

The task force has suggested that governments give the urban poor security of tenure because only then will they participate without fear in a process of renewal. Slum redevelopment, for instance, is a better and cheaper option than relocation, but it needs to be achieved through a community effort.

Similarly, finance has to reach the poor and for that they have to be brought within the banking system. Micro-finance institutions (MFIs) have a role to play here. Once again flexibility is called for so that MFIs can take deposits.

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Is urban renewal just hype?

April 2009 Edition
Is urban renewal just hype?

Citizens’ probe finds shoddy data, little consultation

Civil Society News
New Delhi

A national mission to make investments in 63 Indian cities over seven years has run half its course, but there are concerns about how projects are being chosen and whether all the money and effort will finally deliver an improved and inclusive urban environment.

The Jawaharlal Nehru National Urban Renewal Mission (JNNURM) was launched in 2005 shortly after the Congress-led United Progress Alliance (UPA) came to power. It was supposed to make investments in infrastructure and basic services for the urban poor.

The idea was to help cities solve their problems quickly by providing funds, reducing red tape and introducing new efficiencies through public-private partnerships. Local bodies were to have a key role and projects were to be judged on inclusiveness. Consultation, broad-based and in the public domain, was to be given importance so that investments flowed to where they were needed most.

However, preliminary findings of two studies undertaken by the Delhi-based Hazards Centre in various cities indicate quite the opposite: We are told there is inadequate consultation and lack of awareness about projects at the local level. There is also a mishmash of data and an absence of vision for cities.

The Hazards Centre has several years of experience in working with the poor in cities. It looks at issues of governance, community rights and the provision of basic urban services.

The early findings of Hazards Centre on how the JNNURM is being implemented were presented in the last week of February by Harini Narayanan and D Leena at the Indian Social Institute. Both Leena and Narayanan also spoke to Civil Society, as did Dunu Roy, the director of Hazards Centre.

JNNURM envisions a city development plan (CDP) followed by a detailed project report (DPR). The Hazards Centre says it was asked by the National Institute of Urban Affairs (NIUA) to examine 15 CDPs. This was the first study. In the second study, which is ongoing, local groups are part of a citizens’ initiative anchored by the Hazards Centre to evaluate JNNURM claims on the ground.

These groups are now reporting that many of the claims made under JNNURM are simply not true. “For instance in Ajmer,” says Leena, “we gave a group information about a project which we had downloaded from the urban development ministry’s website. But when they went to the spot they found the project did not exist.”

“Many of the claims are sweeping. When we went to the ministry we were given brochures and CDs and told to get further information from the website. For instance, we are told that a large number of houses have been built for the poor. But where are they, have people moved in?” says Leena, lamenting the lack of tangible claims.

“Now what we have done is got the list off the website of all the detailed projects and we are asking organisations to go with this list and visit each of these projects and take a photograph and come back,” says Narayanan.

In Patna, for instance, there is a project that has been listed as having been completed. But when citizens visited the site all they found was a board. There are many more such examples the Hazards Centre review is throwing up.

The Hazards Centre sees basic flaws in the JNNURM approach. For instance, a distinction is made between urban infrastructure and governance (UIG) and basic services for the urban poor (BSUP). Leena and Narayanan point out that it is essential to see infrastructure as serving the needs of both the rich and the poor. A modern city primarily needs to be inclusive. Then again, in practical terms a division makes it difficult to fund an infrastructure project when it involves the poor.

The new and the old. The urban backlog is huge.The Hazards Centre gets the impression that the JNNURM is being used to push the poor out of cities instead of endorsing their productive role in the urban economy and meeting their needs of affordable housing, clean water, drainage and health care. To this extent, JNNURM in spirit merely replaces old-style city beautification schemes which involve eviction and demolition.

While 75 per cent of the money to be spent is for infrastructure, just 12 per cent is for basic services for the poor, says Roy.

Most of the proposed schemes for the poor seem to be for housing, but there appears to be no coordinated effort to promote an entrepreneurial spirit that will deliver housing that the poor can afford. The goal should have been to give the poor better shelter within the city so that they remain close to sources of employment.

The CDPs, in fact, seem confused on the question of future employment. First of all they do not cite baseline data on employment though such data are widely available. Secondly, they talk of tertiary sector jobs without explaining what exactly this means.

The CDPs accept that a majority of people in cities are poor and belong to the unorganised sector. But they do not seem to have a strategy for keeping such people in employment. For example, even as jobs in manufacturing are seen as drying up in cities, it is not clear where alternative employment will come from.

The JNNURM favours market-driven measures. It has made certain legal measures such as abolition of rent control and land ceiling mandatory for city governments seeking financial support.

The JNNURM favours user charges and sees a growing role for the private sector in providing services. But private players do not seem to be interested in waste management, sewerage or even low-cost housing – which are the priorities for the majority of people in cities.

The absence of consultation with beneficiaries is a big concern. Public hearings have been held but apparently only in name. Hazards Centre says that its own experience in trying to be heard has been disappointing. “We would be called to a hearing with no notice and then without replying to our objections we would be listed as having been heard,” says Leena. Roy says he has written 15 letters to the Union ministry for urban development but is yet to receive a reply.

It has been much more difficult for average citizens. They have either had no intimation of hearings or been required to decipher voluminous reports without expert assistance. When the Hazards Centre asked citizens’ groups about projects that are supposed to be coming up, they invariably had no knowledge of them or had difficulty locating them.

The CDPs were meant to document the vision for cities. It was intended that they be crafted out of wide discussion and a search for new answers to longstanding problems. But the CDPs don’t seem to have any evidence of this.

In the case of Hyderabad for instance, the CDP gives a vague list of stakeholders consulted and says that among them were “representatives of poor communities”. It is no different in Mumbai. In Bangalore’s CDP it is stated that 50 stakeholder consultations were held between March and June 2006 and the stakeholders included “government agencies, ULBs, NGOs, elected representatives, trade associations and the public.”

One city that seems to stand out for its consultative process is Pune. It provides details of three stakeholder meetings with specific points raised and attributed to stakeholders. The discussions also seem to have gone into difficult issues such as relocation of slum dwellers and their need for finance and so on.

If the CDPs are lacking in vision it is perhaps because they have no clear ownership. The task of drafting them, says the Hazards Centre, seems to have been left to consultants. “When NGOs have been involved, they have been chosen because they are known to be market-friendly,” alleges Roy.

The CDPs are fuzzy on figures for population, employment, migration and so on though these are readily available in most cases and should have been used to define a clear vision for the future of a city.

“How can plans be made for a city when a CDP does not spell out the baseline data with which the consultants are working?” asks Narayanan.

How thorough has the Hazards Centre been? Has it allowed its own position against privatisation in general to influence its assessment of JNNURM?

Asked about this, Roy says the Hazards Centre’s interest is in what works. “All evidence points to private-public partnerships not working. If that is so why are we pushing them?” he asks.

In the case of JNNURM, the stakes are particularly high. If the government’s single biggest initiative on urban renewal is adrift, as the Hazards Centre says, then an opportunity to showcase India’s growth through its cities will be lost together with precious time and resources.

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more urbanisation at all cost?

The WB is also preparing a new AAA in 2009 on urban issues and this could be a part of the build up to that.

Basically stating the people should live in cities and not in rural areas and more resources must be made available to cities and maybe not to the rural areas?

World Bank sees NREGA as a barrier to economic development

15 Mar 2009, 1024 hrs IST,
http://economictime s.indiatimes. com/Economy/ NREGA-a-barrier- to-development- WB/articleshow/ 4266622.cms

NEW DELHI: The World Bank has described the much-acclaimed National Rural Employment Guarantee (NREGA) scheme of the UPA government as a policy barrier hurting economic development and poverty alleviation.

Various schemes of the Indian government like NREGA, watershed programmes and schemes for development of small and medium towns are acting as “policy barriers to internal mobility”, the bank said in its ‘World Development Report’ 2009.

The internal mobility, the report argued, is necessary as “lifting people out of poverty requires shifting populations from villages to cities”. The process of migration should be encouraged, the bank said.

“Negative attitudes held by (the) government and ignorance of the benefits of population mobility have caused migration to be overlooked as a force in economic development, ” it said.

The report said economic benefits of migration are not always recognised by policy makers and, in fact, two forms of policy have been attempted in India to counter migration.

“The first response has been to increase rural employment, in an attempt to stem movement out of rural areas … These measures include the recently introduced National Rural Employment Guarantee Programme,” it said.

The World Bank cited other programmes such as watershed development to improve agricultural productivity and development of small and medium towns, which the Indian government has taken up to reduce migration.

“The second policy response is implicit. Because of the perceived negative effects, local governments remain hostile toward migrants, while employers routinely disregard laws to protect their rights and needs,” the report said.

In many cases, welfare policies and social services are designed for a sedentary population, the bank said.

“This is best exemplified by location-specific entitlements to social services, housing subsidies, food rations, and other public amenities especially important to working poor people,” it said.

The report, which recommends concentration of production and mobility of people, said, “Current policies do not allow communities to fully capture the benefits of labour mobility.”

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What private sector efficiency?

Only 10% of money sanctioned for the UPA’s JLN Renewal Mission used?

New Delhi: If the dismal record of Jawaharlal Nehru National Urban Renewal Mission (JNNURM), the UPA government’s flagship programme for reviving cities, is anything to go by, the urban aam aadmi has failed to capture political imagination.
Just about 10% of the amount sanctioned for JNNURM has been utilised in the last four years since the mission’s launch in December 2005.
This despite the fact that after delimitation, over 120 Lok Sabha seats comprise urban areas and another 117 semi-urban areas.
Maharashtra tops the list of fund-users though the state has spent only 26% of the Rs10,790 crore sanctioned for its 74 projects. Gujarat, Andhra and Karnataka follow at 11%, 10% and 6%.
Congress general secretary Veerappa Moily, however, says the important point is the money is available to state governments.
“This is a never-before attempt. The Centre has made a huge fund available to cities. This in itself will create a good vibe for the government,” he says.
Optimism apart, JNNURM’s poor performance is enough to give any government going to polls the jitters.

Of the Rs45, 839 crore sanctioned for over 430 projects across the country, only Rs6,931 crore has been availed of. An additional
Rs21,446 crore sanctioned for contingency also remains unutilised.
This means, states have availed of just over 10% of the funds sanctioned for the scheme.

Most, 127, projects have been approved for water supply, which remains a bane of urban dwelling, but only 39% of the available money has been sanctioned so far.

Around 74 road projects have barely taken off, with only 9% of funds. Only 21% of the fund sanctioned for the 93 sewerage projects has been released and 3% for solid waste management. A majority of the 19 urban transport projects consist of bus rapid transport systems, which almost cost Sheila Dikshit the Delhi elections, but only 11% of the fund has been availed of.

Strangely, only one project has been sanctioned for parking, an urban nightmare, and appallingly, only 0.10% of the fund released.

Urban development ministry officials are quick to point out that it is the state governments that are responsible for implementation of the projects, with the Centre acting as a cashier.

“We release money only when states spend their sanctioned funds,” a ministry official says.

State governments have complained in the past of accounting double standards and stringent municipal governance reforms.
Urban development secretary M Ramachandran, however, says reforms and renewal go “hand in hand”.

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