Category Archives: Urban Infrastructure Finance

Urban Development and Housing in Union Budget 2010-11

Urban Development and Housing in Union Budget 2010-11

While presenting the Union Budget 20010-11, the Finance Minister said that “Swarna Jayanti Shahari Rozgar Yojana” designed to provide employment opportunities in urban areas has been strengthened with focus on community participation, skill development and self employment support structures. For the Year 2010-11, the allocation for urban development increased by 75 per cent from Rs. 3,060 crore to Rs. 5,400 crore. In addition the allocation for Housing and Urban Poverty alleviation has also been raised form Rs. 850 crore to Rs. 1,000 crore in 2010-11.

In last year’s budget, a Scheme of one per cent interest subvention on housing loans was introduced, where home buyers get one per cent interest subsidy for banking loans up to Rs 10 lakh, provided the cost of house does not exceed Rs 20 lakh. This Scheme has been extended up to March 31, 2011 and a sum of Rs. 700 crore has been provided under this scheme for 2010-11 period.

The Rajiv Awas Yojana (RAY) for slum dwellers and urban poor was announced last year to extend support to States that are willing to provide property rights to slum dwellers. Allocation to this scheme is Rs. 1,270 crore for 2010-11 as compared to Rs. 150 crore last year. This marks an increase of over 700 per cent. The government efforts in the implementation of RAY would be to encourage the States to create a slum free India at the earliest.


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JNNURM expansion plan does not enthuse local bodies

JNNURM expansion plan does not enthuse local bodies
6 Jul 2009, 0148 hrs IST, TNN

VIJAYAWADA: Union urban development minister S Jaipal Reddy’s decision to increase the coverage of Jawaharlal Nehru National Urban Renewal Mission (JNNURM) programme has not enthused the local bodies in the state in spite of the fact that the Centre will generously fund the developmental programmes in the towns.

For, the fund-starving state government’s decision to convert its share into loan has dampened the hopes of growing towns to get listed under the JNNURM. The state government’s move has already created tremors in Vijayawada and Visakhapatnam local bodies which were part of JNNURM phase I programme as it led to a huge financial burden on these civic bodies.

The government had not only slashed its share of grant from 20 to 2 per cent but also financed the 18 per cent as loan with huge rate of interest. As per the original scheme, the Centre would extend 50 per cent of the total fund as complete grant and directed the state government and urban local body to share the remaining 50 per cent.

With a view to cornering maximum funds under the scheme, the state government too had agreed to give 20 per cent as grant and left the urban bodies to take the remaining 30 per cent load. “We thought that the scheme will provide a major relief even if we needed to pool up 30 per cent funds from our sources. But, backtracking by the state government will hurt the local bodies,” observed senior Congress corporator Anne Prasanna.

Stung by the development, Vijayawada MP Lagadapati Rajagopal has promised to take a delegation from the civic body to the chief minister to discuss the issue as the Vijayawada Municipal Corporation (VMC) has to additionally garner funds to the tune of Rs 600 crore to complete the schemes. Initially, many civic bodies of big towns like Guntur, Kurnool, Warangal and Rajahmundry cried foul when only Hyderabad, Visakhapatnam and Vijayawada from the state were selected for the programme taking the 10 lakh population as the main criteria.

The public representatives in Guntur have even criticised the way the neighbouring Vijayawada bagged the programme by including Mangalagiri town located in the Guntur district to inflate its population to 10 lakh. Curiously, these civic bodies responded cautiously when Jaipal Reddy brought an amendment to population criteria by reducing it to five lakh to enable more towns and cities to take advantage of the programme as part of his 100-day action plan.

According to sources, several corporations, including Kadapa, Nizamabad, Elur, Kakinada and Nellore, which have population between 3 and 4 lakhs, too could send their proposals by extending the programmes to more suburban areas to make the population cross five lakh. “We wanted to study the guidelines and also the implementation before going for funding,” said Guntur mayor Rayapati Saimohan Krishna.

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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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begging bowl of 8-10,000 crs for Bengaluru

Rs 8,000 crore sought for Bangalore infrastructure

BANGALORE: The state government has sought a special grant of Rs 8,000 crore from the Centre to address Bangalore’s infrastructure needs. Chief Minister B S Yeddyurappa who met Union Finance Minister Pranab Mukherjee in Delhi recently in a delegation had requested the latter to provide Rs 8,000 crore for infrastructure development in IT capital which contributes $ 14 billion to the country’s export earnings. Karnataka’s representative in Delhi Dhananjay Kumar on Wednesday told reporters that the state government had estimated that Rs 36,000 crore were needed in the next six years to fulfil the infrastructure needs of Bangalore.
He said that the state government alone cannot mobilise such a huge amount even if the funds under JNNURM and State Finance Commission were taken into consideration. There would be a gap of about Rs 16,000 crore, he added.
Kumar said Mukherjee had promised to consider the demand sympathetically.
During his meeting with Mukherjee, Yeedyruappa is said to have requested him to release Rs 500 crore to the state on ad-hoc basis towards the losses incurred due to floods and drought last year.
The CM also requested the Centre to provide loans to small and medium enterprises (SMEs) at interest rates on par with prime lending rates.
“As of now SMEs are being charged 2 to 2.5 per cent more interest than the prime lending rates,” Kumar said.,000+crore+sought+for+Bangalore+infrastructure&artid=r/tv/Lpov6k=

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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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SAME OLD reforms? again?!!

Sunita Narain: A time to be different
Put the poor who have voted for this govt at the centre of reforms
Sunita Narain / New Delhi June 5, 2009, 0:43 IST

The new (old) government is back. The question is if it has learnt its most important lesson: How to join its political agenda to the agenda of government.

Let me explain. It was not the Indo-US nuclear deal which won the Congress Party the elections. It was the National Rural Employment Guarantee Scheme (NREGS), which provided employment to people, gave them cash to survive drought or a flood. Similarly, it was not the ecstasy of the stock market, the opening of the retail sector or the grandiose special economic zones that won the day. This government was re-elected — as its leaders reminded people in their rallies — because it gave better prices to farmers, wrote off loans and gave tribals and other poor forest dwellers rights over their land.

In other words, it got elected for all the ‘wrong’ reasons, as the reformists put it. Now the reformists have already made it clear: They want to divorce politics from governance. They want ‘populist’ measures — good to win votes and rally people — out of the way. Already, corporate leaders have taken over the airwaves to hammer in the market reform agenda. People appear to have been forgotten already .

So are we in for another interregnum between elections when government will focus on the ‘real’ agenda of the corporate world and forget the issues that got it the votes? Or will this second-term government grow up and understand good politics is also good governance?

After all, this is a time the entire free-market loving world is learning greed is not so good, and that a corporate-driven agenda creates havoc. In these times, we also need a new growth model, driven by resilience and sustainability. This is a time to be different. Instead of focusing on past bankrupt ideas — disinvestment in the public sector; foreign direct investment in retail; privatisation of insurance, banks and pension funds — we can think of strategies that combine the needs of all with growth for all.

Take the example of the NREGS, dismissed as a corrupt, inefficient programme. The fact is that this scheme is no different from what the rich world is today re-discovering in the name of Keynesian public investment-driven recovery programmes. It invests public funds to create public assets with the labour of poor people. The opportunity lies in using such labour to build assets: Drought relief for relief against drought, for instance. Today, the NREGS is already the world’s biggest ecological regeneration effort — just under a million water bodies being dug, desilted or renovated by people. Now we must make sure these water bodies are not just holes in the ground, but will capture the next rain and recharge the aquifer.

It is possible. Doable. People’s desperation and demand for work, already recognised, must now be converted into a demand for development. People will use their labour to put their village regeneration plans in order and then build their own durable assets. This is not possible without giving people rights over their resources — their local forest and water resources. This is the ‘reform’ the top leadership must believe in and back.

Another big-ticket concern is dryland and rainfed agriculture. Most of India today, after years of independence and public investment in surface irrigation structures, remains dependent on increasingly variable rain. Today, our policies discount and destroy these local economies; tomorrow, our strategies must build on their strengths. For instance, fiscal policies must recognise crops that minimise the use of water — more crops per drop — and include ‘coarse’ cereals in the Public Distribution System (PDS). Simultaneously, we must build local water security to enhance productivity. We must do this not by increasing the cost of cultivation but by reducing costs and investing in resilience.

The third challenge is to invest in building employment opportunities for the future. But this will demand recognising jobs where we do not see they exist. Currently, all our policies push for organised business, in retail or in manufacturing. But we forget this business is not labour-intensive and tends to collapse like a pack of cards when the world sneezes. We need employment which is domestic, built on multiple opportunities and comprises millions of enterprises.

The next reform must be in education and health — reinvent ways to ensure the systems are efficient, but also affordable and accessible by all. We also know private investment will not flow into these sectors, which, being about the poor, are not profitable. So, we will have to do things differently, without dogma, but with the idea of reform for the poor who voted this government to power.

Postscript: Remember corporate India had anointed Gujarat chief minister Narendra Modi as their prime minister. They had dumped this government and its prime minister. This government is in power not because of them, but because of the blessings of the poor. This trust must be kept. It is time to be different

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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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