India will require an estimated Rs 39.2 lakh crore to fund its urban infrastructure over the next two decades with nearly half of it (44%) being accounted for by roads in towns and cities, an expert committee has said in a report.
Raising such large sums would, however, crucially depend on the reform of institutions and the capacity of those who run the institutions for service delivery and revenue generation, the High Powered Expert Committee (HPEC) for estimating the investment requirements for urban infrastructure services said in the report.
The HPEC, chaired by Isher Judge Ahluwalia, chairperson, Indian Council for Research on International Economic Relations (ICRIER), was set up in May 2008 to provide an estimate of the investment requirements for urban infrastructure services for the period till 2020 including maintenance and replacement requirements on a cycle basis and suggest options of financing urban infrastructure services.
"The municipal entities need to be strengthened as local governments with own sources of revenues," the report said.
"Improved tax revenues combined with rational user charges will enable cities to leverage their own resources to incur debt and also access new forms of financing through public private partnership (PPP)," it said.
While transfers from states and the Centre have increased in recent years, tax bases of urban local bodies are narrow and inflexible and lack buoyancy, and they have also not been able to levy rational user charges for the services they deliver.