MUNICIPAL FINANCE IN INDIA : AN ASSESSMENT

CONTENTS

Chapter Title

Executive Summary

1.0

Introduction

1.1

Introduction

1.2

Importance of Local Public Finance

1.3

Context of the Study

1.4

Urbanisation and Economic Growth

1.4.1 Cities and Agglomeration Economies

1.4.2 Cities as Generators of Resources

1.5

Investment Requirements for Urban Infrastructure

1.6

Imperatives of Decentralisation

1.7

Objectives of the Study

1.8

Analytical Framework, Data Source and Limitations

1.9

Structure of the Report

2.0

Fiscal Federalism : Theory & Practice

2.1

Approach to Review

2.2

International Studies

2.2.1 Fiscal Decentralization - Theoretical Aspects

2.2.2 Structure of Local Bodies

2.2.3 Resources of Local Bodies

2.2.4 Imbalance of Revenues and Responsibilities

2.2.5 Inter-Governmental Fiscal Transfers

2.2.6 Municipal Finance and Economic Development

2.3

International Experience

2.4

Indian Studies

2.5

Summary Observations

2.5.1 International Literature

2.5.2 Indian Literature

2.5.3 Some Issues for ULBs in India

3.0

Legal and Institutional Framework

3.1

Framework for Municipal Governance

3.2

Expenditure & Revenue Assignment

3.3

Finance Commissions

3.3.1 Central Finance Commission

3.3.2 State Finance Commissions

Chapter

Title

3.4

Central-State-Local Finance Linkages

3.5

Some Observations

4.0

Trends in Municipal Finances in India

4.1

Overview of Municipal Finances

4.2

Size of the Municipal Sector

4.3

Finances of select Municipal Corporations

4.4

Municipal Revenues

4.4.1 Structure of Municipal Revenues

4.4.2 Composition & Trends of Municipal Revenues

4.5

Municipal Expenditure

4.5.1 Structure of Municipal Expenditure

4.5.2 Composition & Trends of Municipal Expenditure

4.5.3 Expenditure on Public Works

4.6

Summary

5.0

Assessment of Municipal Finances

5.1

Approach to Study

5.2

Analytical Framework

5.3

Major Inferences from Analysis

5.3.1 Standard Approach

5.3.2 Normative Approach

5.4

Projection of Investment Requirement in Urban Areas

5.4.1 Basic Amenities

5.4.2 Urban Mass Transport Systems

5.5

Estimate of Potential for Revenue Mobilisation by ULBs

5.6

Some Observations

6.0

Concluding Observations

6.1

Major Findings of the Study

6.2

Municipal Finance Reforms

6.3

Framework for Urban Policy

List of Appendix

Appendix 1 : The Trends in Urbanization and Metropolitan growth in India

Appendix 2 : International Experience in Municipal Finances

Appendix 3 : Details of State Finance Commissions

Appendix 4 : Proposed Formats for National Database on Municipal Finance –

Municipal Finance Information System (MFIS)

References

List of Boxes, Figures and Tables

List of Boxes

Box 1

:

Lessons from Impact Fee Legislations in USA

Box 2

:

Functions of Urban Local Bodies: Twelfth Schedule

(Article 243W)

Box 3

:

Learnings from Cross-sectional Study of Intergovernmental

Fiscal Relationships

List of Figures

Figure 1

:

Fiscal Dependency of Local Bodies

Figure 2

:

Components of Revenue of Municipal Corporations 2000-04,

(As average percent of Aggregate Total Revenues)

Figure 3

:

Composition of Expenditure of 35 Municipal Corporations

2000-04, (As average percentage of total expenditure)

Figure 4

:

Composition of Expenditure on Public Services

in the MCs (average of 1999-2000 to 2003-2004)

Figure 5

:

Municipal Finance Assessment Framework

Figure 6

:

Ranking of MCs based on Dependency ratio and

Under-spending

Figure 7

:

Ranking of MCs based on Revenue Decentralisation and

Under-Spending

Figure 8

:

Ranking of MCs based on Efficiency of Revenue

Administration and Under-Spending

Figure 9

:

Ranking of MCs based on Under-spending and Cost recovery

Figure10

:

Ranking of MCs based on Average Establishment and

Administration

List of Tables

Table 1

:

Poverty Ratios of Select States (2004-05)

Table 2

:

Share of Urban Areas in National Income

Table 3

:

Contribution of Urban Areas to National Income

Table 4

:

Share of Hyderabad and Ranga Reddy Urban Districts

Combined in the Collection of Major Taxes in Andhra Pradesh

Table 5

:

Funds Requirement/Availability for Water Supply, Sanitation and

Solid Waste Management in the Tenth Plan

Table 6

:

Structure of Sub-national Governments in Selected Countries

Table 7

:

Tax Assignment: Who should tax what?

Table 8

:

Criteria for Choice of a Local Tax

Table 9

:

Vertical Imbalances in Selected Countries

Table 10

:

Details of Bonds Issued by Municipal Corporations

Table 11

:

Revenue Powers of Municipalities across Major States 2004

Table 12

:

Central Finance Commission and Municipal Finances

List of Boxes, Figures and Tables

Table 13

:

Revenue Significance of Municipal Sector

Table 14

:

Expenditure Significance of Municipal Sector

Table 15

:

Study Sample - Cities with more than 1 million

population in 2001

Table 16

:

Revenue Sources of Municipal Corporations

in India 1998-2002

Table 17

:

Sources of Major Tax Revenues of Selected

Municipal Corporations in India 1998-2002

Table 18

:

Sources of Major User Charges and Fees of Selected

Municipal Corporations in India 1998-2002

Table 19

:

Sources of Shared Revenues of Selected

Municipal Corporations in India 1998-2002

Table 20

:

Major Sources of Grants-in-Aid of Selected

Municipal Corporations in India 1998-2002

Table 21 (a)

:

Composition of Municipal Revenue and Trends

(Rs.in Lakhs)

Table 21 (b)

:

Composition of Municipal Revenue and Trends

(Per cent to Total)

Table 22

:

Categorisation of Municipal Expenditures

Table 23 (a)

:

Composition and Trends of Municipal Expenditure

(Rs.in Lakh)

Table 23 (b)

:

Composition and Trends of Municipal Expenditure

(Per cent to Total)

Table 24 (a)

:

Composition of Expenditure on Public Works and its Trends

(Rs.in Lakh)

Table 24(b)

:

Composition of Expenditure on Public Services and its Trends

(as Percentage of Total)

Table 25

:

Zakaria Committee Norms of Expenditure on Services

Table 26

:

Balance of Municipal Revenues and Expenditure

(Average of 1999-2000 to 2003-2004)

Table 27

:

Resource Gap of the Municipal Corporations

Table 28

:

Categorization of Municipal Corporations as per Revenue

Expenditure to Total Expenditure Ratio (2003-04)

Table 29

:

Zakaria Committee Norms and Under-spending of the Municipal

Corporations (Averages of 1999-2000 to 2003-2004)

Table 30

:

Dependency ratio and Under-spending of the

Municipal Corporations

Table 31

:

Categorization of Municipal Corporations as per

Dependency Ratio (Average of 1999-00 to 2003-04)

List of Boxes, Figures and Tables

Table 32

:

Decentralisation and Under-Spending of the Municipal

Corporations (Average of 1999-2000 to 2003-2004)

Table 33

:

Categorization of Municipal Corporations as per Revenue

Decentralisation Ratio (Average of 1999-00 to 2003-04)

Table 34

:

Own Revenue and Under-Spending of the

Municipal Corporations

Table 35

:

Own Revenue-GSDP Ratio and Performance on

Individual Taxes

Table 36

:

Under-spending and Cost recovery of the

Municipal Corporations

Table 37

:

Relative Share of Expenditure Components of the MCs

(Average of the Shares during 1999-2003)

Table 38

:

Average Establishment and Administration Expenditure of

the Municipal Corporations (1999-2000 to 2003-2004)

Table 39

:

Summary of the Assessment of Finances of

Municipal Corporations

Table 40

:

Borrowings to Capital Expenditure Ratio of the MCs

(Average of 1999 - 2003)

Table 41

:

Debt Repayment to Revenue receipts ratio of the MCs

(Average of 1999-2003)

Table 42

:

Interest Coverage Ratio of the Municipal Corporations

(Average of 1999 – 2003)

Table 43

:

Debt Coverage Ratio to Operating Surplus of the MCs

(Average of 1999-2003)

Table 44

:

Projection of Investment Requirement in Urban Areas

Table 45

:

Projection of Potential Revenues of ULBs (2004-05)