By Vaibhav Anand, IFMR Capital

Continuing from our earlier post on JNNURM, this post discusses the progress made during JNNURM-I, key lessons learnt from the mission and the proposed features of the next phase of the Mission, JNNURM-II.

JNNURM-I was envisaged as a reform-driven planned development of cities. However, the mission degenerated, to an extent if not completely, to a funding source for stand-alone urban infrastructure projects with funding delinked from reforms. The implementation status of key mandatory reforms across the states and identified cities has not been encouraging:

• Only 11 out of 30 states/UTs, audited by CAGⁱ, have transferred all functions, as per the 74th CAA, to the ULBs
• Nearly 33% of ULBs/parastatals have not implemented the accrual based double entry accounting method
• More than 40% of ULBs have failed to meet the 85% coverage of Property Tax by 2010-11
• Out of 39 cities audited by CAG, only seven cities have implemented the user charge collection mechanism for water supply (only five cities have done this for solid waste management system)
• Rent control law reforms and stamp duty rationalization has not been implemented by all the states

The total allocation of funds by the Central Government for the Mission was revised to INR 660.8 bn in 2009 from the initial allocation of INR 500 bn. During the Mission (from 2005 to 2012), only 60% of the allocated funds were released. Further, only 9% of the 2815 approved projects were completed during this period.

Key lessons from JNNURM-I

1. Lack of integrated planning at city and regional level: It was expected that the City Development Plan (CDP) would ensure that projects were identified based on an integrated plan and a long term vision for the city development. However, CDPs ultimately reduced to just the investment plans for various haphazardly selected stand-alone infrastructure projects
2. Lack of participation in planning: Not all ULBs were involved in the preparation of development plans; CDPs were prepared either by the state or the city development authorities in little or no consultation with the ULBs in many cities. Further, the preparation of Detailed Project Reports (DPRs) was done with limited interaction with the stakeholders.
3. Exclusion of peri-urban areas: The development of peri-urban areas (suburban and countryside areas) was not included in the Mission and didn’t find mention in the development plans. This has led (and is leading) to the unstructured development around the city boundaries resulting in expensive modifications at a later date.
4. Process Heavy and Lack of coordination: The Mission was process heavy and tedious with the involvement of many governing and sanctioning bodies, advisors and consultants. This resulted in a significant lack of coordination and delayed decision making for the state officials.
5. Failure to adopt service level benchmarks in designing and appraising the approved projects resulted in sub-optimal quality of service delivery.
6. Lack of adequate capacity: Implementation of reforms at the state and ULB/parastatal level suffered severely due to the lack of adequate capacity at the development planning, financial management and project management.
7. Lack of differential approach towards reforms: The Mission adopted a one-size-fits-all approach for the reform implementation across the states and identified cities, which resulted in significant mismatch in the progress of reform implementation across states.
8. Delay in the implementation of 74th CAA and incomplete devolution of financial powers to ULBs further deterred the ability of ULBs to leverage the funding assistance provided under the Mission.

Proposed JNNURM-IIⁱⁱ

The Committee to facilitate the redesigning of the second phase of JNNURM, JNNURM-II, was formed by the MoUD and Planning Commission in Sept, 2011. The committee was chaired by Sh. Arun Maira (Member, Planning Commission) and other members of the JNNURM steering committee and the state governments. The proposed structure and features of JNNURM-II discussed in the following section are based on the report submitted by the Committee in March, 2012.

Proposed JNNURM-II: Key features

• Duration: 10 years (JNNURM-I was 7 years long)
• Transition period of 2 years beginning 2012-13 to complete the approved projects under JNNURM-I and to implement the pending reforms as the state and ULB level. During this period the following would be ensured:
• Complete JNNURM-I sanctioned projects
• Centre, state and ULBs to undertake capacity building reforms
• Municipal Cadres to be established
• Development Plan and Financial Plan to be finalized (refer next section for details)
• Audit of ULB’s financial statements for at least 3 years up to 2011-12
• Base level reforms to be completed
• Nature of scheme: State Sector with Additional Central Assistance (ACA) (same as JNNURM-I)
• JNNURM-II will be an umbrella scheme with various submissions: Rajiv Awas Yojna (RAY), slum rehabilitation in areas outside RAY, Urban Infrastructure and Governance (UIG), capacity building
• Submissions/sub-schemes discontinued: UIDSSMT, BSUP, IHSDP
• Schemes merged: MoUD’s UID for Satellite Towns, RAY (Funding aspect to be governed by the guidelines approved by Cabinet)
• Division of financial assistance for JNNURM-II
• Base funds- 80% [available on completion of all mandatory reforms]
• Capacity building funds- 10% [funds available for capacity building even during the reform implementation during the transition period]
• Incentive funds- 10% [available on completion of ‘incentive’-linked difficult reforms]

Proposed JNNURM-II: Key objectives and Strategies

The chief objective of the second phase remains the reform linked development however significant stress is on identifying internal resources of fund, leveraging the Mission assistance using the idiosyncratic strengths (i.e. tourism, carbon credits, solid waste recycling, etc) of the cities, empowering ULBs, participatory and transparent governance, effective management of land resources, and pro-poor service delivery.

One of the Implementation strategies of JNNURM-II is to build adequate capacity, including the development and training of municipal cadres. Other key strategies include:

• Stress on planned development of cities: The CDPs and DPRs have given way to a ‘Development Plan’ (DP) which will be a vision document with a 10 year perspective. It would include project sequence, timelines, intended outcomes, monitor-able milestones based on the service level benchmarks developed by MoUD.
• Simplification of the processes by resolving overlapping domains and making the governance more efficient
• Ensuring the accounting reforms at ULBs. Further the ULBs to make 10-year financial plans (FP)
• Adoption of service level benchmarks to monitor and appraise the project outcomes
• Planned development of small towns and peri-urban areas
• Ironing out the distortions in land market
• Stress on innovation and learning across the urban system to build on the internal resources and strengths of the cities

The complete report of the committee on the proposed design of JNNURM-II is available here.
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i – Performance report of JNNURM by CAG India: Read here
ii – Report of the Committee on JNNURM-II (available at http://jnnurm.nic.in/wp-content/uploads/2012/08/Final.pdf)