Editorial 1: India’s urban infrastructure financing, needs and reality

Context

With the urban population set to rise exponentially, urban India’s future depends on the ability to address the key financial and structural challenges.

 

Introduction

India’s urban population will increase from 400 million in the last decade to 800 million over the next three decades. While this offers an opportunity to transform India’s urban landscape, there are significant financial challenges that must be overcome to get there.

• A recent World Bank report estimates that India will require about ₹70 lakh crore by 2036 to meet its urban infrastructure needs. Current government investment (2018 figures) in urban infrastructure stands at around ₹1.3 lakh crore annually.
• This is just a little over one-fourth of the required ₹4.6 lakh crore per year.
• Broadly, about 50% is estimated for basic urban services, with the other half for urban transport.

 

Issues at the local level

• Stagnant growth: Municipal finances, a crucial component of urban infrastructure funding, have remained stagnant for decades.
  • Since 2002, municipal finance has stayed at just 1% of GDP.
• Contribution to urban investments: Municipal bodies contribute 45% of urban investments, while the remainder is managed by parastatal agencies.
• Increased transfers but precarious financial health: Despite an increase in central and State transfers from 37% to 44%, the financial health of municipalities remains precarious.
• Slow growth in revenues: Tax revenue grew by only 8% between 2010 and 2018. Grants grew by 14%, and non-tax revenue by 10.5%.
  • The share of municipalities’ own revenue sources has declined from 51% to 43%, reflecting a diminishing capacity for self-sufficiency.

 

Collection inefficiencies

• Low revenue collection: Data from 2017-18 reveals that ULBs in Bengaluru and Jaipur collect only 5%-20% of their potential tax revenue.
• Low property tax collection: Nationwide, property tax collection stands at a paltry ₹25,000 crore, which is only 0.15% of GDP.
• Service cost recovery gap: Cost recovery for services ranges from 20% to 50%, highlighting the significant gap between the costs of urban services and the revenues generated from them.

 

Utilisation challenges

Indian cities also struggle with low absorptive capacity, further complicating the urban infrastructure landscape

• Unspent revenues: According to the Fifteenth Finance Commission report, about 23% of total municipal revenue remains unspent, indicating a surplus in the municipal system that is not being effectively utilised.
• Limited capital expenditure: Even major cities such as Hyderabad and Chennai only managed to spend 50% of their capital expenditure budgets in 2018-19.
• Utilisation of central schemes: The Atal Mission for Rejuvenation and Urban Transformation (AMRUT) achieved 80% utilisation. The Smart Cities Mission reached 70%.

 

Public-private partnerships (PPPs)

Public-private partnerships (PPPs), another crucial avenue for urban infrastructure financing, have seen a marked decline over the past decade.

• Decline in ppp investments: PPP investments in urban infrastructure peaked at ₹8,353 crore in 2012 but plummeted to just ₹467 crore by 2018.
• Challenges in viability: The viability of PPP projects is often dependent on the availability of payments or viability funding for ensuring bankability. Due to the lack of project-specific revenues, these projects further diminish commercial attractiveness.

 

The next step is reform

Given the myriad of financial challenges outlined, it is imperative to adopt a dual-pronged approach with specific long-term and medium-term measures.

Long-term measures

• Structural reforms: Strengthening State finance commissions to enhance autonomy and capacity for better financial management at the municipal level.
  • Empowering municipal governments with greater financial and administrative autonomy to manage and allocate resources more effectively for urban development.
  • Attracting private capital through mechanisms like debt borrowing and municipal bonds.

 

Medium-term measures

• • Develop a robust pipeline of projects: The High-Powered Expert Committee and 12th Plan Working Group have developed a financing framework to meet the ₹70 lakh crore urban infrastructure investment requirement over the next 20 years.
    • About 15% of this total investment could potentially come through PPPs, translating to roughly 250-300 PPP projects annually.
    • To achieve this, a pipeline of 600-800 projects must be in place.
  • Decouple project preparation from financial assistance: The last two decades have shown that investments in urban infrastructure have not advanced to the extent required, often due to hurried project preparation.
    • As new national programmes are conceived, it is essential to decouple project preparation from financial assistance.
    • Ensuring that these projects are designed for financial, social, and environmental sustainability is vital, especially given India’s vulnerability to climate change.
  • Leverage Digital Public Infrastructure (DPI) for improved operations: Urban service delivery, particularly in public transport, remains hampered by outdated practices.
    • Embracing DPI can revolutionise the management and the operation of public services, positioning India as a global leader in this domain.
  • Capture land value in transport projects: With half of the ₹70 lakh crore investment by 2036 earmarked for urban transport, particularly metro rail projects, there is a unique opportunity to harness land value.
    • Metro and rail projects should be integrated with urban development, ensuring that they bring jobs closer to transit hubs and contribute to the overall efficiency and design of cities.

 

Conclusion: The need for collaboration

To conclude, India’s urban future hinges on the ability to address these financial and structural challenges head-on. The stakes are high, and this is the window for action. By pursuing both immediate and long-term strategies, India can build urban infrastructure that meets the demands of its growing cities, thus ensuring sustainable and inclusive development for the decades to come. The path forward will require collaboration across government levels, private sector participation, and a relentless focus on innovation and governance efficiency.

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Editorial 2: Why India’s 6Ghz spectrum dilemma is affecting PS5 Pro console launch in India?

Context

In India and throughout the world, WiFi has mainly used two key bands of frequency — 2.4GHz and 5GHz. By 2021, several regulatory authorities around the world began de-licensing a third band of spectrum for WiFi. However, India and China have not yet allowed the use of 6GHz spectrum.

 

Introduction

Earlier in November, the PlayStation 5 Pro console was released in key markets around the world, but no announcement was made regarding India. On November 8, Sony said, “PS5 Pro will not be available in some countries (which presently includes India) where 6GHz wireless band used in IEEE 802.11be (Wi-Fi 7) has not yet been allowed.”

 

What’s the history on WiFi bands?

• Key bands of frequency: In India and throughout the world, WiFi has mainly used two key bands of frequency — 2.4GHz and 5GHz.
• Home broadband users may recognise these frequencies as separate transmissions from the same router.
• Characteristics of frequency bands: 2.4GHz: Limited data bandwidth, but can blanket a larger area with coverage. And 5GHz: Significantly faster, but covers a shorter distance.
• Introduction of de-licensing (2002):The frequencies for the spectrum used by these WiFi bands was de-licensed for indoor and outdoor use separately in India starting in 2002.
  • WiFi Technology Until 2020: This state of WiFi technology remained the same well into the introduction of WiFi 6 in 2020.
  • Introduction of WiFi 6 (2020): WiFi 6 uses both 2.4GHz and 5GHz frequencies simultaneously, with greater efficiency, resulting in better speeds.
  • WiFi 6E and Global Regions (2021): In 2021, WiFi 6E was introduced, splitting the world into two regions:
    • Those who allowed the use of 6GHz spectrum.
    • Those that didn’t.

 

What is 6GHz spectrum and what does it have to do with WiFi?

• By 2021, several regulatory authorities around the world, including Japan, Mexico, South Korea, Taiwan, United Arab Emirates, the U.K., and the U.S. began de-licensing a third band of spectrum for WiFi.
• The WiFi 6E standard was introduced that year, allowing the creation of routers that broadcast on this frequency, bringing up theoretical maximum speeds to 9.6Gbps.
• This relied on the band of spectrum between 5,925MHz and 7,125MHz, known as 6GHz spectrum.
• But in several countries, that is not yet the case. India and China have not allowed the use of 6GHz spectrum for WiFi yet.
• While the International Telecommunications Union (ITU) generally tries to keep wireless frequencies for telecom, WiFi, satellite and other use cases uniform around the world, several countries have not yet agreed on a standard division of the 6GHz band.

 

Who has the 6GHz band in India, and who wants it?

• Current allocation: The 6GHz band is currently with the Indian Space Research Organisation (ISRO) for satellite use cases.
  • Satellite communications over 6GHz are unlikely to interfere meaningfully with WiFi-like use cases.
• World radiocommunications conference: At the World Radiocommunications Conference last year, India and some other countries secured an extension until 2027 to decide on the use of some or all of the spectrum.

 

Competing Interests for 6GHz Spectrum

• Telecom operators’ demand: Telecom operators in India and worldwide have shown intense interest in using the 6GHz spectrum for 5G and 6G.
• Tech companies’ argument: Tech companies, including Google, Meta, and Amazon, represented by the Broadband India Forum, advocate for a U.S.-like allocation of this spectrum to WiFi.
• Conflict of usage: Both telecom and tech companies push for the entire 6GHz band to be allocated for their respective use cases — telecom or WiFi.

• Australia’s model: The government may follow Australia’s example, de-licensing half the spectrum for specific use while deliberating the allocation of the remaining half.

 

What comes next?

• While the 6GHz debate is complex in its own right, it is not entirely clear that the consumer electronics’ interests are significantly impacted by India’s decision.
• Apple and Samsung phones sell in India with the exact same support for 6GHz WiFi, for instance, but the WiFi feature is programmed to avoid connecting to 6GHz spectrum.
• Sony could do the same, by making consoles sold in India incompatible with this band of spectrum until regulatory clarity emerges.
• If and when Sony decides that this is worth the work, or if they decide to invest in manufacturing a separate variant of the PS5 with older WiFi hardware, it will release in India.

 

Conclusion

At any rate, WiFi 7 as a technology does not need 6GHz to work in India. Advances in WiFi technology are based not (just) on newer bands of wireless spectrum, but in greater efficiency and using these bands simultaneously. Even without the 6GHz spectrum, WiFi 7 routers can be sold in India that make the maximum wireless speed faster than any home broadband plans that are even sold here in the first place.

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