Since there are constraints on the capacity of the governments to finance urban infrastructure, the need to channelise private capital has become critical.
Cities are like economic powerhouses, generating about 80% of the world’s GDP. India is no different, with places like Mumbai and Delhi alone generating GDP more than that some of the countries. To keep our cities thriving and improving, we need to build new infrastructure and upgrade the existing one. The number of people living in cities in India is supposed to reach 600 million by 2036. This humongous growth provides an opportunity as well as poses a challenge to improve service delivery and quality of life for millions of citizens.
Therefore, we need to dedicate significant resources towards building future-ready urban infrastructure. Recognising this, the Indian G20 Presidency chose the theme of “Financing Cities of Tomorrow: Sustainable, Inclusive and Resilient” and the New Delhi leaders declaration endorsed a set of ‘Principles on Financing Cities of Tomorrow’, to promote a shared understanding amongst both developed and developing countries to shape a sustainable infrastructure investment ecosystem within the cities.
Since there are constraints on the capacity of the governments to finance urban infrastructure, the need to channelise private capital has become very critical. Accordingly, G20 under the Indian Presidency has endorsed some very relevant and high-quality reports to guide the cities for financing sustainable, resilient and inclusive urban infrastructure. The strategy includes urban planning reforms, augmenting own source revenues, maximising investment efficiency, improving creditworthiness of cites, use of innovative financing instruments such as green, social and sustainable bonds targeting a pipeline of investible projects, enabling regulatory environment, use of facilitating tools like GIS and capacity augmentation and institutional preparedness.
Many Indian cities have showcased that innovative revenue generation and financing options are a possibility. Rewa Municipal Corporation (RMC) in Madhya Pradesh spends an average of Rs 350 crore per year on infrastructure. Out of this amount, only 34% is generated through own source revenue of the municipality and the rest is funded by the central and state governments through variouas schemes and grants. However, even with this low own revenue contibution to infrastructure, leveraging strategic urban planning based on re-densification of urban landscape, RMC has recently implemented a successful urban infrastructure projects through the PPP route—such as the New Rewa Bus Stand. In this project, a barren area of 3.5 acres was converted into a thriving bus stand with commercial complex which has led to premium of Rs 10.5 crore and an annual lease rental of Rs 35 lakh. Similarly, other cities in India have also been able to successfully leverage innovative revenue models for improving urban infrastructure like the Industrial water supply from treated waste water project implemented by Greater Visakhapatnam Municipal Corporation (GVMC) which has enabled the GVMC to earn approximately Rs 30 crore per year as additional revenue from the sale of treated wastewater in strategic collaboration with the private sector for industrial consumption. In order to channelize funding for the project, GVMC had to demonstrate consistent revenue collection and service delivery benchmarks which helped in enhancing its creditworthiness for achieving a credit rating of AA. Likewise, the city of Surat had also created a new revenue stream Rs 140 crore in FY 2022 by selling treated wastewater for industrial reuse. As a pioneer in tapping sustainable finance, Ghaziabad has become the first ULB to issue India’s first municipal green bonds worth Rs 150 crore. These examples show that by using better urban planning and innovative financing models, even smaller cities can attract private investors to develop infrastructure and improve the lives of their citizens.
While the G20 outcome documents have a lot of relevance and can serve as a guide for our cities to develop a high-quality infrastructure, India’s experiences have also contributed immensely to the global infrastructure agenda. The lessons learnt from the implementation of the Atal Mission for Rejuvenation and Urban Transformation (AMRUT), Smart Cities Mission, Housing for All (PMAY), Metro rail projects, Transit-Oriented Development, the Integrated Control and Command Centres under the Smart City Mission, Municipal Bonds issuances by various cities and India’s National Urban Policy Framework (NUPF) formulated in 2018 have enriched the discourse enormously and guided the Group as to how a shared vision for cities across sectors can be developed to accommodate the aspirations of cities of different sizes and at different stages of development.
Going forward, to leverage other means for mobilising sustainable finance, it is imperative that Indian cities augment their institutional capacity, adopt a digitised accounting system, have a pipeline of investible projects, improve their creditworthiness and revenue collection efficiency to create a conducive environment to attract private capital towards urban infrastructure projects. This transition would be crucial in bridging the infrastructure deficit and accelerating the pace of urban infrastructure development.
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Autor(en)/Author(s): Solomon Arokiaraj & Aman Garg
Quelle/Source: Financial Express, 18.11.2023
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