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There are alternative models available for funding local bodies. For instance, local bodies, including in Tamil Nadu, were looking at raising tax-free municipal bonds, said Mr Rajamani.

CHENNAI, March 20

FUNDS will not be a constraint for urban local bodies but will be available only if they demonstrate a commitment to reform. If they want funds, it will be available but with riders. Fiscal responsibility will enable additional sourcing of funds and encourage private sector participation in infrastructure.

This was the message conveyed by officials on the second day of the Summinfra 2003, the infrastructure summit organised by the Confederation of Indian Industry here on Thursday.

According to Mr M. Rajamani, Joint Secretary, Union Ministry of Urban Development and Poverty Alleviation, the budgetary allocation alone will not be sufficient for an urban local body's needs for investment in infrastructure. There are alternative models available for funding, but all these will call for accountability in operations. For instance, local bodies, including in Tamil Nadu, were looking at raising tax-free municipal bonds. But this will call for credit rating and eligibility to float bonds.

The Centre was working on an Urban Reform Incentive Fund that would soon be available for local bodies. But this would entail reforms, most of which would have to be effected at the State Government level including devolution of funds. The reforms ranging from relating to stamp duty, property tax, rent control, urban land ceiling and accounting systems will be assessed on a weighted average basis. This will decide the allocation from the fund, he said.

In an informal chat with Business Line, Mr Rajamani said the Centre had wanted to launch the fund earlier, but the State Governments had expressed reservations about the move. For instance, rationalisation of stamp duty could affect revenues. The Centre has struck on the weighted average assessment mechanism.

According to officials concerned, the Centre would soon circulate guidelines for municipal accounting. It was also working on a model municipal law that would encourage private sector participation in infrastructure and the Reserve Bank would soon be coming out with concrete guidelines for municipal funding.

Mr Sameer Vyas, Managing Director, New Tirupur Area Development Authority Ltd, which is implementing the Tirupur water supply project, said public-private partnership in infrastructure projects should commence from the initial stages of project development. A water project, for instance, will be looked at differently by the Government and a private player. Therefore, the project structuring and individual responsibilities including allocation of risk can be clearly spelt out.

Tariff was a sensitive issue where water was concerned. Often the levels of tariff levied do not cover the operation and maintenance costs, he said. The tariff will have to be structured in a way that poorer sections of the society are not affected while tapping those with the ability to pay. This will also encourage judicious use of water by the payers. A significant benefit through improved management was the prevention of waste.

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