Housing minister recommends municipal bonds to improve financial condition of municipalities

The financial condition of municipalities is a ’cause for concern’, union minister Hardeep Singh Puri said, on January 11, 2018 and pitched for ‘robust financial management’, to enhance their revenues and raise funds by tapping the capital market through bonds. He said the combined receipts of all municipalities in India was estimated to be lower than Rs 1.5 lakh crores, with less than a third of the amount coming from their resources, making them dependent on the central and state governments. It is also estimated that nearly Rs 65 lakh crores would be required as capital investment and for services in Indian cities over a 20-year period, the minister said, adding that therefore, 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 has come to adopt the recommendations of the Second Administrative Reforms Commission and merge the functions of the person 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. The minister said the kind of urbanisation that India will witness in the 21st century, with technology and innovation at its core, required skills and expertise that 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 become the norm and not exception,” he said.