India's daunting urban challenge

India's urban population is projected to go up by around 100 million in the next 12 years; that means urban space and facilities equivalent to at least seven Mumbais will have to be created.

The challenge is making governments at the Centre and in the states start focusing on the needs of towns and cities, in part because more voters live in them than before.

In the latest Budget, for instance, the finance minister has introduced a low-cost housing programme (named inevitably after Rajiv Gandhi) that is grandly intended to abolish slums in five years.

The likelihood of this happening can be gauged from the fate of that flagship programme, the Jawaharlal Nehru National Urban Renewal Mission, which has used only a third of the funds made available during four out of its seven years.

The states' inability to spend the money given to them is tied closely to the way they run their affairs. The Mission was carefully designed to offer resources to states to build their urban infrastructure while reforming the way cities are run (like abolishing the urban land ceiling, and ending unrealistic rent control laws that distort the housing market).

The scheme has worked in patches, so that there is now a big gap in the way different states have progressed along the reform route. What is disappointing, in some respects, is that even those who have failed to reform keep securing central funding. This may be understandable because the losers cannot be left behind, but it does undermine the premises of the Mission.

In the two metros, Mumbai and Delhi, creating a market for land by abolishing the urban land ceiling has been stymied. Maharashtra has repealed the law in question but, since most of the land available had already been notified and resulted in litigation, the market will not get going unless the litigation is over.

In Delhi, the land monopoly of the malfunctioning and under-performing Delhi Development Authority continues. In fact, Delhi is a particularly bad example of a state that has continued to get money even without carrying out a whole menu of reforms. Reform of this state of affairs is critical, because it is widely held that India's leading cities are such dynamic growth engines that if the local governments set their houses in order, they will be able to garner sufficient resources for their own re-development, on commercial terms.

Yet, virtually no state has transferred the urban planning function to local bodies. While the administrative structure of Delhi is exceptional, the blame for town halls remaining powerless rests with state governments which are reluctant to devolve power.

Just a few states have adopted the 'mayor-in-council' structure of city government, which is considered effective. The urban challenge cannot be faced without initiating such change.