Regional Centre for Urban & Environmental Studies, Lucknow

Municipal Resource Mobilisation for

Urban Infrastructure including PPP

Madhusudan Sharma

• Legal Framework• Resources required for Urban Infrastructure • Resource Mobilisation Issues• Conventional Sources of Revenue• Non-Conventional Resources

Pooled Finance and BondsLand Value Capture FinancePPPCost management

Legal Framework

• The Constitution of India• State Municipal Act and Rules• State PPP Act • ULB Rules • Central Finance Commission• State Finance Commission• GoI Guidelines for Pooled Finance• GoI Guidelines for PPP• State Policy for PPP

The Constitution of IndiaArticle 243W – 12th Schedule – 18 Functions assigned to Municipalities

Article 243X • Taxes, duties, tolls and fees as authorised by the State• Assigned taxes, duties, tolls and fees levied and collected by the State • Grants-in-aid from the Consolidated Fund of the State

Article 243YState Finance Commission to recommend for Municipalities:-• Taxes duties, tolls and fees which may be assigned • Allocation of the taxes, duties, tolls and fees leviable by the State • Grants-in-aid from the Consolidated Fund of the State • Measures needed to improve the financial position

Article 243Z• State to make provisions with respect to the maintenance of accounts and

audit.

Punjab Municipal Corporation Act for Chandigarh

Section 90 (1) - Taxes by Municipal Corporation on:• Land and buildings (including Water, Fire and General Tax)• Advertisement other than in Newspapers• Buildings along with application for sanction of Building plan• Development tax on increase in urban land value caused by

execution of any development or improvement Section 90 (2) - Taxes after prior approval of Govt:• Profession, trade, callings and employment• Any other Tax which the State has power to levySection 90 (6) - Assigned Revenue• Stamp Duty• Motor Vehicle Tax• Electricity Duty• Entertainment Duty and Tax

Resources required for Urban InfrastructureUrban Infrastructure – Water supply, Sewer,

SWM, Drainage, Transport, Parks Funds required for:• Initial Capital Cost • Replacements during project life• Operations and Maintenance• Debt service• Asset Replacement

Conventional Sources of ULB Revenue

Own• Taxes-Property, Advertisement etc.• License Fee• User Charges-Water, Sewer, SWM• Rent from properties• Sales• Income from InvestmentsOthers• Assigned Revenue• Grants

Non-Conventional Resources• Pooled Finance and Bonds• Public Private Partnership (PPP)• Value Capture Finance (VCF)• Citizen Participation• Cost Recovery of services• Cost Management

Value Capture Finance (VCF)• Land value tax• Land use conversion tax• Land value increment tax• Development permission charge – value/area

based • Betterment charges / Impact Fee• Transfer of Development Rights (TDR)• Sale / Incentive FSI• Tax Increment Financing (TIF)

Public-Private Partnership (PPP)What is PPP? • Long term contract • Between Govt. or Govt. Agency and Private

party• For a Public serviceWhy PPP?• Service coverage and quality-Unmet Need• Reasonable cost-Revenue opportunity• Shared risks and returns

Private Sector

Contribution Options• Finance • Service Delivery • Technology Efficiency• Risk management• Cost optimization• Revenue Collection

Public Sector Gains• Coverage• Improved service delivery• Cost savings• Transfer of construction and operations risks Obligations• Policy clarity • Political Will • Social Equity and empowerment of consumers

PPP Models for Municipal InfraWater supply • Build-operate-transfer (BOT) - Concession agreement• Performance-Based Management Contract for O & M• Service management contract: Metering, Billing and CollectionSolid Waste Management • Single Concession for collection, transportation, segregation, treatment and

disposal.• Separate concessions for: 1 Collection and transportation 2. Segregation,

Treatment and disposal Sewerage • Construction of the sewerage network through EPC on a BOQ basis• Construction and operation of STP through a hybrid annuity model based on

BOT by the same private operator.Septage• Single Concession for collection, transportation, treatment and disposal.• Separate concessions for: 1 Collection and transportation 2 Treatment and

disposal

PPP AlertsProject Development• Clarity of purpose• Realistic assessment of feasibility• Value for money analysis• Balanced risk sharing • Measurable Service standards• Performance linked payment• Approvals and clearances• Documentation-Standard

Transparency in selection Monitoring and Regulation

Cost Management• Works• Establishment• Administration• Operation and Management• Programmes• Interest

Resource Mobilisation Issues• Taxing powers • Coverage• Collection• Rate revision• Partial Capital cost funding with grants • Debt service obligation• Additional O & M cost • Infrastructure cost and revenue mismatch• Quality of Assets - life and maintenance costs • Gaps in Recording and Monitoring System

Thanks