India’s
Pro-Investor Plans
For Urban Renewal
By Jake Skeers
25 March 2006
World
Socialist Web
Indian
Prime Minister Manmohan Singh launched an “urban renewal”
program last month designed to attract private investment to 63 of India’s
largest and most important cities. His government is proposing to supply
more reliable infrastructure and services, remove city regulations that
act as impediments to the market, abolish rent caps and provide reliable
and enforceable property rights.
State governments and associated
Urban Local Bodies wishing to draw from the 500 billion rupees ($US11.2
billion) allocated to the Jawaharlal Nehru National Urban Renewal Mission
(JNNURM) over seven years, will first need to sign an agreement to implement
a list of 13 mandatory items. A central government directorate will
monitor the program and withhold funds from cities not implementing
it.
Mumbai, Kolkata, Delhi, Bangalore,
Chennai, Hyderabad and Ahmedabad—India’s cities with 4 million
plus populations— have been allocated 47.5 percent of the funds.
The government has also assigned 47.5 percent of funds to the next 28
largest cities, having a population over 1 million. The remaining 5
percent of funds has been provided to 28 other cities that are state
capitals or have religious or other significance.
There is certainly an overwhelming
need for proper infrastructure and basic services in India’s cities,
particularly in the huge urban slums. In the 1990s, India’s urban
population grew by over 65 million, with the fastest growth in the largest
cities. An estimated 21 percent of the urban population lives in slums.
In Mumbai, the figure is over 50 percent. Some 25 percent of urban dwellers
do not have electricity, 23 percent do not have access to toilets and
37 percent do not have potable water in their dwellings. By 2020, some
analysts estimate that another 300 million people will live in urban
India.
However, the JNNURM plan
is not directed at ameliorating the terrible conditions facing ordinary
working people, but at satisfying the long-standing demands of business.
The World Bank and Asian Development Bank in particular insist that
the government must make India’s cities more conducive to private
capital.
The government’s objectives
become clear when one takes a closer look at the compulsory measures
set out in the JNNURM scheme. These include:
* The repeal of rent control
laws. These state government laws place a cap on rent increases. The
removal of these laws will force many low-income families out of relatively
cheap housing.
* The repeal of Urban Land
Ceiling and Regulation Acts. The Maharashstra Act, for example, limits
individual land holdings to 500 square metres. The legislation allows
the state government to take surplus land from private holders and use
it to build housing for the poor. It also limits the use of agricultural
land for non-agricultural purposes.
* The reduction of stamp
duty to no more than 5 percent within seven years. This move will cut
state revenues from land sales as well as making property transactions
cheaper and easier.
* The implementation of decentralisation
as envisaged in the 74th Constitutional Amendment Act, which gave formal
constitutional recognition to local governments. The calculation in
handing over responsibility for urban services is that local bodies
will be more susceptible to business demands.
* The requirement that, within
seven years, local bodies levy charges on service users to recover full
costs. Users unable to pay will be refused basic services such as water.
In addition, local bodies will be responsible for providing basic services
for the urban poor from their limited budgets.
* The reform of property
taxation using geographical information system software so that “collection
efficiency reaches at least 85 percent within the next seven years”.
* The adoption of modern
accounting methods and e-governance, to better enable governments to
more efficiently collect charges.
Optional reforms include:
the revision of by-laws to streamline building and development approvals;
simplification of laws to convert land from agricultural to non-agricultural
uses; the introduction of a property title certification system; and
the encouragement of Public Private Partnerships (PPP).
The JNNURM states that Urban
Local Bodies should provide “basic services to the urban poor
including security of tenure at affordable prices, improved housing,
water supply and sanitation”. In launching the project, Prime
Minister Singh also spoke grandly of the need to help the poor. Far
from alleviating the plight of India’s urban poor, this pro-business
program will inevitably make it worse.
Even if all the money were
allocated to helping the poor, it would not resolve the immense social
problems in Indian cities. But the purpose of the plan is to create
an “investor friendly environment” and attract greater “private
sector investments through PPPs”. These Public Private Partnerships
are aimed at maximising profit for private investors, not providing
affordable, high-quality services for the poor.
The government’s real
aims can be gleaned from the Economic Survey 2005-6, which was handed
down along with last month’s budget. “India has the potential
to absorb $150 billion in FDI [Foreign Direct Investment] in the next
five years in infrastructure alone,” it said. The World Bank,
the Asian Development Bank and USAID have been pushing for years for
the reforms contained in the JNNURM plan to enable foreign investors
to cash in on lucrative infrastructure projects.
Much of the “reform
agenda” is to shore up property rights and to streamline investment.
Along with inadequate infrastructure such as roads and electricity supply,
a major complaint of foreign investors is bureaucratic “bottlenecks”.
According to the World Bank, the median time to start a new business
in India is 89 days. In Australia, it is 2 days, in the US 5 days and
41 days in China. An estimated 14 percent of senior management time
is spent dealing with state government officials over various regulatory
issues. In China, the figure is 8 percent.
Far from assisting the tens
of millions living in squalour in Indian slums, the program will pave
the way for vast clearance programs to open up what is often prime land
for other uses. In many cases, slum dwellers have been living on land
illegally for years and have no property rights.
The initial results of Mumbai’s
urban renewal plan, based upon a report entitled “Vision Mumbai”
produced by international consultants McKinsey and Co, indicate what
is being prepared.
In 2005, 90,000 huts were
demolished, leaving approximately 350,000 slum dwellers homeless, to
make way for urban development. As part of the plan to transform Mumbai
into India’s Shanghai, “Vision Mumbai” envisages a
vast reduction of slum dwellers from 50 percent of the city’s
population to about 10-20 percent.
Mohammed Badruddin, who lived
with 4,000 others in a Mumbai slum, had his home demolished early last
year. He was at work as a floor tiler when he heard news that his home
had been bulldozed without warning.
“I rushed back and
saw the whole slum demolished,” he told the Washington Post. “We
resisted the bulldozers, and the police beat us. All my hard work was
raised to rubble.” To prevent the inhabitants from returning,
the government dumped rotting garbage on the land and employed security
staff. Those evicted set up shelters made of bamboo and plastic on a
nearby burial ground.
As part of the urban renewal
program, many workers have been laid off and factories demolished to
make way for new shopping malls and apartment blocks. To provide for
growing demand in urban centres like Mumbai, the Maharashstra state
government—a coalition of the Congress Party and the Nationalist
Congress Party—last year cut off free electricity supplies to
farmers across the state.
The implementation of the
JNNURM reforms will only accelerate these processes, with devastating
consequences for India’s impoverished masses.