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G. Srinivasan

New Delhi , Jan. 26

EVEN as the development of community-level infrastructure for the poor and low-income communities remains a crucial component of the poverty reduction agenda in the country, the quality of services is quite often poor and access to independent services is very limited, says a new joint study by the World Bank and UK-based Department for International Development (DFID).

"Insufficient and poor quality of community infrastructure is reflected in the high ratios of slum settlements in Indian cities, the relatively low level of access to safe and reliable water for the poor and low-income groups and the totally inadequate level of sanitation services," the study said.

Stating that this also reflects a failure to meet the untapped demand from communities, the study said a key aspect of this problem is "unsustainable financing arrangements that fail to enable leveraging private resources through tapping savings or through community-based finance systems as well as the formal finance sector."

It was in this light that the Ministry of Urban Development and Poverty Alleviation as well as the Department of Economic Affairs of the Union Government approached the World Bank and DFID to bolster development and pilot testing of such an approach to be focused on fostering market-based mechanism with a commercial financing institution as the main financial intermediary that would on-lend to community-based financial institutions for community infrastructure.

The experience of the government programme mostly focuses on community mobilisation and its role in service provision, moving towards sustainable citywide slum improvement from the early emphasis on slum removal, continued stress on employment programmes both in rural and urban programmes and greater focus on decentralisation and the role of local governments in economic programmes and service delivery.

The limited available information, the study said, shows inadequate coverage, poor condition and poor maintenance of available services. Even in rural areas while new community-driven models have supervened, their wider acceptance and practices remain to be achieved.

Key issues include, among others, unsustainable subsidy rules and inadequate space for savings and private finance, inappropriate allocation processes that affect flow of funds and disbursement, making local level planning difficult due to unpredictable resources and risks in convergence with government programmes.

According to the study, in the current financial market conditions due to a decline in interest rates and a relatively low credit offtake, there is a greater possibility of financial institutions (FIs) seeking opportunities for community infrastructure, if developed within a risk management framework that meets the `comfort' level of FIs.

Though many FIs have displayed zeal in such opportunities, within the corporate structure this is still deemed a `development activity'. Still, in many cases, this portfolio is developed on a commercial basis, as for instance by the Housing Development Finance Corporation (HDFC) has set up a special unit for decentralised infrastructure and new technology to focus on smaller projects and appropriate technologies on a commercial basis and as a normal part of the business.

In order to ensure `space' for private finance and more predictable flow of funds to ensure effective convergence with government programmes and to resolve legal tenure, local pricing distortions and fiscal sustainability of subsidies, government-funded subsidies for community infrastructure could be redesigned using approaches such as output-based aid to enhance predictability and leveraging of private resources.

Again, it said, a key factor inhibiting the potential of private financing community infrastructure is the lack of bankable investment opportunities through well-structured sub-projects. This calls for appropriate changes in policy and programmes at central, State and local levels to create the `space' and an enabling environment for private financing of community infrastructure and the need to support development and implementation of emerging opportunities to create the necessary precedents that would provide a greater understanding and acceptance of the approach.

The study noted that the role of the Government is crucial in facilitating articulation of demand through development and funding of potential opportunities for community infrastructure and policy and programme development to scale up and market development. It could also institute an inter-ministerial oversight structure with involvement of other stakeholders from the NGOs, micro-finance and formal financial sectors.

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Access to pvt social infrastructure services limited in India: Study

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