Finance Commission recommendations aligned with our suggestions: CEPT University arm on water & sanitation

“Among the suggestions by CWAS, a few of our recommendations to the Finance Commission along with our papers ‘to continue publications of Service Level Benchmarks (SLBs) by Urban Local Bodies’ has been accepted in the Sixteenth Finance Commission (XVI-FC) report,” Meera Mehta, CRDF Professor Emeritus and Head of Department at the Center for Water and Sanitation. She also contributes to courses at the Faculty of Planning, CEPT University, told The Indian Express.

The 16th FC notes that almost “all the state governments expressed their views on grant-related conditionalities in their State memoranda” and goes on to mention how Chhattisgarh, Mizoram, Sikkim, West Bengal and so on advocated for either no tied grants or a larger share of untied grants as compared to the 40 per cent recommended in FC 15.

Prof Mehta said that the near-doubling of allocation of grants to ULBs and reducing the conditions for the conditional grants was part of their recommendations as well.

“The 16th FC has significantly increased total local body grants. The per capita grants for urban local bodies have nearly doubled in real terms. It also recommended “a one-time urbanisation incentive grant addressing additional fiscal pressures arising from rapid urban expansion, to support the merger of peri-urban villages into adjoining ULBs with populations above one lakh”.

Unlike the 15th FC, the 16th FC has recommended 80 per cent grant as a basic grant and 20 per cent as a performance grant. It mandates spending 50% of the basic component towards ‘Sanitation and Solid Waste Management’ and/or ‘Water Management’ and leaving the remaining 50 per cent untied. We have recommended reducing excessive conditional and tied grants while increasing the untied funds,” Dinesh Mehta Professor Emeritus and Senior Advisor of the Center for Water and Sanitation told this paper.

Other suggestions for the consideration of the 16th FC were to make a recommendation for continuing grants linked to ULB’s mandatory reporting of annual service outcomes for basic services.

“The XVI-FC can consider the use of online portal-based systems for regular reporting on service level performance and municipal finance information by urban local governments. In addition, implementation of such state-wide systems across all ULBs by state governments will help provide a sound basis for the work of SCs in the future. It will also make it possible to link outlays to outcomes as per the State Finance Commission (SFC) Terms of References (ToRs). This will require an active role to be played by XVI-FC to bring continuity on the regular use of prevailing data portals,” Prof Meera Mehta said.

In one of the papers submitted by CWAS to the 16th Finance Commission titled ‘Strengthening monitoring service delivery: Continuing grants to ULBs linked to Service Level Benchmarks (SLBs)’ it has suggested establishing a SLB Cell at national and state level to track the performance of local government and to facilitate use of this information for improving service delivery.

“The SCs and state governments can use this information for allocation of funds and make more informed investments. It would also help state and national governments to track the outcome of significant investments being made in cities through the national flagship programme such as AMRUT, SBM, SMART Cities and various state level programmes. The XVI-FC has an opportunity to play a catalytic role to strengthen the third tier of government through recommendation of strengthening monitoring of urban services. It will also help sustain existing data portals and sustain momentum and opportunity already gained. This mandate and support from the XVI-FC, will help sustain and take forward the national and state-wide monitoring systems set up for SLBs and municipal finance in India,” it read.

Suggestions by CWAS; FC-16 recommendations

• Establishing an SLB Cell at the national and state levels to track the performance of local government
• FC-16 recommends “to enhance the credibility of the self-reported figures for SLBs by cities and establish a reliable database of service data by third-party assessment or audit to verify these self-reported figures”
• Increase overall share of transfers to Urban Local Governments (ULGs)
• FC-16 significantly increased total local body grants. The per capita grants for urban local bodies have nearly doubled in real terms. FC-16 also recommended “a one-time urbanisation incentive grant address additional fiscal pressures arising from rapid urban expansion, to support the merger of peri-urban villages into adjoining ULBs with populations above one lakh”
• Provide dedicated climate mitigation & adaptation support for cities
• “A Special Infrastructure Component is proposed for selected ULBs that directly addresses urban climate resilience risks, particularly flooding and wastewater stress. This is applicable for cities with populations between 10-40 lakh (2011 Census), limited to two cities per State. Cities can plan project Up to 5,000 crore (cities ≥15 lakh) and upto 3,500 crore (cities <15 lakh)”.
• Funding pattern: 60% Union + State/ULB share.