India's urban renewal plan goes wrong

On December 3, 2005, prime minister Manmohan Singh launched "the single largest initiative of the Government of India for a planned development of our cities". The programme, the Jawaharlal Nehru National Urban Renewal Mission (jnnurm), acknowledged that urbanisation was a "relentless process" that had caused an acute urban crisis. Infrastructure development had not kept pace with urban growth and the people who were paying for this were the most vulnerable people: those living in expanding slum sprawls and the homeless. Urban poverty was fuelling crime and unregulated growth, increasing environmental damage, Singh noted in his inaugural speech.

The Centre set aside Rs 50,000 crore under jnnurm, covering a period of seven years beginning with the 2005-2006 fiscal. Another Rs 50,000 crore was to be raised through private sector participation.During this period, the mission proposed to develop 63 Indian cities into model sustainable cities. In return, cities would have to implement mandatory and optional reforms, the mission guidelines said, "to ensure improvement in urban governance so that urban local bodies (ulbs) and parastatal agencies became financially sound with enhanced credit rating and ability to access market capital for undertaking new programmes and expansion of services. In this improved environment, public-private participation models for provisioning of various services would also become feasible". Singh claimed that the mission, in keeping with his government's National Common Minimum Programme, sought "to do away with those statutes that inhibit the functioning of land and housing markets".

The carrot of Rs 100,000 crore lured state governments and urban bodies into hurriedly preparing development plans that were mandatory for accessing jnnurm funds. Consultants, hired overnight, started preparing plans in less than a month with "active public consultation" as directed by the mission. The Centre hired appraisal agencies to assess plans; within three months of jnnurm's launch, over 23 infrastructure projects worth Rs 86,482.95 crore had been approved.

Some sanctioned projects are going to aggravate urban crisis, warn experts. For instance, till March 31, 2006, four projects were cleared in the transport sector -- three flyovers for Hyderabad, Andhra Pradesh, and bridges in Nagpur, Maharashtra -- at a cost of Rs 6,128 crore and Rs 8,628 crore. All these projects are against the National Urban Transport Policy of the Indian government that proposes to strengthen the public transport system.

Similarly, there are projects that will augment water supply to cities such as Ahmedabad, Rajkot, Indore and Nagpur, but with no provision for dealing with the sewage that augmented supply will generate.

Narendar Pani of The Economic Times has summed up jnnurm in an article, Dressing up the urban crisis, saying it "could result in a huge expenditure on underutilised infrastructure, even as access to basic services gets more difficult and urban taxes increase inequality".

What need?
"Urbanisation is growing at a rapid pace and all this while we have ignored our urban areas. Our cities are facing extreme decay; hence jnnurm is a welcome programme that will transform the face of urban India. This is the first large-scale programme of the Government of India that studies cities in a comprehensive manner. Things are bound to change for good," says R Rajamani, jnnurm mission director and joint secretary, moud, New Delhi.

Statistics support Rajamani's viewpoint. Urban India is witnessing phenomenal growth. According to the 2001 census, India has a population of 1,027 million with approximately 28 per cent, or 285 million people, living in urban areas (see graph: Growing fast). The share of urban population may increase to about 40 per cent of total population by the year 2021. Union minister of state for urban development Ajay Maken recently quoted figures as high as 75 per cent urban population by 2021.

Paradigm shift
To ensure 'smooth clearance of projects' under jnnurm, a parallel administrative set-up has been put in place. At the top of this set-up is a seven-member national steering group with the minister of urban development as its chairperson and at the bottom is the ulb. The decision-making and release of funds take place through these parastatal bodies beyond the jurisdiction of elected representatives.

Once a city decides to adopt reforms under jnnurm, its ulb and the state government have to sign a tripartite memorandum of agreement (moa) with the Centre indicating specific milestones to be achieved for each item of reform. If necessary, parastatal agencies may also be involved in the signing of moa. Signing the moa is a necessary condition to access jnnurm funds. This moa along with programme plans are submitted to the Centre which releases funds in a phased manner on the basis of these documents. Programme plans can be scrutinised either by the technical wing of respective ministries, or appraisal bodies identified by the Centre.

In the first phase of project clearance, the Centre had hired two New-Delhi-based appraisal bodies -- the National Institute of Urban Affairs (niua) and National Institute of Public Finance and Policy (nipfp). In the second phase, the Hyderabad-based Administrative Staff College of India, New Delhi-based Indian Institute of Public Administration, Ahmedabad-based Indian Institute of Management and Ahmedabad-based Centre for Environmental Planning and Technology were brought on board. Based on their recommendations, the eight-member central sanctioning and monitoring committee, chaired by the urban development secretary, prioritises projects and "projects with private sector participation [are to] be given priority over projects to be executed by ulb /parastatals themselves..." At the national level, a technical advisory group headed by Ramesh Ramanathan of the Bangalore-based Janaagraha has also been set up to "encourage private sector participation, citizens' involvement in urban governance at grass root level and transparency in municipal governance". But Janaagraha's own track record on 'participatory' schemes such as the Greater Bangalore Water Supply and Sewerage Project is dodgy (see 'Virtual realities', Down To Earth, December 31, 2005).

The states eyeing jnnurm funds have to set up a parastatal structure. A state-level steering committee headed by the chief minister has to decide on and prioritise projects under jnnurm. The steering committee is assisted by a state-level nodal agency, which the state has to 'designate' (a new or existing organisation which is not elected).

This nodal agency has to appraise projects submitted by ulbs/parastatal agencies; manage jnnurm grants; release funds to ulbs/parastatal agencies; monitor physical projects and agreed reforms. All the projects have to be cleared by state-level steering committee before being submitted to mission directorate in New Delhi. The jnnurm process is thus concentrated in the hands of chosen non-elected parastatal bodies.

There is no scope for public debate.

Local debt trap
"Since independence, externally assisted urban sector projects have accounted for us $2,300 million. A review of these projects indicated a need to adopt a (programmatic) approach (read jnnurm) rather than a project approach for availing external assistance."This is what the moud says about urban reforms and it is here that the genesis of jnnurm lies. The Bangalore-based Collaborative for Advancement of Studies in Urbanism through Mix-Media (casumm), a group of researchers and activists, has prepared a factsheet on jnnurm, A blueprint for unconstitutional, undemocratic governance, that claims it forces ulbs to take loans and get into a debt trap.

The factsheet claims that jnnurm is required less for Indian cities and more for international financial institutions, which have been trying for the past few years to increase the amount of sub-national government loans in their portfolio. jnnurm was the only way to coerce local bodies to take loans. Now all earlier central funding schemes for cities are subsumed under jnnurm and linked to reforms (see 'Missionary zeal', Down To Earth, January 31, 2006).

Says Sharma who handles most of the work on bsup, "After the launch of jnnurm no other central scheme of slum development will be carried out in the chosen 63 cities. All the existing schemes have been dovetailed with jnnurm. The Rs 250-crore per annum Valmiki Ambedkar Awas Yojna scheme will run only for the ongoing projects till 2007."

This leads to the fear that new inequities will be created between the elite, accessing sophisticated infrastructure and services, with the poor being deprived of even basic amenities. For instance, the criteria for funding are driven by fiscal performance, monitored closely by 'financial rating agencies' that emphasise cities as 'good investments'. Hence, funds will go only to places where large property developers and financial institutions see economic opportunity, rather than based on actual needs of people. This is reflected in the funding pattern of both uig and bsup. While the former is attracting private partnership up to 50 per cent, no private partnership is expected for the latter. Even for uig, there is city size-based disparity.

ulbs are at another disadvantage. While they have no say in preparing the cdps or prioritising projects, the post-construction operation and maintenance of these projects is their responsibility. Parastatal agencies decide on the projects but have no local accountability. In fact, jnnurm finances and encourages commissioners of municipal bodies to set up unelected special purpose vehicles to implement schemes, possibly to do away with the risk of political interference.

casumm's factsheet says: "Municipal agencies may be forced to adopt significant debt burdens ultimately passed on to all citizens. However, in the immediate phase, the elite benefit from high-grade infrastructure and services -- since they live and work in master planned areas which 'conform' to required legal and other administrative prerequisites. Thus inequities get reinforced since municipalities, like those in the Bangalore metro areas, have their property and other accounts 'escrowed' to pay back loans availed on their behalf. The high debt means that some can't cover this obligation even with all their revenues. Thus, most will be forced to cut back on the provision of essential services."

There has also been a change in the way the Centre will fund state projects. As against the earlier system of extending assistance at a 70:30 loan-grant ratio to states (10:90 for special category states), in the new scenario states will have to directly take loans from donors/international financial institutes. Earlier, the Centre absorbed the burden of change in currency values during project implementation, but now the risk will fall on the state. Several state governments fear they will now have to bear exchange and interest rate risks of external loans. Gujarat was the first to question, in May-June 2006, this change in policy for state loans and is hesitant to take loans, worth us $130 million, from the World Bank for the Gujarat Urban Development Project. The state's debts have reached Rs 81,492 crore, a four-fold increase since 1998.

Baindur claims that the Water and Sanitation Program South Asia of the World Bank has been asking for reforms to disallow ulbs from taking loans from non-commercial institutions, and instead coerce states to approach only il&fs, idfc, hdfc, World Bank, adb among others for urban infrastructure funding. Hyderabad had asked for Rs 1,500 crore from the World Bank under jnnurm, but was refused till it implemented a plan for public enterprise reforms phase iii requiring 30 public sector enterprises to be "restructured". As per media reports, the state has conceded.

Badly constituted
The second major allegation against jnnurm is that it is unconstitutional. Under Article 246(3) of the Constitution, state legislators have exclusive power to make laws in respect of local government. But via jnnurm the Centre is encroaching on this function by forcing states to pass laws like the Community Participation Law and Municipal Disclosure Law, rather than enabling laws like the 74th constitutional amendment.

For instance, to institutionalise citizen participation, the Community Participation Law introduces "area sabhas" in urban areas. This has been adopted from the Nagara Raj Bill drafted by Ramanathan's Janaagraha. This is going to have far-reaching implications, warns casumm. The area sabha has a polling station limit, rather than the ward as a boundary. This means that an elite part of a ward, with a minority in term of voters, has a chance to "nominate" a candidate. Area sabhas will nominate and not elect representatives. The Nagara Raj Bill also proposes 'institutional membership' that lets industry, schools and trade bodies to nominate members. " jnnurm, by recognising the area sabha form of elitist governance, is not just unconstitutional, but also opens spaces for increasing divides and political conflict," says the casumm factsheet.

This will have a direct negative impact on the urban poor, who form a majority of the voters.In national elections, usually 60-65 per cent of poor groups vote as against 10 per cent of the elite. However, in municipal elections 85-95 per cent of voting is the poor vote while only 2 per cent is the elite vote. By disenfranchising voters via an unconstitutional structure, jnnurm will empower the rich and disempower the poor under the garb of citizen participation.

Experts claim there are legal ways of ensuring citizens' participation, but the government is not serious about implementing such options. The 74th amendment proposes that ward committees be formed allowing citizens' participation in municipal governance. Kerala and West Bengal have moved towards instituting one ward committee headed by the councillor, rather than one for multiple wards like in other states. They have also started local government cabinet-style through the mayor-in-council structure and empowered the councils over the mayor and president to build cross-party consensus. "Under the 74th (amendment) and subsequent conformity legislation, the third in the series of municipal and corporation elections are now due. Elections are due in Bangalore in late 2006 and Mumbai in early 2007. The concern here is that under the guise of a speedy launch and implementation of projects, the next batch of elected representatives are not going to get a chance to give their opinions on cdps under jnnurm and are again being served a fait accompli," warns Baindur.

Activists also claim jnnurm centralises decision-making, but decentralises the debt burden. For instance, the agencies involved in handling jnnurm funds and monitoring progress are not elected bodies and are outside the purview of any political debate. For instance, in Karnataka, central and state government funds will go to the Karnataka Urban Infrastructure Development Finance Corporation, a parastatal body.

For accessing jnnurm funds it is mandatory for ulbs to prepare cdps and other reports. But the process of preparing cdps has turned into a joke, with hired consultants putting reports together overnight. Take Vadodara's plan. It comprises separate master plans for water, sewerage, stormwater drains and solid waste management, but all these have been prepared at different times. While the water supply plan is as recent as 2004-2005, that for sewerage was made in 1999. The stormwater drainage plan was drawn up in 1996. "cdps lack vision. jnnurm offers a chance but we seem to be losing it. Governments have a fire-fighting approach," says Suresh.

Chennai's case is no different. The Chennai Metropolitan Development Authority has assisted Tamil Nadu Urban Finance and Infrastructure Corporation Ltd in preparing the cdp. But neither has the mandatory multi-stakeholder meeting been held, nor is the cdp available in the public domain. Chennai has sought funds to support solid waste management, water supply and transportation projects, with a total outlay of about Rs 20,000 crore.

There are also questions about the way in which appraisal agencies such as niua and nipfp have been hired to review cdps. "These agencies are studying cdps in a very superficial manner. Within a matter of 10-15 days they have to review the entire cdp and give their comments. There is no provision for appraisers to visit cities, hold discussions with people and verify facts," says P S N Rao, professor of urban management at the Indian Institute of Public Administration.He raises another issue: "ulbs have been making master plans for ages and they understand it well. Why is the government not trying to strengthen the legal way of planning instead of setting up a parastatal system of cdp formulation and clearance?" The 12th Schedule of the 74th amendment gives 18 functions to ulbs, one of which is preparing master plans. But jnnurm takes away those functions and gives them to consultants, he adds. Rajamani, however, says there is no dichotomy between master plans and cdps; jnnurm will ensure they go hand in hand.

In the shadows
The effect of this rejigging is clear in the kind of support bsup is getting compared to uig. Till March 31 this year, over Rs 864.83 crore has been approved for 23 projects for uig. Till June 2006, only nine projects in two cities have been sanctioned for bsup. "In Hyderabad, we have cleared five projects and another four in Bhopal. The cost of these projects is Rs 698 crore and the Centre's share Rs 349 crore. The first instalment, Rs 87.3 crore, has been released -- Rs 77.99 crore for Hyderabad and Rs 9.3 crore for Bhopal," says Sharma.

On being asked why bsup was being ignored, he admitted it was difficult to get slum development projects going, and private participation was negligible. For instance, the cost of a unit of housing under bsup was Rs 80,000 of which 80 per cent was being paid by the Centre. Activists allege that limiting funding for bsup to one-third of jnnurm funds speaks volumes about how the government is interested only in making big projects instead of providing basic needs. bsup is usually managed by impoverished ulbs. uigs will be looked after by posh development authorities with no local representatives, but with some ngo collaborators. The whole idea is to first get in huge infrastructure projects that displace urban poor and then use bsup funds to resettle them, says Benjamin.

While jnnurm talks about keeping 20-25 per cent land for weaker sections or low-income groups and providing them with land tenure, this may not be a good idea. For instance, to get land tenure, slum dwellers may be shifted to outskirts making it difficult to earn a livelihood. Most slum development and infrastructure projects have marginalised the poor (see 'For a clean backyard' , Down To Earth, July 15, 2006).

"Most jnnurm projects are meant for a certain [elite] class but jnnurm funds are linked to taxes. So while one group enjoys the facilities, everyone pays for it," says Benjamin. Rajamani claims that a technical advisory group has been set up to address the issue of people's participation. It is working with civil society groups. It is also holding city-level consultations. But Benjamin says such "participation" is only to contain politics.

Reforms forced on states are also seen with suspicion since they undermine democratic governance. casumm points to the lack of democratic involvement in making cdps. Moreover, the introduction of e-governance will help developers to take land from small and marginal farmers and promote speculation (see 'Logged out' , Down To Earth, March 31, 2006). Rajamani dismisses such charges, claiming reforms will bring trans-parency and improve governance.

Questions remain. While JNNURM makes reforms mandatory, it fails to fund ULBs to implement them. Will ULBs then have to borrow from the market? "JNNURM funds only physical projects and not reforms. But we are trying to help ULBs. We have already sent a note to the Union ministry of finance asking if funds can be made available," says Rajamani.

It may be premature to judge JNNURM but as things stand, one thing is clear: it is not heading in the right direction. A lot of public money is being put into financially and ecologically unviable projects. Questions are also being asked as to what will happen after the 63 cities are covered in seven years? "It is too early to comment on this. The first evaluation of JNNURM will be carried out after a year of the mission's implementa-tion. If required, mid-term corrections will be carried out. Maybe other cities will learn from this and rebuild themselves with support from private partners," says Rajamani.

Therein lies the rub. JNNURM is charting a course that will channelise government funds for elite infrastructure. The poor will be left to the mercies of badly funded local bodies. JNNURM is not needed as much by Indian cities as by global financial institutions, like the World Bank, which want to expand their credit operations