FINANCIAL EVALUATION OF SLUM UPGRADATION

SCHEME UNDER JNNURM -BSUP

Municipal Finance Assignment

Submitted By: KAUSHAL PATEL ROLL NO:07

S.S. OF M.U.R.P.-II (2014-2015)

DEPT. OF ARCHITECTURE

FACULTY OF TECHNOLOGY AND ENGINEERING

M.S.UNIVERSITY OF BARODA-VADODARA

1

Contents 1. Introduction: ................................................................................................................................... 2

2. Demogra phics: ................................................................................................................................ 3

3. Housing Schemes for Slum Up Gradation: ........................................................................................ 4

4. Functions ......................................................................................................................................... 5

5. JnNURM .......................................................................................................................................... 5

6. JnNURM-BSUP analysis of financial aspects of projects at Surat. ...................................................... 7

7. Financial Models which can be adopted ........................................................................................... 9

8. Conclusion: ...................................................................................................................................... 9

References: ........................................................................................................................................... 10

1. Introduction:

Surat is a city located on the western part of India in the state of Gujarat. It is one of the most dynamic city of India with one of the fastest growth rate due to immigration from various part of Gujarat and other states of India.

Surat is one of the cleanest city of India and is also known by several other names

like "THE SILK CITY", "THE DIAMOND CITY", "THE GREEN CITY", etc. It has the most vibrant present and an equally varied heritage of the past. It is the city where the British first land in India. The Dutch and the Portuguese also established there business centers in Surat, the remnants of which are still preserved in the modern day Surat. In past this was a glorious port with ships of more than 84 countries anchored in its harbour at any time.

Still today, Surat continues the same tradition as people from all around the country flock in for business and jobs. Surat has practically zero percent unemployment rate and jobs are easier to get here due to very fast development of various industries in and around Surat City.

2. Demographics :

Statistics for Surat Municipal Corporation

Surat City

OLDEST MUNICIPALITY 1852 AD

AREA 326.515 Sq.Km.

POPULATION 2876374 (2001)

4466826 (2011)

DENSITY 13680 Persons/Sq.Km. (as per Census -2011)

NO. OF SLUM POCKETS 334 (as per Census -2011)

ZONES 7

WARD OFFICES

NO. OF ELECTION WARDS 38

NO. OF COUNCILLORS 114 (75 M, 39 F)

NO. OF EMPLOYESS

SEX RATIO 756/1000 Male

CRUDE BIRTH RATE

CRUDE DEATH RATE

INFANT MORTALITY RATE

MATERNAL MORTALITY RATE

LITERACY RATE 87.89%

MALE 91.22%

FEMALE 83.44%

DECADAL GROWTH RATE 55.29% (as per Census -2011)

4

3. Housing Schemes for Slum Up Gradation:

Slums are an integral part of urban areas and contribute significantly to their economy through their labour market contributions and informal production activities. The density of slum shelters is substantially high, making slum areas highly congested and without having facilities of drinking water, roads, street lights and drainage.

Unhygienic and dismal squalid environment prevailing in the slums is not only the source of spreading diseases in the city, but also it is a disgrace for those who live in it. It is also disgrace for the authority and road passers, even though slum dwellers are contributors to the city's growth and prosperity.

The poor represent an extremely important element of the urban labour force and contribute substantially to total productivity and labour market competitiveness. Surat Municipal Corporation has recognized the contribution of the urban poor in helping to build city prosperity and decided to make sufficient provision for them to have access to affordable land, house site and services.

Looking to the physical condition and life of slum dwellers, it is quite essential to upgrade the slums by providing site and service schemes and ready built housing schemes.

Though slum shelters are being upgraded with all basic infrastructure facilities, the ultimate environment remains typical slum environment.

City without slums is the goal and objective of Surat Municipal Corporation, for which the Slum Upgradation Cell is its special purpose vehicle. Therefore, to reach this goal, it has been decided to rehabilitate the slums in the EWS housing colonies, which can definitely provide the hygienic environment and help to get rid of typical slum environment. The slums so upgraded will definitely provide a hygienic and aesthetics importance to the city.

4. Functions

The functions of the Slum Up gradation Cell can be broadly classified into two categories as below :

Slum Upgradation

Surat Municipal Corporation is providing basic infrastructure facilities like water supply, drainage, roads, street light, nursery schools etc. since many years. 10% of municipal budget is allocated every year under section 63 / 2 for providing the basic infra-structure in slum area. Till March 2006, about 70-80% of slums have been provided all the basic services. It is estimated that about 125 crores of rupees has been spent for this mission. However this activity is mainly carried out by zones of Surat Municipal Corporation.

Slum Rehabilitation

As per this category the slum dwellers and the citizens falling in the EWS category can avail ready built houses on a different plot of land then the existing slums in a total new hygienic environment.

5. JnNURM

The government of India has launched the Jawahar Lal Nehru National Urban Renewal Mission Scheme for the selected cities of the country. The JnNURM scheme has two submissions namely Urban infrastructure and Basic Service to the Urban Poor. Basic Services to the Urban Poor focus on access to infrastructure for the urban poor. This submission shall have a seven-point charter: Security of tenure, Housing, Water supply, Sanitation, Education, Health and Social security cover. Eligible cities proposing projects for investment support shall be eligible for Central assistance 50 %, State assistance 20 % and the 30 % contribution shall be of ULB / beneficiaries.

Surat is one of the eligible cities under JnNURM scheme. The status Detailed Project Report Sanctioned under JnNURM of Basic Service to the urban poor for Surat Municipal Corporation is as under.

6

Details of Detailed Projects Reports Sanctioned under JnNURM-BSUP (in Lacks)

units allotted. 35562 units completed. 43596 units are under construction. 3260

7

6. JnNURM-BSUP analysis of financial aspects of projects at Surat.

As per the budget presented by S.M.C. for the financial year 2015-16. The total share of E.W.S. housing out of Capital Works 2015-16: Rs. 2506 cr is about 20.67 % of total municipal budget.

As per the table mentioned above the detail the we can see the share of E.W.S. housing holds good amount in the budget allocation. Where as the same model function of share allocation of S.M.C. varies at the end of each project where as funds received is fixed in each of the project based on estimated cost of construction. The Government of Gujarat has share of around 20% ,Government of India has share around 50% which is being allotted fully for the most of the cases, but for the escalated cost in some cases is definitely born by ULB to complete the project which asks for an effective share in municipal budget allocation for the same.

In most of the cases it has been observed that the cost of project is escalated by 0 to 20% of total coast which need to be fulfilled by the own cost of the U.L.B. where it has to resettle this cost in total budget of the project. Here if we see the above mentioned table where the total cost of all housing is around 6999.29 lacks out of which S.M.C. has allot extra share of R.S. 7422 lacks which is almost around 10.6% of the total cost apart from the cost of construction 30% share.

Ultimately the S.M.C. has to pay around 40% instead of planned 30% cost as per the designed scheme of the JNNURM-BSUP. This increased share is due to various factor of the ULB to plan and execute these scheme in an inefficient way.

This analysis of the above table thus shows that the expenses and the share by G.O.G. and G.O.I. is appropriate but there is need of proper project management and implementation for JNNURM-BSUP projects. Thus it becomes necessary to recover as well as convert this cost to a appropriate profit to benefit future schemes. It becomes necessary for U.L.B. to make these schemes more sustainable looking to the future to make city slum free.

There are various suggestions can be adopted by U.L.B. for the successful project finance management by adopting various methods like which are as mentioned below.

There is a need to involve private players in the scheme of slum up gradation program where as PPP project module can be verified and the actual share which is born by U.L.B. can be born and manage by private company and the ULB keeps the power of the unit allocation, monitoring and management under strict time bound management and specification to minimize the extra cost bared by S.M.C. so the project finance is appraised properly and utilized properly in an efficient manner. PPPs provide a good alternative for attracting private investmentas well as efficiency in the provision of services that meet the current social needs. But ULBs often face a dilemma while

choosing to opt for PPPs or private sector participation in infrastructure provisioning or services delivery. Following to the guidelines for affordable housing in partnership given by Ministry of Housing & Urban Poverty Alleviation (JNNURM Mission Directorate) under NUHHP-2007 has also given guidelines to manage such project which also need to consider. So me of the fund management can be done as mentioned below by the guideline are Cost of construction can also be driven down by planning layouts which mix WS/LIG/MIG with HIG houses and commercial layouts, and cross subsidizing through the premium earned on the sale of HIG and commercial spaces. In order to promote EWS/LIG dwelling units / cross-subsidize the cost of land, the project, with approval of the State/UT Governments may also offer zoning incentives such as land use conversion, additional FAR/FSI for the patch, with or without TDR, based on the prevailing market price of land and the cost of construction, provided the civic infrastructure at the site or the TDR sites is not put under strain. The State/UT Government may also permit a portion of the identified plot of land being used for construction of HIG dwellings or commercial purpose, on which the development partner can raise funds to cross subsidize the construction of EWS/LIG dwellings. The constitution of BSUP Fund and its utilization to meet the objectives can be done effectively when there are adequate resources/funds available with the ULBs. It is therefore imperative for the ULBs to ensure that there are adequate funds available through strengthening resource mobilization. In Land based resource mobilization While the services provided by ULBs may be shared by a wide range of population, the land consumed is mostly related to economic activity and wealth of citizens. Therefore, the ULBs need to exploit various land based revenues for resource mobilization, which have greater implication to urban growth and development and concomitant problems like slum formation, redevelopment, rehabilitation and resettlement. The funds realized from land based revenue sources can be effectively deployed to the improvement of urban poor people living in the slum areas. Voluntary sector contributions: There are several voluntary organizations or NGOs e.g., SPARC, Mahila Milan,NSDF etc, that have been working in the urban poverty sector and also working closely with community with their own funds mobilized from private sources. These organizations may be made part of the plan and converging projects of ULB and NGOs may be implemented with joint financing.

7. Financial Models which can be adopted Build Operate Transfer (BOT)/ and Concession projects: Detailing of the basis of costs and assumptions is necessary although the risk of design and hence the responsibility for undertaking detailed design preparation is passed onto the private sector. Design Build Operate (DBO) and Design Build Finance Operate (DBFO): As the risk of design is passed onto the private sector, detailed design may be avoided. Lease: Such a transaction may include augmentation and strengthening of the existing system and facilities. The detailing may be with regard to functioning or performance of the existing facilities, location data etc., while detailed design risk and responsibility for this transaction may be with the private sector. Build Own Operate Sell: In the case of high-risk projects, the private sector s perception of risks may be high and ULBs may finance, construct and operate the project for an initial period till the risk profile of the project is reduced or is lower. In such a case, as construction would be undertaken by the ULB, the project would have to be sufficiently

8. Conclusion:

Looking to the above mentioned guidelines and analyzing the budget of the surat Municipal Corporation there is a need of ULB follow the different guidelines to generate finance for the projects which is possible. In the way by following the guidelines different ideas can be worked out by ULB to minimize the share in housing by effective resource mobilization and going for PPP and other popular financing model to minimize the share for such projects. Thus creating and utilizing indirect resources is a must for smart way of development of such sectors.

References:

http://www.suratmunicipal.gov.in/ Ministry of Housing & Urban Poverty Alleviation,Guidelines For Affordable Housing In Partnership Draft Budget 2015-16,Revised Budget 2014-15-Surat Municipal Corporation City Development Plan-S.M.C.-Surat (2006-2012)

CAPACITY BUILDING AND JNNURM , National Institute of Urban Affairs New Delhi DEVELOPMENT OF BASIC SERVICES FOR URBAN POOR (BSUP) FUND IN URBAN LOCAL BODIES, Centre for Good Governance ,Hyderabad

Asian Development Bank (2009): Urban Poverty in India, Business Standard Books, New Delhi CGG (2008a): Evaluation of the utilisation of 40% allocation of Municipal funds for the poor in Andhra Pradesh, Centre for Good Governance, Hyderabad CGG (2008b): Urban Poverty Reduction Strategy for Hyderabad, Report Submitted to National Institute of Urban Affairs under GoI-UNDP project on National Strategy for Urban Poor , Centre for Good Governance, Hyderabad CGG-DFID India (2008): Evaluation of DFID support to Andhra Pradesh: Lessons learnt from Municipal Service Delivery, Published by Centre for Good Governance, Hyderabad. GoI (2001), National Slum Policy (Draft), Government of India, New Delhi GoI (2001), National Urban Housing and Habitat Policy (2007), Ministry of Housing and Urban Poverty Alleviation, Government of India, New Delhi. GoI (2004), National Municipal Accounting Manual for ULBs, Government of India, New Delhi Hentschel, J. and Seshagiri, R. (2000), The City Poverty Assessment: A Primer , Technical Paper No. 490, The World Bank, Washington DC. MoHUPA (2008), Toolkit for Preparation of Urban Poverty Alleviation Plan, Ministry of Housing and Urban Poverty Alleviation (MOHUPA), Government of India, New Delhi

http://www.suratmunicipal.gov.in/