Cover Story
MAKING
CITIES SELF
SUSTAINABLE
The Smart Cities Mission Guidelines recommend
imposing of user fee and other taxes for the cities to
generate additional fund. The recommendation however
is fraught with social and political risks in a nation
depending heavily on subsidies.T
HE Smart Cities Mission
Guidelines have concep-
tualized Indian cities as
financially self- sustaina-
ble which is capable of raising
money and can maintain their in-
frastructure without depending on
grants from the Centre or states.
Globally cities are becoming more
financially independent and are
able to manage their own resources
through various revenue stream. In
India, however, the revenue sources
of Urban Local Bodies(ULBs) are
not enough to address their finan-
cial needs. That is why they largely
depend on financial aid from states
and the Central Government.State of city finance in India
In India cities depend on two
sources to generate taxes. One is its
own revenue which is by levying
user tax, property tax, water tax and
the external source which is grant
given by the state and the central
government.
The Twelfth Finance Commis-
sion indicates that total revenue of
the Indian municipal sector in
2001-02 was merely 0.67% of GDP,
of which municipalities’ own reve-
nues constituted only 0.38%, which
is well below that of other emerging
economies like Brazil which, for ex-
ample, has municipal revenues at
7.4% of GDP and own revenues at
2.6% of GDP.
In most cities, user charges are in-
adequate to recover even the basic
cost of service delivery, due to lack of
political will to undertake periodic
increases. For example, cost recov-
ery (through user charges) for solid
waste management ranged between
25-50% even for larger Municipal
Corporations like Delhi and Chen-
nai, as per the 2014 JNNURM re-
forms appraisal report. Less than 10
cities have achieved full cost recov-
ery for water supply and sewerage
services, while less than five cities