Indian Urban Infra Requires Rs. 50L-cr Investment : Kamal Nath

Indian Urban Infra Requires Rs. 50L-cr Investment
"India is fast emerging as one of the engines of global economy where the real estate and the construction sectors are playing a pivotal role in the growing graph of the economy by contributing 9.3 percent and 8.2 percent respectively to the GDP in the 2009-10 financial year. The country currently is the 9th largest construction market in the world commanding 3.3 percent of the global market share and is heading to become the third largest global construction market by 2020," says Union Urban Development Minister Kamal Nath in an exclusive interview with S.A.Faridi and S.K.Khanna.

Hon'ble Minister Sir, if you kindly permit, we would start our discussion with your remarks made in our earlier interaction that the next decade would be the decade of development. Sir, what is your concept and vision of development as related to urban development for the next decade and its fast track implementation.
The Challenges of Urbanization in India are unprecedented in scale and significance. The magnitude of the challenge can be understood from the sheer fact that our urban areas may be required to accommodate an additional 250-300 million people in about two decades. Similarly, the scale of investment required would be of the order of nearly Rs. 50,00,000 crore over next two decades.

Urbanisation and economic progress are concomitant processes as cities provide large economies of agglomeration. The urban sector contributes around 60% of GDP which is likely to increase to 75% by 2021. Over 70% of new jobs in future would be largely created in cities. The link between economic performance of cities and the national economy is increasingly getting stronger.

Indian Urban Infra Requires Rs. 50L-cr Investment

The vision of the Ministry is: "To facilitate creation of economically vibrant, inclusive, efficient and sustainable urban habitats." Consistent with the vision, the Mission is to "promote cities as engines of economic growth through improvement in the quality of urban life by facilitating creation of quality urban infrastructure with assured service levels and efficient governance."

Broad strategy for the next five years:
  • Augmentation of Basic Urban Infrastructure ie water supply, SWM, sanitation, storm water drainage
  • Urban Transport
  • e – governance
  • JNNURM- Focus of the Mission would by and large continue in the present cities to ensure sustained commitment of the Government for implementation of reforms and service levels in core areas
  • Capacity Building
  • Strengthening of ULB Finances
The Ministry of Urban Development should be a key facilitator of this process as efficient urbanization in the country would need closer cooperation between Union, States and Cities than ever before.

The task is indeed formidable and challenging particularly from the resources point of view. Don't you think Sir that the country will have to heavily rely on Public Private Partnership (PPP) model not only for resources mobilization but also for the manner of its financing?

Rapid urbanization has increased the demand for urban services. The investment requirement for addressing basic needs has been assessed from time to time by various committees and organizations. The XIth Five Year Plan (2007–12), has estimated total fund requirement for implementation of the Plan target in respect to urban water supply, sewerage and sanitation, drainage and solid waste management at Rs. 1.29 lakh crores. The requirement for urban transport is projected at Rs. 1.32 lakh crore.

According to the estimates based on the CDP's prepared for the cities/towns under the Jawaharlal Nehru National Urban Renewal Mission, the investment requirement for urban infrastructure services and urban transport was estimated at Rs. 8 lakh Crores.

Indian Urban Infra Requires Rs. 50L-cr Investment

A study by the CII estimates that between 2011–20, India will need investments of the order of $990 billion or Rs. 45 lakh Crore for basic urban amenities like sewerage and sanitation, water supply, housing, transport, electricity, healthcare etc. The Mckinsey Global Institute puts the investment requirement relating to capital and operating expenditure at 100 lakh Crore over next 20 years.

The High Powered Expert Committee constituted by Government of India for assessing investment requirement has projected the capital investment requirement for Urban Infrastructure, Renewal and Redevelopment (including slums), and Capacity Building for the 20-year period from 2012-13 to 2031-32 at Rs. 35.75 lakh crore. It has further projected a requirement of nearly Rs. 15 lakh crore for operation and maintenance.

The actual investment in urban infrastructure against this requirement is assessed at Rs. 0.45 lakh crore in the last year of the 11th Plan, indicating a need for manifold increase if the challenge of urbanization is to be addressed effectively.

It is evident that we need to harness the knowledge base as well as the financial resource base of the private sector in order to bridge the urban infrastructure deficit.

Despite its success in other sectors of infrastructure, why PPP model has not gained grounds in the urban development sector. What kind of enabling milieu for the promotion, introduction and growth of PPP can be created in this sector?
Indian Urban Infra Requires Rs. 50L-cr Investment
Public Private Partnerships provide an opportunity to bring in not only private capital but also human resources leading to improvement in service levels. In India, there has been significant progress over the last couple of years in the implementation of infrastructure projects under the PPP model.

We also have some examples of PPP projects in the Urban development sector – in water supply projects, solid waste management projects, city bus service projects and the metro projects. However, there is a need for upscaling and mainstreaming these initiatives.

The Government of India has initiated several measures to mainstream PPP - Viability Gap Funding scheme, establishment of the India Infrastructure Finance Company, the India Infrastructure Project development fund and the National PPP capacity building programme are intended to address issues related to financing as well as project development and implementation of PPP projects.

These initiatives have met with some success. The implementation of the reforms being ushered in through the JNNURM will go a long way in improving the environment for implementation of PPPs. Forty-seven projects under JNNURM are being implemented in PPP mode. Handholding support is being provided to cities and towns for the implementation of PPP through Centres of Excellence.

Housing is a vital component of urban development but there is a huge gap in its demand and supply. The affordable housing scheme appears to be making an impact due to liberal financing options available. Today, when technological options are affordable, what is not affordable is land cost. Do you think a regulatory mechanism can facilitate land cost affordability in checking the interplay of market forces to make the land cost consumer-friendly?
Indian Urban Infra Requires Rs. 50L-cr Investment
Making available developed land at the right time and at affordable cost is indeed a challenging proposition. The Govt of Haryana has recently brought in new Land Acquisition Policies to ensure that the landowner gets adequate compensation for land acquired. In addition, under the National Mission on Sustainable Habitat, the Ministry is considering promoting alternatives to the Land Acquisition, Development and Disposal process through TP Schemes.

To make the land cost affordable, the government development agencies have a crucial role to play. But over the time, these agencies instead of focusing on their mandate on development have increasingly become land holding agencies and are trading on land parcels and land banks at their command. Do you think that a course correction is needed in their function?
Implementation and Enforcement are two aspects of Development which need rigorous follow up. Currently, there is increasing focus on involving private players in the development process to ensure that land cost becomes affordable especially for EWS and LIG category.

There are local urban bodies and their agencies, but they lack resources and technical capabilities to undertake development at their ends. How can they be empowered with financial resources and capability enhancement resources to play a more proactive role? Various proposals are in the air. When one could expect ground – level action plans to translate these proposals into a realty ?
The 74th CAA mandates devolution of funds and functions to the ULBs in order that they emerge as vibrant entities at the 3rd tier of Government. However, capacity building of ULBs to handle all the 18 functions of the 12th Schedule is an issue which is being addressed through the Strategic Plan of the MoUD.

Jawaharlal Nehru National Urban Renewal Mission (JNNURM) launched on 3rd December, 2005 aims at focused attention to integrated development of urban infrastructure and services with emphasis on provision of basic services to the urban poor including housing, water supply, sanitation, slum improvement, community toilets/baths etc. JNNURM is the largest intervention by the Union Government in the urban sector. The Mission is reforms driven i.e. the States and Cities are required to undertake certain reforms, mandatory as well as optional, as a pre-condition to accessing funds for the various projects. The reforms aim at improving financial health of the local bodies, sustainability of assets created, improvement of Urban Governance and service delivery. The Ministry will continue with the Mission over the next five years. The focus will be on implementation of unfinished agenda and expand coverage to achieve goals identified above.

Ministry of Urban Development has various flagship schemes on Urban Development through JNNURM, Urban Transport development and others. While programmes under Urban Transport have made the desired impact, the impact of JNNURM is not very visible at the ground level. Do you think that there is a need to revisit some of the programmes and schemes under JNNURM in view of new urban realities and challenges and various issues need to be re-addressed?
The strategy under JNNURM is to incorporate the learning during implementation of the Mission in the last 5 years and bring in appropriate changes so as to bring in renewed energy and focus to the Mission in the next 5 years. The essential elements of the strategy are:

1. Sustained commitment of the Government for implementation of reforms and service levels in core areas.

2. Cities to select reforms from a menu of options through bottoms up approach. Some of the difficult reforms like introduction of property title certification system in ULBs, simplification of legal and procedural framework for conversion of agricultural land for non-agricultural purposes and transfer of some of the functions under 74th Constitutional Amendment Act may need to be relooked at.

3. ULBs that have successfully implemented the present reforms may undertake the 2nd generation reforms and be incentivized for the same.

4. Funding support to ULBs through a combination of budgetary support (ACA) and performance grants. Performance grants will be available for achievement of reforms and service levels and leveraging of funds.

5. Implementation of Reforms and achievement of service level benchmarks to be given priority, including usage of latest technologies and inclusivity in services.

6. Capacity Building to be given adequate priority for creation of capacities in institutional project management, finance and reforms.

7. Mission management to be strengthened by convergence of activities between both the components of the Mission at the state and ULB level.

The Real Estate sector has a crucial role in the urban development process through marketing of innovative housing schemes. But by and large, the sector lacks public trust. Both governments as well as public are very cautious about their promises and delivering assured end products. What can be done to improve its image and business practices? If its growth potentials are not being recognized, don't you think the blame lays with the sector which can be one of the biggest contributors in the task of urban development?

The Ministry is considering regulation aimed at the real estate sector in order to bring in greater accountability and transparency on the part of the developer and also regulating the secondary market.

Indian Urban Infra Requires Rs. 50L-cr Investment

Migration of rural population to metros and cities is putting a great pressure on urban infrastructure services. There could be several reasons for the exodus employment as well as fascination to have good quality of life in cities which are not available in rural areas. Whatever may be reason, ways and means to discourage migration need to be found to ease pressure on cities? Perhaps the solution could lie in upgrading living conditions in the rural areas.
Migration occur on account of both push and pull factors i.e the push from impoverished rural areas and pull of large urban centres which afford livelihood, access to better services, education and health care etc.

The implementation of regional development plans will to a large extent address the issue of migration by identifying a new order of settlements, developing linkages and facilities and services in settlements to achieve metropolitan decentralisation.

Today, it is a well-known fact that roads and highways development contribute to GDP growth. But what is not known is that urban development too can contribute to GDP. In your message to all through this Journal, would you like to sensitize the fact that urban development propels economic growth, improve quality of life which in turn contributes to GDP nationally and improve Development Index globally?
India is fast emerging as one of the engines of the world economy. In this growth story, real estate and construction has been playing an important role - contributing 9.3% and 8.2% respectively in 2009-10. India is the ninth largest construction market in the world, currently accounting for 3.3% of global market share and is expected to become the third largest market by 2020.
NBMCW July 2011
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