Focus on urban jobs, invest more in cities to accelerate post-Covid recovery: Panel to Finance Commission

NEW DELHI: Cities are the worst hit by Covid-19 and the Centre should consider increasing fund allocation to strengthen urban local bodies, and enable them to meet exigencies of pandemic-like situations and facilitate their faster recovery, a study commissioned by the Fifteenth Finance Commission has said.

It also suggested that the government tweak the proportion of grants from the divisible pool for local bodies, to 65:35 between rural and urban local bodies in 2024-25 from 67.5:32.5 in 2020-21, or an annual transition of 0.5%. This will help "commit steady and significant public expenditure to urban areas”, it said, while suggesting that this programme be started “with the 100-largest cities to enable sustainable post-Covid recovery".

A panel comprising experts from the Indian Institute for Human Settlements, which conducted the study, submitted its report last week.

The report, reviewed by ET, also suggested that the Centre set up a "Dedicated Urban Governance and Financial Resilience Fund" to help cities recover from Covid-19’s impact, and have a ten-year plan to take urban investments to over 10,000 places by 2031. It said this fund could get 5% of the total finance commission grant to urban local bodies.

Among the worst affected by Covid-19 are the cities of Mumbai, Pune, New Delhi, Chennai, Bhubaneshwar, Ahmedabad and Bengaluru. Several other cities such as Surat, Vadodara, Jamshedpur, Gurgaon, Coimbatore, Indore, Mohali, Faridabad and Bhopal have also recorded a large number of cases. Many states have complained about Covid-19 draining their financial resources in many ways.

Experts, while acknowledging that cities offer opportunities for smart reinvestments that can kick-start economies, have asked the government to be mindful about post Covid-19 realities in their planning.

The report said the government should focus on strengthening linkages to urban areas, and "creation of urban jobs by incentivising livelihood schemes in cities, improving affordable housing and strengthening the fiscal base and ability of urban local bodies to access and deploy finances."

For immediate post-Covid economic recovery to happen, safety nets for food, tenure/housing, decent work and basic services have to be put in place, it said.

According to finance commission officials, the report was put together at its request to assess the potential of greenfield towns and cities to assist economic recovery, and to define ways to enable the process of urbanisation to accelerate post-Covid economic recovery.

Finance commission chairman NK Singh told ET that a presentation had been made to the commission and the urban development ministry's inputs had also been taken.

"The sums of money expected is very significant and we have to really see, given the shrunken resources envelope we have right now, how these recommendations can be reflected," he said.

The report suggested setting up also of a Rs 3,000 crore Urban Land and Property Systems Reform grant fund to enable "the reform of revenue, peri-urban and urban land systems to enable affordable housing and disaster resilient infrastructure development, apart from the implementation of digital property taxation, registration and land records systems."

It recommended a Rs 2,000 crore municipal cadre development grant fund to enable the strengthening of municipal cadres, and a dedicated Rs 1,000 crore economic and financial data systems improvement grant fund to enable monitoring and report on economic activity in cities by third-party institutions.

The report warned the Centre that it would not be prudent now to go for building new cities and planning many SEZs.

"In the post-1991 era, there has been an attempt to create less than five new cities, less than two by private developers. None have created significant new employment or emerged as noteworthy economic hubs over a 30-year period. Most private developments have floundered because of land assembly, environmental clearances and financing challenges... Lack of land is often highlighted as a barrier to SEZ development. Yet, more than 50% of current SEZ land remains unutilised (CAG, 2014) and is predominantly held by private sector developers," the report said.