As the current monsoon deluge shows, India’s metropolises struggle to deal with civic upkeep. More information about finances with citizens can change that
As a citizen of my ward and city, why don’t I get a performance and financial scorecard every month or quarter? Why don’t I see how much money has been earned and spent in my ward and city? And on what projects has the money been spent? If you are a shareholder in a company, you receive its annual accounts audited by a chartered accountant before September 30 each year. In the case of listed companies, you get an update on their financial performance every quarter. In addition, you get a chance to attend their annual general meeting and raise questions about their financial and operational performance. Yet as a citizen of a city — and every citizen is a kind of a shareholder — why don’t I get such information or an opportunity to participate? These questions on following the money hold the key to a virtuous cycle of participatory democracy in our wards and cities, something we badly need to address the mounting civic challenges in our cities exacerbated by climate change.
Audited annual accounts are the singular instrument of trust between institutions and their stakeholders. (HT File Photo)
In a quiet but series of firm moves over the past four years, the Union ministry of housing and urban affairs (MoHUA), armed with far-reaching recommendations of the 15th Finance Commission, has been transforming municipal finance in India. At the heart of this transformation is www.cityfinance.in which has emerged as India’s national municipal finance portal. For the first time in independent India, 3,000 urban local governments (out of 4,700 plus) have published their unaudited annual accounts for FY 2020-21 and audited annual accounts for FY 2019-20 on this website.
At the back end of the portal, these annual accounts, which are drawn up in several different formats as per respective state municipal acts and rules, have been standardised and made comparable. As a result, not only can mayors, city managers and the market ecosystem access this rich database of municipal finance information, but also any citizen anywhere in India can now look up their city’s (in fact, any city’s) financial position and performance. This is a leap towards radical transparency in urban governance in India.
Audited annual accounts are the singular instrument of trust between institutions and their stakeholders. The 15th Finance Commission mandated that every urban local government in India needs to publish their audited annual accounts to access grants. Citizens, civil society organisations and businesses seek financial accountability from their urban local governments. They would like to know to what end taxpayers’ money is being spent and that there are sound financial governance systems and processes in place in their local government. The audit of annual accounts by independent auditors assures the same. Equally, investors (and market intermediaries, such as credit rating agencies) rely on audited annual accounts to make investment and lending decisions.
The unavailability of credible and timely annual accounts has been a bugbear of municipal finance reforms in India and has been cited repeatedly as a pet peeve by successive finance commissions, the Comptroller and Auditor General of India and the market ecosystem. However, the leadership shown by MoHUA and the 15th Finance Commission, their willingness to partner with civil society and their openness to new ideas such as www.cityfinance.in has finally brought us close to the proverbial light at the end of the tunnel.
The ministry of finance and MoHUA have complemented this effort with incentives for states to reform property tax and user charges regimes and access municipal borrowings, to enhance the financial sustainability of urban local governments. In addition, MoHUA launched City Finance Rankings to encourage cities to improve their financial performance and learn from peers. The National Urban Digital Mission, too, is playing its part through the digitalisation of finance systems.
Yet, the journey towards financial accountability and sustainability has just begun and needs to gather pace. The own source revenues and municipal borrowings of urban local governments in India are only a fraction of the investment needed in infrastructure and service delivery in cities (estimated at $840 bn by the World Bank over the next 15 years).
Uniform accounting standards, progressive regime of property taxes and user charges, better budget management, transparency through the entire project lifecycle, inventorising municipal land and property for municipal asset monetisation, municipal infrastructure pipeline of bankable projects, and matchmaking between projects and investors mainly insurance and pension funds, are all important reforms waiting their turn.
Other city agencies such as development authorities, bus transport corporations and water supply boards, which control large swathes of land and funds, must be brought under the whole spectrum of municipal finance reforms. State governments, which have a broad sweep of authorities over urban local governments, need to lead from the front. They must meaningfully enable state finance commissions (SFCs) to ensure predictability in the amount and timing of grants to urban local governments. Many smaller cities (4,000 out of the 4,700-plus urban bodies have populations less than 100,000) would continue to depend substantially on state grants.
MoHUA and the 15th Finance Commission have led by example in infusing new energy and thinking into municipal finance reforms, and it is now about time for state governments and SFCs to emulate the same. The benchmark for them is a citizen receiving easy-to-understand performance and financial scorecards of their wards at least every quarter.
Why is this important? Transparency in finances and projects alongside formal platforms for citizen participation will empower and enable communities, councillors and ward-level officials to work together and transform their neighbourhoods. It will in due course develop into a strong foundation of trust and engagement between citizens and governments which is much needed to address emerging 21st century challenges of climate change and urban flooding in our cities.
Srikanth Viswanathan is CEO, Janaagraha Centre for Citizenship and Democracy. The views expressed are personal
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