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US$60 Million World Bank Credit to Help Build Capacity of Urban Local Bodies

July 21, 2011

Project will Build Capacity of Select Urban Local Bodies for Better Urban Management and Planning

Washington, July 21, 2011 - The World Bank today approved a US$60 million credit for capacity building of select Urban Local Bodies (ULBs), which is expected to improve their skills for better urban management and reduce urban poverty.

The Project is part of Government of India’s (GoIs) larger vision for urban development as envisaged under programs like the Jawaharlal Nehru National Urban Renewal Mission (JnNURM) and the Rajiv Awas Yojna (RAY), the GoI’s flagship urban development programs.

Capacity Building for Urban Development Project, approved today by the World Bank Board, will help states and ULBs (at least 20 in the initial phase) improve systems for financial management; urban planning; service delivery and better governance. It will also build the capacity of states and ULBs to recognize and incorporate innovative programs and best practices; diagnose urban poverty; and prepare poverty alleviation strategies in ULBs. This Project will be implemented through both the national urban ministries, viz. Ministry of Urban Development (MoUD) and Ministry of Housing and Urban Poverty Alleviation.

Today, India has an urban population of about 300 million which is expected to more than double by 2030 to nearly 600 million. The Government of India, state and city governments have introduced and are implementing a number of policies, programs and schemes to provide adequate public services and infrastructure, create opportunities for economic development and ensure that urbanization is environmentally sustainable. Some of the areas that require focus from ULBs are water supply and sanitation, urban transportation, environment, affordable housing and the development of the capacity of ULBs to function successfully in a decentralized environment.

Building capacity of Urban Local Bodies (ULBs)

Today Indian ULBs are attracting millions of people and are centers of economic growth. Yet they are battling several challenges to ensure maximum economic benefits from such urbanization. In many cases ULBs do not have the financial and technical capacity to bring about significant improvements in urban service delivery. This Project will work with the ULBs to improve their budgeting and project planning; provide better management of expenditure; accrual accounting; and pro-poor planning approaches amongst several other initiatives.

Given the rapid urbanization, Indian ULBs need large investments on infrastructure for service delivery. However, few Indian ULBs are creditworthy to access capital markets for funds. Most ULBs rely on intergovernmental transfers, and borrowings from government owned financial institutions.

“One of India's key challenge and one that is critical for India’s economic growth are to meet the needs of a fast growing urban population. Well functioning ULBs is a first step to achieving this,” said Mr Roberto Zagha, World Bank Country Director for India. “This Project will help link worldwide experiences in the area of urban development directly with the Government’s flagship programs for urban development.”

Urban challenges

While the 74th Constitutional Amendment Act of 1993 gives urban local bodies an independent status within the Constitution, they face several challenges. “While ULBs generally have a good understanding of the need to introduce reforms, many would benefit from capacity enhancement to prepare a credible step by step implementation plan. Many of them need a comprehensive package of assistance covering both urban management and poverty reduction. Others, particularly in large urban areas, need more targeted assistance, e.g. in revenue management, capital budgeting or tariff design,” said Songsu Choi, Project Team Leader and Lead Urban Economist, World Bank.

Through this Project, the GOI will set up a Challenge Fund. This Fund will recognize innovative practices by ULBs on urban poverty alleviation. It will also constitute a network of practitioners. The network will include government officials from select ULBs, academics and other actors active in the area of urban poverty alleviation both nationally and internationally. It will also serve as a platform for peer-to-peer learning. 

The credit is from the International Development Association (IDA) – the World Bank’s concessionary lending arm – the Credit is on IDA terms with a maturity of 25 years, including a 5 year grace period. 

Media Contacts
In Washington
Benjamin S. Crow
Tel : (202) 473 1729
In New Delhi
Nandita Roy
Tel : 91-11-24617241
Natalia Cieslik Natalia Cieslik
Tel : (202) 458-9369