Lessons on expenditure and performance on cleanliness on Indian cities

The study has been authored by Shishir Gupta and Rishita Sachdeva.
The urban share of the population is expected to touch 40% by 2030.(Sunil Ghosh/Hindustan Times)
The urban share of the population is expected to touch 40% by 2030.(Sunil Ghosh/Hindustan Times)
Updated on Aug 09, 2021 04:56 PM IST
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India is urbanising rapidly; the urban share of the population has steadily increased from 18% in 1971 to about 34% by 2020. It is expected to touch 40% by 2030, amounting to approximately 600 million urban inhabitants.

Increasing urbanisation is a systemic phenomenon observed globally, characterised by the workforce moving away from agriculture to non-agriculture jobs and people moving away from villages to cities in pursuit of better livelihoods.

While urbanisation has followed the standard script, the same may not be true with respect to how much value India has derived from this rural-urban shift. The urban share of Net Domestic Product (NDP) was 38% in 1971, which grew steadily to 52% by 2000. However, from 2000 to 2012, the urban share of NDP has remained constant at 52%. Since the urban population has increased steadily from 2000 to 2011, the constant urban share of NDP implies that per capita urban NDP growth has been lower than rural growth during this time period. This may be an indication that urban centres are not able to create enough high productive jobs and/or not allowing existing inhabitants to increase their productivity fast enough. It is noteworthy that increasing share of urban NDP between 1971-2000 and stagnant share between 2000 to 2012 is accompanied by increasing share of rural manufacturing, which steadily increased from 26% of overall manufacturing in 1971 to 51% by 2012 .

It would be interesting to observe whether urban share of NDP increases over time to around 60% by 2020 as estimated by multiple credible sources.

Low and deteriorating levels of basic civic services could be one of the reasons for lower productivity growth in urban areas compared to the countryside in the more recent years. In an ideal scenario, 100% of the solid waste generated must be collected. For Indian cities, currently only 78% of solid waste is collected. Poor service delivery is not only a problem pertaining to SWM. The acceptable level of water supply should be between 135-150 litres per capita per day in an urban setting; at present, Indian cities provide about 70 litres per capita per day (ministry of housing and urban affairs, 2019). This hampers their ability to create gainful employment for a large share of the population and provide services necessary for a dignified human life.

A low level of service delivery is not a fait accompli for a lower-middle- income country such as India. In 2011, a government appointed High Powered Expert Committee (HPEC) had noted that “the state of urban service delivery in India’s cities and towns is far poorer than is desirable for India’s current income levels.”

Literature suggests improvements in planning, governance and funding, coupled with innovative practices and use of technology as the key building blocks to improve service delivery . While efforts have been made to improve on these, implementation remains woefully inadequate and largely on paper. For example, the 73rd and 74th Constitutional Amendment Act (CAA) of 1992, which recognised panchayats and urban local bodies (ULB) as the third tier of government, was a step in the right direction. However, nothing much has changed on this front over the last 20-30 years. “Key problems in urban governance include weak legal and institutional framework within which the ULBs operate and their poor capacity including lack of professional and sensitised cadre, to perform their development and regulatory functions”. Likewise, the 15th Finance Commission report for 2020-21 recommended that 4.31% of the divisible revenue pool should be allocated to local bodies, up from 3.54% in 2019-20. Despite this higher provision, ULBs are largely dependent on Central and State grants which constrain their ability to invest in infrastructure and improve quality of service delivery. Municipal tax revenue as a share of Gross Domestic Product (GDP) has declined from 0.30% to 0.25% between 2010 and 2018. During the same period, the combined tax revenue of Centre and states as a share of GDP has increased from 16% to 18%.

Estimates suggest that India needs to spend six to eight times more per capita on urban infrastructure, every year, for the next 15-20 years to be able to provide acceptable levels of service delivery across key urban services. Around 80% of this estimated spend is required to build capital intensive urban infrastructure like affordable housing, mass rapid transit systems like metro network and more roads and relatively little is needed to provide services like solid waste management (SWM), which keep cities clean, but are not capital intensive. Since capital intensive urban infrastructure in most Indian cities is not financed by the urban local bodies (ULBs) anyway, it begs the question, is lack of funding really the primary reason Indian cities are not able to provide acceptable levels of services such as SWM. Furthermore, is it true that higher the spending on SWM, better the service delivery?

In this paper, we probe these questions by comparing revenue expenditure that our sample of 27 cities are incurring on SWM services, relative to what they ought to spend to provide acceptable levels of service delivery, with their current performance on cleanliness. The results are counter-intuitive. Lack of funding is not a binding constraint in every city to deliver acceptable levels of SWM services. Nineteen out of 27 cities spend more than the required amount, yet none has a perfect cleanliness score. Nine out of these 19 spend at least 1.5 times more than the benchmark amount. Secondly, while expenditure has a significantly positive influence, it explains only 23% of the variation in performance, indicating the importance of non-monetary factors such as better city governance.

While there is overwhelming evidence that city finances need to be strengthened significantly, the findings of this paper suggest that there is an equally important need to map the expenditure and outcomes achieved across a range of urban services. This would help establish where funding is a real constraint, and where lower service delivery could be due to other reasons such as inefficient and ineffective usage of funds. This will increase transparency and accountability and improve allocation of funds across services within a city. It will also help unearth best practices amongst Indian cities, which may be easier to adopt than global best practices since they are located within our political economy. Early observations suggest the key role that stable city leadership, effective public-private partnerships, and citizen engagement have played in providing better SWM services. For example top performing cities such as Indore has had the same mayor and commissioner since 2015 and has involved 850 Self-Help Groups (SHGs) for citizen awareness campaign on waste segregation; Amdavad and Pune municipal corporations have adopted a PPP model to collect and transport waste from the city. Focus on expenditure and outcomes assumes even greater importance due to the fiscal stress caused by Covid-19, making devolution of funds to the third tier all the more challenging.

The study can be accessed by clicking here

(The study has been authored by Shishir Gupta and Rishita Sachdeva)

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Tuesday, December 07, 2021