User charge is the new infra reform

[TIMES NEWS NETWORK Wednesday, February 28, 2007 03:10:01 am]

Use it, pay for it: states have no option but to levy user charges to
mobilise large capital investment needed for infrastructure development.
According to the Economic Survey, this would increase funding for
projects without burdening the fiscal deficit. Urban local bodies lack
funds to support urban infrastructure projects though they have been
allowed to raise capital through municipal bonds.

User charges are levied in the US and Europe on all basic services
delivered to the citizens. Water, electricity, waste disposal and other
basic amenities provided by the government to its citizens are taxed.

“In terms of financing patterns, the foundation of urban infrastructure
has to be user charges. It is possible for urban institutions to access
funds from the capital markets to finance a large portion of capital
expenditure on urban infrastructure, which can be serviced by user
charges in the future,” says the survey.

It is said that the key to transform economy lies in levying user
charges. “By making a case for levy of user charges, the survey has
given an indication of a new reform movement. Today, water payment in
India is miserable. The rich don’t pay for water and many remote rural
areas lack water services. The way to extract the best out of
public-private -participation model is through levy of user charges,”
FICCI president Habil Khorakiwala told ET.

The survey has also stressed increased participation from the private
sector in municipal projects like rain water harvesting and garbage
management under the Jawaharlal Nehru National Urban Renewal Mission. A
sum of Rs 50,000 crore has been earmarked as central assistance for
JNNURM for 7 years beginning from 2005-06. The mission will fund
programmes like urban renewal, water supply, sanitation and urban
transport.