Towards Sustainable Cities: Lessons from Urban Decentralization in India and Bangladesh

Fiscal and financial management in South Asian cities typically face constraints in capacity and utilization of resources. This paper attempts a systematic analysis of three corporations in the region: the Indian city of Kolkata (Kolkata Municipal Corporation, KMC) and the city corporations in Bangladesh’s capital city, Dhaka (Dhaka North City Corporation, DNCC, and Dhaka South City Corporation, DSCC). Based on the incomes and expenditures of these corporations, this paper attempts for the first time a comparison in the status of finances and service delivery in cities of two South Asian Countries. The main findings suggest that the revenue receipts of KMC is significantly higher than that of either DNCC or DSCC or even both the bodies combined. This is true for own revenue as well as for grants from the upper tiers. Both DNCC and DSCC have expenses, which are way below the low level of existing earnings. These expenses are less when compared with international expenditure norms also. For KMC the revenue is not sufficient to cover the expenditures. For DNCC and DSCC, levels of expenditures on provision of urban services are abysmally low, which is also reflected in the status of service delivery in these cities. Property tax accounts for the lion’s share of the tax revenue in both Kolkata and Dhaka. For Dhaka, non-tax revenues obtained from fees, fines, rates, etc. have a higher share in own revenue, while Kolkata has higher shares of taxes. Interestingly, despite the low revenue generation capacity of the DNCC and DSCC, this is what comprises the bulk of total revenue. Grants received from the upper tiers are very low in DNCC and DSCC compared to the fact that close to half of KMC’s total revenue comes from grants. We also estimated the GCP for Dhaka and Kolkata and did some simulation exercises for estimating the revenue capacities. Based on these exercises, we suggest that KMC should generate up to 4 percent of their GCP as revenues for the corporation. For Dhaka, 1 percent of GCP as revenues in both DNCC and DSCC are estimated as their potentials.