The Urban Development Ministry has proposed linking of user charges in urban areas to inflation for financing the Smart Cities Mission.
A proposal has been mooted for automatic partial indexing of user charges in urban areas to inflation and quality of services to increase cost recovery to at least cover operation and maintenance charges, sources in the UD Ministry said.
For example, if a special water project were taken up for supplying 24-hour supply in the proposed Smart City then, as per the proposal, some charges would be levied to cover the operation and maintenance costs.
Since there will be a huge resource requirement for Smart Cities Mission and Atal Mission for Rejuvenation and Urban Transformation (AMRUT), the Ministry mooted the idea at a recent regional workshop on Smart Cities here.
The Ministry is developing a Model Concession Agreement in urban water supply based on tariff indexation to inflation to mitigate risks, sources added.
The model document also covers risk allocation between public and private sectors, performance standards and coverage targets besides providing for flexibility to urban local bodies.
The Ministry noted that for urban local governments, parking fee is an important source of revenue, besides having the dual impact of influencing commuting choices in favour of public transport.
Elaborating on the principles of levying user charges, the UD Ministry stressed they should be so structured as to meet at least operation and maintenance costs and needed to be partially indexed to inflation for improved quality of services.
Modalities in this regard are being worked out and loan should be available in 2016 for use by the first batch of smart city candidates to be chosen in the second stage of City Challenge competition among the 100 cities included in the Smart City mission.
