MoUD wants states and cities to go beyond taking small steps for rapid urban transformation

March 2017
  • Fivemajor transformational reforms to be implemented based on report ofGroup of Secretaries.

  • Citiesto grant approvals first and verify later; creditrating, value capture financing, land titlingon agenda.

  • Reformincentive fund to be increased from Rs 500 crore to Rs 3,000 croreper year over next three years.

  • Reformsand six related new initiatives to be discussed with states/UTstomorrow.

TheMinistry of Urban Development (MoUD) has evolved a new reform matrixto enable stateand city governments gobeyond the present incrementalism of taking small steps towardsimplementing transformational reforms over the next three years, fora turn around in urban governance, planning and finance.

TheMinistry will discuss a set of five major reforms with states andUnion Territories at a ‘National Workshop on Urban Development’.Minister of Urban Development M Venkaiah Naidu will chair thedeliberations on the reforms and six other new initiatives thatpromote these reforms since huge private sector investment isenvisaged under five of these initiatives..

Theconcerned Group of Secretaries in their report on urban sector haverecommended that “After a review of the schemes over the years, theGroup felt that instead of an incremental approach, the time has comefor ushering in transformational reforms in governance,planning and finance”.

Major reforms recommended by the Group of Secretaries are;

  1. Movingto a Trust and Verify Approach:Instead of the present practice of verifying first and approvinglater, it has been recommended that trust needs to be reposed in thecitizens and approvals may be accorded first and to be verifiedlater, inverting the model of verifying first and approving laterwhich is resulting in huge delays. This ‘Trust and Verify’approach has been recommended in respect of permissions for buildingconstruction, Change of title in municipal records (mutation) andbirthand death registration,involving the largest number of physical interactions between citygovernments and citizens.

  2. FormulatingLand Titling Laws: Thegroup quoting a study by McKinsey noted that over 90 per cent of theland records in the country are unclear and land market distortionsand unclear land titles are costing the country 1.30 per cent of GDPper year and accordingly recommended enactment of Land Titling Lawsand their implementation in a specific time-frame.

  3. Credit Rating of Urban Local Bodies

  4. ValueCapture Financing

    Notingthat the total revenues of the municipal sector accounts for only0.75 per cent of the country’s GDP as against 6 per cent for SouthAfrica, 5 per cent for Brazil and 4.50 per cent for Poland, thegroup recommended Municipal Bonds further to Credit Rating of ULBsand Value Capture Finance tools for meeting the capital expenditureneeds of cities.

  5. ImprovingProfessionalism of ULBs: Quotinginvestment bank Goldman Sachs report, the Group of Secretaries notedthat a bureaucracy that is based on merit rather than senioritycould add nearly a percentage point annually to the country’s percapita GDP growth. It also expressed concern over shortage ofqualified technical staff and managerial supervisors in ULBspreventing innovation, the group recommended induction ofprofessionals in city governments by encouraging lateral inductionand filling top positions in cities (Commissioners and Heads ofFinance and Revenue) through open competition.

Inpursuance of these recommendations of the Group of Secretaries, theMinistry of Urban Development has come out with the followingimplementation framework in respect of the five major reforms:





Trustand Verify method

-Bringingonline the three services mentioned in 53 million plus populationcities and capital cities

-Onlineprovision for all 500 AMRUT cities

-Onlineprovision for all statutory 4,041 cities

CreditRating and Municipal Bonds

-All500 AMRUT cities to complete Credit Rating

-Actionto be taken for floating bonds

-Actionto be taken for enhancing credit worthiness

-Bondsto be floated for all cities which have investment grade


-Secondround of credit rating for all 500 cities

-Ratingupgradation by atleast one level


-Enactmentof laws for land titling

-Implementationand providing urban title certificates on demand

-Tocomplete all survey and legacy data and make available titlecertificates for all properties

ValueCapture Finance

-Formulationof VCF policy, tools and rules at State level

-Implementationin 53 million plus population cities

-Implementationin all 500 AMRUT cities including Smart Cities

Professionalisationof Municipal Cadre

-Establishingcadre with assessment of requirements, formulation of RecruitmentRules

-Fillingup of posts

-Completionof filling up of posts


Toincentivise, implementation of these five transformational reforms,the Ministry of Urban Development has proposed to increase ReformIncentive Fund from Rs 500 crore during 2017-18 to over Rs 3,000crore per year over the next three years of implementation period.Cities will be ranked based on performance under each reform categoryfor providing reform incentive. Rs 400 crore was distributed during2016-17 for those who pursued reforms indicated in AMRUT Guidelines.

TheMinistry will also discuss with states and UTs new initiatives viz.,Transit Oriented Development Policy, Metro Policy, Green UrbanMobility Scheme, Livability Index for Cities, Value Capture Policyand  Fecal Sludge Management Policy.