January 09, 2002

    Minister for Urban Development and Poverty Alleviation Shri Ananth Kumar has emphasized the need for enhanced transparency, better financial management and reassessment of property tax structure and modernization of municipal accounting system for efficient delivery of civic services by urban local governments.

    Inaugurating the National Seminar on Municipal Accounting Reforms here today, Shri Ananth Kumar said that the ability of municipalities to take advantage of the capital market and resources is dependent on their ability to present themselves as viable financial entities.

    "Transparent financial information and standardized accounting practices not only enable effective governance, but also form the foundation for carrying out municipal credit ratings, development of commercially viable urban infrastructure projects, and involvement of the private sector in the delivery of urban services", the Minister added.

    Stating that the single entry cash based accounting system used by most of the urban local bodies (ULBs) today is subject to a number of defects as the accuracy of account books cannot be verified, Shri Ananth Kumar advocated the need for adopting a double entry accrual based system which enable the preparation of reliable, detailed financial statements subject to checks and balances.

    "One of the biggest constraints that urban local governments face in the area of municipal accounting reforms and corporate governance is the old mindset resisting any new initiative", Shri Ananth Kumar said and added that "without changing the mindset, we cannot create an enabling environment for the local bodies to undertake planning and development".

    "A crucial concern for the government is to ensure that corporate governance does not lead to the dilution of social responsibility and exclusion of the poor and vulnerable sections from the formal delivery system of local bodies. Social responsibility coupled with corporate governance is the requirement of the day", the Minister stressed.

    Stating that Prime Minister Shri Atal Bihari Vajpayee has agreed to convene a meeting of Chief Ministers and Housing and Urban Development Ministers of all States, before the forthcoming Budget Session of Parliament, to evolve a consensus on several contentious issues such as urban land ceiling, municipal accounting reforms, model rent control act, stamp duty etc., Shri Ananth Kumar said that municipal accounting reforms will find a place in the agenda for the forthcoming meeting.

    Addressing the gathering, Urban Development Secretary Shri K. Kosal Ram said that the Government has already introduced several fiscal incentives for attracting private investment in urban infrastructure and allowed 100 per cent Foreign Direct Investment for development of integrated townships.

    Shri Kosal Ram stated that second generation of urban reforms include framing of guidelines for setting up a regulatory framework, Model Municipal Act to enable private sector participation in urban services, municipal accounting reforms based on double entry accrual system, state level pool financing structure to enable small and medium size bodies to access the domestic capital market. He further added that a City Challenge Fund is proposed to be created to enable cities to become creditworthy. A special purpose vehicle will also be put in place for strengthening urban transport such as peripheral expressways and mass rapid transport system.

    The Seminar, organized by the Ministry of Urban Development and Poverty Alleviation, National Institute of Urban Affairs, the Institute of Chartered Accountants of India and USAID, is being attended by representatives of local authorities and non-governmental organizations, financial and accounting experts and civil society organizations.