Puri Prescribes Bond Remedy To Cure Money-Hit Municipalities

The financial condition of municipalities was a "cause of concern", Union Minister Hardeep Singh Puri said on January 12, and pitched for a "robust financial management" to enhance their revenues and raise funds by tapping capital market through bonds.

He said the combined receipts of all municipalities in India was estimated to be lower than Rs 1.5 lakh crore, with less than a third of the amount coming from their resources, making them dependent on Central and state governments. It is also estimated that nearly Rs 65 lakh crore would be required as capital investment and for services in Indian cities over a 20-year period, the minister said, adding the space to raise private funds was "enormous".

"Compared to certain other areas of reform, we have been relatively slower in municipal finance reforms, and the financial position of our municipalities is a cause of concern," Puri, the housing and urban affairs minister, said. He said the municipal finance market faced a range of challenges, including weak administration and political interference by way of waivers.

"Municipalities need to lay a foundation of robust financial management for both enhancing own revenues as well as tapping the capital market through Municipal Bonds," he said.

Speaking about administrative reforms, he said the time had come to adopt the recommendations of the Second Administrative Reforms Commission, and merge the functions of the people chairing the municipal council and the individual exercising executive authority.

"The position of chairperson/mayor duly created must be filled via a direct electoral process, and should have a fixed five-year tenure. The mayor should also be given the power to appoint his/her Cabinet consisting of councillors selected from the elected members," he said.

Currently, in many cities, the head of a municipal corporation, the mayor, is merely a ceremonial authority and executive decisions are carried out by the municipal commissioner appointed by the state government. Many states have a short-term tenure of mayors. For instance, the tenure of the mayor at the Brihanmumbai Municipal Corporation is two-and-a-half years.

The minister said the kind of urbanisation India would witness in the 21st century, with technology and innovation at its very core, required skills and expertise would not always be available within the government fold.

"I urge all state governments, and municipal governments, to look beyond the Indian Administrative Service, and leverage the enormous talent available in Indian society, particularly in the field of finance. Lateral entrants, particularly at the municipal level, should be become the norm and not exception," he said.

With inputs from Housing News