Draft Report On

Corporate Credit Rating of Ranchi Municipal Corporation (RMC)

Submitted to State Urban Development Agency,

Jharkhand (SUDA)

CRISIL Limited

February 2017 2

Background CRISIL has been mandated by State Urban Development Agency (SUDA) to undertake a credit rating of Ranchi Municipal Corporation. Towards this objective, CRISIL adopted a rigorous, multi-tier, analytical credit rating process. As part of the assignment, CRISIL undertook an exhaustive analysis of six broad credit risk parameters: legal framework provided by the governing Act, economic profile of the service area, financial risk assessment, operating efficiency and service quality, managerial assessment and project risk. The above analysis was supported by the management interactions and first-hand assessment of the ULB through visits wherever possible. The team interacted with key officials such as Municipal Commissioners, Executive Officers, City Managers and Accounts personnel. CRISIL also used this opportunity to disseminate the objectives of the credit rating exercise to the managerial and operating officials; in most instances, this ensured their high degree of involvement in the exercise. In addition, the credit rating involved the analysis of annual reports, budget documents and other secondary information, namely, City Sanitation Plan, Census of India etc. The credit risk evaluation process culminated in a discussion at the Rating Committee, which consists of experts and professionals of the highest distinction. The quality of information provided by ULBs as well as that available in documents submitted by them have been inadequate and not reconcilable in certain instances; this posed a certain degree of information risk to the rating exercise. This report is in fulfilment of the objectives as outlined above and forms a key deliverable that not only furnishes the rationale behind the rating assigned, but also details the individual components of the credit rating.

February 2017 3

Contents 1. Executive Summary .............................................................................................................. 4

1.1 Rating Rationale ....................................................................................................................... 4

Rating Drivers ...................................................................................................................................... 4

1.2 Rating Sensitivity Factors ....................................................................................................... 4

1.3 Key rating Issues ...................................................................................................................... 5

2. Rating Analysis .................................................................................................................... 12

2.1 Existing ULB structure ........................................................................................................... 12

i. Legal and Administrative Framework ................................................................................. 12

ii. Economic Base of Service Area ......................................................................................... 14

iii. Socio Economic profile of the state .................................................................................... 16

Overview ............................................................................................................................................. 16

Socio-economic base ....................................................................................................................... 16

Weak civic infrastructure .................................................................................................................. 17

2.2 Economic Management ......................................................................................................... 18

Service Arrangement .................................................................................................................... 18

Operating Efficiency ...................................................................................................................... 21

Reform Orientation ........................................................................................................................ 22

2.3 Municipal Finances ................................................................................................................ 23

2.4 Projects .................................................................................................................................... 27

i. Planned capex details .......................................................................................................... 27

Project Risk .................................................................................................................................... 37

February 2017 4

1. Executive Summary

1.1 Rating Rationale Corporate Credit Rating ‘CCR BBB-’ (Assigned)

Rating Drivers Strengths • Good economic base due to importance in the state as a major administrative hub, and

financial centre along with good connectivity

• Favourable legislative framework

• Strong support from the Government of Jharkhand (GoJ)

• Moderate financial risk profile

Weaknesses

• Weak economic management, reflected in constrained existing own revenues with below average collection efficiency and cost recovery of maintenance

• Inadequate service arrangements

• Exposure to project risk given its limited execution capabilities– projects being undertaken are large compared to its past track record

1.2 Rating Sensitivity Factors • Generate additional revenue sources

o The Jharkhand Municipal Act empowers RMC with power to levy a number of taxes like property tax on land and building, fire tax, tax on advertisements, tax on profession, tax on congregation, tax on tourists and pilgrims etc.

o The corporation can also raise revenues through user charges such as toll on roads, provisions for sewerage and drainage and any other civic service.

o Introduce new charges under by-laws for various services provided

• Increase collection efficiency in existing own revenue sources o Improvement in collection efficiency of Urban development tax (UDT) through

� Completion of property survey leading to increase in number of assessed properties

� Proper billing and facility of online payments � Deploying adequate staff for collection or Outsourcing collection service

o Timely and reasonable increase in fees, charges and rentals charged by the corporation

• Improvement in service levels o Improvement in existing services provided by the corporation like sewerage,

drainage and solid waste management

• Sustained improvement in liquidity profile

• Decline in support from GoJ o Adequacy and timeliness of compensation and other grants o Degree of timeliness in availability of funds under AMRUT and Smart city

• Extent of debt funding for planned capital expenditure (capex) o The corporation plans to fund its contribution for the planned capex through

internal accruals. o Any major debt raised towards funding its contribution may lead to a pressure on

ULB’s financials and rating.

February 2017 5

1.3 Key rating Issues The rating is supported by the following strengths: Strengths: • Good economic base due to importance in the state as a major administrative hub,

and financial centre along with good connectivity Ranchi, given its status as a capital city of Jharkhand is an important centre of trade & commerce in the State. The high literacy rate, stable workforce, political environment and availability of basic facilities make a favorable environment for business to flourish in the area. Ranchi also has a number of Multinational Companies, Public Sector Enterprises & Private Limited Companies, which provide good employment opportunities. Almost 22 per cent of the workforce is engaged in public administration, defence, social security, education, and health. Mineral and Natural Resources in Ranchi Ranchi district is rich is natural and mineral resources. The mining and metal industry drives the economic activity in the region. Ranchi is the headquarters of public sector undertakings HEC and MECON. Usha Martin, manufacturing steel wire ropes and alloy steels, is also located in the city. The metals and mining industry is expected to continue to remain the thrust area for economic growth and will provide more employment, given the large investments planned in the sector in the state. Creation of special economic zones (SEZs), educational institutions, tourism-related activities, and specialty health facilities are seen as the other potential economic development opportunities for the city. Ranchi city is surrounded by large & green forest areas, which provide many basic raw materials to a large number of industries like construction, furniture, match box, paper, rayon, railway slippers, wooden poles, etc. Water for irrigation purpose is drawn from rivers like Swarnrekha, Koyal, and Damodar. The state also has adequate power generation and efforts are being made to enhance it. Jharkhand also has adequate availability of surface and ground water and is sufficient with immense biodiversity supported by a moderate climate. Locational Advantage: Jharkhand is located close to Calcutta, Haldia and Paradeep Ports. Ranchi, the capital, is well connected by air, rail and road. Industrial towns have excellent rail and road connectivity with major market places in the country. Ranchi Airport The city of Ranchi has an international airport Birsa Munda Airport (IXR) which has direct flights from Patna, Kolkata, Delhi, Mumbai, Bangalore, Pune, Chennai, Jammu and Goa. Few major airlines like Air India, GoAir, Indigo and Jet Airways service this airport. Railways Ranchi railway station is well connected from Delhi, Kolkata, Mumbai, Chennai and other major cities. It consist of 6 platforms with all standards necessities. It is also well connected to Ranchi Airport and Bus Terminals. The Ranchi Railway station cater to 36 halting trains, 27 originating trains and 27 terminating trains. Apart from Ranchi Railway Staion, Hatia Railway Staion is also a major railway station in Ranchi. Conducive R&D Facilities: the state houses top most metallurgical institutions like NML Jamshedpur, SAIL R&D, etc.

February 2017 6

• Favourable legislative framework RMC is governed by the Jharkhand Municipal Act, 2011 and is conducive in nature to the corporation as it provides the corporation with good revenue raising powers and favourable borrowing framework. The Act provides RMC power to levy taxes, user charges, fees and fines including penalties and rebates. The Act also provides the corporation with a favourable borrowing framework with provisions for market and bank borrowings. It also stipulates SMC to establish a sinking fund for timely repayment of debt and earmarking of specific tax. However the puts additional load by stipulating ULB’s to operate primary schools and hospitals apart other obligatory services like sewerage, storm water drainage, solid waste management, and lighting of public streets, places and buildings and construction and maintenance of roads, bridges and footpaths. Considering the enabling provisions in the governing act of RMC, the corporation has the flexibility to use the provisions favourably to enhance its resources to support the growth required to implement projects in future.

• Strong support from Government of Jharkhand (GoJ) RMC’s revenue profile depicts moderate own revenues. Since the state does not levy octroi, the major sources of RMC’s own tax revenue include Property Tax (typically referred to as Holding Tax). Own non tax revenue constitutes fees and charges and rent from municipal properties including proceeds from sale of land. Own tax and non-tax revenues constitute around 49 percent of the total revenue in 2015-16. Property tax, Income from Fee and User charges and Rent from municipal properties constituted 25%, 34% and 3% respectively of revenue receipts in 2015-16. State government grants constituted around 13 percent of revenue receipts in 2014-15.

GoJ provides support to the corporation to undertake a number of projects like sewerage management, storm water in the city under Jawaharlal Nehru National Urban Renewal Mission (JNNURM), Smart City and AMRUT.

Particulars (Rs. Lakhs) 2012-13 2013-14 2014-15 2015-16 2016-17 State Grants 1552 787 572 4339 3052 Total Revenue Income 4942 3782 4242 10489 12650 Revenue Grants/ Revenue Receipts 31% 21% 13% 41% 24%

• Moderate financial risk profile RMC has a moderate financial risk profile marked by limited operating deficit but absence of any debt. Own tax and non-tax revenues of the corporation constitute around 49 percent of the total revenue in 2015-16. The corporation has been able to keep the operating deficit at around 29 percent in the past despite high establishment expenses. With non-revenue generating capex planned over the medium term that would lead to an increase in repairs and maintenance cost, coupled with an increase in the establishment expenses on account of introduction of 7th pay commission, the revenue expenditure is expected to increase over the medium term. However RMC expects to operate at an operating surplus over the medium term as it is likely to significantly ramp up non tax revenues and receive adequately support from GoJ in the form revenue grants. Furthermore, RMC has a good financial flexibility on account of absence of any debt on its books as on date. This provides corporation with flexibility to borrow if required towards funding its projects. The corporation over the next 4-5 years is undertaking a number of projects under various schemes such as AMRUT, Smart City etc. Most of these schemes are 100 percent Govt.

February 2017 7

of India (GOI) funded, however, some schemes would require the corporation to provide part funding. Under Smart City project, the corporation is expected to raise modest debt over the medium term and thus the financial risk profile of the corporation is expected to remain moderate. The above rating strengths are partially offset by the following weaknesses: Weaknesses:

• Weak economic management, reflected in constrained existing revenues with poor

collection efficiency and zero cost recovery of maintenance Although the Jharkhand Municipal Act empowers the corporations/ councils with a number revenue augmenting sources, RMC has a limited existing own revenue sources. Revenue receipts from own sources include tax and non-tax revenues which together account for around 49 percent of the total revenue receipts. Per capita Property tax stands at around Rs.93 which is comparable to cities in other states such as Maharashtra, West Bengal, and Rajasthan etc. Until a year back there was no systematic procedure for collection of property tax. Collections are also affected due to severe staff shortage in the corporation and unwillingness of the citizens to pay tax. However in 2016, a third party agency (Sparrow) was awarded the contract to collect all taxes on behalf of the various corporations in Jharkhand. In exchange for this service Sparrow would be allowed to retain a portion of the tax collected. This is expected to significantly improve the collection of taxes in the near future. The moderate own revenues makes the corporation heavily dependent on state government for grants for meeting its revenue expenditure like salaries and pensions. • Inadequate service arrangements The service arrangements in Ranchi are characterized by poor sewerage network, average water supply levels, below average storm water drainage network and limited solid waste management practices with no segregation and treatment facility. Poor coverage of sewerage system Ranchi Municipal Corporation has no sewerage network and treatment plant except for the area occupied by MECON (ward no. 26) and HEC (ward nos. 32,33,34,35,36&37), which had developed their own sewerage system. Total laid sewerage network required as per the smart city plan is around 179 kms. Total sewer generated in the city per day is 49 MLD. The sewer generated from houses is either collected in septic tanks or gets dumped in open drains leading to water pollution or health hazards. Around 77% of population has constructed their own septic tank based latrine and soak pit. However due to poor maintenance, overflow from these septic tanks and soak pits are common and such overflows normally find its way into the nearby nallah or river. In some cases raw sewage is also being discharged directly into open drains, nallahs or even open land. Thus, the current practice of sewerage disposal impacts the hygiene in the city and poses a serious health hazard. Currently, under Service Level Improvement Plan in AMRUT, RMC is planning to undertake a number of sewerage projects beginning 2016 for which a total outlay of Rs 833 crores has been outlined. Post completion of the above projects, the network would cover 100 percent of the total area of the city.

February 2017 8

Average Water Supply levels The water supply system of Ranchi is average and covers around 34 percent of the town in area. Presently Ranchi has cumulative dam capacity of 417 MLD. The average per capita supply of water is 98 lpcd as against a recommended benchmark of 135 lpcd indicating average water supply levels. Sources of Water Supply

WTP Capacity , MLD Actual Treatment MLD Year of Construction

Kanke Dam 19.5 19.5 1956

Hatia Dam 56.8 56.8 1962

Rukka Dam 341 135.5 1971

Status of Water Supply Service Levels.

Sr. Indicators Present Status MOUD

No. Benchmark

1 Per capita supply of water 98 lpcd 135 lpcd

2 Extent of metering of water connections 25% 100%

3 Extent of non-revenue water 70% 20%

4 Quality of water supplied 100% 100%

5 Cost recovery in water supply

services 40% 100%

6 Efficiency in collection of

water supply related charges. 50% 90%

Zone Wise Coverage of Households.

Zone No.

Total No. of Households

Households with Water

Tap Connections

Households without Water

Tap Connections Remarks

25 2, 43,209 Nos 1,00,628 Nos. 1,42,581 Nos. 34%(approx) area

of R.M.C

Below average storm water drainage network The storm water drainage system of Ranchi is below average and covers around 52 percent of the town. Presently the water discharges through the man-made drains, natural drains and gets disposed of to the river. These manmade drains have no proper drainage network and the coverage is hardly 12 %.Storm water drainage work has been started and after completion the concerned firm will look after the maintenance work for 5 years.

February 2017 9

Status of Storm Water Level service levels

Sr. No

Indicators Sustainabl

e standards

Black (Caution for

improvement)

Red (Immediate action for

improvement)

Present Status

1 Coverage of Storm

water drainage network

100% <75% <50% 52%

2 Incidence of

sewerage mixing the drains

0% <25% <50% 80%

3 Incidence of water

logging 0% <25% <50%

4-6 times in a year

Currently, under Service Level Improvement Plan in AMRUT, RMC is planning to undertake a number of storm water drainage projects beginning 2016 for which a total outlay of Rs 417 crores has been outlined. Post completion of the above projects, the network would cover 100 percent of the total area of the city.

Limited solid waste management practices The solid waste management services of RMC are average with limited door to door collection, no segregation and no waste treatment. Presently, a systematic and scientific system of waste disposal is practically non-existent and is yet to be developed. Although, the corporation has started door to door collection of solid waste (~70 percent), a few areas exist where citizens merely dump the wastes in nearby open drains/bins or open space available adding to the piling up of waste leading to clogging of drains. RMC has adopted open transport of wastes from secondary points to the dumping site. The solid waste collected is neither segregated nor treated and is dumped in the dumping yard situated outside the city. However, in order to improve its service level, RMC plans to increase the door-to-door collection and is also planning to undertake a project for setting up a waste to energy plant with a third party company.

• Exposure to project risk given its limited execution capabilities– projects being

undertaken are large compared to its past track record The size of the planned projects as compared to that of those undertaken by the RMC in the past is quite large. The total capital expenditure of the corporation for the past five years has been at around Rs.280 crore. However, the corporation is expected to undertake total capex of over Rs.3200 crore in the next 4-5 years. Furthermore, though the corporation has experience in undertaking public works and developing road projects, it has limited experience and capabilities in undertaking large project of similar nature. Thus limited experience in handling large projects and inadequate staff vis-a-vis the size of the projects, there is a huge risk of the projects to face implementation risk/ project delays due to complexities inherent to such infrastructure projects. Project delays may result in cost escalations, which may put additional financial burden on RMC’s resources. About RMC Ranchi Municipal Corporation (RMC) was established on 15th September 1979 by merging erstwhile Ranchi Municipality, Doranda Municipality and Ranchi Doranda Joint Water Board. It is the second Municipal Corporation of erstwhile Bihar and the first Corporation in the state of Jharkhand. With 55 administrative Wards, the corporation’s jurisdiction extends over an area of 175.12 sq. RMC is governed by the Jharkhand Municipal Act, 2011.

February 2017 10

The 74th Constitutional Amendment Act (1992) has delegated the primary responsibility for urban management to urban local bodies / Governments. Unfortunately, the devolution of powers to ULBs has been very protracted. Like many other ULBs, there has been no real devolution of powers and functions to the RMC. The main functions of the RMC as defined under Section 70 Jharkhand Municipal Act, 2011 are: A) Core Functions

• Urban planning including town planning,

• Regulation of landuse including protection of public land from encroachment and construction of buildings,

• Planning for economic and social development,

• Roads including footpath and road crossing facilities for pedestrians and bridges,

• Water supply for domestic, industrial and commercial purposes,

• Public health, sanitation including storm water drains, conservancy and solid and liquid waste management,

• Fire services,

• Urban forestry, protection of the environment, promotion of ecological aspects and maintenance of environmental hygiene,

• Safeguarding the interests of weaker sections of society, including the handicapped and mentally retarded,

• Slum improvement and upgradation including providing basic facilities,

• Urban poverty alleviation,

• Provision and maintenance of urban amenities and facilities such as parks, gardens, playgrounds, public markets, bathing and washing ghats, waiting sheds for travelers,

• Promotion of cultural, educational and aesthetic aspects,

• Establishment and maintenance of burial and burning grounds, cremations, cremation grounds and electric crematoriums,

• Cattle pounds, prevention of cruelty to animals,

• Collection and updating of vital statistics including registration of births, deaths and marriages,

• Provision and maintenance of public amenities including street lighting, parking spaces for vehicles, bus stops and public conveniences like toilet facilities at public places,

• Regulation of slaughter houses and tanneries and sale of meat, fish and other perishable food stuffs etc.

(B) General Functions

• Organising voluntary workers and promote community participation in all development activities,

• Organise campaign for thrift,

• Awareness building against social evils like alcoholism, consumption of narcotics, dowry and abuse of women and children,

• Organize legal awareness campaigns among weaker sections, campaign against economic offences, adherence to civic duties, and promoting communal harmony,

• Provision of public transport,

• Organise relief activities during natural calamities and maintain relief centres like hospitals, dispensaries, asylums, rescue homes, maternity houses and child welfare centres, etc.,

• Mobilising local resources in cash or in kind,

• Organise and promote resident welfare associations, neighbourhood groups and committees, and selfhelp groups with focus on the poor,

February 2017 11

• Disclosure and dissemination of information of public interest,

• Maintenance of public properties,

• Issue of licences to dangerous and offensive trades and industries,

• Issue of licence to domestic pet animals and destruction of stray dogs,

• Conservation and preservation of water bodies,

• Conservation and preservation of places and buildings of historical and cultural importance,

• Promoting energy efficiency and build awareness on climate change,

• Promote introduction of Information Technology and eGovernance in the working of the Municipality.

February 2017 12

2. Rating Analysis 2.1 Existing ULB structure

i. Legal and Administrative Framework Overview Ranchi Municipal Corporation (RMC) is governed by the Jharkhand Municipal Act, 2011.The Act stipulates core services such as sewerage, storm water drainage, solid waste management, lighting of public streets, places and buildings and construction and maintenance of roads, bridges and footpaths. Legal Framework of RMC

Sr. No

Parameter Yes/No

Composition:

1 Does corporation comprises of an elected body Yes Revenue raising power:

2 Power to levy Cess, Property tax, Theatre tax, Vehicle tax and any other justified user charges

Yes

3 Legislative flexibility in levying penalties and rebates Yes Borrowing power:

4 Governing act conducive to financing by providing for sinking fund creation Yes

5 Earmarking of specific tax, enabling provisions Yes

6 Escrow of receivables Yes Services:

7 Obligations does not include, discretionary services like hospitals, medical college, secondary education.

No

Administration:

8 Healthy relations between elected representatives and civil servant Yes

9 Healthy relations between State and Muni / Elected Reps and Civil Servants Yes

10 Adequate staff at top level. No Good revenue raising powers

• Good Taxing powers

The Act allows RMC to levy property tax on land and building, water tax, fire tax, tax on advertisements, surcharge on entertainment tax, tax on pilgrims, tax on trade & profession tax on congregation etc. The municipal corporation can also raise revenues through user charges such as toll on roads and provisions for civic service. The Corporation also has the powers to levy development charges as determined by the by-laws from time to time.

• Power to levy fees and fines including penalties and rebates Jharkhand Municipal Act provides corporation with power to levy fines & penalties in case of delays in payment or defaults or violation of any provision of the act. The corporation has the power to levy fees in exercise of various regulatory powers such as sanction of buildings plans, issue of municipal licenses for various non-residential use of lands and buildings etc. The Act allows RMC to offer rebates to encourage timely payment of taxes. In addition, RMC also enjoys

February 2017 13

the statutory power to attach movable and immovable property of the defaulter. The municipal corporation can also file cases under any law regulating the recovery of dues as public demand. Adequate Provisions for borrowing The Act has good provisions for facilitating the borrowing by the ULBs. It permits the corporation to borrow funds by takings loans, open credit account with banks, raise short term loans & issue debentures. However, the Act also states the GoJ to frame a comprehensive debt limitation policy regarding general principles and limits for loans raised by the ULBs. The section also limits the use of borrowed funds only for the stated purpose of borrowing. Furthermore, the Act stipulates RMC to establish a sinking fund for timely repayment of debt and earmarking of specific tax and enabling provisions. The state government may lay down a comprehensive debt limitation policy applicable in case of loans to be raised by the municipality Limited operational autonomy RMC possesses limited operational autonomy in terms of appointment of officers in the corporation. The corporation cannot appoint any municipal official without prior approval of the state government. The Act requires the ULB to have a Municipal Executive Officer, Municipal Finance Officer, Municipal Engineer, Municipal Health Officer, Environmental Engineer and Municipal Secretary while the recruitment of these officers is to be done by the state government.

Favourable Legislative Framework The Jharkhand Municipal Act is conducive in nature as it provides the corporation with good revenue raising powers and favourable borrowing framework. The Act provides RMC power to levy taxes, user charges, fees and fines including penalties and rebates.. The Act also provides the corporation with a favourable borrowing framework with provisions for market and bank borrowings. It also stipulates RMC to establish a sinking fund for timely repayment of debt and earmarking of specific tax and enabling provisions. However the legal framework is constrained since the Act also stipulates public health and educational only limited obligatory services like sewerage, storm water drainage, solid waste management, and lighting of public streets, places and buildings and construction and maintenance of roads, bridges and footpaths Administrative and Service arrangements: The civic administration in Ranchi is under the purview of Ranchi Municipal Corporation which is governed by the provisions of the Jharkhand Municipalities Act of 1959. The obligatory functions of the corporation include provision of water supply, solid waste management, storm water road side drainage network, sewerage system, street lighting, construction and maintenance of city roads and slum improvement. The General body of the corporation consists of 18 Councilors who are elected representatives of 18 wards of the city. The Councilors are elected every 5 years and the meeting of the Councilors is held once in every three months. Chairperson, the first citizen of the city, is elected by the Councilors and holds office for a period of five years. The Chairperson presides over the General Body Meetings of the Councilors.

February 2017 14

ii. Economic Base of Service Area Ranchi City Profile Ranchi is the capital of the state of Jharkhand. Jharkhand was carved out of Bihar in November 2000. The city is an important commercial, administrative, and educational centre of the region, and also serves as the regional wholesale trading hub. A little over 60 per cent of the city’s working population is engaged in public services, wholesale and retail trade, and manufacturing and repairs; the balance is spread across sectors such as mining, transport, electricity, gas, and water supply. The contribution of agriculture is almost negligible, at 2 per cent.

The city, spread over 175 sq km, had a population of 10.73 lakh, as per the 2011 census. The population is estimated to have grown at a compounded annual rate of about 2.4 per cent. The city’s civic administration is under the purview of Ranchi Municipal Corporation (RMC) and Ranchi Regional Development Authority (RRDA); only 50 per cent of the city’s area is with RMC. The corporation is governed by the Jharkhand Municipal Corporation Act of 2011.

February 2017 15

Demographic Profile: Demographic Profile

Corporation/ Council - Ranchi Municipal Corporation

City - Ranchi

State - Jharkhand

No. of Wards Nos. 55

Area Sq. km 175

Population Nos. 1,073,427 (2011 Census) 8,46,000 (2001 Census)

Population Density Nos./ Sq. km 6134

Population Growth (yearly) % 2.41

Sex Ratio No of females / 1000 males

920

Literacy Rate % 87.37 as per 2011 Census

No. of Household Nos. 2,43,209

Slum Population Nos. 74,287

Slum as % of total population % 6.92%

Nearest Airport Name &distance Birsa Munda Airport (7 km)

Nearest Ports Name& distance Haldia Port, West Bengal (400 km)

Nearest Important Cities Name& distance na

Educational Infrastructure Ranchi has adequate educational infrastructure with over 619 schools catering to ~1 lac students, 25 coaching institutes catering to ~50000 students, 40 Higher/technical colleges catering to ~4000 students and ~600 private hostels with a capacity of ~12000.

Railway Connectivity Broad Gauge Line- well connected to major Indian cities

Connectivity by road- Highways, Expressways

Connected by national highways

Upcoming Major Infra Projects in

District

Selected in a number of central government schemes like Smart

City, AMRUT

Population Growth

Ranchi Bundu Khunti Ramgarh SimdegaLohardaga Gumla

Population Census 2001 847,093 18,519 29,282 104,686 33,981 46,196 39,761

Population Census 2011 1,073,42721,054 36,390 124,692 42,944 57,411 51,264

Municipal Area (Sq. Km) 175 11 26 150 49 35 16

Population density (No./Sq. Km.)

6,130 1,914 1,410 834 869 1,640 3,204

Population decadal Growth (%)

27.00% 14% 24.27% 19.11% 26% 24.28% 28.93%

Population yearly Growth (%) 2.40% 1.29% 2.20% 1.76% 2.37% 2.37% 2.37%

Economic Activities Ranchi, given its status as a capital city of Jharkhand is an important centre of trade & commerce in the State. The high literacy rate, stable workforce, political environment and availability of basic facilities make a favorable environment for business to flourish in the area. All types of business can be found in Ranchi from small daily need shops, medical stores, ready-made garments to high end branded stores. Many premium brands, fast –food chains & multiplexes have set shop in Ranchi. With the increasing spending power of the consumer many malls & multiplexes are also doing great business in Ranchi. Ranchi also has a number of Multinational

February 2017 16

Companies, Public Sector Enterprises, & Private Limited Companies, which provide good employment opportunities. Almost 22 per cent of the workforce is engaged in public administration, defence, social security, education, and health. Mineral and Natural Resources in Ranchi Ranchi district is rich is natural and mineral resources. The mining and metal industry drives the economic activity in the region. Ranchi is the headquarters of public sector undertakings HEC and MECON. Usha Martin, manufacturing steel wire ropes and alloy steels, is also located in the city. The metals and mining industry is expected to continue to remain the thrust area for economic growth and will provide more employment, given the large investments planned in the sector in the state. The state also plans to encourage the information technology (IT) industry to set up base in the state, but any significant contribution from the IT industry towards employment will take time to fructify. Creation of special economic zones (SEZs), educational institutions, tourism-related activities, and specialty health facilities are seen as the other potential economic development opportunities for the city. The Ranchi city is surrounded by large & green forest areas, which provide many basic raw materials to a large number of industries like construction, furniture, match box, paper, rayon, railway slippers, wooden poles, etc. Water for irrigation purpose is drawn from rivers like Swarnrekha, Koyal, and Damodar. The state also has adequate power generation and efforts are being made to enhance it. Jharkhand also has adequate availability of surface and ground water and is sufficient with immense biodiversity supported by a moderate climate. Locational Advantage: Jharkhand is located close to Calcutta, Haldia and Paradeep Ports. Ranchi, the capital, is well connected by air, rail and road. Industrial towns have excellent rail and road connectivity with major market places in the country. Conducive R&D Facilities: the state houses top most metallurgical institutions like NML Jamshedpur, SAIL R&D, etc.

iii. Socio Economic profile of the state

Overview Ranchi is an administrative centre, and benefits from its status as the state capital. The city has a large percentage of urban poor, primarily tribals. The population is mainly engaged in the metals and mining industry and trading. Ranchi, is a regional trading hub and an educational centre. Three national highways, NH-23, NH-31, NH-2, NH-33, and NH-75, pass through the city. It also has an airport, Birsa Munda Airport connecting it to Kolkata, Bangalore, Patna, Indore, Mumbai and Delhi. Socio-economic base As per provisional reports of Census India, population of Ranchi in 2011 is 1,073,427; of which male and female are 558,872 and 514,555 respectively. The socio-economic condition of the population is average, which is reflected in the literacy rate of 87 per cent of which male and female literacy is 91.67 and 82.72 percent. The number of urban poor is low, with nearly 7 per cent of the population live in slums. The sex ratio of Ranchi city is 921 per 1000 males

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Weak civic infrastructure The city has inadequate service arrangements with inadequate water supply, sewerage network and solid waste management. This adversely impacts the willingness to pay for user charges. As can be seen from Table 1, the city’s infrastructure is currently weak and requires attention. Table 1: Current service levels

Infrastructure Desired level of service Present level of service

Water 100% 52%

Sewerage, sanitation 100% coverage of the

population

77% coverage

Drainage 100% coverage na

Solid waste management 100% coverage 90%

Urban transport 20% of area Inadequate

Environment & pollution Safe Air, land, and water pollution

Street lights 100% of streets Inadequate coverage

Demographic Profile:

Demographic Profile Corporation/ Council - Ranchi Municipal Corporation

City - Ranchi

State - Jharkhand

No. of Wards Nos. 55

Area Sq. km 175

Population Nos. 1,073,427 (2011 Census) 8,46,000 (2001 Census)

Population Density Nos./ Sq. km 6134

Population Growth (yearly) % 2.41

Sex Ratio No of females / 1000 males

920

Literacy Rate % 87.37 as per 2011 Census

No. of Household Nos. 217432

Slum Population Nos. 74,287

Slum as % of total population % 6.92%

Nearest Airport Name &distance Birsa Munda Airport (7 km)

Nearest Ports Name& distance Haldia Port, West Bengal (400 km)

Nearest Important Cities Name& distance na

Railway Connectivity Broad Gauge Line- well connected to major Indian cities

Connectivity by road- Highways, Expressways

Connected by national highways

Upcoming Major Infra Projects in

District

Selected in a number of central government schemes like Smart

City, AMRUT

February 2017 18

Financial factsheet of the state-

Rs. Cr. 2015-16 (Budget

Estimates) 2014-15 (Revised

Estimates) 2013-14

(Accounts) Revenue Receipts (RR) 48,027 43,904 26,137 Revenue Expenditure (RE) 43,343 40,073 23,431 Capital Receipts 7,895 7,357 4,701 Capital Expenditure 62,168 59,343 53,449 Debt 40,740 35,570 31,690 Guarantees Outstanding 160 160 160 GSDP 214,896 197,514 172,773 Revenue Deficit (RE- RR)/(Surplus) -4,684 -3,830 -2,705 Primary Deficit 1,731 2,183 -392 Gross fiscal Deficit 5,157 4,911 2,222 Revenue Deficit/ RR -9.8% -8.7% -10.4% Primary Deficit/GSDP 0.8% 1.1% -0.2% GFD/GSDP 2.4% 2.5% 1.3% (Debt+Guarantees)/GSDP 19.0% 18.1% 18.4% (Debt+Guarantees)/RR 0.9 0.8 1.2 Revenue Deficit/ GFD -90.8% -78.0% -121.7% Own taxes/ GSDP 6.8% 6.7% 5.4%

• Govt of Jharkhand (GoJH) has a moderate economic structure with low contribution from secondary sector at around 26% and state ranking relatively lower on socio-economic indicators.

• The GSDP growth has also been moderate at around 10% CAGR over the past three years.

• This is offset by healthy state finances with stable revenue surpluses and relatively lower indebtedness (ratio of sum of debt and guarantees to GSDP), levels at less than 20%.

• The state runs moderate fiscal deficits at less than 2.5% of GSDP to fund capital outlays.

• While state has shown a healthy tax buoyancy however poor health of its power sector marked by high AT&C losses and debt constrains its economic management.

2.2 Economic Management Economic management of any ULB is assessed through level of services provided by the body, by comparing the obligatory and discretionary services as defined in the Act, the maintenance of such services and evaluating the operating efficiency of the ULB in terms of its revenue collection efficiency. Further, the economic management of the ULB is also enhanced or constrained by its capacity (management) and reform orientation. Capacity building leads to improvement in the abilities of personnel and organizations to perform their tasks in a more effective and efficient manner and reform orientation helps in improving the overall service levels of the body leading to creation of new revenue sources or improvement in operating efficiency.

Service Arrangement • Service level arrangements of the corporation Obligatory services to be provided by the RMC are limited to only water supply, sewerage, storm water drainage, solid waste management and slum improvement. The level of coverage and the quality of service provided by the RMC is inadequate as reflected in poor sewerage network, average water supply levels, below average storm water drainage network and limited solid waste collection with no segregation and treatment facility. Considering that the city has been

February 2017 19

selected under AMRUT, SMART CITY, the service levels are expected to improve significantly over the next 4-5 years. Sewerage (Poor) Ranchi Municipal Corporation has no sewerage network and treatment plant except for the area occupied by MECON (ward no. 26) and HEC (ward nos. 32,33,34,35,36&37), which had developed their own sewerage system. Total laid sewerage network required as per the smart city plan is around 179 kms. Total sewer generated in the city per day is 49 MLD. The sewer generated from houses is either collected in septic tanks or gets dumped in open drains leading to water pollution or health hazards. Around 77% of population has constructed their own septic tank based latrine and soak pit. However due to poor maintenance, overflow from these septic tanks and soak pits are common and such overflows normally find its way into the nearby nallah or river. In some cases it is observed that raw sewage is also being discharged directly into open drains, nallahs or even open land. Thus, the current practice of sewerage disposal impacts the hygiene in the city and poses a serious health hazard. Currently, under Service Level Improvement Plan in AMRUT, RMC is planning to undertake a number of sewerage projects beginning 2016 for which a total outlay of Rs 833 crores has been outlined. Post completion of the above projects, the network would cover 100 percent of the total area of the city. Water Supply levels (Average) The water supply system of Ranchi is average and covers around 34 percent of the town. Presently Ranchi has cumulative dam capacity of 417 MLD. The average per capita supply of water is 98 lpcs as against a recommended benchmark of 135 lpcd indicating average water supply levels. Sources of Water Supply

WTP Capacity , MLD Actual Treatment MLD Year of Construction

Kanke Dam 19.5 19.5 1956

Hatia Dam 56.8 56.8 1962

Rukka Dam 341 135.5 1971

Status of Water Supply Service Levels.

Sr. Indicators Present Status MOUD

No. Benchmark.

1 Per capita supply of water 98 lpcd 135 lpcd

2 Extent of metering of water connections 25% 100%

3 Extent of non-revenue water 70% 20%

4 Quality of water supplied 100% 100%

5 Cost recovery in water supply

services 40% 100%

6 Efficiency in collection of

water supply related charges. 50% 90%

February 2017 20

Zone Wise Coverage of Households.

Zone No.

Total No. of Households

Households with Water

Tap Connections

Households without Water

Tap Connections Remarks

25 2, 43,209 Nos 1,00,628 Nos. 1,42,581 Nos. 34%(approx) area

of R.M.C

Storm water drainage system (Below Average) The storm water drainage system of Ranchi is below average and covers around 52 percent of the town. Presently the water discharges through the man-made drains, natural drains and gets disposed off to the river. These manmade drains have no proper drainage network and the coverage is hardly 12 %.Storm water drainage work has been started and after completion the concerned firm will look after the maintenance work for 5 years. Status of Storm Water Level service levels

Sr. No

Indicators Sustainable standards

Black (Caution for improvement)

Red (Immediate action for

improvement)

Present Status

1 Coverage of Storm

water drainage network

100% <75% <50% 52%

2 Incidence of

sewerage mixing the drains

0% <25% <50% 80%

3 Incidence of water

logging 0% <25% <50%

4-6 times in a year

Currently, under Service Level Improvement Plan in AMRUT, RMC is planning to undertake a number of storm water drainage projects beginning 2016 for which a total outlay of Rs 417 crores has been outlined. Post completion of the above projects, the network would cover 100 percent of the total area of the city. Solid waste management practices (Average) The solid waste management services of RMC are average with limited door to door collection, no segregation and no waste treatment. Presently, a systematic and scientific system of waste disposal is practically non-existent and is yet to be developed. Although, the corporation has started door to door collection of solid waste (~70 percent), a few areas exist where citizens merely dump the wastes in nearby open drains/bins or open space available adding to the piling up of waste leading to clogging of drains. RMC has adopted open transport of wastes from secondary points to the dumping site. The solid waste collected is neither segregated nor treated and is dumped in the dumping yard situated outside the city. However, in order to improve its service level, RMC plans to increase the door-to-door collection and is also planning to undertake a project for setting up a waste to energy plant with a third party company.

February 2017 21

Parameters Units 2015-16 Solid waste generated TPD 550

Average collection (~90%) TPD 495

Bio-medical waste generated TPD 2-3

Door-to-door collection % 90%

Segregation at source % Not done

Area coverage of sweeping % 80%

Population coverage of sweeping % 80%

Disposal of waste

• Segregation of waste % Not done

• Type of disposal Open dumping

• Total medical waste disposed separately % Done by hospitals themselves

Waste treatment Plant Capacity TPD 600 ( in progress)

Capacity utilization TPD NA

Any tie up with waste mgmt. companies - NA

Cost recovery of maintenance % 0

Operating Efficiency

• Operating efficiency of the corporation: Low Operating efficiency of the corporation is measured by the revenue generation ability, tax collection efficiency and ability to recover the maintenance cost from the various services provided by the ULB. The operating efficiency of RMC is low on account of limited ability to generate additional revenue sources, constrained existing revenue sources with low collection efficiency and cost recovery of maintenance. Limited existing revenue raising sources and low maintenance cost recovery adding pressure on service levels Although the Jharkhand Municipal Act empowers the corporation with a number revenue augmenting sources, RMC has a limited sources of own revenues. Own non tax revenue constitutes fees and charges and rent from municipal properties including proceeds from sale of land. Own tax and non-tax revenues constitute around 49 percent of the total revenue in 2015-16. Property tax, Income from Fee and User charges and Rent from municipal properties constituted 25%, 34% and 3% of revenue receipts in 2015-16. State government grants constituted around 13 percent of revenue receipts.

585 615 1132

1608

5103

2673

1463 1655

3492 3646

1552

787 572

4339

3052

2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

Break up of Revenue Income

Own Tax Revenue Own Non-Tax revenues State Grants

February 2017 22

Low property tax collection efficiency RMC has a poor collection efficiency of property tax. As discussed with the management, there is no systematic procedure for collection of property tax. Collection is only focused on collecting from regular tax payers and hence the tax collection is low. Until a year back there was no systematic procedure for collection of property tax. . Collections are also affected due to sever staff shortage in the corporation and unwillingness of the citizens to pay tax. However in 2016, a third party agency (Sparrow) was awarded the contract to collect all taxes on behalf of the various corporations in Jharkhand. In exchange for this service Sparrow would be allowed to retain a portion of the tax collected. This is likely to bring a significant improvement in collections over the near future. RMC follows unit area method for calculating the property tax. Residential and commercial properties are charged differently. Property tax collection efficiency

Demand Raised (Rs.Cr) Collections (Rs.Cr.) Collection Efficiency % Particulars Arrears Current Total Arrears Current Total1 Current Overall

FY 2015 24.04 6.12 30.17 - - 7.09 - 24% FY 2014 28.04 5.96 34.01 - - 5.15 - 15% FY 2013 25.53 5.73 31.26 - - 5.82 - 19%

As per raw data given by municipal corporation officials, does not match with budgeted figures

Reform Orientation Slow pace of reforms RMC has not been able to undertake major reforms due to inadequate technical capabilities and insufficient staff at lower level. The various reforms undertaken by the corporation so far as follows:

a. Accounting Reform Particulars Yes /No

Full migration to double entry system Yes (Audit pending)

Production of financial statements (income expenditure and balance sheet)

Yes

Completion of registration and valuations of assets & liabilities -

b. Property Tax Particulars Yes /No Remarks GIS database of record of proprieties liable to property tax No Under process

Non-discretionary method for determination of property tax Yes Unit Area method

Migration to self-assessment system No Yes

Tax payer education programme No No

Establish dispute resolution mechanism Yes No

c. E-Governance Initiative E governance initiatives Yes /No Use of ERP packages No

Biometrics based access control System Yes

February 2017 23

Software for simplifying building construction approvals procedures Yes

Does the city have a GIS base map in place Yes

Online process of birth and death certificates Yes

Computerized billing system adopted Yes

Online property tax and water tax Yes

Does municipality have a website of its own Yes

Frequency data update on the website Monthly

Automated tender process Yes

d. Reforms to be implemented under AMRUT

Under AMRUT, cities are required to undertake certain reforms in e-governance, accounting, audit, improvement in user charges etc. As per the AMRUT guidelines, one purpose of the Mission is to improve governance through a set of Reforms. Past experience shows that projects get delayed if release of project funds is linked to non-completion of Reforms. Therefore, the AMRUT mission shifts towards incentivising the completion of project by keeping a 10 percent of the total project cost and giving to the States/UTs every year as incentive for achievement of Reforms. This incentive fund is an additional fund that will be provided by the MoUD and no matching funds will be required to be given by the State/ULB. The incentive cannot be used as the State share in project in the AMRUT, but can be used by the ULBs for their project funding. As discussed with the management, though RMC has initiated a number of these reforms, the pace of implementation is slow. CRISIL believes that a lack of in-house skill sets and inadequate staff are the likely reasons for the delays in reforms implementation.

2.3 Municipal Finances Basis of analysis Analysis of RMC’s finances is based on the income and expenditure statement (Municipal Budgets) for the period between 2011-12 and 2016-17. The corporation has implemented double entry system for accounting; however financial statements (balance sheet and p&l) were not audited and hence were not available. Moreover, the actuals or revised estimates of 2015-16 are not available and hence the budget estimates of the year has been used for the purpose of analysis. Financial Performance:

Ranchi Municipal Corporation Actual Actual Actual

Budget Estimate

Budget Estimate

Key Financial Figures (Rs. In Lakh) 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 Revenue Income 4942 3782 4242 10489 12650

Revenue expenditure (Excl. Interest) 5869 4962 5835 8503 8217

Operating revenue Surplus (928) (1179) (1592) 1986 4433

Interest expense 0 0 0 0 0

Principal repayment (outside sink. Fund) 1 0 0 0 0

Contribution to Sinking fund 0 0 0 0 0

Revenue Surplus (929) (1180) (1592) 1986 4433

Capital Income 10195 10173 10506 83259 142378

Capital Expense 6671 4039 9226 83443 157691

Capital Surplus 3524 6134 1279 (184) (15313)

Overall Surplus 2595 4955 (313) 1801 (10880)

Deposits and Advances (net) 111 85 128 120 (896)

Initial Cash / Bank balance 4302 7008 33178 24156 26077

Change in Cash / Bank balance 2706 5040 (185) 1921 (11776)

Final Cash / Bank balance 7008 12048 32993 26077 14301

Cash/Bank balance (yearly data from muni) 7008 12048 32992 26077 16685

February 2017 24

Key service related figures

Per capita property Tax collection 53 48 93 114 396

Growth in Property Tax Collection na -7% 97% 25% 254%

Property tax to Total Revenues 12% 14% 25% 12% 36%

Own revenues/ Revenue receipts 66% 55% 66% 49% 69%

Establishment Exp./ Revenue exp. 53% 60% 80% 38% 44%

Operating Surplus/ Revenue receipts -19% -31% -38% 19% 35%

Revenue Surplus/ Revenue receipts -19% -31% -38% 19% 35%

Overall Surplus/ Revenue receipts -279% -420% 20% 91% -245%

Operating Surplus/ Net debt - - - - -

Debt/ Revenue receipts - - - - -

DSCR (Op Surplus/Interest + Principal) - - - - -

• Moderate revenues base with high dependence on state government grants for its

revenue

Chart 1: Revenue Profile of RMC for 2015-16

Own Tax

Revenue

15% Shared/ Assigned

taxes

10%

Own Non-Tax

revenues

33%

State Grants

42%

2015-2016

February 2017 25

Revenue profile of RMC

Particulars (Rs. Lakhs) 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 4 year CAGR

Own Tax Revenue (a + b + c) = (d) 585 615 1132 1608 5103 72%

Octroi (a) 0 0 0 0 0 Na

Property Tax (b) 571 530 1041 1300 4600 68%

Other Own Taxes (c) 14 86 92 308 503 145%

Shared/ Assigned taxes 131 917 883 1050 850 60%

Own Non-Tax revenues (e + f + g) =(i) 2673 1463 1655 3492 3646 8%

Income from Fee and User Charges (e) 1763 1307 1423 3281 3419 18%

Rent From Municipal Properties (f) 434 8 118 45 50 -42%

Others (g) 476 147 114 165 177 -22%

State Grants (j+k) = (m) 1552 787 572 4339 3052 18%

Compensation for Octroi (j) 0 0 0 0 0 Na

Revenue Grants (k) 1552 787 572 4339 3052 18%

Total Revenue Income (d + i + m) 4942 3782 4242 10489 12650 26%

The rise in revenue income can be attributable to the rise in income and user charges expected going forward on account of better compliance and on account of increase in revenue grants Income from Fee and User Charges breakup

Particulars (Rs. Lakhs) 2012-

13 2013-

14 2014-

15 2015-

16 2016-

17 Road cutting charges, parking & other traffic related fees 0 0 261 358 306

License & registration fees 18 202 133 254 272

Solid waste collection & disposal fee 307 145 118 174 400 Town Planning, development charges, building permission fees etc 1085 470 703 859 705

Collection from Public Places 0 0 0 3 0

Water supply & Sewerage charges 330 313 190 454 1175

Others 24 177 18 1178 561 Total Fees and User Charges 1763 1307 1423 3281 3419

• Operating deficit likely to improve to surplus however Op. Surplus expected to

continue to remain moderate Ranchi Municipal Corporation Actual Actual Actual BE BE

2012-13

2013-14

2014-15

2015-16

2016-17

Operating revenue Surplus (928) (1179) (1592) 1986 4433 Operating Surplus/ Revenue receipts

-19% -31% -38% 19% 35%

Revenue expenditure of RMC

February 2017 26

Ranchi Municipal Corporation

Actual Actual Actual BE BE 4 yr

2012-

13 2013-

14 2014-

15 2015-

16 2016-

17 CAG

R Establishment 3109 2973 4680 3244 3626 4% Admin & General 1271 676 1043 3763 2272 16% Repair & Maintenance 1490 1259 84 1491 2318 12% Others 0 53 28 5 0 Total 5869 4962 5835 8503 8217 9%

• Financial flexibility on account of absence of any debt and moderate debt funded

capex over the medium term RMC has a good financial flexibility on account of absence of any debt on its books as on date. This provides the corporation with flexibility to borrow if required towards funding its projects. Going forward, the corporation plans to raise moderate debt towards funding its future capex plans over the medium term. The corporation over the next 4-5 years is undertaking a number of projects under various schemes Most of these schemes are 100 percent GoI and GoJ funded, however some schemes would require the corporation to provide part funding. Under AMRUT, the corporation is executing projects worth Rs.1100 crore over the next 4-5 years. RMC plans to fund its share of contribution through internal accruals. However, under Smart city project, the corporation is expected to raise moderate debt over the medium term. Thus with expectation of limited debt funded capex over the medium term, the financial risk profile of the corporation is expected to remain moderate. • Assumptions to Projections:

o Revenues- Revenues receipts are expected to grow in line with the past For the year ended March 31,

2017-18 2016-17 2015-16 2014-15 2013-14

Proj. Actuals Growth (%) 10 21 147 12 -23

o Operating deficit- Revenue deficit expected to turn to revenue surplus in 2015-16 however surplus would to remain moderate at around 20 percent of revenue receipts over the medium term

o Capital receipts and capital expenditure-

Project Total Cost

AMRUT 1384 crore

Smart City 1785 crore

Total 3169 crore

o Debt- No debt assumed over the medium term as the corporation is expected to fund its capex requirements for the planned capex through internal accruals and grants. Towards the smart city project, the corporation is expected to raise moderate debt post 2018. The corporation is not expected to pick up significant debt if it is able to sell its land bank worth nearly Rs 6600 crore (as per estimates of the management).

February 2017 27

2.4 Projects

i. Planned capex details

� Smart City Mission

Smart Cities Mission is an urban renewal and retrofitting program by the GoI with a mission to develop 98 cities all over the country making them citizen friendly and sustainable. The MoUD is responsible for implementing the mission in collaboration with the state governments and ULBs of the respective cities. A total of Rs.48,000 crore have been approved by the Indian Cabinet for development of 98 smart cities with a matching contribution from the state governments and ULBs of respective cities. Highlights of Smart city Challenge- � The objective of the Smart Cities Mission is to develop cities with core infrastructure and

decent quality of life for its citizens, a clean and sustainable environment and application of Smart Solutions.

� Each aspiring city had to compete for selection as a Smart City in what is called a City Challenge.

� The two stage selection process involved intra state competition in which the State/UT shortlisted the potential Smart Cities on the basis of conditions precedent and scoring criteria and in accordance with the total number allocated to it and then each of the potential 100 Smart Cities prepared their proposals for participation in the City Challenge.

� GoI has so far announced the list of 60 cities to be taken up for development as smart cities in Round 1 and 2 of the Smart City Programme out of the 98 competing cities.

Ranchi Smart City- � Ranchi has been selected by the MoUD as one of the 100 cities to participate in the Smart

City Mission. A list of 60 cities has been declared so far out of the 100 cities. � Ranchi improved its smart city plan by 27 per cent to secure a place in the list of 13 cities

selected in the fast-track process to accommodate those that were left out of the first round of 20 beneficiaries of the Centre's scheme.

� The total project would be taken under two heads- Area based development and Pan City development with a project cost of Rs.1489.28 crore over a period of five years.

� The life cycle of the infrastructure assets created is estimated to be about 15 years and IT based systems about 10 years with periodic upgradation

� Lifetime cost of the project is estimated at Rs.2077.95 crore, which comprises initial capital costs at Rs.1489.28 crore and Operations and Maintenance (O&M) costs of Rs.588.68 crore.

Details of the Projects proposed to be undertaken under Smart City are as follows:

Sr. No. Project/Component Cost in Capital Cost Phasing Convergence-GoI Scheme Smart City

JSUDP World Bank Fund PPP O&M Cost p.a

Total O&M Cost -

10 years

AREA BASED DEVELOPMENT PROPOSALS INR Cr 2016 2017 2018 2019 2020 Rs. Cr Scheme Rs. Cr Rs. Cr Rs. Cr Rs. Cr Rs. Cr

1 Land Development 60 20 40 0 0 0 60

2 Transport & Circulation (Roads) 210 10 136 63 0 0 210 4 42

3 Open Spaces & Parks 49 2 37 10 0 0 5 AMRUT 44 3 35

4 Water Supply and Reuse of Recycled Water 55 3 30 22 0 0 40 AMRUT 15 2 17

5 Waste Water Management 36 2 20 14 0 0 26 AMRUT 10 2 18

6 Water Management- Storm Water Drainage 8 0 4 3 0 0 6 AMRUT 2 0 4

7 Power Supply, Source & Efficiency 108 0 27 81 0 0 24 MNRE/ SOLAR

City 84 6 65

8 Safety & Security 22 0 5 16 0 0 22 3 26

9 Transit Hhb/centre 184 0 55 129 0 0 124 60 9 90

10 Smart Administrative & Command Centre (SACC) 149 15 97 37 0 0 0 62 88 7 75

11 Student Resource Centre 88 0 29 59 0 0 0 88 4 44

12 Solid waste management system 5 0 1 4 0 0 1 SBM 4 0 2

13 EWS 39 0 31 8 0 0 19 PMAY 20 1 12

14 Convention Centre 230 0 127 104 0 0 69 161 7 69

15 JUPMI 95 0 52 43 0 0 29 67 3 29

16 Public Facility Centre 37 0 7 30 0 0 37 1 11

17 Health facilites 1 0 0 1 0 0 1 0 0

18 Other Social Infrastructure 20 0 4 16 0 0 20 1 6

A Total Cost of Area Based Proposals in Rs. Lakhs 1397 53 705 640 - - 122 901 315 60 54 542

PAN CITY PROPOSALS

1 Intelligent Public Transport System 16 2 9 0 0 0 11 5 1 8

February 2017 29

2 Corridor Management System (Traffic) 21 2 19 0 0 0 21 1 11

3 Parking Management System 8 1 7 0 0 0 8 0 4

4 IPT Integration 3 0 3 0 0 0 3 0 1

5 Fare mangement system 2 0 2 0 0 0 2 0 1

6 Command & Control Centre (RITTS) 43 0 43 0 0 0 43 2 22

B Total Cost of Pan City Proposals in Rs. Lakhs 92 4 83 - - - 0 0.00 87 0 5 5 46

Grand Total (A+B) in Rs. Crore 1489 57 788 640 - - 122 - 988 315 65 59 589

C Private Investments through Land Monetization 6645 17 1671 2679 2278

Summary of Smart City Projects costs for the next 5 years

Particulars Cost

Cumulative Project cost Rs 1489 crores

O &M cost for next 5 years Rs 294 crores

Total Smartcity Project costs Rs 1785 crores

Current Funding Plan

Total capital structure Amount (Rs.Crores) Share

Grant 122 7%

Equity 988 55%

Debt 675 38%

Total capital structure 1785 100%

Although the current plan entails debt of Rs 675 crores, team believes that the eventual debt in the books could be low as RMC has over Rs 6600 crores of land bank that it plans to monetize. Further given Ranchi’s strategic importance, RMC is likely to receive support from the Jharkhand Government.

October 2016

Implementation plan for the project

Formulation of Special Purpose Vehicle (SPV):

As per norms, the formation of SPV is mandatory to participate in the project. RMC is to set up

a special purpose vehicle for the Smart City project. The SPV will be named as Ranchi MSW

Company Private Limited. The SPV will be a limited company incorporated under the

Companies Act, 2013 at the city-level, in which the Government of Jharkhand and RMC will be

the promoters having 50:50 equity shareholding.

Capital structure

RMC’s contribution

RMC will receive a tied grant of INR 488 crore from GoI in first four years of the mission period,

which will be used as Ranchi Municipal Corporation (RMC) Equity in the SPV to be invested in

the first four years of the mission period;

Govermnment of Jharkhand’s (GoJ) contribution –

Equity of INR 500 crore from GoJ would be invested in first four years of the mission period;

The board shall comprise of:

• Chairman - Principal Secretary Urban Development and Housing Department

• Managing Director - Municipal Commissioner, Ranchi Municipal Corporation

• Director, State Urban Development Agency

• Managing Director, Jharkhand Vidyut Vitran Nigam Limited.

• Deputy Commissioner, Ranchi.

31

February 2017

• Chief Engineer Power Supply & Efficiency, Ranchi Municipal Corporation

• Suptd. Engineer, Water Board- Ranchi Municipal Corporation

• Representative from Government of India.

• Independent directors as deemed suitable

A person of suitable experience and qualification shall be appointed as CEO from open market.

The CEO will be assisted by a super PMU consisting of HOD and domain consultants for Legal,

HR, Finance, Marketing and Strategy. The CEO will also be supported by HODs in

Transportation, Water & Sanitation, Power, City Operations and Security, Technology, Buildings

and Parks and Estate. For all these sectors the SPV shall hire external project domain

consultants and domain contractors.

Project Implementation Structure:

The key functions and responsibilities of the SPV shall be:

• Approve and sanction the projects including their technical appraisal.

• Execute the Smart City Proposal with complete operational freedom.

• Take measures to comply with the requirements of MoUD with respect to the

implementation of the Smart Cities programme.

• Mobilize resources within timelines and take measures necessary for the mobilisation of

resources.

• Approve and act upon the reports of a third party Review and Monitoring Agency.

• Overview Capacity Building activities.

• Develop and benefit from inter-linkages of academic institutions and organizations.

• Ensure timely completion of projects according to set timelines.

• Undertake review of activities of the Mission including budget, implementation of

projects, and preparation of SCP and co-ordination with other missions / schemes and

activities of various ministries.

• Monitor and review quality control related matters and act upon issues arising thereof

• Incorporate joint ventures and subsidiaries and enter into agreements that may be

required for the implementation of the Smart Cities.

• Enter into contracts, partnerships and service delivery required for the implementation

of the Smart Cities Mission.

• Determine and collect user charges and taxes as authorised by the ULB

SPV shall function like a holding or investment company. All funding assistance, grants,

contributions from GoI, GoJ, Municipal Corporation under various missions and schemes that

could relate to smart city initiative would be channelised through this SPV on a convergence

mode.

32

February 2017

SCP – P& L & Balance Sheet ( Figures in Rs Crore)

Profit & Loss Statement 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2030-31 Taxes & Service Charges

Holding Tax 10 20 20 20 20 22

Sewerage Tax 2 4 4 4 4 5

Smart City Cess 2 4 4 4 4 5

Water Charges 2 3 3 3 3 3

Sewage Water Recycling 1 2 2 2 2 4

SWM 1 3 3 3 3 5 Operational Revenue

Land Monetization 225 225 225 75 - - -

Convention Center 10 10 11 11 16

Parking Fees 11 18 22 22 26 44

Urban Mobility 1 2 4 6 9 9 14

Advetisement - 1 2 2 3 3 4

Rental Income - 1 41 52 63 66 98

Park Ticketing 0 0 0 0 0 0

Total revenue 226 258 335 204 144 153 219

2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2030-31

Assets

Cash & Bank -2 387 1,006 976 1,038 1,020 1,011 1,180

Total Current Assets -2 387 1,006 976 1,038 1,020 1,011 1,180

Gross Fixed Assets 392 657 910 910 910 910 910 910

Less: Depreciation - - - 15 30 44 59 178

Net Fixed Assets 392 657 910 895 880 865 850 732

Total Assets 389 1,044 1,916 1,871 1,918 1,886 1,861 1,912

Liabilities

Current Liabilities

Deposits

Loan - 228 681 481 466 419 373 0

Total Liabilities - 228 681 481 466 419 373 0

Grant 4 69 122 122 122 122 122 122

Share capital 388 588 788 788 788 788 788 788

Reserves and Surplus -2 158 325 480 542 557 579 1,002

Total Networth 389 815 1,235 1,390 1,452 1,466 1,489 1,912

Total Liability & Equity 389 1,044 1,916 1,871 1,918 1,886 1,861 1,912

Ranchi SCP - IRR

Capex plans to be funded out of grants from state and central government and equity contribution from ULB & state government

33

February 2017

Total capital structure Rs cr Share Grant 122 7% Equity 988 55% Debt 675 38% Total capital structure 1785 100%

� AMRUT

Ranchi has been selected by the Ministry of Urban Development as one of the 500 cities under the Atal Mission for Rejuvenation and Urban Transformation (AMRUT). A total of 7 cities have been selected from Jharkhand. Under AMRUT project each ULB has to work on 5 key identified areas for improvement. These include:

i. Water Supply ii. Sewerage iii. Storm water drainage iv. Urban transport v. Open space and greenery

A total capital expenditure of Rs.3918 Cr has been estimated and approved towards development work under AMRUT project for the state of Jharkhand . Out of this, Rs.909 Cr has been allocated to Ranchi. Component wise allocation ( Rs 3918 crore)

34

February 2017

Project Funding for Ranchi

Committed Expenditure (if any) from

Previous Year (2015-16) Proposed Spending during current

Financial Year Balance Carry Forward for Next

Financial Years

ULB ULB ULB

City Cost Centre State 14th FC OTH Total Centre State 14th FC OTH Total Centre State 14th FC OTH Total

Ranchi 910 37 45 24 6 30 19 23 12 3 15 247 296 158 40 197

Deoghar 242 19 11 6 2 7 28 17 9 2 11 75 45 24 6 30

Hazaribagh 682 23 14 7 2 9 13 8 4 1 5 306 183 98 24 122

Giridih 508 8 5 3 1 3 39 23 12 3 15 208 125 66 17 83

Adityapur 445 23 14 7 2 9 13 8 4 1 5 187 112 60 15 75

Chas 268 28 17 9 2 11 30 18 10 2 12 77 46 25 6 31

Dhanbad 864 0 0 0 0 0 26 32 17 4 21 262 314 168 42 209

Total 3919 138 105 56 14 70 166 127 68 17 85 1360 1121 598 150 747

Of the total Rs.120 Crore, projects of Rs.90 Crore towards water supply and sewerage are at top priority and are expected to be completed in 3 years. The remaining projects would be completed within next 4-5 years starting from 2016-17. Details of the Projects undertaken under AMRUT are as follows: Water supply Master Plan of Water Supply Projects

Sr. No

Project Name Year in which to be

implemented Year in which to

be completed

Cost (Approx)

1 DMA Formation 2016 – 17 2017 – 18 210

2 Provision of Bulk Meters 2016 – 17 2017 – 18 33.0

3 Deepening of Kanke Dam &

Improvement of its Raw Water Quality. 2016 – 17 2017 – 18 5

4 Modernization of WTP kanke 19.50 MLD 2016 – 17 2017 – 18 5.6

5 Provision of Pressure Release Valves. 2016 – 17 2017 – 18 2

Total 255.6

Year Wise Plan for Service Levels Improvements

Proposed Projects

Project Cost

Indicator

Base Line

Annual Targets, (Increment from the Baseline Value)

Adityapur Water Supply

189 Cr. FY16 FY 2017

FY 2018

FY 2019

FY 2020 H1 H2

HH Connection 48 0 53 65 75 90 100

LPCD 135 0 135 135 135 135 135

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Metering 0 0 10 20 35 70 100

NRW 75 0 70 60 50 40 30

Quality of Water 100 0 100 100 100 100 100

Cost Recovery 40 0 40 70 80 90 100

Collection efficiency of water charge

45 0 50 65 75 85

Storm Water Drainage Annual Fund Sharing Pattern for Storm Water Projects

Share

Sr. No.

Project Name

Total project Cost (Crores )

GOI State ULB Others Total (Rs Crs)

1 Zone I 79.05 26.35 31.62 21.08 79.05 2 Zone II 222.87

Discussions are going on with JICA/ADB/World Bank but would come under AMRUT

222.87

3 Zone III

& IV 115.08 115.08

Total 416.93 416.93 Year wise Plan for Service Levels Improvements

Annual Targets (Increment from the Baseline

Value) FY 2016

Storm Water Drainage

Proposed Projects Indicator Baseline H1 H2 FY

2017 FY

2018 FY

2019 FY

2020 Zone I Coverage of

Storm Water Drainage Network

44%

Zone II 52% 65% 80% 100%

Zone III & IV

The provision of water supply and maintenance of the water transmission and distribution system in the city is the responsibility of the state government. The state government under the AMRUT scheme is undertaking a project of Rs.417 crore for setting up storm water supply and drainage projects. Sewerage- Zone wise coverage of Households

Zone No

Total No of Households

(as per 2011

census)

Households with Sewerage Network (as per Meinheardt

DPR

Households with Septic

Tank

Households without any

outlets for toilets

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February 2017

I 38526 14333

NA NA II 113637 28666

III 39246 28666

IV 26023

Service Level Indicators

Sr. No. Indicators

Existing Service Level

MOUD Benchmarks

1 Coverage of latrines (individual or community) 77% 100%

2 Coverage of sewerage network services 0% 100%

3 Efficiency of collection of sewerage 0% 100%

4 Efficiency in Treatment: Adequacy of sewerage treatment capacity 0% 100%

Master Plan of sewerage Projects for Mission period

Sr. No.

Project Name

Priority number

Year in which to being implemented

Year in which proposed to be

completed

Estimated Cost (Crores

)

1 Zone I 1 2015 2017 158.1

2 Zone II 2 2016 2018 445.74

3 Zone III & IV 3 2017 2019 230.01

Grand Total 833.85

Zone I from JnNURM Scheme and Zone II, III& IV will converged with other schemes Annual Fund Sharing Pattern for sewerage projects

Share Sr. No.

Project Name

Total project Cost (Crores )

GOI State ULB Others

1 Zone I 158.1 50% 40% 10% 0

2 Zone II 445.74 Discussions are going on with JICA/ADB/World Bank

but would come under AMRUT 3 Zone III

& IV 230.01

Year wise Plan for Service Levels Improvements

Annual Targets (Increment from the

Baseline Value)

FY 2016

Proposed Projects

Total project Cost (Crores )

Base

line

H1

H2 FY

2017

FY 2018

FY 2019

FY 2020

Zone I 158.1 0 30%

100%

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February 2017

Zone II 445.74 0 30%

70% 100%

Zone III & IV 230.01 0 30%

70% 100%

Urban Transportation- RMC does provide the service of transportation (Bus service) to its people, however under the AMRUT reforms the corporation is planning to improve the services significantly

Proposals Phase I (in

Cr.) Phase II (in Cr.)

Phase III (in Cr.)

Total (in Cr.)

Public Transport system 3432.7 2076.5 2996.2 8505.4

Pedestrian Facility Improvement 210.1 380.1 507.9 1098.1

NMT Facility Improvement 151.6 156 97.3 404.9

Corridor Improvement Plan 41.5 0 0 41.5

Parking Management Plan 38.5 17.5 12.3 68.3

Intelligent Transport systems 76 28.2 51.2 155.4

Grade separation 67.6 64.4 0 132

junction Improvement 4 0 0 4

Freight 70 50 25 145

New links 41.1 225.4 44.7 311.2

Widening of Roads 103.2 43 0 146.2 Total Cost from Projects 4236.3 3041.1 3734.6 11012

Open space and Green park- As per the AMRUT norms RMC is also undertaking development of green space and parks with special provision for child-friendly components. Annual fund sharing break-up for green open space & child friendly park FY 2016-17

State ULB Sr. No.

Project Name GoI 14th FC

Others Total 14th FC

Others Total

1 Development of Community Park at

Argora 0.67 0.8 0.8 0.42 0.11 0.53

Project Risk Large size of the projects vis-à-vis execution track record The size of the planned projects as compared to that of those undertaken by the RMC in the past is quite large. The total capital expenditure of the corporation for the past five years has been at around Rs.280 crore. However, the corporation is expected to undertake total capex of over Rs.3200 crore in the next 4-5 years. Furthermore, though the corporation has experience in undertaking public works and developing road projects, it has limited experience and capabilities in undertaking large project of similar nature. Thus limited experience in handling large projects and inadequate staff vis-a-vis the size of the projects, there is a huge risk of the projects to face implementation risk/ project delays due to complexities inherent to such infrastructure projects. Project delays may result in cost escalations, which may put additional financial burden on RMC’s resources.

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