Finmin blinks, urban reforms to be gentler

NEW DELHI: The finance ministry is pushing for urban reforms albeit by diluting some of the stringent conditions that the states are expected to fulfil to gain access to the newly-created Rs 500-crore Urban Incentive Fund.
After six months into the current fiscal, the government has realised that such reforms measures would prove to be non-starters if they are not designed realistically. Such incentive-linked funds have a corpus of Rs 15,000 crore in the current fiscal. While non-usage of these funds would ease the fisc at the end of the year, the government is not looking at savings under this head.
“The idea is to push reforms and not save on this account,� sources said.
Expenditure contraction would be welcome on the non-Plan side, they added.
In one of his first initiatives on state-level reforms, advisor to finance minister Vijay Kelkar has called for redesigning the milestones for urban reforms.
The finance and the urban ministries will now evolve a friendlier package for cities with population between 1-5 million.
As per the initial package, states could draw from the Rs 500-crore pool if some identified cities manage to push reforms by rationalisation of stamp duty and property tax, abolition of rent control Act and repeal of urban land ceiling acts and a double-entry accounting system by municipal bodies.
Sources said putting all conditions at one go proved to be a tough agenda for states. So, it is now proposed to space out reforms benchmarks over a period of time. The final guidelines would have a phased reforms agenda for growing urban agglomerations.
The need to clean up the cities stems from the fact that urban population of the country has grown to 285 million, more than the total population of the US. The target cities for this fund are those with population between 1-5 million and would exclude the metropolitan cities. Cities that would gain from reforms total 35 including Ludhiana, Ahmedabad, Nagpur, Coimbatore, Amritsar, Pune and Surat.
States will have to sign an MoU with the urban development ministry for drawing the funds. The initial fund allocation is based on the city’s share of population vis-à-vis total population. States will be free to transfer the funds to any city which follows the population criteria.