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Friday, 03 February 2017 00:00
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Ishaan's edit

 

With India needing to build two new Mumbais every year till 2030, to cite the McKinsey figure, if it has to accommodate 40% of its population that moves to urban areas, up from around 33% right now, it is obvious financing this will be a big challenge—building the cities right is critical since, even now, cities produce three-fifths of the country’s GDP. To cite one number, according to the High Powered Expert Committee, about R39 lakh crore (at 2009-10 prices) would be needed to create these cities. While there are various approaches to get that money—the DMICDC one involves creating trunk infrastructure in a city using government money and then selling land around it at a premium—what happens after these cities are built is even more critical. Most cities today are starved of funds and, as a result, are unable to provide citizens anywhere near the kind of facilities they need to. Part of the problem, of course, is political since with, say, a lot more votes to be got from a Maharashtra as compared to a Mumbai, few politicians will give Mumbai the kind of money it needs. Sorting this out will take time.

What can be done relatively quicker, the Economic Survey points out, is a rapid step-up in the property taxes collected by states—right now, while OECD countries manage to average property tax collections of around 1.9% of GDP, India is a much lower 0.2%. The main reason, it appears, is that city administrations do not have the wherewithal to correctly assess the number of properties in their boundaries, apart from the fact that if a large part of this is unauthorised construction, it is not possible to collect taxes. The Survey quotes a study for Bengaluru and Jaipur, using satellite data. It found that, in the case of Bengaluru, nearly half the city was built-upon. Once this data was juxtaposed with the circle-rate in each area, the study found Bengaluru could collect four to seven times its current property taxes. In the case of Jaipur, where 39% of area was built-up, collection levels could rise by between 10 and 20 times. Based on a similar assessment of 36 cities, the 13th Finance Commission had found increasing property tax compliance to even 80-85% would raise the property tax revenues from R4,400 crore to as much as R22,000 crore. Given how important revenue collection is, and by how much it can be scaled up, it remains a mystery that it hasn’t been tapped to its full potential. While the Centre can at most help the states with its technical expertise, including access to satellite information, the ball is really in the latter’s court—since part of NITI Aayog’s mandate is to showcase best practices across states, its role in this cannot be understated.

 
 
 
 
 

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