Jawaharlal Nehru National Urban Renewal Mission (JnNURM)

Jawaharlal Nehru National Urban Renewal Mission (JnNURM) was a massive city-modernisation scheme launched by theGovernment of India under Ministry of Urban Development. It envisaged a total investment of over $20 billion over seven years. Named after Jawaharlal Nehru, the first Prime Minister of India, the scheme was officially inaugurated by prime minister Manmohan Singh on 3 December 2005^[1] as a programme meant to improve the quality of life and infrastructure in the cities. It was launched in 2005 for a seven-year period (up to March 2012) to encourage cities to initiate steps for bringing phased improvements in their civic service levels. The government had extended the tenure of the mission for two years, i.e., from April 2012 to March 31, 2014.

JnNURM was a huge mission which relates primarily to development in the context of urban conglomerates focusing to the Indian cities. JnNURM aims at creating ‘economically productive, efficient, equitable and responsive Cities’ by a strategy of upgrading the social and economic infrastructure in cities, provision of Basic Services to Urban Poor (BSUP) and wide-ranging urban sector reforms to strengthen municipal governance in accordance with the 74th Constitutional Amendment Act, 1992.

JnNURM is a unique project dedicated to the redevelopment of India's cities, as India has traditionally primarily focused on the development of rural areas, especially its underdeveloped villages.

As per the 2011 census, India is home to about 1.21 billion people, making it one of the most densely populated areas of the world. However, it was also estimated that 68.9% of India's population lies in rural areas. Urban India is fast growing but sometimes in unplanned ways.

India is benchmarked to be the next superpower that held a steady growth rate during the recent recession. But unplanned growth has taken a toll on urban India, especially due to problems in the rural agricultural sector. The rising urban population due to transformation of rural areas into urban areas (not migration) and other factors have contributed to the decrease of living standards in urban areas.

Inadequate infrastructure, rising population rates as well as rising urban poverty are major causes to the degradation of the cities. Hence, the government of India has taken up the initiative to redevelop urban towns and cities by developing infrastructure, municipal reforms and providing aid to the state governments and the urban local bodies (ULBs). As per the information in the JnNURM mission brochure as launched by the authorities, cities and towns account for 30 percent of the country's population, contributing 50–55 percent of the gross domestic product (GDP). The degrading conditions in cities have forced the government to rethink their strategies to adhere to the socio-economic objectives of the country.Hence, this had been proposed.

Need for Development of the Urban Sector 1. Background (1) Need for Urban Sector Development: According to the 2001 census, India has a population of 1027 million with approximately 28per cent or 285 million people living in urban areas. As a result of the liberalization policies adopted by the Government of India is expected to increase the share of the urban population may increase to about 40 per cent of total population by the year 2021. It is estimated that by the year 2011, urban areas would contribute about 65 per cent of gross domestic product (GDP). However, this higher productivity is contingent upon the availability and quality of infrastructure services. Urban economic activities are dependent on infrastructure, such as power, telecom, roads, water supply and mass transportation, coupled with civic infrastructure, such as sanitation and solid waste management. (2) Investment Requirements in the Urban Sector: It is estimated that over a seven-year period, the Urban Local Bodies (ULBs)1 would require a total investments of Rs. 1,20,536 crores. This includes investment in basic infrastructure and services, that is, annual funding requirement of Rs. 17,219 crores. It is well recognised that in order to fructify these investments, a national level initiative is required that would bring together the State Governments and enable ULBs catalyse investment flows in the urban infrastructure sector. 2. Need for Reform Initiatives (1) Harnessing the Potential of Reforms in Urban Infrastructure: While several reform initiatives have being taken e.g. the 74th Constitutional Amendment Act and model municipal law, there is potential for further reform-oriented steps in order to meet the development objectives. Reform initiatives also need to be taken further and articulated by the State Governments in order to create an investor-friendly environment. URBAN SECTOR INVESTMENT REQUIREMENT (Rs. crore) Category Number of Investment Annual Funds Cities Requirement Requirement (over 7 years starting 2005-06) Cities with over 4 million population 7 57,143 8163.3 Cities with 1-4 million population 28 57,143 8613.3 Selected Cities with less than 1 million population 28 6,250 892.9 Total 63 1,20,536 17219.5 1 In 63 identified cities 3 (2) Need for National-Level Reform-Linked Investments: There is a need to integrate the reform initiatives and scale up the effort to catalyse investment in urban infrastructure across States in the country. There is a felt need to set up an initiative that will provide reformlinked assistance to State Governments and ULBs in the country. (3) Need for Sustainable Infrastructure Development: Another crucial aspect requiring immediate attention is that physical infrastructure assets created in urban areas have generally been languishing due to inadequate attention and/or improper O&M. The fiscal flows to the sector have laid emphasis only on the creation of physical assets. Not much effort has been made either to manage these assets efficiently or to achieve self-sustainability. It is therefore necessary that a link be established between asset creation and management, as both are important components for ensuring sustained service delivery. This is proposed to be secured through an agenda of reforms. (4) Need for Efficiency Enhancement: Concurrent with statutory reforms, such as the enactment of a model municipal law, reduction in stamp duty, repeal of the Urban Land (Ceiling and Regulation) Act, 1976 (ULCRA) etc, there is an urgent need to take measures to enhance efficiencies in urban service deliveries. 3. Rationale for the JNNURM (1) National Common Minimum Programme of the Government of India: The National Common Minimum Programme attaches the highest priority to the development and expansion of physical infrastructure. Accordingly, it is proposed to take up a comprehensive programme of urban renewal and expansion of social housing in towns and cities, paying attention to the needs of slum dwellers. (2) Commitment to Achieving the Millennium Development Goals: The Millennium Development Goals commit the international community, including India, to an expanded vision of development as a key to sustaining social and economic progress. As a part of its commitment to meet the Millennium Development Goals, the Government of India proposes to: (i) facilitate investments in the urban sector; and (ii) strengthen the existing policies in order to achieve these goals. (3) Need for a Mission-led Initiative: Since cities and towns in India constitute the second largest urban system in the world, and contribute over 50 per cent of the country’s GDP, they are central to economic growth. For the cities to realise their full potential and become effective engines of growth, it is necessary that focused attention be given to the improvement of infrastructure. 4 II. Jawaharlal Nehru National Urban Renewal Mission 1. The Mission Mission Statement: The aim is to encourage reforms and fast track planned development of identified cities. Focus is to be on efficiency in urban infrastructure and service delivery mechanisms, community participation, and accountability of ULBs/ Parastatal agencies towards citizens. 2. Objectives of the Mission (1) The objectives of the JNNURM are to ensure that the following are achieved in the urban sector;. (a) Focussed attention to integrated development of infrastructure services in cities covered under the Mission;. (b) Establishment of linkages between asset-creation and asset-management through a slew of reforms for long-term project sustainability;. (c) Ensuring adequate funds to meet the deficiencies in urban infrastructural services;. (d) Planned development of identified cities including peri-urban areas, outgrowths and urban corridors leading to dispersed urbanisation;. (e) Scale-up delivery of civic amenities and provision of utilities with emphasis on universal access to the urban poor;. (f ) Special focus on urban renewal programme for the old city areas to reduce congestion; and (g) Provision of basic services to the urban poor including security of tenure at affordable prices, improved housing, water supply and sanitation, and ensuring delivery of other existing universal services of the government for education, health and social security. 3. Scope of the Mission The Mission shall comprise two Sub- Missions, namely: (1) Sub-Mission for Urban Infrastructure and Governance: This will be administered by the Ministry of Urban Development through the Sub- Mission Directorate for Urban Infrastructure and Governance. The main thrust of the Sub-Mission will be on infrastructure projects relating to water supply and sanitation, sewerage, solid waste management, road network, urban transport and redevelopment of old city areas with a view to upgrading infrastructure therein, shifting industrial and commercial establishments to conforming areas, etc. 5 (2) Sub-Mission for Basic Services to the Urban Poor: This will be administered by the Ministry of Urban Employment and Poverty Alleviation through the Sub-Mission Directorate for Basic Services to the Urban Poor. The main thrust of the Sub-Mission will be on integrated development of slums through projects for providing shelter, basic services and other related civic amenities with a view to providing utilities to the urban poor. 4. Strategy of the Mission The objectives of the Mission shall be met through the adoption of the following strategy: (1) Preparing City Development Plan: Every city will be expected to formulate a City Development Plan (CDP) indicating policies, programmes and strategies, and financing plans. (2) Preparing Projects: The CDP would facilitate identification of projects. The Urban Local Bodies (ULBs) / parastatal agencies will be required to prepare Detailed Project Reports (DPRs) for undertaking projects in the identified spheres. It is essential that projects are planned in a manner that optimises the life-cycle cost of projects. The life-cycle cost of a project would cover the capital outlays and the attendant O&M costs to ensure that assets are in good working condition. A revolving fund would be created to meet the O&M requirements of assets created, over the planning horizon. In order to seek JNNURM assistance, projects would need to be developed in a manner that would ensure and demonstrate optimisation of the life-cycle costs over the planning horizon of the project. (3) Release and Leveraging of Funds: It is expected that the JNNURM assistance would serve to catalyse the flow of investment into the urban infrastructure sector across the country. Funds from the Central and State Government will flow directly to the nodal agency designated by the State, as grants-in-aid. The funds for identified projects across cities would be disbursed to the ULB/Parastatal agency through the designated State Level Nodal Agency (SLNA) as soft loan or grant-cum-loan or grant. The SLNA / ULBs in turn would leverage additional resources from other sources. (4) Incorporating Private Sector Efficiencies: In order to optimise the life-cycle costs over the planning horizon, private sector efficiencies can be inducted in development, management, implementation and financing of projects, through Public Private Partnership (PPP) arrangements. 5. Duration of the Mission The duration of the Mission would be seven years beginning from the year 2005-06. Evaluation of the experience of implementation of the Mission would be undertaken before the commencement of Eleventh Five Year Plan and if necessary, the program calibrated suitably. 6. Expected Outcomes of the JNNURM On completion of the Mission period, it is expected that ULBs and parastatal agencies will have achieved the following: 6 (1) Modern and transparent budgeting, accounting, financial management systems, designed and adopted for all urban service and governance functions (2) City-wide framework for planning and governance will be established and become operational (3) All urban residents will be able to obtain access to a basic level of urban services (4) Financially self-sustaining agencies for urban governance and service delivery will be established, through reforms to major revenue instruments (5) Local services and governance will be conducted in a manner that is transparent and accountable to citizens (6) E-governance applications will be introduced in core functions of ULBs/Parastatal resulting in reduced cost and time of service delivery processes. 7 III. Assistance under JNNURM 1. Financial Assistance under JNNURM The Government of India has proposed substantial assistance through the JNNURM over the seven-year period. During this period, funds shall be provided for proposals that would meet the Mission’s requirements2 . Under JNNURM financial assistance will be available to the ULBs and parastatal agencies which could deploy these funds for implementing the projects themselves or through the special purpose vehicles (SPVs) that may be expected to be set up. Assistance under JNNURM is additional central assistance, which would be provided as grant (100 per cent central grant) to the implementing agencies. Further, assistance from JNNURM is expected to facilitate further investment in the urban sector. To this end, the implementing agencies are expected to leverage the sanctioned funds under JNNURM to attract greater private sector investments through PPP that enables sharing of risks between the private and public sector. 2. Areas of Assistance under JNNURM (1) Assistance for Capacity Building, City Development Plan (CDP), Detailed Project Reports (DPRs), Community Participation, Information, Education and Communication (IEC) The JNNURM will provide assistance for the above-stated components with a provision of 5 per cent of the total central assistance or the actual requirement, which ever is less. In addition, not more than 5 percent of the Central grant or the actual requirement, whichever is less may be used for Administrative and Other Expenses (A&OE) by the States For capacity building, ULBs and parastatal agencies could engage consultants, in consultation with the SLNA, and seek reimbursement from the Ministry of Urban Development (MoUD) of the Mnistry of Urban Employment and Poverty Alleviation (MoUEPA). (2) Investment Support Component Investment support will be provided to implementing agencies on a project-specific basis for eligible sectors and projects proposed to be undertaken in eligible cities subject to approval of the Central Sanctioning and Monitoring Committee (CSMC) of MoUD/ MoUEPA. As part of the process for seeking investment support, each ULB seeking assistance from the JNNURM would be required to prepare a CDP that shall inter alia include strategy to 2 Refer Section IV: Eligible Cities, Sectors and Projects 8 implement reforms, city-level improvements and an investment plan to address the infrastructure needs in a sustainable manner. Assistance under investment support can be deployed in the following forms: (a) Enhancing Resource Availability: The JNNURM assistance can be used to leverage additional resources available with the ULBs in addition to their existing resources and transfers from the State. These resources could be utilised for capital investment and O&M investments in a project. (b) Enhancing Commercial Viability of Projects: In respect of projects, which are not commercially viable on a stand-alone basis, assistance under the JNNURM may be sought for enhancing project viability. This assistance could be in the nature of viability gap support to projects. (c) Ensuring Bankability of Projects: Cash flows of infrastructure projects having long gestation periods are susceptible to variations in cash flows, rendering a project non-bankable. To enhance predictability of underlying cash-flows, credit enhancement mechanisms such as establishing liquidity support mechanisms, up-front debt-service reserve facility, deep discount bonds, contingent liability support and equity support are required in order to make the projects bankable. The JNNURM assistance could therefore be used for funding such support mechanisms.