IIM, Bangalore to help TN prepare Value Capture policy for Amrut cities

Chennai:

Tamil Nadu government is seeking the help of Indian Institute of Management, Bangalore, for helping in prepare Value Capture Policy for all Atal Mission for Rejuvenation and Urban Transformation (AMRUT) cities and towns in the state.

This comes as Ministry of Urban Development has come out with a policy framework for an innovative resource mobilization through Value Capture Financing (VCF) to enable States and city governments raise resources by tapping a share of increase in value of land and other properties like buildings resulting from public investments and policy initiatives, in the identified area of influence.

The proposed VCF policy framework that works as a guide to state and cites will assist in assessing the scope of resource mobilization, identifying the area of influence of proposed projects and optimizing resource mobilization.

The different instruments of VCF are ; land value tax, fee for changing land use, betterment levy, development charges, transfer of development rights, premium on relaxation of Floor Space Index and Floor Area Ratio, vacant land tax, tax increment financing, zoning relaxation for land acquisition and land pooling system.

It is learnt that a high-level meeting was held on January 31, 2018 where in Tamil Nadu Urban Finance and Infrastructure Development Corporation Limited (TUFIDCO) has IIM Bangalore for implementation of Venture Capital Financing as transformative reforms in AMRUT.

A total of 33 towns in the state have been selected under the Amrut scheme of which eight are within the jurisdiction of Chennai Metropolitan Development Authority and 25 are under Directorate of Town and Country Planning (DTCP).

The Centre is keen about integrating VCF into project feasibility assessment for systematic and large scale adoption of capturing a part of potential increase in the value of land and other properties resulting from the proposed investment.

It is learnt that TUFIDCO has asked Chennai Metropolitan Development authority to submit details like planning development fund, charges for premium Floor Space Index, revenues from development charges, open space reservation charges and L&T Ramboll report on densification of MRTS corridor to Indian Institute of Management, Bangalore.

Value Capture is based on the principle that private land and buildings benefit from public investments in infrastructure and policy decisions of governance.

The Centre is planning to implement Value Capture Financing as the municipalities which receive a fair share of handholding support in the form of revenue and grants from the State as well as Central Governments are still struggling to meet their fiscal needs.A burgeoning urban population has also resulted in increased demands from the population for provision of services and amenities. Thus, adopting VCF mechanisms by municipalities will strengthen and augment the fiscal resources of local bodies, sources said.

Factfile:

1.  1. A McKinsey report has estimated that around Rs 325,000 crore1 of urban infrastructure investments are required annually.

2. The High Powered Expert Committee Report 2011 projects urban infrastructure requirement at 0.75%, which will increase to 1.5% of the GDP by 2032 (Rs 97,500 crore to Rs. 195,000 crore annually).

3.  Presently, national urban missions are investing about Rs 32,500 crore annually leading to an investment gap of nearly Rs 65,000 crore.

4.   Value Capture as practiced widely in the world is based on the principle that private land and buildings benefit from public investments in infrastructure and policy decisions of Governments.

5.  VCF tools can be deployed to capture a part of the increment in value of land and buildings. In turn, these can be used to fund projects being set up for the public by the Central/State Governments and ULBs