Making municipal development work : the Calcutta experience

DISCUSSION PAPER Report No, UDD-48 MAKING MUNICIPAL DEVELOPMENT WORK: THE CALCUTTA EXPERIENCE by Calcutta Metropolitan Development Authority and Third Urban Project World Bank Mission March 1984 Water Supply and Urban Development Department Operations Policy Staff The World Bank The views presented herein are those of' the author(s), and they should not be interpreted as reflecting those of the World Bank;  This report is an attempt to share the experience of Calcutta's Municipal Development Programme (MDP) with other urban areas. The MDP itself is one component, albeit an important one, in a larger integrated programme of urban improvements, the third Calcutta Urban Development Programme, CUDP III. The ideas and innovations that lie behind the Calcutta experience have evolved over a long period of time and. involved people too numerous to mention individually. The MDP itself has been set in place by the Calcutta Metropolitan Development Authority (CMDA) and the World Bank Mission during the preparation of CUDP III, and. the report has been written by Kalyan Roy of CMDA and Christopher Turner of the Bank Mission.  ABSTRACT Cities in the developing countries are increasingly faced with the pressure of improving existing urban servic.e delivery performance but with inadequate resources to provide and sustain the necessary assets. This paper describes the response to such problems being adopted in the Calcutta Metropolitan Area of India with the hope that this experience will be of benefit to other urban areas. The case of Calcutta is particularly appropriate as for many years it has suiffered from economic decline, minimal investment in infrastructure and civic services, chronic health problems and rapid population growth. The success that has been achieved to date in Calcutta and which is described in the following pages, owes much to the State Government's commitment to the devolution of major decision making rqsponsibilities to a local level and the emergence of an informal but highly effective metropolitan management team made up of key people in different agencies. This team is effectively co-ordinating and steering the overall development programme.  TABLE OF CONTENTS 1.0 Introduction ........................................... 1 2.0 Historical Sketch of Urbanization and Urban Development in India, West Bengal and the Calcutta Metropolitan Area .............................. 2 2.1 Urbanization in India and West Bengal ................. 2.2 Urban Development in India and West Bengal..........2 2.3 The Evolution of the Calcutta Metropolitan Area (CMA) ............................ 4 2.4 Early Urban Development Planning Initiatives in the CMA...............................S 2.5 Calcutta Metropolitan Development Authority (CMDA) and the Urban Development Process--CUDP I and II 6 3.0 Origins of the Municipal Development Programme...........8 3.1 The Essential Preconditions ...........................8 3.2 Impact Evaluation of CUDP I and II ................... 10 4.0 Formulation of the Municipal Development Programme. 114 4.1 Background ......................................... 14 4.2 Strengthening the Institutional Capacity of Local Government ................................ 14 4.3 Strengthening the Financial Capacity of Local Government ................................ 15 4.4 Design and Appraisal of the Municipal Development Programme ...................... 22 4.5 Designing and Institutionalising the Appraisal Process .............................. 24 5.0 Implementation of the MDP ............................... 31 5.1 Implementation Functions and Processes ............... 31 5.2 Implementation Progress .............................. 33 5.3 Monitoring and Evaluation of MDP ................... ..34  6.0 Lessons for Other Cities ............................ 41 6.1 Defining the Problems and Response*................... 41 6.2 Generation of Sustainable Investment Programmes .... 42 6.3 Evaluation and Appraisal ........................... ..43 6.4 Implementation ........................ 44 6.5 Monitoring of Programme Performance .................. 44 6.6 Training Initiatives ............................... 45 6.7 Some Costs and Potential Risks of the MDP ............ 45 Annexes 1 Summary Appraisal Format for Municipal Programmes. ....... 47 2 MDP Sectoral Investment Allocation by Municipality ........ 56 3 Additional Staff Requirements for MDP Implementation .... 64 4 Guidelines for Preparation of Estimates ................... 65 5 Standard Forms for Submission of istimate ................. 68 6 Bibliography ............................................ . 76  1.0 INTRODUCTION Many cities in developing countries are faced with the dual problems of meeting acute deficiences in infrastructure and service delivery and at the same time of financing and sustaining the necessary investments. In some instances previous investment programmes have exacerbated the situation by creating assets that are overly sophisticated, fail to meet their service delivery targets, are unrelated to the existing local level deficiencies and are incapable of being sustained. These factors poinrt to the need for a process that allows the views of local representatives to be incorporated in the design of new investment programmes while also linking the allocation of investment funds more closely to the sustainability of the assets created. Such a process is currently being implemented in the Calcutta Metropolitan Area of West Bengal, India. Termed the Municipal Development Programme (MDP), it represents one legisla-tive, institutional, financial and technical response to the array of problems outlined above. The approach has evolved over a considerable period and from two previous major urban investment programmes, CUDP I and II. The Municipal Development Programme forms part of a comprehensive metropolitan-wide urban improvement programme (CUDP III) and represents roughly 36% of the new CUDP III programme investment. Of equal importance to the MDP process in its application to other cities are the lessons learnt from the impacts of previous urban investments which have had an important bearing on the way in which the MDP has evolved. Both are the subject of this report which is structured accordingly. Section 2.0 presents a brief sketch of the Indian urban context and early planning and development initiatives in the Calcutta Metropolitan Area. The origins of the Municipal Development Programme are set out in Section 3.0 in terms of the impacts of previous investments and the comprehensive local government policy reforms and initiatives that have been enacted by the West Bengal State Government. Section 4.0 describes how the MDP has been formulated from the strengthening of institutional and financial capacity of local government, the establishment of the size of programme, and sector priorities, to the design and institutionalisation of the appraisal process. The implementation functions and processes are set out in Section 5.0 which also describes the monitoring and evaluation to be undertaken during the implementation and operation of the programme. Section 6.0 draws out the most important lessons arising from the Calcutta experience for the mun!.-ipal development programmes of other cities.  2.0 HISTORICAL SKETCH OF URBANISATION AND URBAN DEVELOPMENT IN WI)DIA, WEST BENGAL AND THE CALCUTTA METROPOLITAN AREA 2.1 Urbanisation in India and West Bengal India's urban growth has increased over the past 30 years from 2.3% per year in the 1950's to 3.9% per year in the 1970's, and is currently adding more than 7 million people to India's towns and cities annually. Were the present trends to continue, India's total urban population would reach roughly 300 million by the end of the century and 43 cities would have populations in excess of 1 million. After Kerela, West Bengal is the most densely populated State in India and by 1981 its population had reached 54.5 million of which 13 million (24%) lived in urban settlements including Calcutta, the State capital. The Calcutta Metropolitan Area (CMA), formerly the Calcutta Metropolitan District, is the slowest growing metropolitan area in India. However, it still continues to increase at a rate of more than 200,000 persons annually despite the infrastructure, civic service and employment deficiencies. 2.2 Urban Development in India and West Bengal The Constitution of India provides for a combination of federal and unitary forms of Government. This determines the furnctional domains of the Central Government (GOI) and State Governments, and areas common to both. The Constitution also provides for a mixed economic system. In an attempt to direct the process of rural and urban, private and public sector economic development, a five-year national planning process has been adopted. A National Planning Commission was set up in 1950 at the Central Government level to formulate 5 year plans for the Uinion, and to integrate State and Central Plans. Urban development planning only became an explicit part of the 5 year planning process with the formulation of the Fourth Plan in 1969-70. The Third Plan partially recognised the need for town and country planning as part of the national housing programme. It provided for the preparation of master plans for a number of urban centres in the Country. The Fourth Plan acknowledged the severity of the urbanisation problem and stressed the need for an increase in the absolute magnitude of expenditure on urban development which had hitherto been very small. The Fifth Plan represented the first attempt to outline the objectives of, and strategy for the urban development of the Union. The increased priority given to urban development has been continued under the Sixth Plan (1980-81 to 1984-85) - through a much larger outlay and more clearly stated urban development objectives and strategies. This growing recognition of the problems of urban development is reflected in the increasing per-capita Plan outlay given tr the urban sector over recent 5 year plans (Table 1),  -3- TABLE 1: PER CAPITA PLAN OUTLAY IN URBAN SECTOR Per-capita urban sector outlay (Rs/ur,an Five Year Plan 2opoulation) Third Plan 2.40 Fourth P.Lan 6.90 Fifth Plan 38.80 Sixth Plan 61.70 As in the Union as a whole, the process of urbanisation in West Bengal has been faster than the planning and investment response. Urban development in West Bengal first received significant attention during the Fourth Plan in 1969-70, when provision was made for a substantial urban development outlay in tChe State Plan budget. This emphasis on the urban sector was maintained in the subsequent Fifth and Sixth Plan periods. The State Plan outlay on urban development over the Fourth, Fifth and Sixth Plan periods has been Rs. 39.20 (US$ 4.30); Rs. 99.80 (US$ 10.98) and Rs. 196.80 (US$ 21.65) respectively, in terms of per capita urban development outlay/urban population. In the Fourth and Fifth Plan periods, the bulk of State Plan outlay on urban development was earmarked for the Calcutta Metropolitan Area relative to other urban centres in the State. As Table 2 indicates, this spatial disparitv was reduced during the Sixth Plan period as a result of a shift in State Government Policy to a more balanced spatial urban growth strategy. TABLE 2: PER CAPITA URBAN DEVELOPMENT OUTLAY IN CMA AND REST OF STATE Per Capita Outlay-2 (Rs)_ Area/Plan Period Fourth Plan Fifth Plan Sixth Plan CMA 49.09 93.40 183.70 Urban areas in rest of State 2.47 11.91 92.84 /1 All prices given in the report are for April 1983, and are consistent with those used at Appraisal /2 Per capita urban development outlay with respect to urban population only  2.3 The 3volution of the Calcutta Metropolitan Area (CMA) The City of Calcutta was founded in 1690. Because o9 its strategic advantages and harbour facilities the City was developed by the British merchants as their major trading centre in East Asia and became the capital of India. industrial and commercial activities were attracted to and around the City on a large scale and Calcutta remained the capital of India until 1912, when the seat of Government was transferred to Delhi. In the period since Independence Calcutta has remained the political capital of the State of West Bengal and the major economic centre for the whole of eastern India. The CMA is the largest metropolitan area in India with a 1981 Census population of 10.2 million out of a state-wide urban population of 14.43 million. It stretches over an area of 1,350 sq. km. made up of 2 municipal corporations (Calcutta and Howrah), 37 municipalities (out of a total of 110 in the state), 70 non-municipal urban towns (NMU's) and about 450 rural mouzas or vil'lages. The Calcutta and Howrah Municipal Corporation areas account for about 3.3 and 1.2 million of the CMA's total population respectively. The CMA houses the capital of the State, major administrative and banking functions, the second largest port in India and a large number of industries and trades in both the formal and informal sectors. The area's economy is dominated by manufacturing and service activities and in the manufacturing sector engineering has replaced jute as the dominant industry. In recent years the overall economic performance has been poor and industrial production continues to decline. At the time of Independence and Partition (1947), the CMA was subjected to a major inflow of refugees from East Pakistan (now Bangladesh), with which West Bengal shares a common border. Since that time there has been additional immigration into the CMIA from Bangladesh and neighbouring States. Despite the CMA's deficiencies, these influxes together with the availability of economic and social opportunities, physical infrastructure and civic services in Calcutta resulted in an excessive concentration of population and economic activities in the CMA relative to other urban centres in the State. The attendent problems of such highly concentrated urban growth have been manifested for many years now in terms of some of the highest population densities in the world, continuing in-migration, significant inequalities in income distribution, large scale unemployment, serious environmental pollution, chronic health problems, poorly controlled and inefficient land uses, inadequate civic services and an acute shortage of shelter. of particular concern is the staggering growth of the slums (bustees), which currently account for about one-third of the total CMA population or over 3 million 'people.  -5- During the 1950' s the CM? and particularly the metrocore a:,ea of Calcutta and Howrah experienced rapid urban population growth but almost no improvement to civic services or urban infrastructure, resulting in chronic public health problems. Epidemics such as cholera were wideslpread and recurrent, especially amongst the bustee dwellers. Being one of the largest and poorest metropolitan areas in the Third World, Calcutta's problems attracted the attention of international organisations such as the World Health Organisation (WHO). At this time local government was cons citutionally, orgarnisationally and financially ill-equipped to respond to these mounting urban problems. By the late 1950's the situation had deteriorated to such a extent that it required major Governmental intervention. 2.4 Early Urban Development Planning Initiatives in the CMA The State Government of West Bengal has played a pic..eering role in the Union's response to the urbanisation problems, having initiated the first concerted urban planning exercise through the creation of the Calcutta Metropolitan Planning Organisation (CMPO) in 1960. Assisted by support from the Ford Foundation, the CMPO prepared a document entitled the "Basic Development Plan (BDP) 1966-86" for the CMA. The main objectives of this document were as follows: i) to promote faster growth of the Metropolitan economy in a manner consistent with the economic development of the State and Eastern Region of India ii) to create socially acceptable and financially sustainable urban environment iii) to create the mechanism by which to sustain development planning and effective plan implementation iv) to strengthen local self-Government and citizen participation in the development of the CMA, and more effective mobilisation of local fiscal resources. It was a comprehensive and multi-disciplinary exercise which examined the prevailing constraints and problems and recommended an integrated programme of financial, physical, socio-economic and institutional responses. Both short and long-term action plans were identified with the former emphasising schemes which would help arrest the further deterioration of urban conditions in the CMA. The BDP was supported by two master plans, the 'Comprehensive Transportation Plan' and the 'Master Plan for Water Supply, Sewerage and Drainage'. The overall exercise assisted the State Government to delineate the Calcutta Metropolitan Planning Area as a single planning region and provided a basis for the enactment of the Calcutta Metropolitan Planning Area (then District), (Use and Development of Land) Control Act of 1965.  The initiatives which were to have been taken up during the Fourth Five Year Plan coincided with the deepening economic crisis and industrial recession of the mid 1960's and remained largely unimplemented. During the 1960's the CMA's physical, social and economic conditions deteriorated still further. The shelter problem became more acute and only about 100 million gallons per day of treaced water reached consumers in the cities of Calcutta and Howrah, and this on a sporadic basis. Sanitation was in the main dependent upon service privies and upon the inadequate and irregular collection of refuse. Large areas of land which had become high density unplanned settlements for the urban poor were subject to extensive waterlogging in the monsoon due to the poor drainage sys temr. 2.5 Calcutta Metropolitan Develop:;.ent Authority (CMDA) and the Urban Development Process - CUDP I and I: The failure to implement the CMPO's plans through the inadequacies of the financial and organisational capacity of local government deepened the CMA's urban crisis. By the late 1960's the situation required a massive public investment programme in urban infrastructure and municipal services. In an attempt to respond to the crisis, the State Government in 1970 created the Calcutta Metropolitan Development Authority (CMDA) through the enactment of legislation. CMDA was.given a fund of Rs. 150 crores (US$ 157.5 million) by the Government of West Bengal for the implementation of a number of urban development projects in the CXA. Based on the previous planning exercises of the CMP0, the CMDA selected about 100 schemes in different urban sectors for implementation on a minimum needs basis. These included water supply, sewerage and drainage, solid waste management, conversion of service privies into sanitary latrines, bustee improvement, traffic and transportation, new townships, area development and shelter. The institutional response to inadequately defined responsibilities and lack of planning and implementing capacity within the CMA was for the CMDA to assume overall responsibility for the programme involving other agencies as sub-contractors. In 1973 the International Development Association (IDA), the soft loan affiliate of the World Bank, expressed its interest in participating in CMDA's development programme and as such agreed to finance 44 out of the 100 on-going urban infrastructure projects. Under this loan, known as CUDP I, IDA provided US$ 35 million equivalent of assistance over 5 years. During the implementation of IDA I, CMDA continued to expand its implementation responsibilities through the creation of sector specific operational directorates. By the mid 1970's it was realised by CMDA, the State Government and IDA that the shortfall in urban infrastructure and basic municipal service provision was so great that the process of urban development and investment would need to continue over a time period well beyond that of the then existing programme.  -7- Moreover, there was a growing realisation that many of the expectations of the Basic Development Plan were unlikely to be realised. Actual project costs were also found to greatly exceed the CMPO estimates thereby reducing the impact of the overall development programme. In order to reconsider the development strategy for the CMA, a Planning Directorate was created within CMDA. After reviewing the Basic Development Plan against the rapidly changing urban situation, the Planning Directorate produced the 'Development Perspective Plan' (DPP) in 1976. This document proposed the creation of a multi-centre investment strategy for the CMA and provided the revised basis for the subsequent urban development programme - CUDP I:. The document also identified a list of probable projects in different sectors for implementation under CUDP II consistent with the revised development strategy, largely on the basis of achieving the minimum required delivery of urban services. The DPP recognised the overriding requirement to complement physical infrastructure improvements with socio-economic ii"Atiatives such as small scale employment creation, preventative health, primary education and training programmes. Such programmes were included in CUDP II (1978-79 to 1982-83) which was finalised at Rs. 278 crores (US$ 292 million) of which IDA contributed US$ 87 million. The institutional arrangements for the implementation of CUDP II remained as for CUDP I, with CMDA the major executing agency supported by other agencies and State Government departments. Although the (then) 36 urban local bodies within the CMA had neither the elected representation nor the institutional and financial capacity to play a major role in the development process, CUDP II introduced the first step in the devolution of investment decisions through the Municipal and Anchal programme. This programme was targetted at basic water supply, drainage and sanitation and local road investment in the outlying areas of the CMA. It was administered by the CMDA although there was a dialogue with the local bodies, and proved so successful that the original programme allocation of Rs 5 crores was increased to Rs 9 crores under CUDP II.  3.0 ORIGINS OF THE MUNICIPAL DEVELOPMENT PROGRAMME 3.1 The Essential Preconditions During the implementation of CUDIP I and II a series of initiatives were triggered at various levels of State and Metropolitan Government in response to the magnitude of the problems encountered in achieving the programme's objectives. These initiative form the basis for the design, organisation and implementation of the subsequent CUDP III programme of which the MDP is part. Among the more important preconditions for MDP are the legislative, institutional and financial initiatives taken over the past several years at the State and Metropolitan level, the State Government's commitment to the devolution of significant decision making responsibilites and the emergence of an informal but highly effective metropolitan management team, made up of key people in different agencies. This section focusses pa-rticularly on the legislative, institutional and financial reforms that have been carried out and also on the implications of an ex post evaluation of previous investments. In both instances the considerations relate to the design, organisation and implementation of the CUDP III programme. 3.1.1 Specific Initiatives and Reforms (i) the provisions of the Bengal Municipal Act of 1932 were significantly amended in 1980 in order to strengthen the constitutional and financial base of the CMA municipalities. In particular provision was made for municipal elections and fiscal autonomy of the municipalities was strengthened (ii) the Calcutta Municipal Corporation (CMC) Act of 1951 was rescinded and a new Act introduced in 1980 to provide for a greater devolution of powers to the Corporation. For the first time in India, the 1980 Act provides for a cabinet system of Government for civic administration, whereby a Mayor-in-Council, elected for a five year term would become responsible for the day to day management of Calcutta's civic affairs. The new Act was introduced in January 1984 (iii) new and separate legislation has also been enacted for Howrah, the second City of the CMA in the form of Howrah Municipal Corporation (IMC) Act of 1980. This has similar objectives to the Calcutta Municipal Act (iv) a Municipal Finance Commission (MFC) for West Bengal was set up in December 1979 to enquire into different aspects of municipal finance such as revenue and expenditure performance; development needs and finance; relationship of municipalities with the development authorities; property valuation methods and tax structure  -9- (v) in submitting its report in March 1982, the MFC concluded that the existing revenue base of the local bodies was not adequate to cover recurrent expenditure. This led to the recommendation that this resource gap, which currently falls on the State Government, should be grauually reduced through improved internal revenue generation and enlarged tax sharing. With respect to development finance the Commission emphasised the need for the local bodies to more effectively participate in the development process and to prepare annual capital budgets as a part of their own five year plan (vi) a major cause of the financial weakness of the local bodies has been the under-valuation of lands and properties. To overcome this deficiency, the Central Valuation Board (CVB) was set up in 1979 under the terms of the West Bengal Central Vaulation Board Act of 1978. The Board is assisting the municipalities in selection and retention of assessors, issuance of guidelines for property valuation, evaluation of methods of property valuation and collection of current and arrears demands. The Board has also started work on a valuation manual and holds regular meetings with the local bodies to monitor their tax collection efforts. Revised valuation lists have been prepared for most local bodies and it is estimated that property re-valuations coupled with changes in property tax structure are likely to increase overall municipal tax revenues significantly (vii) in July 1980 the State Government set up the West Bengal Urban Development Strategy Committee. The Committee's terms of reference included the formulation of a State-wide urban development strategy to bring about the decentralisation of urban development activities; to co-ordinate the activities of different agencies and Government departments involved in urban development and to recommend criteria by which to allocate resources between different urban centres in the State. Principal among the Committee's recommendations were the following: an increased investment allocation for urban centres outside the CMA; and an increase in the share of CMA investment allocated to the local bodies outside the metrocore area of Calcutta and Howrah (viii) in May 1981 elections were held in the local bodies outside the Calcutta Corporation area for the first time for 18 years and a council of elected representatives now govern each of the municipalities (ix) under the provisions of the Bengal Municipal (Amendment) Act of 1980, the State Government is required to provide each municipal body with one executive, finance and health officer and an engineer. Placement of such officers has already commenced.  32 XImpact Evaluation of CUDP I and II In late 1979 it was decided by the Government of West Bengal and IDA to undertake an impact evaluation of CMDA's CUDP I and II projects and programmes. By then, CIMDA had already established a Progress Monitoring Unit, later designated as the Programme Management Unit (PMU), and a coordination cell to improve the management, coordination and physical and financial progress monitoring of the CUDP II programme. To evaluate the overall impacts of the programme, an appraisal, monitoring and evaluation cell, later designated as the AMEU, was set up in CMDA in 1979. The first task of the cell was to prepare an evaluative study of the major impacts of CMDA's multi-sectoral investment programme. The objective being to use the findings of the impact evaluations in the design and implementation of subsequent urban investment programmes. The impact evaluations identified some positive improvements in service delivery performance, together with a strengthening of institutional capacity and increased employment and income generation in the local economy - all as a result of CIJDP I and II investments. Examples of the major service delivery improvements achieved are as follows: More than 2 million people living in slum areas (over 65% of the total) benefitted from the bustee (slum) improvement programme. Treated water supplies were increased from 100 million gallons per day, to 200 million gallons in parts of the cities of Calcutta and Howrah. Over 5,000 metres of new branch sewers were laid in Calcutta City and 1,000 metres in Howrah, which previously had no sewers. Over 35,000 sanitary latrines were installed, waterlogging was reduced with the completion of some 80,000 metres of new drainage and improvements to existing outfalls. Solid waste collection and disposal was either improved or instituted and 50 kilometres of new roads completed. Under a primary school programme, 50 new schools were built and 200 existing schools renovated and a highly successful preventative community health scheme was launched. A number of potentially serious problems were also identified however. These related to the programme as a whole and also to specif ic sectors. 3.2.1 'General Problems (i.e. common to all sector investments) (i) the implications of the total recurrent expenditures (including operations and maintenance costs) on the CMA's revenue base had not been sufficiently assessed in the design of the CUDP I and In programmes. The total recurrent expenditure shortfall amounted to roughly Rs. 34 croees (51% of total revenue expenditure) in 1982-83 and was projected to increase to Rs. 39 crores (47% of total revenue expenditure) by 1985-86 for all CMA local bodies. This is exclusive of any CUDP III liabilities. In simple terms, under the-prevailing financial regime the assets could not have been sustained  (ii) for major infrastructure investments such as water supply and sewerage and drainage, emphasis had been placed on trunk or primary infrastructure to the almost total exclusion of the secondary distribution system with the result that minimal improvements in service delivery were being achieved in practice (iii) both invest-> -fit cost per-capita and delivery of service to the tar(U. population was found to vary significantly across the CMA. Investment was overly concentrated in the Calcutta and Howrah (metrocore) area rather than in the rest of the CMA although the latter area had experienced a more rapid rate of population growth over the 1970's. Of a total CTUDP investment of Rs. 355 crores (US$ 372.75 million), 67% was invested in the Calcutta and Howrah metrocore area (iv) average CMA per-capita income falls with distance from the metrocore. One estimate indicates that per-capita income for Calcutta is 1.7 times the overall average for the CMA. This suggests that the relatively high proportion of investment made in the CMA was discriminating against the urban poor. While 63% of the population outside Calcutta and Howrah belong to the economically weaker section, the figure is 50% for both cities and 45% for Calcutta alone (v) the institutional capacity of the local bodies* was unequal to the task of satisfactorily sustaining the assets created by the CUDP I and II investments. Moreover there was a growing view that CMDA had become too autonomous and powerful to the detriment of other agencies amd institutions which remained underutilised, including the municipalities. It was also increasingly felt that CMDA was giving too much attention to the implementation of projects and not enough to its economic and financial responsibilities * The local bodies are defined as the two municipal corporations of Calcutta and Howrah and the 37 municipalities.  -12- (vi) the choice of technology was found to he inappropriate and overly sophisticated in several sectors. Either the proposed technology was not affordable by the target population or physical.constraints mitigated against its adoption. For example, a high cost underground sewerage project was designed and built for the City of Howrah although the majority of its population belong to the urban-poor and despit.e the inadequacies of the City's local road network. As a result a secondary distribution network could not be provided in certain areas and only at a great social cost in terms of the disruption of everyday life in others. Moreover, the majority of households could not afford the house connections to the trunk system (vii) the length of time required by the legal process to acquire land imposed severe constraints on the implementation of specific programmes and particularly shelter. 3.2.2 Sector Specific Problems (i) water supply: serious inequalities were found in the per-capita delivery of water between municipalities and between different parts of the City of Calcutta, together with major constraints on the delivery of water to consumers such as the lack of house connections (ii) bustee improvement: in all about 2 million or 65% of the bustee (slum) dwellers have been covered by improvements in municipal services and environmental hygiene under CUTP I and UI. Despite this significant achievement two major concerns are (a) the appropriation of rental increases in improved bustees by a class of middlemen known as 'hutowners' and (b) the possible eviction of poor tenants unable to afford increasing rents in the improved bustees (iii) sewerage and drainage: despite achieving some reduction in the intensity and duration of waterlogging and conversion of service privies into sanitary latrines in individual premises, serious problems were identified in this sector. Underground sewerage and drainage technology was both overly sophisticated and generally not integrated with ancillary investments. As a result many schemes were either not completed or not properly integrated with existing sewerage and drainage infrastruc ture  -13- (iv) traffic and transport: despite major investments on arterial roads improvements and traffic operation and management within the metrocore, measurable benefits were very limited. The situation was made worse by the widespread encroachment of pavements aPd roads by hawkers and the failure to fully implement the CUDP II solid waste management programme. This in turn led to problems of blocked roads, pavements, sewers and drains thereby reducing the potential benefits of the traffic and transport investments and policies still further. 3;2.3 Recommendations of Evaluative Studies A number of recommendations were made by the AMEU to ovecome the shortcomings of the CUDP I and II programmes in the design of subsequent urban improvement programmes. Major among these were the following: (i) as a prerequisite to any h,>rzher investments in the CMA, the financial sustainab,i1ity of the assets created must be clearly established. This required an assessment of the institutiorns., organisational and financial resource base of local government (ii) emphasis in future programmes should be given to completing the secondary distribution systems of major infrastructure projects so as to ensure the achievement of service delivery benefits from previous investments in trunk infrastructure (iii) a higher proportion of future investments to be allocated to areas outside the metrocore both to reduce the spatial imbalance in past investments and the regressive impact of those investments on the urban poor (iv) low-cost technology and lower design standards to be adopted on all major infrastructure projects (v) steps to be taken to expedite the process of land acquisition which had seriously delayed the implementation of CUDP I and II programmes, and land acquisition requirements of subsequent programmes to be minimised. 3.2.4 A Revised Perspective Plan It was further concluded that in view of the rapidly changing socio-economic circumstances the 1976 Development Perspective Plan required revision. In November 1981 the CMDA drafted a new Perspective Plan. This recommended that the urban centres outside the metrocore should be the focus of future CMA growth and investment. It also supported the recommendations of the evaluation studies through its emphasis on reduced design standards and a basic needs approach to the delivery of urban services.  -14- 4.0 FORMULATION OF THE MUNICIPAL DEVELOPMENT PROGRAMME 4.1 Background The findings of the evaluation studies of previous investments together with the local government reforms and initiatives have been substantially reflected in the approach to the third Calcutta urban development programme - CUDP III. CUDP III has adopted a metropolitan-wide and local* approach to planning and implementation and represents the first such approach in India. Metropolitan planning and programme implementation remains the responsibility of the CMDA, increasingly supported by other agencies such as the Calcutta and Howrah Imtprov,ement Trusts and other State Government departments. Local planning and programme implementation has been effectively devolved to the elected representatives of the individual local bodies, supported by the technical resources of the CMDA and State Government. The local bodies have been made responsible for preparation of capital budgets, selection of sector priorities and appraisal, detailed planning of investment schemes, their implementation and continued operation and maintenance. 4.2 Strengthening the Institutional Capacity of Local Government In order to formulate, execute and mionitor the Municipal Development Programme, the following institutional arrangements have been made within CMDA a.nd the State Government to support the local bodies: 4.2.1 Within CMDA (i) the Programme Management Unit (PMU) has been made responsible for monitoring and reporting on the physical and financial implementation of the schemes under this programme (ii) the Appraisal, Monitoring and Evaluation Unit (AMEU), has been strengthened and made responsible for the appraisal of the MDP, for monitoring and evaluating programme and institutional performance. Programme evaluation will concentrate on the achievement of the overall goals of the programme and specifically on key indicators of socio-economic, fiscal and institutional performance * that is ward level within the Corporation areas of Calcutta and Howrah and municipal in the rest of the CMAc  -15- (iii) a new MDP Directorate has been created within CMDA with technical and accounts staff to guide and assist the local bodies in drawing up detailed plans and estimates once their overall sector investments have been appraised by the AMEU. The Directorate will also assist PMU in monitoring the physical and financial implementation of the programme. These arrangements are illustrated in Figure 1 which sets out the revised organisational structure of the CMDA. 4.2.2 Within Government of West Bengal (i) the Dire,7torate of Local Bodies (DLB) under the Local Government and Urban Development Department (LGUDD) has been strengthened to provide the additional staff requirements of the local bodies required to implement the MDP. The DLB is also responsible for the placement of additional officers committed to the municipalities by the State Government and for monitoring and reporting on annual municipal revenue and expenditure performance against preset annual targets (ii) in order to strengthen the existing institutional capacity of local government through seminars and training programmes on the MDP, the State Governmient set up the Institute of Local Government and Urban Studies (ILGUS) under the LGUDD in 1982. The Institute has already organised a number of highly successful training programmes, workshops and seminars for both the elected municipal representatives and their staff. 4.3 Strengthening the Financial Capacity of Local Government 4.3.1 Objectives The lessons of previous urban development programmes in the CMA clearly demonstrates the futility of making further investments if the assets cannot be properly operated and maintained. The MDP transfers the responsibility for operating and maintaining all assets created/improved under that programme to the local bodies. However, the Municipal Finance Commission (MFC) findings had previously shown that the municipalities face substantial resource gaps in their revenue budgets. These shortfalls have previously been made up by ad hoc subventions from the State. The MFC concluded that the local bodies' dependence on ad hoc State subventions should be gradually reduced and their internal current account fiscal performance progressively improved through: (i) improved internal revenue mobilisation, (ii) implementation of an incentive based system for the devolution of grants and shared taxes from the Government of West Bengal.  FIGURE 1: ORGANIZATIONAL STRUCTURE OF CMDA [ . CMDA Bxusd J ,u- - - - - - input norn Oitsus Diroclu Gone3 1s of Opoto3ions S.Ufccas & ADOOncIo GG OGc* Soci foiy OGO NoUCICC GoCKwoI (fi~ntrv& ov~zcrsonI)- -- - Chiot PnyrlcJ flonnu DU)OCIGC Go' ual of Enonco 1.Moorvr loaoofnco d o\ .~~~_ _ _ _ _ _ _ - I C M D A Th oo bam zrLhX+L>D>;u, inIfon-anfngce!co ACcCsj)fin:l AdrmnInsIsaIoAb & Coovdinolio C3 p 12 A IUJ' Is V mpo lIC Its n i Sm n;nQ . * . ,CUDP Iii * , Sou3rce: UDA ,. i E( 5 c 0  The MFC also recommended that the level of capital investment given to the local bodies should be linked to this improvement in their internal fiscal performance, the objective being to control and reduce the deficits of the local bodies on their current accounts by making annual current account performance the basis for each subsequent year's MDP capital account allocation. 4.3.2 The Revised Grant Structure (RGS) On April 1st 1983 the State Government implemented a Revised Grant Structure (RGS) designed to achieve the objectives described above in 4.3.1 and to coincide with the commencement of CUDP III and the State Government's fiscal year. The RGS basically sets out annual current account performance targets which are individually set for each local body. The achievement of the performance targets then triggers the subsequent year's MDP capital account allocation, with over- and under-achievement of the performance targets being rewarded in the manner set out in section 4.3.3. Table 3 summarises the key relationship between targetted internal revenue growth and the additional recurrent liability attributable to the MDP for each year of the programme period and across all local bodies. Over the five year programme period, total internal revenue generation is projected to increase by Rs 2040.26 lakhs against a growth in the recurrent liability attributable to the MDP of Rs 792.95 lakhs. Of equal significance is the fact that property tax revenue as a proportion of internal revenue generation is projected to increase from 49% in year 1 (1983-84) to over 56% by year 5 1987-88. TABLE 3: PROJECTED INTERNAL REVENUE AND CUDP III/MDP RECURRENT EXPENDITURE GROWTH 1983-84 TO 1987-88 (Rs lakhs) CUDP III/MDP Total internal Property tax recurrent Year revenue revenue expenditure 1983-84 5183.68 2582.30 24.60 1984-85 5512.12 2780.73 129.57 1985-86 6072.54 3205t13 333.66 1986-87 6643.85 3632.23 583.32 1987-88 7223.97 4062.83 792.95  Over the MDP period there will however still be a continuing need for the transfer of resources to the local bodies from the State Government in the form of grants and shared taxes as total recurrent expenditure from existing.and new investments will not be entirely met by internal revenue sources. The extent of the targetted current account shortfalls/surpluses of each local body for the first year of the MDP under the RGS is illustrated in column 11 of Table 4, with the Table itself presenting the complete financial picture of each local body. These summary current account targets are in turn made up of revenue and expenditure performance targets set individually for each local body. Revenue Performance On the revenue side, performance targets have been primarily related to property tax administration and include rateable value, assessment and minimum collection targets for current and arrears demands. These targets relate to the existing tax base and collection efficiency of each local body and assume an improvement over time specific to each local body. Statutory receipts from the share of Entry Tax (Octroi) have also been projected and are included as a source of revenue for each individual local body (Table 4, column 3). The most important revenue performance target has been set with respect to the collection efficiency of property tax, by far the most significant source of municipal revenue (Table 4, column 2). Targets have been set at 75% and 50% for current and arrears tax demands respectively, to be achieved by the local bodies over varying lengths of time depending on the levels of efficiency from which they start. Expenditure Performance On the expenditure side, additional MDP and existing recurrent operational and maintenance expenditure has been projected for each local body (Table 4, columns 8 and 9). For recurrent operation and maintenance expenditure, MFC norms have been adopted as annual targets (i.e. a maximum of 5% compound annual increase for 'wages and salaries' and 10% for 'other recurrent expenses') for each local body. Annual Current Account Performance Targets Each local body has been provided by the State Government with three current account performance targets for 1983-84, the first year of the CUDP IIt programme and of the Revised Grant structure, based on the projections set out in Table 4. These targets are:  TABLE_4: FINANCIAL PERFORMANCE PROJECTION BY INDIVIDUAIL LOCAL BOD)Y (1983-84) Rs Lakhs ___ v i. i1 ___I: x P1 I: [I I 1 i 11 LtIe Rvtofj1I TOE_ claT___;iiT-?tT*cno~ - E:x i !t i nc Sho I L (d1 II Or ie r ~;ha re of inLOVcual COM111ilt tM~. Cdui to) COD. - I 1 1 L:xj..rd i t or e Tota I I or ol )~' 1 Ira nje' *a O"i(ropu.ltIy I nternia 1 Fn t r y 1Ilvoanuo & ,I Deb t 'Pot.,) CI DUP Coi'II'I rinen t "x pond i tu re Stirpius I+ xaill c CI I CII I 17 'Px Rvne Tx 234I tJ4/ o ics2 I I;x-oid - r~co i