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1. Present Situation

Rapid Industrialization has put increasing pressure on urban areas.

There is dramatic increase in urban population which has resulted in serious infrastructure constraints. Estimated population of India is likely to be 1451 million in 2021 out of which urban population shall constitute 37%, as against 27% during 2001. Numbers of cities having population more than 1 million are expected to increase to 53 by the year 2021 from present number of 35.

There is inadequate Urban Mass Transport System and numbers of personalized vehicles are likely to increase by eight fold in next 20 years. Requirement of Urban Transport, sanitation, housing etc has increased substantially with growing urban Population. Urban areas are expected to continue to grow in the foreseeable future.

Therefore, the deficiencies too will become even more pressing problems. One fifth of the urban population of the country already lives in six mega cities. The number of people without adequate water and sanitation services will grow unless drastic changes are made in the present policies and practices.

Though urbanization contributes to the growth process, by and large, this positive aspect is often overshadowed by deterioration in the physical environment and quality of life in urban areas on account of the widening gap between demand and supply of essential services and infrastructure.

1.1. Cost & Time Overruns

India needs a strong infrastructure support to grow strongly and since urban India contributes to more than 50 per cent of the country's GDP while containing only 27 per cent of its total population, the improvement in infrastructure will definitely have an impact on the GDP growth of the country and the overall development of its citizens. However, we as a whole India have found it intricate to handle all the projects without costing us heavily in terms of both time and cost overruns.

1.2. Undesired happenings

Lot of projects are planned for Urban areas but

• Projects are refused before being rewarded as no longer possible due to client's delay.
• Scope is scaled down drastically from original scope,
• Wild and impossible promises are made to the clients who have an extremely low probability of coming true. The Project Teams are stressed out throughout the project due to their involvement in the big promises. The projects are very late, accusations made, refusal to pay, etc.
• The customer abandon project in mid stream due to the situation going from bad to worse, or their realization that they had not been informed the true state of affairs.

1.3. Grim Situation (An Example): Review of the World Bank's Urban Lending Programmes

• Completed projects - 27
• Financial commitment - US$2.60 billion
• Satisfactory outcome - 59.3 percent
• Unsatisfactory outcome - 29 percent
• Institutional development - 22 percent were able to substantially build capacities and enhance the ability of institutions to better use the human, financial and organizational resources.
• Benefits likely to be sustained - Only in 26 percent
   

1.4. Responsible factors

(i) Highly complex nature of projects in relation to the limited planning, engineering, financial, administrative and implementation capacity of the borrowers.
(ii) Reluctance on the part of borrowers to compensate for the shortcomings in capacity deficit by utilizing external consultants.

(iii) Lack of ownership of, and commitment to, Bank's projects by the borrowers, and to the covenants attached to projects.
(iv) Difficult and lengthy procedures for land acquisition, procurement, and corruption, and
(v) Weak municipal institutions.

1.5. Requirements and Resources

Urban Utility infrastructure requirements:

• Transportation
• Water Supply
• Sanitation
• Power supply
• Communication

Basic resources utilized for urban infrastructure

• Space
• Energy
• Time
• Capital
• Manpower
• Environment

1.6. Resource Allocation

Mechanisms are required to ensure that resources are allocated to those activities having the biggest impact on achieving the objectives.

1. How to allocate resources around a country is a key decision - whether targeted at centrally managed projects or increasingly as local decentralized funding.
2. Effective financial management requires good monitoring, evaluation and audit procedures.

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