Revisiting the role of funding for improved urban services

Nineteen of 27 cities spend more than the benchmark amount (>100%) recommended by the High Powered Expert Committee (HPEC), 2011. (Representative image)

By Shishir Gupta & Rishita Sachdeva

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India’s GDP shrank by 7.3% in 2020-21 as the country went in for one of the world’s most stringent lockdowns to contain the spread of Covid-19. This pushed the already elevated fiscal deficit of 4.6% of GDP in 2019-20 to 9.3% for 2020-21. Buoyed by significant petering out of the first wave and resumption of economic activity, the IMF projected that India is likely to grow at 12.5% during 2021-22 and will be the fastest growing major economy. However, the unprecedented second wave and the possibility of a third wave have upended all bets about the strength of economic recovery.

In these challenging times, it is unlikely there will be meaningful increase in devolution of funds to urban local bodies, which are severely resource starved. India’s municipal revenue as a percentage of GDP has remained constant at 1% since 2007-08, which is very low compared to other developing nations such as Brazil and South Africa whose ratio stood at 7.4% and 6%, respectively, in 2010. The question policymakers and city administrators need to ask is: Are there other non-monetary levers to improve service delivery in Indian cities? Thankfully, the answer is ‘yes’.

The quality of basic services delivery to an average city dweller leaves much to be desired. For example, 75-80% of municipal waste is collected, and of this only 22-28% is processed and treated; average water availability is about 70 litre per capita per day (lpcd) in urban areas compared to 135-150 lpcd required for hygienic living, and the list goes on.

In a new study ‘Revisiting the role of funding’ we argue that there is a compelling need to map the expenditure and outcomes achieved across a range of urban services. This mapping would help establish cities and services 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. We probe this link by comparing revenue expenditure that our sample of 27 cities are incurring on providing solid waste management (SWM) services with the performance outcomes on cleanliness as measured by the Swachh Survekshan. The results are counterintuitive.

—Nineteen of 27 cities spend more than the benchmark amount (>100%) recommended by the High Powered Expert Committee (HPEC), 2011. Yet none have an expected perfect cleanliness score; nine of these 19 spend at least 1.5 times more than the benchmark amount;

—While spend has a significantly positive impact on cleanliness, it explains only 23% of the variation.
The study finds that cities that spend more are not necessarily better off than those who spend less in terms of their cleanliness performance. For example, in the population category of ‘more than 5 million’ Amdavad and Greater Mumbai scored 73% and 77% in 2016 SS, respectively, but had large variations in their per-capita SWM spend of Rs 273 and Rs 1,234, respectively. Jaipur and Chandigarh, both with population between 1-5 million, have similar spend per-capita of Rs 430 and Rs 438, respectively, on SWM and yet have a stark difference in their performance scores at 62% and 86%, respectively.

The argument is not to belittle the importance of funding, but to highlight the importance of allocation efficiency as well. For example, funding remains an important lever to improve service delivery for cities such as Ranchi and Guwahati, which spend Rs 157 and Rs 130, respectively, in 2016, much lower than the HPEC benchmark of Rs 302, and also have a poor SS survey score of 44% and 52%, respectively.

Early observations point to the role that stable city leadership, effective public-private partnerships, and citizen engagements have played in providing better SWM services. Take the example of a top performing city such as Indore, which has had the same mayor since 2015 and has involved 850 self-help groups for citizen awareness on waste segregation; Amdavad and Pune municipal corporations have adopted PPP models to collect and transport waste from the city.

Gupta is senior fellow and Sachdeva is research analyst, Centre for Social and Economic Progress