Dressing up the urban crisis
NARENDAR PANI
[ FRIDAY, MAY 05, 2006 12:25:20 AM]
The vision underlying the National Urban Renewal Mission could result in
a huge expenditure on under-utilised infrastructure, even as access to basic
services gets more difficult and urban taxes increase inequity.
One of the pitfalls of policy making in a crisis is that the dire
situation tempts us to uncritically accept virtually any response. This is
perhaps nowhere more true than in the case of the Jawaharlal Nehru National
Urban Renewal Mission.
There is no doubt that the infrastructure in most of our major cities is
under severe strain. There is then great relief that the government is
willing to pump in huge sums of money to address this challenge. And under
the barrage of projects worth thousands of crores of rupees, there is little
scope for a critical analysis of whether this is the most efficient response
to the crisis. In the process we could be left cheering a Mission that is
actually making the situation worse.
The Mission itself does not go beyond a simple, popular notion of the
urban challenge. In essence, the argument is that liberalisation will cause
a huge spurt in urbanisation, leading to a greater demand for urban
infrastructure. This demand can only be met by huge, expensive projects.
While the government can contribute to the setting up of these projects,
they have to run themselves. The users must then be made to pay the costs of
operation and maintenance. And if the cities have to contribute they must
raise local resources, particularly property taxes.
The trouble is that this popular notion is based on fudging a number of
less convenient facts on the ground. The very contention that liberalisation
will lead to a rapid spurt in urbanisation is not as clear-cut as it seems.
The National Urban Renewal Mission insists that the proportion of urban
population will rise from less than 28% of the population in the 2001 census
to 40% by 2021 as a result of liberalisation. But in the first decade of
liberalisation, from 1991 to 2001 the proportion only increased by around
two percentage points, from just a little less than 26% in 1991.
It is then by no means certain that the rate of urbanisation will be
trebled over the two decades following 2001. Indeed, given the fact that
economic growth in cities like Bangalore or Hyderabad is more linked to
foreign markets than it is to the hinterland, the growth may well be more in
terms of the expensive elements of urbanisation rather than the number of
people involved.
The tendency to exaggerate size influences the choice of projects as
well. Nothing less than systems that deal with much larger numbers, in the
largest cities in the world, will do. These symbols of development have to
be introduced regardless of cost. The experience of Delhi and Kolkata may
show that the people using the metros are much less than estimated, but that
will not stop urban policy makers, as well as the popular mind, from
believing that these are essential for urban development.
The preference for large glamorous symbols of development also diverts
attention from the specific requirements of infrastructure that the economic
development of each city needs. An Information Technology led industrial
growth for a city would generate a demand for an infrastructure that
emphasises telecommunication. On the other hand, a garment industry led
growth would emphasise other more rudimentary infrastructure on a much
larger scale. These nuances will only be understood if there is a critical
place for the economic impulses in each city.
Since the Mission has no significant place for local economic impulses,
it can at best offer standardised infrastructure for all cities. There is
then the very distinct possibility of expensive infrastructure not being
fully utilised since it is not consistent with the direction in which the
local urban economy is moving.
The only check that a market economy would put on such projects is that
sooner or later they will be seen to be economically unviable. But one of
the major objectives of the National Urban Renewal Mission is to offer
assistance to ensure such a stage is never reached. Apart from the usual
assistance to enhance the bankability of long-gestation infrastructure
projects as well as to enhance resource availability, the Mission will also
fill the viability gap of projects. In other words, once the Mission decides
a particular project is essential, it can put in any amount of public
resources to make an unviable project viable.
This unchallenged right to throw good public money after unviable
projects necessarily constrains the resources available to the urban sector.
This increases the pressure to raise user charges on basic services. While
there is undoubtedly a need to ensure that prices are used to prevent the
misuse and wastage of scarce resources like water, a situation cannot also
be created where urban citizens cannot afford basic services. The Mission's
response is to create a sub-Mission to provide basic services to the poor.
These projects will typically focus on slums. But often, particularly
when the poor migrate to the cities, they settle into clusters of huts that
are not recognised as slums, thereby keeping them away from these benefits.
And there is also the challenge of meeting the needs of those who are not
below the poverty line but are not rich enough to be unaffected by
spiralling prices of essentials like water.
The possible inadequacies of user charges has contributed to the National
Urban Renewal Mission looking for other urban sources of revenue, with
property tax being a prime target. But here again the effort could be hurt
by a lack of sensitivity to local economic impulses. The real economic
growth in a city like Bangalore has been occurring around the IT industry on
its periphery. But since the general tendency in property tax is to place a
premium on the city centre, there is a real possibility of this tax being
iniquitous.
The vision underlying the Jawaharlal Nehru National Urban Renewal Mission
could thus very easily result in a huge expenditure on under-utilised
infrastructure, even as access to basic services gets more difficult and
urban taxes increase inequity. In other words, existing urban problems can
get worse even as they are hidden behind expensive infrastructure
projects.
NARENDAR PANI
[ FRIDAY, MAY 05, 2006 12:25:20 AM]
The vision underlying the National Urban Renewal Mission could result in
a huge expenditure on under-utilised infrastructure, even as access to basic
services gets more difficult and urban taxes increase inequity.
One of the pitfalls of policy making in a crisis is that the dire
situation tempts us to uncritically accept virtually any response. This is
perhaps nowhere more true than in the case of the Jawaharlal Nehru National
Urban Renewal Mission.
There is no doubt that the infrastructure in most of our major cities is
under severe strain. There is then great relief that the government is
willing to pump in huge sums of money to address this challenge. And under
the barrage of projects worth thousands of crores of rupees, there is little
scope for a critical analysis of whether this is the most efficient response
to the crisis. In the process we could be left cheering a Mission that is
actually making the situation worse.
The Mission itself does not go beyond a simple, popular notion of the
urban challenge. In essence, the argument is that liberalisation will cause
a huge spurt in urbanisation, leading to a greater demand for urban
infrastructure. This demand can only be met by huge, expensive projects.
While the government can contribute to the setting up of these projects,
they have to run themselves. The users must then be made to pay the costs of
operation and maintenance. And if the cities have to contribute they must
raise local resources, particularly property taxes.
The trouble is that this popular notion is based on fudging a number of
less convenient facts on the ground. The very contention that liberalisation
will lead to a rapid spurt in urbanisation is not as clear-cut as it seems.
The National Urban Renewal Mission insists that the proportion of urban
population will rise from less than 28% of the population in the 2001 census
to 40% by 2021 as a result of liberalisation. But in the first decade of
liberalisation, from 1991 to 2001 the proportion only increased by around
two percentage points, from just a little less than 26% in 1991.
It is then by no means certain that the rate of urbanisation will be
trebled over the two decades following 2001. Indeed, given the fact that
economic growth in cities like Bangalore or Hyderabad is more linked to
foreign markets than it is to the hinterland, the growth may well be more in
terms of the expensive elements of urbanisation rather than the number of
people involved.
The tendency to exaggerate size influences the choice of projects as
well. Nothing less than systems that deal with much larger numbers, in the
largest cities in the world, will do. These symbols of development have to
be introduced regardless of cost. The experience of Delhi and Kolkata may
show that the people using the metros are much less than estimated, but that
will not stop urban policy makers, as well as the popular mind, from
believing that these are essential for urban development.
The preference for large glamorous symbols of development also diverts
attention from the specific requirements of infrastructure that the economic
development of each city needs. An Information Technology led industrial
growth for a city would generate a demand for an infrastructure that
emphasises telecommunication. On the other hand, a garment industry led
growth would emphasise other more rudimentary infrastructure on a much
larger scale. These nuances will only be understood if there is a critical
place for the economic impulses in each city.
Since the Mission has no significant place for local economic impulses,
it can at best offer standardised infrastructure for all cities. There is
then the very distinct possibility of expensive infrastructure not being
fully utilised since it is not consistent with the direction in which the
local urban economy is moving.
The only check that a market economy would put on such projects is that
sooner or later they will be seen to be economically unviable. But one of
the major objectives of the National Urban Renewal Mission is to offer
assistance to ensure such a stage is never reached. Apart from the usual
assistance to enhance the bankability of long-gestation infrastructure
projects as well as to enhance resource availability, the Mission will also
fill the viability gap of projects. In other words, once the Mission decides
a particular project is essential, it can put in any amount of public
resources to make an unviable project viable.
This unchallenged right to throw good public money after unviable
projects necessarily constrains the resources available to the urban sector.
This increases the pressure to raise user charges on basic services. While
there is undoubtedly a need to ensure that prices are used to prevent the
misuse and wastage of scarce resources like water, a situation cannot also
be created where urban citizens cannot afford basic services. The Mission's
response is to create a sub-Mission to provide basic services to the poor.
These projects will typically focus on slums. But often, particularly
when the poor migrate to the cities, they settle into clusters of huts that
are not recognised as slums, thereby keeping them away from these benefits.
And there is also the challenge of meeting the needs of those who are not
below the poverty line but are not rich enough to be unaffected by
spiralling prices of essentials like water.
The possible inadequacies of user charges has contributed to the National
Urban Renewal Mission looking for other urban sources of revenue, with
property tax being a prime target. But here again the effort could be hurt
by a lack of sensitivity to local economic impulses. The real economic
growth in a city like Bangalore has been occurring around the IT industry on
its periphery. But since the general tendency in property tax is to place a
premium on the city centre, there is a real possibility of this tax being
iniquitous.
The vision underlying the Jawaharlal Nehru National Urban Renewal Mission
could thus very easily result in a huge expenditure on under-utilised
infrastructure, even as access to basic services gets more difficult and
urban taxes increase inequity. In other words, existing urban problems can
get worse even as they are hidden behind expensive infrastructure
projects.