July 09, 2023

Neoliberal Guidelines to Burden Urban People

R Arun Kumar

THE union government issued two sets of guidelines on June 19 to all state governments, asking them to implement urban reforms. In order to ensure the implementation of these reforms, a carrot of monetary incentive is dangled before them. This initiative reflects the BJP-led central government's push towards the aggressive implementation of neoliberal reforms.

Before delving into the current guidelines, it is important to recap the previous directives issued by the central government during the COVID lockdown. In what were supposed to be financial packages intended to pull out our economy from the downturn caused by the pandemic, the government had linked funding to state governments with the implementation of reforms in the urban sector.

The fifth tranche of the economic stimulus package directed state governments to implement revenue reforms in Urban Local Bodies (ULBs). This involved setting property tax floor rates based on circle property rates and establishing water and sewerage charges to at least recover the operation and maintenance (O&M) costs. In simpler terms, it meant a directive to raise property tax and user charges in order to access central government funding. These reforms, along with the privatisation of distribution and discoms in the electricity sector, the elimination of cross-subsidies, and the subsequent increase in tariffs, have placed additional burdens on urban residents.

Continuing with this pattern, the government has recently introduced a new set of guidelines. The states have been categorised into three groups based on their level of urbanisation. Each state is required to submit a plan proposal outlining the implementation of reforms – where would they be implemented, how would they be implemented, the baseline or starting position from where they intend to implement and the intended change visualised after the implementation of reforms. It is on the basis of this proposal, followed by action and results that the central government promises the states access to its Rs 15,000 crores funding.

In order to secure these funds, the government is fostering competition among states and cities. The practice of pitting them against one another and forcing them to vie for the limited resources offered by the central government originated with the SMART City project, if not earlier, and has been continued in all subsequent schemes and projects.

In practice, this approach leads to cities, elected local bodies, or state governments engaging in a competition to raise taxes, user charges, and employ coercive measures to collect them. The ones who succeed in burdening the people the most through these means will be rewarded with funds. As a result of the growing centralisation of resources implemented by the current BJP government, state governments and urban local bodies are experiencing a shortage of funds and resources. Consequently, they are forced to explore any available avenue to enhance their revenues. Thus, what in fact appears to be a carrot, is a stick that is wielded by the central government.

Another aspect of these guidelines is its attempts towards centralising administration. Urban local bodies are generally regarded as the third tier of government, positioned just below the central and state governments. They are the most accessible government structure, responsible for addressing the immediate daily needs of the people, such as water, sanitation, land, traffic, pollution, and more. However, due to financial reforms and changes in taxation structures, urban local bodies lack the necessary funds to carry out their mandated tasks. They are compelled to rely on grants from state governments. However, with the implementation of the Goods and Services Tax (GST) and the increasing appropriation of tax revenues by the central government, even state governments are experiencing financial constraints. The funds they are expected to transfer to the urban local bodies have gradually diminished. Consequently, both urban local bodies and state governments are now forced to depend either on the central government or external sources for financial resources.

The central government is using this situation to its advantage by utilising its financial power to impose reforms. As a result, the diversity and unique characteristics of each urban centre or city/town, which previously served as the foundation for developmental activities, have been lost. A standardised, uniform model of development is being promoted, replacing heterogeneity with homogeneity, as the central government dictates the design of cities, land use, slum development, housing construction, road infrastructure, water and sanitation practices, transportation modes, and so on. This overt centralisation aligns with the objective of facilitating the smooth implementation of a neoliberal agenda.

The current guidelines issued by the central government are introduced against this backdrop. One of the key reform proposals is to modify the overall land usage policies at the city/town level. To achieve this, the government recommends the recruitment of town planners, and specific guidelines have been provided in this regard. By directing who should be recruited as a town planner, the government implies that contract-based appointments can be made and emphasizes the utilisation of "private expertise." This implicitly suggests the recruitment of individuals who are associated with private developers and builders as planners.

There is no doubt regarding whose interests these planners would serve. Consequently, a comprehensive shift in the approach to city design is proposed, primarily aimed at facilitating private builders and developers. Instead of private builders adhering to the overarching regulations set by urban local bodies which have a holistic perspective on urban planning, the development of a city will now be shaped according to the preferences of private builders. This transition essentially strips away the collective rights of the people over the city, placing them in the hands of private developers.

The central government strongly believes that urban planning or development should be left to the private players. A series of guidelines have been issued subsequent to the recruitment of planners, asking the urban local bodies and state governments to modify township policies, land usage policies, building bye-laws, and more, with the aim of liberating land for monetisation. This aligns with the overarching policy of the National Monetisation Pipeline and Land Monetisation Policy introduced by the central government. The primary objective is to free as much land as possible and make it available for development by…of course, private players.

The government aims to consolidate all land resources and make them available to private developers. This is done under the pretext of urban expansion, in order to cater to the projected requirements of 50 percent of the urban population that is anticipated to be reached by 2050.

In the current era of neoliberalism, land as an asset holds immense value, and economic activities centered around land are seen as lucrative avenues to build a fortune. Real estate, speculation, construction, and renting spaces are all regarded as main sources of income, particularly during these uncertain times. The fundamental need for shelter will always exist as long as human beings inhabit the Earth, and this necessity is exploited by "land sharks" and the central government is encouraging it through its reform agenda.

In relation to the development of slums, the government puts forth some intriguing suggestions. Under the guise of promoting in-situ development (development within the same area where a slum exists), the government proposes projects that incorporate the concept of vertical growth. This entails constructing multi-story buildings for slum-dwellers, thereby clearing the current horizontal spread of slums and freeing up vast tracts of land. This land would then be offered to private developers, who would be entrusted with constructing multi-story houses for the displaced slum-dwellers. However, as the private developers may claim to lack sufficient capital to build houses for the slum-dwellers, they would be permitted to monetise the allocated land. The resources generated from this monetisation would then be used to construct houses for the slum-dwellers. What would happen if the private developers claim they could not raise enough resources to construct houses for the evicted slum-dwellers, is an easy guess. It is private profits first, only then come the interests of the poor.

The guidelines dictate a modification in the building bye-laws to facilitate the monetisation of land transferred to private builders. Elements such as setback area, ground coverage, permissible height, and floor space index (FSI) will be altered to align with their interests. It is worth recalling another scheme introduced by the central government during the COVID period, the Affordable Rental Housing Complexes (ARHC), where private developers were similarly provided with incentives and favourable treatment.

These Affordable Rental Housing Complexes (ARHCs) are to be developed by private players who have been granted numerous concessions and exemptions. These include exemptions from Income Tax and GST on profits derived from operating ARHCs. Additionally, they are eligible for project finance/loans at lower interest rates through a concessional window under the Affordable Housing Fund (AHF) provided by Housing Finance Companies (HFCs), as well as Priority Sector Lending (PSL) by Commercial Banks. Furthermore, if required, they may receive permission for changes in land use with an additional floor area ratio (FAR)/floor space index (FSI) of up to 50 percent, free-of-cost statutory approval for ARHC projects through a single window system within 30 days, trunk infrastructure up to the project site, and municipal charges at par with residential properties. A similar array of benefits will be extended to private developers who are enticed by the current set of guidelines.

While private developers enjoy various exemptions and incentives, the middle-class and small house owners face burdens in the form of increased user charges, water charges, and property taxes. The current set of guidelines continues this trend by introducing substantial incentives for urban local bodies and state governments that raise property tax rates and ensure effective collection. Similar incentives are offered to increase water tax and maximum water users are brought under the tax net.

Interestingly, the funds collected through the increased user charges are not intended for the improvement of services. Instead, the government directs urban local bodies to "ring-fence" this money by depositing it into an escrow account. The primary objective is to utilise these funds to repay the existing debts of the urban local bodies and subsequently enhance their credit rating. By achieving a higher credit rating or creditworthiness, the urban local bodies become eligible to issue municipal bonds and secure loans from external financial institutions.

Several international financial institutions are increasingly interested in directly financing local self-government bodies, perceiving them as easy prey to manipulate. By exerting micro-level control over the implementation of neoliberal reforms, these institutions aim to break the collective and united resistance that such reform programmes are giving rise to in various countries. So, this is another method of the ‘divide and rule’ policy. While we all together fought against the British and their ‘divide and rule’, now a Party that remained a mere onlooker during the freedom struggle, is once again implementing the very same policy. Divide and rule – both socially, where people are divided in the name of religion and economically – in the name of neoliberal reforms.

Realising the game plan of the BJP government, it is crucial for us to thoroughly study how and where these neoliberal guidelines are sought to be implemented in our respective cities/towns and states.  By exposing their implications through our concrete study, we can  mobilise broad sections of the affected people. Challenging times, demand creative means to mobilise and organise struggles. That is the direction in which we need to march…to put a halt to these disastrous reform guidelines.