Most ULBs today suffer from a wide gap between the need for services that are perceived and the financial resources that are provided to them
When talking about India, local bodies are at the forefront of administration and directly influence the welfare of the inhabitants by providing them with civic services and socio-economic infrastructure facilities. We are well cognizant of the fact that urbanization and economic growth are intertwined together with a city, as the impetus for growth generally comes from the urban sector. Currently, urban spaces in India accommodate about 31% of India’s current population and contribute almost 63% of the GDP.
In the not so distant future, it is projected that one out of every two Indians would be living in urban areas, which means that this rapid urbanization is putting pressure on available infrastructure facilities such as water, housing, sanitation, schools, hospitals, transport, etc. It is no secret that the provision of adequate infrastructure requires huge finances and if you take a look at urban local finances it is quite noticeable that most of the ULBs are lacking mobilization of resources and also financial autonomy. Statistically speaking the total revenue collected by all ULBs in India amounts to less than 1,50,000 crores which is equitable to only 1% of India’s GDP. This deficiency of infrastructure also ends up affecting a city’s ability to attract investment.
Functional clarity and strengthening of financial management for ULBs in India should occupy the centre-stage of the follow-up action on conformity legislation. Most ULBs today suffer from a wide gap between the need for services that are perceived and the financial resources that are provided to them.
The fiscal gap is due to contributory factors like the unrealistically high standards of service such as sanitation, water supply, transport, health, education etc. actually beyond the financing capacity of the residents of the urban spaces. The misallocation of functions and revenues allotted to urban governments is also one of the main factor. Another factor is inadequate exploitation of the tax resources that are existent, due to the inefficiency of municipal functionaries.The inefficient mechanisms used to produce and deliver public services.
The path to rational allocation of responsibilities and finances between the levels of government and the incentive-penalty structure, is to enhance the local efforts to raise revenues. This means that there is a need for an improvement in the responsiveness of the service providers, estimation of total demand with accuracy in real-time, minimization of waste, adoption of efficient and cost-effective practices, efficiency of tax collection and the promotion of policies that actually enhance local initiative. Thus, urban reforms ultimately need to address all these issues systematically.
The fact of the matter, is that the resource base of ULBs generally consists of their own sources, the state revenue, government grants, loans that are garnered from state governments and market borrowings. ULBs sometimes are not even aware of the available opportunities and avenues that can be explored for generating revenues through taxes and even non-tax charges.
Information and technology play a major role in improving the efficiency of not only delivering public services and making the delivery process transparent, but also being able to enhance revenue collection for urban local bodies in India. Geographical Information System or GIS has emerged as an important instrument in improving operational efficiency and also planning and management of the urban infrastructure in such a manner that ULBs can eventually gain financial autonomy and be able to discharge the larger responsibilities assigned to them under the 74th Amendment.
GIS can be used by ULBs to extend the coverage of water supply and solid waste management, reduce power losses and also increase property tax collection amongst other revenue generating avenues. GIS-led technological innovations can make significant contributions in overhauling the finances of ULBs by preparing a database of existing infrastructural assets and planning their augmentation by integrating hardware and software applications to capture and analyse all forms of spatially referenced information of a particular urban space.
One of the most significant revenue potentials the GIS can improve the coverage of, is property tax. Since property tax is one of the biggest contributors to ULBs revenue and the coverage of properties is relatively low –an improvement in collection would require that all taxable properties are brought under the tax net. Once the GIS is integrated with the property tax database, it is able to show details of tax liability such as the amount paid and amount due. This will not only enable corporations to be able to identify tax defaulters, it will also help in checking whether appropriate tax has been assigned as per current land usage, thus increasing the efficiency of tax collection.
Of course, the actual power of technology that can be used for the deliverance of public services efficiently, transparently and also augment municipal finances cannot be harnessed to its full potential without the necessary administrative and institutional reforms. Other open avenues that can be tapped into like trade license fees, holding tax, smart payment and POS etc. means that there is a requirement of strong fiscal administration, so that these resources are not lost in inefficient, ineffective, wasteful operations.
ULBs have a tremendous potential for growth. However, except for a few large municipalities, the growth of ULBs has been muted. In order to strengthen and improve them, it is important to find new revolutionary ways to pool in finance. There currently are a number of revenue streams that are available for ULBs to be able to mobilise revenue. Hence, projects need to be planned in such a manner that they accelerate the pace of growth of tax revenues of various government departments and be able to spur the city’s economy in a sustainable manner. Leveraging GIS to improve the information available regarding infrastructure and services of urban spaces hence, becomes a prime need, to increase the revenue potential and sustainability of urban local bodies in India.
The author is COO Transerve Technologies. Views are personal.
As authored by Ashish Raj and originally published on etgoverment.com