tion, parking fee and other innova-
tive financing mechanisms such as
municipal bonds and tax increment
financing (TIF). The argument of
the ministry is that the sustainabil-
ity of the service is possible only if
citizens are ready to pay a value for
it.
According to Kumar V Pratap,
Economic Advisor, MoUD, “Parking
fee is an important instrument of
revenue enhancement through user
charges for local governments. To
enhance revenue streams and pro-mote the use of public transport,
ULBs should introduce parking
fees. Apart from raising fund, it also
serves to influence commuting
choices in favour of public trans-
port”.
The government guideline says
that where services can be measured
and beneficiaries identified, user
charges must apply. Water and sew-
erage charges should be levied sepa-
rately rather than built into the
property tax User charges should
also be linked to improved quality of
service.
Advertisement tax is prescribedcollection efficiency for property
taxes for India stood at 37%, an
abysmally low number. This makes
the cities severely handicapped and
that force them to depend largely on
the external grants from the state
and the central government.Self-sustainable model
But the smart city mission guide-
lines clearly prescribe the ULBs to
look at various measures to bridge
the financial gap to maintain their
various programme.“Many cities are asking for more
funds. In order to make the mission
successful, it is important that city
should mobilize its own fund. Purely
depending on the central grants are
not going to serve any purpose. We
are looking at helping the cities to
make them viable, but demand of
more grant simple is just not feasi-
ble,” said a senior official in the Min-
istry of Urban Development.
The mission guidelines has al-
ready prescribed to urban local bod-
ies to generate resources from col-
lection of user charges, beneficiary
charges, impact fees, land monetisa-have achieved full cost recovery in
solid waste services.
As per the 13th Finance Commis-
sion, all non-tax revenues from all
ULBs amounted to 0.13% of the
GDP. In the absence of a user charge
regime, cities are severely handi-
capped in their ability to provide
even the basic minimum services.
Property taxes are the most im-
portant individual revenue source
for municipalities. The Thirteenth
Finance Commission indicates that
property taxes in OECD countries
are at around 2% of GDP, while in
India, property taxes are at 0.20% of
GDP. Even at 0.50% GDP, the prop-
erty tax collection in India would be
at a very substantial Rs 20,000 crore
as compared to the Rs. 8,000 crores
currently.
Even where tax is applicable, the
collection is very poor. For instance,
the Thirteenth Finance Commis-
sion (13th FC) estimated that the