Towards better urban growth: 15th Finance Commission has duly recognised role of urbanisation in development

By KK Pandey

The Fifteenth Finance Commission (FFC) has duly recognised the role of urbanisation in national economic development with a specific focus on air quality, water and sanitation, health emergencies (diagnostic infrastructure), incubation of new towns on a pilot basis, and shared data centres.

The all-time high allocations include Rs 1,21,055 crore (against Rs 87,144 crore by the Fourteenth FC) for urban local bodies (ULBs) for 2021-26, along with additional allocation for the urban sector on account of health emergencies (Rs 26,123 crore), incubation of towns (Rs 8,000 crore) and shared service centres (Rs 450 crore).

The ULB allocations are twofold: the Million-Plus Cities Challenge Fund of Rs 38,196 crore for 44 urban agglomerations (UAs) with 67 one-lakh-plus towns and 1,048 towns that have population less than 1 lakh, and Rs 82,859 crore for other towns with population less than 1 lakh including 1,048 towns already covered under the Challenge Fund giving special focus on the city region to stimulate the economy.

The division of funds for UAs covers ambient air quality (32%) and service-level benchmark for drinking water and solid waste management (68%). Other towns with under 1 lakh population will get untied funds (40%) for 18 subjects as provided in Schedule XII except for salaries and tied funds (60%) for sanitation and solid waste management (30%) and drinking water, rainwater harvesting and water recycling (30%). UAs are also expected to follow performance assessment as year-wise plan for quantification of year-wise improvement as per the Air Quality Index. In case of non-achievement, 50% of unutilised balance shall be allocated to better performing towns according to improvement levels. Funds for health emergencies are meant for urban health and wellness centres (Rs 24,028 crore) and urban PHCs (Rs 2,095 crore). Incubation of cities is meant for eight cities at Rs 1,000 crore per city to be given on the basis of interstate competition to eight states for one city each.

This quantum jump in allocation will go a long way in minimising gaps (needing eight time increase in per capita municipal expenditure by 2030: McKinsey report) in the urban infrastructure provided it is used as seed capital and has synergy with other allocations for the urban sector by the government of India, states and other stakeholders. Accordingly, a well-planned follow-up agenda should be adopted by states enabling (1) ULBs to utilise the grants as intended and (2) linking allocation with funds available from other sources. The agenda should include:

—Enable ULBs to qualify entry-level benchmarking and performance assessment. Additional dispensation should be made by states for accounting and asset management reforms as per Article 243Z of the Constitution to keep the auditing, budgeting and financial statements ready as per requirements. Also, prepare SOPs, guidelines and checklists using Mission Karmayogi/urban digital portal of the government;

—Synchronise NCAP (National Clean Air Programme) funds and central government missions for air quality and water and sanitation which are interconnected (such as construction and demolition waste and drainage plants). The Jal Jeevan Mission also provides funds for water and sanitation covering rejuvenation of water bodies to augment transit supply, green spaces, reduce floods, circular economy of water, water balance plan and 20% of water demand from reuse;

—The role of extra-budgetary resources at the ULB level should be duly recognised to enhance the availability of funds for all the components with a special focus on health emergencies, shared services and processing of waste. Corporate social responsibility (CSR) funds should also be looked into. Local elasticity at the ULB level has a vast potential as is already being seen in several forward-looking cities such as Bengaluru, Pune and Nagpur (for waste processing) and Ahmedabad for C&D waste, etc;

—As many ULBs do not carry out water supply, tied funds for towns without the responsibility of water supply should be diverted for better solid waste management and water harvesting/revival of water bodies;
—New city incubation grants and competition should be used to develop other cities in the less/least urbanised regions in states.

The author is coordinator, Centre for Urban Studies, IIPA, New Delhi. Views are personal