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Resource Mobilisation for Urban Infrastructure

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Resource Mobilisation for Urban Infrastructure

  1. 1. Regional Centre for Urban & Environmental Studies, Lucknow Municipal Resource Mobilisation for Urban Infrastructure including PPP Madhusudan Sharma
  2. 2. • Legal Framework • Resources required for Urban Infrastructure • Resource Mobilisation Issues • Conventional Sources of Revenue • Non-Conventional Resources Pooled Finance and Bonds Land Value Capture Finance PPP Cost management
  3. 3. Legal Framework • The Constitution of India • State Municipal Act and Rules • State PPP Act • ULB Rules • Central Finance Commission • State Finance Commission • GoI Guidelines for Pooled Finance • GoI Guidelines for PPP • State Policy for PPP
  4. 4. The Constitution of India Article 243W – 12th Schedule – 18 Functions assigned to Municipalities Article 243X • Taxes, duties, tolls and fees as authorised by the State • Assigned taxes, duties, tolls and fees levied and collected by the State • Grants-in-aid from the Consolidated Fund of the State Article 243Y State Finance Commission to recommend for Municipalities:- • Taxes duties, tolls and fees which may be assigned • Allocation of the taxes, duties, tolls and fees leviable by the State • Grants-in-aid from the Consolidated Fund of the State • Measures needed to improve the financial position Article 243Z • State to make provisions with respect to the maintenance of accounts and audit.
  5. 5. Punjab Municipal Corporation Act for Chandigarh Section 90 (1) - Taxes by Municipal Corporation on: • Land and buildings (including Water, Fire and General Tax) • Advertisement other than in Newspapers • Buildings along with application for sanction of Building plan • Development tax on increase in urban land value caused by execution of any development or improvement Section 90 (2) - Taxes after prior approval of Govt: • Profession, trade, callings and employment • Any other Tax which the State has power to levy Section 90 (6) - Assigned Revenue • Stamp Duty • Motor Vehicle Tax • Electricity Duty • Entertainment Duty and Tax
  6. 6. Resources required for Urban Infrastructure Urban Infrastructure – Water supply, Sewer, SWM, Drainage, Transport, Parks Funds required for: • Initial Capital Cost • Replacements during project life • Operations and Maintenance • Debt service • Asset Replacement
  7. 7. Conventional Sources of ULB Revenue Own • Taxes-Property, Advertisement etc. • License Fee • User Charges-Water, Sewer, SWM • Rent from properties • Sales • Income from Investments Others • Assigned Revenue • Grants
  8. 8. Non-Conventional Resources • Pooled Finance and Bonds • Public Private Partnership (PPP) • Value Capture Finance (VCF) • Citizen Participation • Cost Recovery of services • Cost Management
  9. 9. Value Capture Finance (VCF) • Land value tax • Land use conversion tax • Land value increment tax • Development permission charge – value/area based • Betterment charges / Impact Fee • Transfer of Development Rights (TDR) • Sale / Incentive FSI • Tax Increment Financing (TIF)
  10. 10. Public-Private Partnership (PPP) What is PPP? • Long term contract • Between Govt. or Govt. Agency and Private party • For a Public service Why PPP? • Service coverage and quality-Unmet Need • Reasonable cost-Revenue opportunity • Shared risks and returns
  11. 11. Private Sector Contribution Options • Finance • Service Delivery • Technology Efficiency • Risk management • Cost optimization • Revenue Collection
  12. 12. Public Sector Gains • Coverage • Improved service delivery • Cost savings • Transfer of construction and operations risks Obligations • Policy clarity • Political Will • Social Equity and empowerment of consumers
  13. 13. PPP Models for Municipal Infra Water supply • Build-operate-transfer (BOT) - Concession agreement • Performance-Based Management Contract for O & M • Service management contract: Metering, Billing and Collection Solid Waste Management • Single Concession for collection, transportation, segregation, treatment and disposal. • Separate concessions for: 1 Collection and transportation 2. Segregation, Treatment and disposal Sewerage • Construction of the sewerage network through EPC on a BOQ basis • Construction and operation of STP through a hybrid annuity model based on BOT by the same private operator. Septage • Single Concession for collection, transportation, treatment and disposal. • Separate concessions for: 1 Collection and transportation 2 Treatment and disposal
  14. 14. PPP Alerts Project Development • Clarity of purpose • Realistic assessment of feasibility • Value for money analysis • Balanced risk sharing • Measurable Service standards • Performance linked payment • Approvals and clearances • Documentation-Standard Transparency in selection Monitoring and Regulation
  15. 15. Cost Management • Works • Establishment • Administration • Operation and Management • Programmes • Interest
  16. 16. Resource Mobilisation Issues • Taxing powers • Coverage • Collection • Rate revision • Partial Capital cost funding with grants • Debt service obligation • Additional O & M cost • Infrastructure cost and revenue mismatch • Quality of Assets - life and maintenance costs • Gaps in Recording and Monitoring System
  17. 17. Thanks

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