Indian Urban Cities Reforms

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Indian Urban Cities Reforms

The Union ministry of housing and urban affairs has prepared a comprehensive road map for municipal reforms.

Background –

  • From 2015 to 2017, some basic reforms were implemented in 500 cities under the Atal Mission for Rejuvenation and Urban Transformation.
  • For example, 104 cities in 14 states collected more than 90% of user charges; 21 states have established municipal cadres; 256 cities started offering online citizen services; 21 states established state finance commissions; and 363 cities have completed credit rating.

Tier 1 cities reforms –

The purpose is to accelerate ongoing key financial and service delivery reforms. There are three sets of reforms –

  1. Cities have to submit financial year audited accounts for the two years preceding the one in which the municipality seeks to claim the performance grant,
  2. Cities have to show an increase in their revenue over the preceding year, as reflected in the audited accounts. Specifically, urban local bodies have to recover more than 70% of their revenue expenditure from their own revenue receipts, and
  3. Cities have to measure and publish service levels for coverage of water supply, reduction of non-revenue water, 24×7 water supply and scientific processing of solid waste.

Once these conditions are met, cities get the performance grant (Rs18,000 crore in five years) set down by the Fourteenth Finance Commission.

Tier 2 cities reforms –

Tier 2 consists of five transformative reforms –

  1. formulating and implementing value-capture financing policy,
  2. ensuring that all urban local bodies undergo credit rating and cities with investible- grade rating issue municipal bonds,
  3. professionalize municipal cadres by creating five of them, filling up posts and allowing lateral entry of professionals,
  4. implementing the trust and verify model, and
  5. enacting and implementing a land-titling law with a focus on using information technology.

Trust and verify model – A paradigm shift –

  • While granting building permissions, cities generally inspect first and give approvals later. This is the verify and trust model. The process of inspection results in time delays and cost overruns, and opens up opportunities for rent seeking.
  • Inverting this process gives us the trust and verify process in which permission is issued first and inspection taken up later. The assumption is that citizens can be trusted and will furnish correct information. It saves time, money and efforts of all the stakeholders.

Land Titling –

  • In India, ownership rights to property are proved through title deeds. Even though the law provides that transfers of title and interest in property should be registered, this only provides limited assurance. Transfers can be challenged in several ways.
  • One way to authenticate transfers is to formulate a land-titling law. The Rajasthan government, for instance, has passed the Urban Land (Certification of Titles) Bill, 2016 to issue certificate of ownership to state residents living in urban areas.
  • States/cities are also incentivised to use leapfrog technology, such as the blockchain. Blockchain is a digital ledger of transactions—here, property—which allows digital information (of property titles and transactions) to be distributed. The database is not stored in a single location; no centralised version exists as it is hosted by millions of computers simultaneously belonging to all interested entities. Every user of the blockchain has a copy of the entire ledger of transactions concerning the property and every transaction is uploaded on each such copy of the ledger. This ensures multiple layer security and information dissemination.

Tier-3 cities reforms –

The focus of tier 3 is rapid and even more transformational reforms along three main avenues: governance, planning and finance. The emphasis is on

  1. deepening decentralisation and strengthening urban local bodies through greater devolution of funds, functions and functionaries,
  2. own source revenue mobilisation for self-reliance and
  3. flexibility in urban planning, particularly aligning master plans to changing socio-economic conditions in cities.

These involve reforms that can be pushed for enhancing downstream accountability mechanisms, like making local ward committees responsible for operation and maintenance of projects, etc.

Conclusion –

States and cities compete against each other and the incentive is given based on competition. They have the flexibility to define their reform paths and innovate; only the what of reforms is given, the how is left to states.

Prelims Facts


  • The Atal Mission for Rejuvenation and Urban Transformation (AMRUT) is a mission approved by the Cabinet in 2015 for the transformation of 500 cities and towns into efficient urban living spaces. The mission was approved by the Cabinet for Rs 50,000 crore, which is to be spent over the next five years.
  • The Jawaharlal Nehru National Urban Renewal Mission (JNNURM) essentially morphed into the Atal Mission for Rejuvenation and Urban Transformation, and the new incarnation will extend its support those projects that are at least 50% complete under the JNNURM. This move is expected to benefit over 400 existing projects.

Mains Answer Writing

Question:  AMRUT mission has launched a competitive federal structure among the Indian states in terms of municipal reforms. Examine the proposed reforms and suggest how this competitive federal mechanism can be a panacea for cooperative federalism.

By | 2018-01-03T15:11:25+00:00 January 3rd, 2018|Categories: GS Paper 1, GS Paper 3|0 Comments

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