Municipal resource mobilization through land monetization : a case of Bhopal municipal corporation

Abstract

The growth of urban population has been rapid in India, around 31.3% of population in India lives in towns and cities. With the rapid growth in population, these towns and cities are coming under more pressure to deliver urban infrastructure services to an increasing urban population, but cities have very limited resources to provide these services and infrastructure and demand for them is very high. Since, the resource requirement is very large in case of cities for providing these services, thus cities have to resort to some alternative method for resource generation. Since 1980’s India has witnessed a rapid growth in population, especially urban population, and is rapidly becoming urbanized at a steady pace. According to Census 2011, 31.3 percent of people resides in cities or towns in India. One of the key reasons for the lack of infrastructure in India is the low level of spending on it and this is because not very much importance is given to the bottom most or third level of government i.e. local bodies, and thus it affects its fiscal base as well as its performance to a good extend. The requirements of funds for the development of urban infrastructure in India is huge. India Infrastructure Report prepared by Rakesh Mohan Committee in 1996, estimated that a total investment of Rs. 79,300 crores to Rs. 94,000 crores are required for provision of infrastructure in urban areas in India. High Power Expert Committee (HPEC) estimated the requirement of funds for infrastructure investment over a period of 20 years from 2012-13 to 2031-32. The committee estimated the requirement of funds for eight major sectors of urban infrastructure which are sewage, water supply, solid waste management, urban roads, storm water drains, urban transport, street lights, and traffic support infrastructure. Investment of Rs. 39.2 lakh crore has been estimated over a 20-year period from 2012 to 2031 for provision of urban infrastructure. Resource mobilization at the local level needs not only improving the efficiency of the existing resources but also using some new ways of resource mobilisation to generate extra resources. Therefore, Local Bodies need to tap both conventional as well as non-conventional resources to the extent possible. One such method of Resource Mobilization is Land Monetization. Monetization refers to the conversion of a thing into money, which means that it is in general accepted as a medium of exchange. The aim is to study Land Monetization as a method of resource mobilization for an Urban Local Body to finance the increasing infrastructure need of the city. The study aims to look for an unconventional way of resource mobilization in a city to cater to the ever-increasing urban population and their needs of infrastructure and services. Thus study aims to unlock the potential of land to generate these additional resources, and see it as one of the most important and potential method to generate resources of such magnitude. To achieve the above-mentioned aim, following are the objectives of the study: 1. Assess the potentially marketable public vacant/underutilised land in the city 2. Identify the causative factors and formulate the functional relationship between the impacted and impacting variable(s) 3. Estimate the revenue to be generated by land monetization at circle rates 4. Estimate the revenue to be generated by land monetization at market rates on the basis of hedonic price model There are some general principles, which need to be followed for disposal of public land held by authorities. First, Local Bodies shall not that land whose retention is necessary for public interest or that parcel of land, which help in the supply of services. Land, which need to be disposed, shall be disposed at market value and not at circle rates to ensure the maximum value gain by the authorities. Moreover, accountability of the disposed land and its financial value gains shall be ensured in proper financial statements. Moreover, one of the most important thing is to ensure that the amount gained from monetizing these public lands shall be used only for provision of new infrastructure and shall not be used for maintenance and operation purposes. For estimating the value of land parcels at market rates, hedonic pricing is used. Hedonic Pricing (HP) approach is derived from the characteristic theory of value first proposed by Lancaster (1966) and Rosen (1974). It is a revealed preference method. This seeks to explain the value of a commodity as a bundle of valuable characteristics. For example, the price/rent of house depends on number of rooms, availability of garden in the campus, proximity to shops, noise level in the neighbourhood, air quality levels etc. HP was first applied to environmental valuation by Ridker and Henning (1967) Hedonic Pricing Method, assumes that the value of a property is affected by a particular combination of characteristics that it possesses given that properties with better qualities demand higher prices as compared to properties with lower qualities. Y = b0 + b1X1 + b2X2 + b3X3 is the hedonic equation, here Y is the dependent variable that would be market price, and X1, X2, X3 are independent variables like Distance to city centre, Distance to educational centre, Distance to Health service, Distance to bus stop etc. For the purpose of the study, city of Bhopal is chose. Bhopal is one of the fastest growing cities in the country. As per 2011 census, the population of Bhopal district is 18.38 lakhs out of which 14.35 lakhs live in Bhopal city, in 85 wards, covering a gross area of 685 sq. km. including the lakes and hills. The urban local body of Bhopal is the Bhopal Municipal Corporation. The fund requirement for provision of infrastructure and services is huge. According to AMRUT, the total estimated fund required for provision of infrastructure and services is about 1858.55 Crores, for provision of water supply, Sewage and septage management, Storm water drainage, Green Spaces, Urban transport and mobility. Although the closing fiscal balance for Bhopal Municipal Corporation was positive, i.e. 97.92 crores for 2011-12, 48.93 crores for 2012-13, and 145.99 for 2013-14, but the amount of fund required for provision of infrastructure and service was huge, and much greater than the amount of balance with the Bhopal Municipal Corporation. For the analysis of the study, first the public vacant land is identified in the Bhopal Municipal corporation area. This is done with the help of Khasra maps and the ownership details of the khasra’s. Then to formulate the hedonic equation, data is collected for previous transactions of parcels of land in Bhopal. Data is collected on nine different variables for each parcel of land and its Market price. These variables are Distance to Central business district, Distance to green spaces, Distance to Hospital, Distance to education centre, Distance to police station, Distance to BRTS bus stop, Area of Land parcel, Shape of Land parcel, weather land parcel is a corner plot or not. Then for each variable correlation is done with the market price to estimate the degree of relationship between each other. For the variables having significant correlation with the market price, multivariate regression is done to find the parameter value for each variable and thus to form the hedonic equation. For further study, the zone with the maximum amount of public vacant land in the Bhopal Municipal Corporation is selected. For the public vacant land identified in the selected zone, each parcel of land is subjected at circle rates to estimate the amount of revenue, which can be mobilised at circle rate. Then, for each identified parcel of land, nine of those variables are find out and put in the hedonic equation formulated before, to estimate the amount of revenue, which can be mobilised at market rate.