Easing Water Wars 1

           Easing Water Wars 1 

Most of the Publications on Water supply and sewage Treatment agree that Projected municipal and domestic water demand will  double by 2030, to the tune of 100 billion m3 .

A cross-region study by the Asian Development Bank in 1997 found  average rates in
Calcutta and  Delhi of 1-3 US cents/kilolitre (KL), 6 cents/KL in Mumbai and  25 US
cents/KL in Chennai. In comparison, rates were 9 cents/KL in Dhaka and  Karachi, 20
cents/KL in Lahore and 34 cents/KL in Kuala Lumpur.

 The initial cost in establishing efficient and sustainable water supply to large urban settlements needs huge investment.India's National water policy 2002 encourages private participation in water planning and supply. However The cost recovery mechanism is the major hurdle in investment by Private Sector.  Lack of a national regulator has also been a reason cited by Foreign Direct Investment as well .

Water collection is carried out by pumping from water bodies,  including lakes and rivers, for major domestic requirements. In  India, water collection and treatment is mainly looked after by the municipal bodies, sometimes in collaboration with the state government. To meet their domestic requirement of water, families depend on privately shared wells and tube wells. In locations near the sea or ocean, their water demand is catered to by desalination of the water collected

Since India has a tropical climate, rain water harvesting is also a growing option for fresh water collection.Although the private sector has not been involved in water collection, purification and supply-distribution so far due to the inadequacy of the existing infrastructure.

Private models such as JUSCO and public-private partnership in certain parts of India have been very successful due to enhanced the efficiency and effectiveness of the service provided. It is based on assumption that  that people prefer to pay higher amounts for better availability of water and consistency of the service. The Government has now begun to outsource certain work to the private sector, including water collection, piping, construction of reservoirs, water channelizing, etc.

Encouraging PPPs in urban water supply systems; helping water utilities to significantly enhance their service delivery by leveraging private sector capacity, with a greater focus on efficiency gains initially, where possible, rather than on bringing in private investment.

Case Study I

For Maharashtra, the Maharashtra Jeevan Pradhikaran (MJP) is the nodal agency responsible for development and regulation of water supply and sanitation.  In May 2005, MJP commissioned a source augmentation project for the city through the Stage V water supply scheme – a bulk water supply and distribution project. This included bulk water transmission over 65 kms at a capital cost of approximately Rs. 130 crores.

Latur Municipal Corporation (LMC)  took over this scheme from MJP in 2005 but was unable to operate and maintain it optimally. Despite ample availability of water, LMC was unable to manage its distribution network and Latur city was receiving water only once a week. Consequently the percentage of Non Revenue Water (NRW), which is the difference between the quantity of treated water in the distribution system and the quantity of water that is actually billed to consumers, was very high for LMC.  In addition to such operational issues, LMC was also plagued by low collection efficiencies and constraints on revenue growth through revisions in water tariffs. Given LMC’s  liabilities and its inability to raise additional resources of Rs. 17.17 crores for completing the existing water supply system, LMC initially decided to transfer the Stage V Water Supply scheme to MJP.

MJP was responsible for the operations and maintenance of existing water supply schemes as well as raising finance for completing the water supply scheme through a private operator.  MJP was also given the right to charge water tariff as necessary and collect the revenue from the water users.

MJP eventually floated a management contract tender in March 2006. For the contract duration, the private entity was responsible for Taking over assets , to repair and provide minimum average water supply within a stipulated time to residents of Latur. It had a responsibility of  increasing Piped water coverage , 100% metering connections , recover cost of water based  of tariff fixed, Implementation of billing and collection system and readdress  e.t.c 

Case Study II

In Karnataka at the local body level, projects were identified for the select three ULBs of Belgaum, Gulbarga and Hubli-Dharwad.  The project involved refurbishment/rehabilitation of the existing distribution network of the select five demonstration zones in these three Urban Local Bodies, followed by the operation and management of water distribution systems in these zones on a PPP basis.

The private developer was to do rehabilitation works and undertake the operation and maintenance (O&M) of the distribution network for the period of the contract. The capital investment required for the rehabilitation works was to be compensated for by the World Bank through KUIDFC and the private developer was to be provided a fee for undertaking the O&M activity. The project was planned for a total time period of 3 years and 6 months inclusive of both rehabilitation works for the distribution networks and the operation and maintenance of the distribution system.

The private developer was responsible for identifying and tendering out the construction activity. Post construction of the project, the private developer was required to demonstrate the achievement of the performance targets in the demonstration zones. Subject to an audit of the efficiency of the working of the system in the demonstration zones, the private developer would take over the distribution system for the operation and maintenance phase of the project. The activity of raw water supply, its treatment and supply till the treated bulk water distribution points was to be fully managed by KUWSDB. The tariff to be levied and the structure of the same were to be set by the ULBs in consultation with KUWSDB and KUIDFC.

During the O&M phase of the project, the private developer was required to ensure 100% individual house service connections in the demonstration zones, supply treated water to the customers, ensure reduction in distribution losses as per performance targets set, generate bills as per the tariff set by the ULBs and distribute bills to the consumers. The collection against the bills was the responsibility of the respective ULBs.

There is remarkable consensus in the all reports  that governments should not be in

the water provision business, but should ensure that private providers are regulated with respect to price structures and water quality, and  should  provide incentives for these providers to serve the poor. This new role for government translates to developing partnerships with the private sector and with civil society for water delivery.

Most studies and reports based on woes of ULB water supply keep themselves restricted to funding by International Institutions and development & management by Private operators. The only variation they suggest  in collection procedures with some reports advocating collection by another private agency under preview of Municipal body and then sharing with operation and maintenance private agency, some other reports advocate handling of operations and collection to a single operator.

 Planning Commission in its "Water Supply and Sanitation A WHO-UNICEF study" on page 34 gives interesting data about revenue generation of Water supply O&M in  Chennai, Hyderabad and  Mumbai .
http://planningcommission.nic.in/reports/genrep/wtrsani.pdf

Resistance to PPP module water supply has raised its head in low income areas of Municipalities.  Incidences of opposition of water supply tariffs  at Latur in Maharsahtra have been not reported eminently  in Media. 

The doubt of transfer of cost of inefficiencies by the Operator to the consumer is not unjustified. The wastage and transmission loss of water still visible on ground in these PPP modules points to the Electrical supply like situation in many states of India. Electrical regulatory bodies in their recent reports have pointed to the phenomenon of Electric Supply Corporations fleecing consumers to compensate transmission losses, theft and their own inefficient system.

Another pointer to a fresh approach seems to stem from the fact that while these PPPs have been successful in smaller municipal corporations  without   water body constraints , they foray  into larger municipal corporations have been few.Probably the reasons being high initial investment and  the magnitude of operations. 

One more reason comes into picture is the existence of large slums in the large municipal corporations. The supply to these areas will be hard and not so forthcoming by any Private O &M contractor. Added to this the cost and difficulty in layout of pipelines will be a big issue. Even in unplanned sections of large municipal corporations ,layout of new lines will not be easy.

Though PPP models can not be straight away be rejected as these Models have paid dividends in affluent states like MahaRashta, Karnataka ,TamilNadu etc. However a fresh approach is needed for poor states, large municipal corporations, slum areas and small Municipalities and water deficient areas.

EXPECTATIONS from ULBs (Water Wars)

 

            EXPECTATIONS from ULBs (Water Wars)

Most state Governments have listed more than the 18 subjects mentioned in 74 Amendment as primary and secondary functions of Urban Local Bodies and named these as obligatory and discretionary functions.Street lighting, fire services , registration of births and deaths , solid waste management, drinking water , sewage etc came under the obligatory duties. Construction of libraries,parks , planting of trees etc are covered under  secondary functions.

In some countries  under the Free Basic Services policy, water supply, electricity, sanitation and waste removal services of a certain minimal quality and quantity are to be provided by local governments to all households free of cost. A minimum level of service is also explicitly defined.Stipulated access to certain amount  of clean water per month for within a certain distance  from dwelling, with fixed  reliability and a minimum flow has been fixed.

Similarly for  electricity each household should have access to a certain amount of KWH per month, which is the amount of energy necessary for a month of basic lighting, small black and white TV, basic ironing  etc .

The funding for minimum basic  services is a part of the unconditional grant from the central government to municipalities in these countries. How much of it can be done in India again needs political will and long duress of legislation and power sharing. (refer to earlier piece on prelude to DOP).

One realizes that Clean Water supply  with reliability has been the foremost activity of ULBs and shall remain so in coming years. Consider the scenario predicted by environmental bodies in view of sanitation misadventures or inaction.

Inadequate water supply in Indian cities seems to be a rule rather than an exception.  Even while taking  100 litres per capita per day as the criterion for defining water deficient and sufficient households, 65% of the sample households remain water deficient. The 54th round NSSO data show that 70.1% of the households in urban India depend on tap water (municipal supply), 21.4% on tube wells, 6.7% on wells/open wells, and the rest on other sources.  The seasonal variations in municipal tap water supply leads to use of ground water by households as it is seen as the easiest, fastest and to an extent durable ‘solution’ to the water crisis. And, as mentioned above, this is resulting in groundwater depletion in and around the cities. The overuse of groundwater resources has lead to increase in arsenic concentration in many wards in Kolkata, and similarly fluoride concentration in majority of cities and towns in Rajasthan and Gujarat. 

Urban water supply and sanitation are important basic needs for the improvement of the quality of life and enhancement of productive efficiency of the people. In urban areas, water is tapped for domestic and industrial uses from rivers, streams, wells and lakes. Almost 80% of the water supplied for domestic use, comes out as waste water. In most of the cases waste water is let out untreated and it either sinks into the ground as a potential pollutant  of ground water or is discharged into the natural drainage system causing pollution in downstream areas
Municipal sewage may be defined as “waste (mostly liquid) originating from a community; may be composed of domestic waste waters and/or industrial discharges”. It is major source of water pollution in India, particularly in and around large urban centers. Waste water treatment , harnessing and water supply can be clubbed as  three facets of the same coin.

In India Municipalities have responsibilities for service provision and are seen as service provider. One way to make our ULBs function better is if  both  the roles are divided. The can be  very useful in making  cities explore more effective and efficient ways of service delivery.

 

David McKenzie and Isha Ray have mostly advocated privatization , increasing efficiency  and hiking of water tarrifs as the main solutions in  URBAN WATER SUPPLY IN INDIA: STATUS, REFORM OPTIONS AND POSSIBLE LESSONS  

http://erg.berkeley.edu/publications/Isha%20Ray/McKenzieRay-India-urbanwater-forWP.pdf

 One should not forget the fact that  easy loans come with other cliches.  In Bolivia  The World Bank pressurized the government to give up its control of municipal water supply. The government sold these rights for the city of Cochabamba to a multi-national company (MNC). The company immediately increased the price of water. Strikes followed  and the government imposed martial law. But the people forced the officials of the MNC to flee the city and made the government concede to all the demands of the protesters. The contract with the MNC was cancelled and water supply was restored to the municipality at old rates. This came to be known as Bolivia’s water war.

The Delhi Government harped on  the subsidy route to  fund for minimum basic  services is a part of the unconditional grant . One understands that Delhi Jal board officials managed a coup of sorts due to haste and unpreparedness of AAP in shifting the focus from efficiency. One also wonders on level and homework of AAP on  the ULB water reforms . The party had no concrete plans but were shouting hoarse on ready made solutions with them for more than a year.

Though one way of natural movement would be establishing the water services   based on subsidy  for basic minimum requirements and gradual shift to a more  efficient and viable solution. It should however have time guidelines for policy implementation and  well defined  penalties  both financial and criminal to ensure easy flow of resources.  It make take a long while to establish an efficient system  but don't good things come with premium of  either cost or time?

One must realize that age of revolutionary changes have passed by us ....

Some Suggestions of Water services will follow in next ...

                               

                   ULBs Leading to Mohalla Sabhas

Even a layman on street realizes that Implementation and not policy formulation has been found lacking in the echelons of our systems at nearly every level. Of course “anarchist”,as some love to call themselves  would try to make us believe in multiplicity  “Ignorance ,Corruption and cronyism” as the reasons behind the lacuna of the system. Much can be debated on these lines as hardliners seem to becoming more and more rhetoric. One can argue for the sake that if the implementation was proper , “would the others cited occur?”.

 Truthfully speaking “Action Taken Reports” in administrative jargon brings a wry cynical smile even to “khakshar” like me. However one should realize that these ATRs are prepared by a different set of people whose primary job is to recommend and not implement. Strict enforcement  suggestion from within (i.e. ability to realize drawbacks and knowledge to improve) and incentives seem to be three ways for better implementation. Would be glad enough to acknowledge any fourth idea or suggestion. Believe me, the suggestion if forthcoming will not only help me in my job but will make be understand life in a better way.

 With some preconceived notions about administration or a so called “ aware” Indian Citizen an non-prejudiced analysis on devolution of power by state governments to Urban Local Bodies under recommendations of Finance Commissions is an ask. It certainly will have Cynical flavor  even  if one tries to be impartial.

 No state reached the limit of percentage of  the next tax proceeds to ULBs. In some states the allotment was nearly half of the proceeds as perceived by the First Finance commissions. Even the one time start up grant to different municipalities  was not forthcoming easily in some states. Most Second Commissions observed that some of the functions transferred to ULB were done without transfer. Even in  most of the functions where  budget was transferred , supervision was not transferred. The arrears of Devolution is piling up with the state governments in nearly all states.  Irony is that loan deductions from devolution in respect of Urban Local Bodies shall  continue unabated. The plea given by most state Governments is The payment of annuities will enable local bodies to get better credit rating thereby getting funds from the market at lower rates of interest.

 The financial health of each Urban Local Body may be analysed by reputed credit rating agencies to determine whether they can afford to bear further loan burden was recommended in many states by the third . However many Governments rejected this on gronud that Mostly Urban Local Bodies take loans from TNUDF/TUFIDCO.  When local bodies go for issue of bonds, they will be subjected to credit rating.

 Many state governments did not accept  separate sub heads in the Revenue Budget for collection of Land Revenue , Local Cess ,Local Cess Surcharge and detailed heads for the apportionment. The  cut off time of adjusting these heads of revenue were left open ended in nearly all states making the ULBs further vulnerable to debts and  poor performance.

 The system somewhat symbolizes  the Village money lender’s “khata”. The interest payable on the interest of mortgaged loans is sufficient to nullify the collateral.

 Abolition of Octroi ,which was the main component of Municipal Bodies has been done away with in most states. The recommendation to compensate the ULBs in terms of revenue sharing is like asking a hungry child to share his favorite Cake.

The importance of entertainment tax for the functioning of ULBs come next to Octroi. In case of Entertainment Tax , Interest on delay of dues to the ULBs were out rightly rejected by the State Governments  The prudence of the rejection and natural financial principles can not even bring a wry smile even on the optimists  Further smile wipe out was rejection of recommendation that the Entertainment Tax should clearly be exhibited in the Revenue Budget so as to cross verify the deduct entry under transfer to local bodies.

The creation of Ombudsman as recommended by Commissions were accepted in states like Kerela and Karnatka while most state Governments felt that the Inspector of Local Bodies was already performing it . 

Some Commissions recommended that  Commercial Taxes Department should  insist on issue assessment certificate every year after verification by Professional Tax clearance by local bodies was again not accepted by any state. The reason cited was “Collection of profession tax  is one of the  basic functions of concerned local bodies”. 

 The permission for change of land uses is granted for the integrated nonsaleable projects as permissible in the zoning regulations of that particular land use stipulated in the development plan after obtaining the requisite conversion charges.  At present this income is credited to the State exchequer in most states even after recommendations. Normally, an area up to a distance of 8 kms beyond municipal limits is declared as controlled area.  In case the owner of the land wants to change the use of land earmarked as controlled area,permission should be needed to be obtained from the Town  Planning of ULBs.

 System to “quantify  backwardness index of ULBs based on basis of Zakaria Committee was a good suggestion by many Finance Commissions” is gathering dust.

 Most of the municipalities are not in a position to perform core civic functions to satisfactory level due to their poor financial position

 Third financial commissions of many states recommended privatization of services like street lighting, solid waste management, construction/maintenance of toilets, garbage collection/disposal, street cleaning, maintenance of gardens/parks/playgrounds etc.  This measure proposed could  be cost saving and help improving the level of civic services.

One should have a look at the larger picture. The financial condition of states  who been somewhat pioneers in devolution to the ULBs.Debt-GSDP ratio of “major states who had attempted to delegate genuinely” during the five year period 1995-2000 was for Maharashtra (17.0%) Tamil Nadu (18.3%), Karnataka (20.4%). The interest payments as ratio of revenue receipts during the five year period 1995-2000  was for Tamil Nadu (13.8%), Karnataka (13.6%), Maharashtra (15.1%).

So improvements  from within (i.e. ability to realize drawbacks ,will and  knowledge to improve) and incentives seem to be the way left out for ULBs.

Still on cakes , it is evident that the ULBs will have to “bake their cake a bit” before getting state governments to delegate .If the baking  process seems right , creditors will automatically come.

Of course much has to be done within the ULBs and Mohalla Sabhas can be a catalyst to the change.

Change from root seems to involve less complexities and more pursuance.  The maladies are pin point specific .

Prelude to DOP in 3-Tier

Prelude to DOP in 3-Tier

Thought of some reality byte on policy before the blog on how much has been devolved to Local Bodies Of Governance by the State Government . Though cynical the piece has to be read before reading  the level of Devolution.

DOP , Delegation of Power or Devolution of Power is a much hyped jargon in Indian Administration. Ask any layer of  Administration and buckets of wishes will emerge. Do  scratch deeper a little further the aversion to give away even the irrelevant invested with the layer concerned will  nearly give the real picture.

Expectations from democracy is a function to  judge any Democracy.Democracies are always in a Test Mode from one test to another test. As people get some benefits of democracy, they ask for more and want to make democracy even better. People will and should always come up with more expectations. Complaints are testimony to the success of democracy.Grievances show that  people have developed awareness and expect .People look critically at power holders and the high and the mighty. A public expression of dissatisfaction with democracy shows the success of the democratic project. (Summary from Outcomes and Expectation of Democracy NCERT)

However the above extract from a high school book can not be used to justify “Anarchy”, a word that gained common political speech acceptance a month ago.

Power sharing in democracies between pillars of democracy has never been easy. One gets the feeling  that that conflicts regards power sharing between institutions have become less visible in public Domain in last 25 years.  “ this reduced friction bear well for the democracy” raises a million dollar understated question. The reasons of the lack of conflict between the four Ks of democracy may have very deep meanings.

Seeing the cynicism present in masses ,one is tempted to believe that all the four institutions have entered into comfort zones.  Can one rule out an unholy alliance between the four checks and  power sharing pillars .   Old timer whisper that the little skirmishes thrown in public domain could be a ploy to hide the “mutual back scratch club”.

While horizontal distribution of power allows different organs of government placed at the same level to exercise different powers.  The Judiciary in case of any dispute about the division of powers is entrusted to resolve.Division of powers involving higher and lower levels of government i.e  vertical division of power is based on Federalism. Herein the sharing has been not so easy. State Center relationship has seen a new dimensions in  Coalition era at national level. However the sharing has not been forthcoming as on principles but has been based upon political and adjustmental  inabilities.

Further devolution of power to local bodies have suffered due to this comfort zone and “why gain if too much pain” syndrome arising from our own social and educational upbringings. Enjoy  and flaunt the rights provided seems to be the “mantra” of Urban Local Body representatives.

Can  the citizens and local bodies to expect Courts to play the role of Activists and “Suo- Motto Cognizance  always ? The higher courts took ample interest in implementation of three- tier system initially  Can Judiciary be absolved of shying away from the final thrust after creating a hope and hoopla about the three tier governance?

In Addition to Mohalla Sabhas

Most of the state finance commissions set  up by provision of  article  243 Y  seemed to start with a handicap. Most state governments did not have the political will to transfer or share it’s domain of power with a supposedly lower level of governance. With the Courts keeping a close eye on implementation on Local Body reforms these finance commissions were formed by in all states. The reluctance can be judged by time delay between  passing of 74^th amendment and the date of formation of these commissions. Nearly all states set finance commission to the effect by early 1995.

Most of the information like revenue  collected  as  taxes,  tolls,  fees  from  property  (House),  Ferry,  Street-light, Shops,  Rickshaws,  Bi-cycle,  Hats  etc.  and  the  expenditure  on  salary  of  staff,stationery,  postage,  rent,  electricity  charges,  etc.  was  available partially   but  since  no standard format for data maintenance existed, it became difficult to compile such information .Further, lack of uniformity in the maintenance of Accounts and the lack of regular audit of Accounts, also lead to complexities of available local finance data.

The initial recommendation was of  all State Finance  Commissions  was

that following of minimum level of data to be maintained by the Local Bodies . Assessment  and  collection  inputs  for  various  taxes  and  non-tax revenues, Annual Accounts Register, Cash Book, Posting  etc were either missing or clinically and critically fudged with. Register of other assets and liabilities,  List of  Roads,  Wells,  Lights,  Drains,  Sewerage  and Water Supply, Buildings (Schools, etc.)  presented a different picture of domains of these Urban Local Bodies on paper than the realities.

The foremost recommendations of the First Commissions were  a fixed  percentage of share of State Taxes had to be transferred to local bodies . Sharing of Motor Vehicle Tax with Urban local bodies was recommended by all State Finance Commissions.  The devolution of fiscal powers to the

local  bodies  in  Water Supply, Sanitation/Sewerage, Solid Waste collection and disposal, Primary Education covering Primary Schools , Primary health covering Public Health Sub-Center , roads and culverts and  Housing were further recommended. The first state commissions seem to have focused on defining the status of the local bodies ,areas of  concern and establish fields where power could be shared . The means therein for devolution seemed to be too time consuming and secondary step to the Commissions. The staffing needs of these local bodies were paid much attention at times  leading to the some neglect on core issue of delegation of financial powers to local bodies.

The recommendations of Zakaria committee seemed to help the second state  finance commissions . Some credit must be accoladed to Zakaria committee and there forth to  the Government of India in setting up of minimum Per Capita Norms for operation and maintenance of  Urban local Bodies. It ensured that water supply in nearly all  Urban areas was transferred to Municipal Bodies .

Recommendation to sharing of individual tax  and non tax revenue were  also made. The State had to share  a certain percentage  of the net proceeds of State’s own tax revenue to ULBs(to the maximum of 4%). Some  share of net proceeds of States were  earmarked for the incentives to these local bodies for mobilizing revenue from their own sources (nearly 0.5% to 1%).

Share of Entertainment  Tax and Mineral Royalty (in case of PR bodies) were common recommendations of all Second State Finance Commissions. that the State Government may consider transfer of entire proceeds of entertainment tax to the Urban Local Bodies.

Most State  Commission were also of the view that entire funds may be transferred as untied grants. These funds  recommended as untied grants could  be utilized by the respective Urban Local Bodies on maintenance and  improvement in basic civic services, up gradation of basic

infrastructure, computerization.

Even in revenue raising areas, specially obligatory taxes, the ULBs did not have full autonomy. They were  dependent on  Government in respect of the rates of the tax and the date from which it was to be levied. Even revision in rates was not in their domain. All state commissions noted that  financial autonomy was necessary functional independence. 

The third finance commissions fell into east trap of  the troubled state and central  government relationship. It stems from the the fact that the primary recommendation of most State Finance Commission  was plea for higher quantum of Central Finance Commission grants to local bodies .

It seems to had become necessary considering the precarious financial health of many states. It also may be due to the lowered priority  being given to local governance  in new millennium than the 1990s. The demands of State regards devolution from Center is expected to become fervent citing further pleas of new State finance Commissions based on 243 I and 243 Y. Some commissions went to extent of stating that the investment  requirements for creation of infrastructure and other facilities should be met from various Central Government Programs (centrally sponsored schemes JNNURM) and international  agencies like the World Bank, Asian Development Bank, etc.

A revelation was that that smaller ULBs (like class III and class IV) had generated more internal income as compared to larger ULBs in the findings of  most reports.  In the total income of  best operating ULBs (2004-05), internal income was  only one fourth . This indicated that ULBs were mostly dependent on the external income. Some state commissions stated that 30% of MLAs Constituency Development Fund falling in urban areas should be earmarked for improving core civic services.

All the three commission of all states are of the view that the poor quality of services rendered by the ULBs was due to not only by a constraint of resources but also due to poor staffing and poor quality of management, among other reasons. The resource potentials of ULBs did not match with

their functional responsibilities, leading to near absolute fiscal  dependence on State Government. Most of the ULBs were financially weak, generated less resources considering the work they are expected to do, and hence were heavily grant dependent.

All state commissions have stated in the 15 years of functioning have felt the need of  sharing of higher percentage of state revenue with local bodies . The poor staffing issue has remained more or less similar through out.

“Status of   Implementation of Second SFC Recommendations of  in respect of ULBs” as listed in the the third SFC report of nearly all states recognizes the fact that “All the activities  listed in the twelfth  schedule of the Constitution  have not been transferred to the ULBs along with budget,

staff and logistic support.

The Financial Mirage of Urban Local Bodies

Article  243 Y lays  down  in  principle  formation of  Finance Commission to review the financial position of the municipalities  and to make recommendations to the Governor within a year  (under amendment 74-1992). It also clarifies that  thereafter at the expiration of every fifth year, another Finance Commission will be set to  review the financial position of the Panchayats and to make recommendations to the Governor . The Governor in turn  with explanatory memorandums shall ensure  to the action taken thereon to be laid before the Legislature of the State.
Nearly all states set finance commission to the effect by early 1995.
Every commissions recognized that Municipal bodies were in no position to meet financial demands in even obligatory functions  leave aside discretionary functions. The Commissions also noted that even statuary avenues provided for revenue remained unexploited or under exploited.
The three main obligatory taxes levied and collected by the municipalities were land and building tax on annual letting basis, octroi and professional or vocational tax . Most of The first  state finance commissions set up did not attempt any headway in exploring more avenues in terms of obligatory tax. The essence was on defining the domains rather than exploring or stretching the limits.
The source  of land and building tax has become not only non buoyant but also  has  run  into  serious  problems  of  record  keeping,  assessment,  valuation, administration and enforcement resulting in decline in revenue in number of cities and towns. Large number  of properties  have remained  un assessed and under assessed. Further, lower assessment of mixed type of construction of which only a part attracts low rate is also one of the factors for low collection. Government properties are outside  the  purview  of  property  tax  though  there  does not seem specific  constitutional provisions for such exemption . Even the rates of these obligatory taxes are set by state governments . For  Revision  Urban Local Bodies have to approach the State Governments  resulting in delay and loss.  There is an initial lay off time where individual houses  deliberately  delay in paying the taxes.
Enforcement may be better ensured if the collection is handed over to Private parties with incremental service fees based on collection over a minimum service fees. It can be based on the principles of electric bill collections by some power distribution network.Government buildings should be brought under these tax levy structure .  Tamil Nadu state commission has requested the Government that Tamil Nadu Electricity Board shall provide the details of service connections given to the new buildings on a monthly basis so as to wake up the revenue wing for assessing the property without waiting .  All the cell towers put up by cell phone companies should be subjected to tax. All fee collecting institutions like Nursery, Matriculation schools, Tutorial colleges, self financed Engineering, Medical/Dental colleges, para-medical institutions, teacher training institutions, coaching centers etc should be subjected to Property tax at twice the rates as applicable to commercial buildings.
Octroi on goods and animals brought into municipal area for consumption or use or sale. Many municipal finances depend heavily on octroi income. By early 2000 administrators realized that octroi is a regressive tax  which adversely affects integration of the economy and interrupts the free flow of goods.   As both octroi and VAT are taxes on commodities and abolishing octroi with corresponding additional  VAT levy amounts only to a change in the mode of levy and collection of tax on commodities.It, however, provides liquidity and a healthy cash flow. Any alternative to octroi therefore, needs to match the resources generated through octroi; it should be free from the defects of the current  levy; should provide adequate liquidity to the urban local bodies (ULB’s);, it will not be possible  for them to discharge their responsibilities unless they  are given an equally potent alternative revenue source. Octroi on sale of goods which are worth more than a certain amount per unit , luxurious items can be added to VAT.Of Course Middle class and upward mobility of the middle class will be pinched .
For traders and business establishments, the gross turnover should be taken as the basis instead of income for levying the profession tax. The collection can be done by  sales tax department on yearly basis and remitted to local bodies.  The income slab rates for salaried class shall be revised and that those in the higher income bracket shall be made to pay slight higher levy. The collection should be done by the employer and remitted to the local body on yearly basis.
The dependence of Urban Local Bodies on obligatory taxes remains very high. The discretionary taxes at most contribute to one tenth of the revenue generated.These type of taxes are surely under exploited. Pilgrimage tax, tax of hired vehicles,water tax ,sewage tax etc come under these obligatory taxes. Many of these can be done with as for eg. Sewage tax collection in small municipalities . Other means to raise revenue can be looked upon.
The power to levy and collect tax on Cable TV from operators at the rate prescribed should be vested on the local bodies instead of State Government. In all Municipal Corporations, parking area may be identified in the business prone locality and parking lot developed. Parking fee may be collected from the owners of vehicles on the basis of the fees fixed by the Council. Special levy may be levied on the commercial business houses which have no parking space or inadequate space . Entertainment Tax shall be transferred to local bodies. With A Collection charge  of the tax proceeds of the  balance should  be transferred to local bodies.
There should be separate detailed heads for Surcharge on Stamp Duty collections and apportionment to local bodies. SIM cards of Mobile phones should be given mandatory on basis of receipt of  Phone . Costly mobile phones should be levied a tax which shall be transferred to local bodies. It will also reduce sale of smuggled phones.

Non tax revenue is another area where impetus is needed.One major area to be ventured into by the local bodies should be development of Parks, buildings  through public –private  partnership. Utilities like conference halls. Marriage halls, recreational facilities can be developed under the scheme and handed over to private entrepreneurs to manage with a fees.Similar attempt in ensuring high end public transport  is being carried out.

The external assistance from governments to municipalities both plan and non plan expenditure  is  insufficient and nearly never forthcoming when needed. An yearly allotment like imprest should form the major part of government assistance by central government. This money can be readily available for  Projects  which when approved by municipal body and accredited town planners shall be expedited. A minimum amount of central assistance based on population shall be remitted to Municipal bodies directly.
Every year along with the Budget, the State and Central  Government must place details of the transfer to the local bodies made during the year. The distribution pattern for the release of assistance should also be looked in.The present practice of releasing the assistance  at the fag end of the financial year shall be discontinued .
The important issue remains related to devolution not aid or assistance by state governments.

Misplaced Democratic Reforms

The  supervision of election of local bodies of governance is vested with the State Election Commission. The state makes available  staff as may be necessary for the discharge of the functions conferred . It is left to The legislature of state to make laws and provisions for election of local bodies.

Different states have enacted their own provisions for the local body elections while keeping the essence of representation of weaker sections and tenure of the bodies.

Expenditure limit  of municipal elections has a wide variation in different sates. Though also related to socio-economic and level of urbanization, there seems to huge variance.  In Odisha  For NACs and municipalities with a population of up to 50,000, a candidate can spend a maximum of Rs 30,000. In case of municipalities with a population between 50,000 and 1 lakh, the maximum expenditure is Rs 40,000, while in areas with more than 1 lakh people, a candidate can spend Rs 50,000. While in Maharashtra  The expenditure limit for candidates contesting elections to the Bombay Municipal Corporation (BMC) has been increased to Rs 5 lakh. The expenditure limit for Pune, Pimpri Chinchwad, Thane, Nashik and Navi Mumbai civic bodies has been raised to Rs 4 lakh . The expenditure limit for those contesting the Zilla parishad elections has been increased to Rs 3 lakh .

Arguments can be put forth that raising the limits allows a level playing field in run up to elections in a locality . 

The larger question pertaining however is that if raising limit is the only solution. The amount involved is certainly a deterrent for many in the weaker or weakest sections of the society. State Funding of  candidates has been doing the rounds for long in India. The local body elections can be the best laboratory to experiment.A good beginning would be to fund in kind by the state the Genuine Candidates with a certain number of recommendation by the local populace .

Even in case of no state funding  ,the expenditure limits can be monitored strictly after rationalization of the limit of expenditure.

NOTA(Non of the Above)  selection being provided in EVMs by the Election Commission is a certainly a good omen .  Provision for Re-election with barring of the contesting candidates of the first exercise if percentage of vote for NOTA is more than a prescribed limit is a logical step forward. The local body elections can  provide ideal field for application of  this election reform.

Other reforms like right to recall can be best experimented at levels where the number of electorates is the minimum.  The ‘political will’ for such reforms will be more forthcoming than at provincial of national level.  Slightly more stringent rules regards disqualification on criminal grounds than in assembly or parliament elections can be enacted in local elections.

The level of personal contact between the candidates and the electorate in local body elections touches the highest level of direct contact. It sometimes  leads to direct bribing or intimidation to voters. It remains an area where educating voter seems to be the only way forward.  Publishing of the affidavit by the candidates regards their wealth and criminal cases pending against them at the polling booth during the Campaign can be one of the measures to stop the menace.

More is needed to be done  in terms of making public the distribution of votes polled. Sections of people based on micro locality seem to have genuine grievance of neglect of the locality in terms of implementation. With technology available the publishing of votes polled can be jumbled to keep