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World Bank funds to come with reforms clause

By Jyoti Mukul in New Delhi
December 28, 2009 12:01 IST
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A fresh $1-billion (nearly 4,600-crore) loan from the World Bank under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM), to be routed through the Union government, would be linked to cities adopting certain efficiency parameters.

These will form part of the second stage of urban reforms which the Centre plans to push in cities that have already shown some progress under JNNURM. These parameters will require them to achieve milestones linked to release of funds.

The Union urban development ministry is working on a concept paper to identify the broad reforms the cities will need to undertake. The paper will be the basis of discussions when a World Bank team arrives in the national capital next month to start negotiations for the loan.

"Projects that will be undertaken through the World Bank funding will be in addition to the ongoing projects under JNNURM. Since the agenda under JNNURM is set, the only thing that could undergo change is the reform agenda, since we want to take up reforms to the next stage," said urban development secretary M Ramachandran.

The official clarified that these conditions were being designed by his ministry and not the World Bank. Under the first phase of reforms, cities and states are required to adopt certain measures, like rationalisation of stamp duty, repeal of the Urban Land Ceiling and Regulation Act and imposition of user charges, for availing funding under JNNURM.

According to the latest information with the ministry, 56 per cent of state-level reforms and 50 per cent of urban local reforms committed till 2008-09 were achieved. Among the states that have done well are Maharashtra, Gujarat, Tamil Nadu and Andhra Pradesh. There have been capacity constraints in the North-East and Jammu and Kashmir.

The nature of projects to be taken up for funding under the World Bank loan will be the same as that under JNNURM and will include water supply, sanitation and urban transport projects.

Besides user charges, the efficiency parameters, for instance in a water project, could include reduction of wastage by specified quantum, achieving energy efficiency in the operation of the system and recycling. It could also include training of staff.

The funding pattern would be the same as for JNNURM. "The project funding could be city-wise and depend on a state's willingness to take part and fund their part of money, and their commitment to do modification," said Ramachandran, adding that the scope to increase the number of cities was not there, since the funding was limited.

At present, there are 63 mission cities, including metros like Delhi and Mumbai, besides Allahabad, Bhopal and Patna.

The urban development ministry is looking at additional funds of Rs 50,000 crore (Rs 500 billion) for JNNURM. The Planning Commission is likely to take a view on this in the mid-term appraisal of the Eleventh Five-Year Plan (2007-12).

Under JNNURM, the Centre allots grants covering 50 per cent of the project cost for cities with population between one million and four million.

For cities with population higher than four million, the Central grant is 35 per cent of the project cost, with the remaining money coming from the state and the urban local bodies.

The states have utilised much of the Rs 1 lakh crore sanctioned for various projects under JNNURM since it was launched in December 2005.

In the case of the North-East, the Centre provides 90 per cent of the project cost as grants, while for Jammu and Kashmir, it contributes 80 per cent.

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Jyoti Mukul in New Delhi
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