Ulb Case Study

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The financial resources flowing into ULBs typically consist of its own tax and non-tax revenues, shared revenues, grants and loans from the state government, and market borrowings. While the types of taxes collected by ULBs are not specified by the 74th CAA, their revenue base is decided by the state government. Generally, Property Tax is the single most important source of revenue for ULBs. ‘User-charges’ significantly contribute towards non-tax revenues. As a part of the urban reform agenda, a portion of funding from GoI has been made available to cities through schemes like Viability Gap Funding (VGF). Since economic liberalisation, multilateral agencies (such as World Bank, Asian Development Bank) have been playing an important role in…show more content…
They are empowered to raise municipal bonds under restrictive umbrella of state control. They fail to generate enough surpluses to establish their loan repayment capacity and hence, do not get convincing credit rating. Ahmadabad Municipal Corporation (AMC) was the first ULB to raise money from capital market through municipal bonds without government guarantee in 1993. Since then, only 8 cities have availed of this source of resource generation. Of them, except AMC, all have gone for private placements with less risk factor. Even large metropolises like Delhi, Mumbai and Chennai have not accessed capital market, though a few of the metro cities have very recently obtained favourable credit rating. The flagship urban programme of the previous government, the JNNURM also took initiative to promote municipal bonds through credit rating on a regular basis for all its 65 mission cities. Of them, only 36 cities were found to be in the investment grade. Very few ULBs have planned for market borrowing as a source of finance. Municipal bonds can be raised for commercially viable projects only. ULBs under state government restrictions, have limited options to make projects viable with levying proper user charges.

Government Initiatives for Increasing Competitiveness

Central government has, from time to time, taken several initiatives for improving quality of life in urban areas. From Third Five Year Plan onwards, major urban development programmes have been financed with 50
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