Get them to the court on time: bumps in the road to justice

by Mugdha Mohapatra, Siddarth Raman and Susan Thomas.

India's district courts currently face a staggering backlog of 4.6 crore pending cases (as of May 2025): 3.5 crore criminal and 1.1 crore civil. Proposals to solve this are familiar: hire more judges, build special courts, adopt new technology. But before rushing to solutions, it is important to understand where cases get stuck in their journey through courts. We hand-collect and analyse the life-cycle of a sample of cases from district courts, with some surprising observations. First, between 50-70 percent of cases are disposed before they get to trial, which is before the judge hears the substantive matter of the dispute. The time spent waiting for parties to appear is over a year. While criminal cases necessarily require strict adherence to due process, even civil cases face delays. These findings challenge conventional wisdom about judicial delays and point to a unexpected bottleneck. If getting people to show up in court is the core source of delays and pendency, strengthening the administrative processes of the court rather than the size of the bench, could lead to more speedy justice delivery from our courts.

The objective of building judicial capacity to achieve judicial efficiency requires an understanding of how cases move through courts, not just tracking pendency rates. This is because the journey of a case moves through deterministic stages, which vary in duration, and imposes varying resource demands from judges and staff. There have been few systematic studies of how a case moves through court. While some studies examine the total time for case disposal, few break this down by stage.

This study analyses stages for two common types of cases that represent a significant portion of the workload of courts: cheque bouncing cases (criminal matters under Section 138 of the Negotiable Instruments Act) and motor accident claims (civil matters under the Motor Vehicles Act).

Cheque bouncing cases account for 10-15% of criminal court workloads, while motor accident claims constitute over 10% of pending civil cases. Cheque bouncing cases happen when a cheque issued does not deliver payment as expected. Motor accident claims are filed to claim compensation for damages caused in the accident against the owner of the vehicle involved, with the vehicle insurance company as a co-respondent. Cheque bouncing cases are filed in a magistrate court, and the motor accident claims at the Motor Accident Claims Tribunals (MACT). Across these two types of cases, there are differences in procedures: whether it is for criminal and civil cases, and for different types of courts.

We use this analysis to answer the following questions:

1. What fraction of the cases go through the whole life-cycle?
2. How much time is spent in different stages of the case life-cycle? Is this different for civil and for criminal cases?

Methodology

The analysis examined 200 disposed cases randomly sampled from from the e-courts database for district courts from courts across Maharashtra, Kerala, Karnataka, Tamil Nadu, Delhi, Telangana and Rajasthan, filed between 2018-2022. After excluding transfers and circumstances where cases never went a court process, the final sample included 147 cases - 77 cheque bouncing cases and 70 motor accident claims cases.

Each case was tracked through its entire journey by analysing court orders and hearings. Cases go through different stages - filing, admission, summons, warrants, bail, written statements, framing of issues, evidence and others. We classify these different stages of 'Pre-Trial' and 'Trial'. Trial begins after both parties appear before the judge - in cheque bouncing cases, after the accused files for bail; in motor accident claims, after written statements are filed and issues are framed.

Results

1. The first finding relates to the stage at which the cases are disposed. Table 1 shows the number of cases disposed at each stage.

Table 1: Where cases end their journey

Stage	Case type: MV		Case type: S138
	No. of cases	Percentage	No. of cases	Percentage
Pre-trial	38	54 %	55	71 %
Trial	32	46 %	22	29 %

More than half of the cases analysed never reached trial. This is higher for the (criminal) cheque bouncing cases, where 70% of cases are disposed before they reach trial. For the (civil) motor accident claims cases, 54% of the cases are disposed before reaching trial.

2. The second finding relates to the time spent in the two stages

Table 2: Time taken by stage

Case type	Total no. of cases	Pre-trial	Trial
MV	70 (32 reached trial)	9.5 months	4 months
S138	77 (22 reached trial)	12 months	3.5 months

Once all parties are in present in court, cases resolve quickly - usually in 3-4 months. Most of the delay in matters is in the pre-trial stage where the court is waiting for parties to appear (usually the respondent). This takes between 9 months to a year.

These findings align with broader patterns visible in the National Judicial Data Grid for district courts (NJDG). The data shows that 72% of pending cases are stuck before trial: 48% are at the appearance stage, 14% are awaiting service of summons, and 10% are awaiting service of warrants. While the data from the NJDG is useful to know where cases are placed within the judicial system, it does not provide insights on the time spent in different stages. Our analysis quantifies the extent of the bottleneck.

Discussion

The analysis points to two key observations: Most cases that are filed in court do not reach trial, where judicial mind is applied to decide issues of the case. Further, the bulk of the time is spent in getting the parties to court. Once all parties are present, the time to resolution is much lower. The puzzle is in understanding what shapes these features, and how this understanding can be used to improve court efficiency in dealing with case workload.

• Are the delays in court cases inevitable?

The analysis points to the paradox of procedural protections for some cases. Cheque bouncing cases and other criminal matters demand the presence of the accused. This creates an inherent tension between speedy resolution of the matter and judicial procedure. The accused, facing potential imprisonment, has every incentive to delay appearing in court until forced by warrant. The very protections meant to ensure fair process become tools for delay.

In India, these procedures continue to evolve. Under Section 223 of the newly introduced Bharatiya Nagarik Suraksha Sanhita, magistrates must now offer the the accused an opportunity to be heard before admitting a complaint as a criminal case. This involves sending a notice by post, a process not unlike the current summons process. While intended to enhance due process, this additional step could further extend the timeline for cheque bouncing cases. The new code also allows for trial 'in absentia' under Section 356. If a person is declared as a 'proclaimed offender', and if the judge thinks that they are absconding to evade trial, the court can proceed without the accused. How these practices are implemented remains to be seen.

• Administrative and judicial functions of the court

The findings expose a fundamental blind spot in how courts actually work. The popular image of justice - a judge hearing arguments, weighing evidence and delivering verdicts - represents only one aspect of the judicial system. Behind every courtroom drama lies an extensive administrative operation of filing documents, scheduling hearings, maintaining records, and getting parties to court. These two systems complement each other, but our understanding of the administrative aspects of the court system is limited, because it is behind the scenes.

Current reform proposals focus heavily on expanding judicial capacity: hiring more judges, creating specialised courts, and implementing new technologies for case management. While these interventions have merit, they miss the core issue revealed by this analysis. The judicial system extends far beyond judges and courtrooms. Delivering summons and notices typically involves police officers, postal services, or process servers. When the simple act of getting parties to court becomes the biggest bottleneck, the solution requires rethinking the entire administrative infrastructure supporting the courts.

What does imply for potential solutions for institutional reforms of the judiciary? Some approaches that could address the summons/notices bottleneck include:

1. Digital service of summons and notices could reduce delays, though this requires updated legal frameworks and reliable technology infrastructure.
2. Police-court integration might improve warrant execution, though this raises questions about optimal resource allocation - should a capacity constrained police forces pursue cheque defaulters or focus on serious crimes?
3. Quicker escalation to warrants may secure attendance faster, but wielding state power to restrict liberty demands careful consideration. A judge's decision to issue an arrest warrant carries real consequences.
4. Penalties for non-appearance could be introduced to create stronger incentives for timely court attendance.
5. Private process servers, as used in U.S. courts, offer another model worth exploring.

Conclusion

The clamour for court reform has been dominated by traditional solutions: more judges, rewritten procedures, and new technology. But when the relatively simple task of getting parties to court becomes the system's biggest bottleneck, a more nuanced approach is essential. Court reform must recognise that efficient justice delivery requires strengthening both judicial and administrative capacity in parallel. Separating court administration from judicial functions, as some countries have done, could allow specialised focus on each component while maintaining their complementary relationship.

The invisible administrative machinery of courts deserves as much attention as the visible judicial functions. Until administrative capacity matches judicial capacity, Indian courts will continue struggling with delays that have less to do with complex legal reasoning and more to do with basic case management. The path to speedier justice may lie not in the courtroom, but in the clerk's office, the process server's route, and the administrative systems that bring cases to life. Only by addressing both aspects of the judicial system can India's courts deliver the swift justice that 4.6 crore pending cases demand.

Siddarth and Susan are senior research lead and senior research fellow at XKDR Forum. Mugdha was a research associate at XKDR Forum. We thank Pavithra Manivannan for insights, Shubho Roy for help with the interpretation, and Ajay Shah for inputs.

An evaluation framework for public procurement processes

by Karan Gulati and Anjali Sharma.

Governments require and use goods and services to operate their machinery and deliver schemes and programs to their constituents. However, self-production cannot meet this need for goods and services. As a result, governments rely on public procurement. However, India does not have an optimal public procurement system. Tenders often undergo modifications, the government incurs significant debt due to payment delays, competition is limited, and contract execution is frequently delayed. Procuring entities also tend to favour large private companies by setting eligibility criteria that exclude small and medium-sized enterprises or providing them with private information that offers a competitive advantage.

Given this experience and the limitations of existing literature, integrating international and best practices can facilitate strategic evolution and ensure that the Indian public procurement system is conducive to achieving broader objectives of efficiency and effectiveness in public resource allocation. By methodically aligning with these practices, India can foster a competitive market environment, attract better vendors, and achieve effective and sustainable procurement outcomes. Specifically, such methodological alignment can help establish an evaluation framework with clear benchmarks and indicators that enable the measurement of procurement processes across departments, identify systematic weaknesses, and explore opportunities for reform.

In a new TrustBridge Rule of Law Foundation Working Paper, we propose "An evaluation framework for public procurement processes" that recognises the government's dual role as the state and a market participant throughout the procurement life cycle and can be deployed to evaluate public procurement across sectors and procuring entities. It contributes to India's growing field of evidence-based literature and policy interventions. Based on the UNCITRAL Model Law on Public Procurement, OECD Recommendations of the Council on Public Procurement, the World Bank's Benchmarking of Procurement, FIDIC, ADB, and NEC standard contracts, and relevant literature, the evaluation framework includes the following benchmark:

• Transparency
• Integrity
• Documentation
• Capacity

• Timeliness
• Negotiation
• Monitoring
• Dispute resolution

It divides these benchmarks along two axes. The first pertains to the role of the procuring entities, either as (i) the state or (ii) a market participant. The second pertains to procurement stages: (i) pre-award to award, (ii) award to completion, and (iii) completion to payment. For instance, as the state, procuring entities must ensure transparency before awarding a tender. To evaluate transparency, the framework assesses whether procuring entities publish procurement plans, which aids in planning and reduces the need for emergency procurement. It also evaluates whether the entity conducts pre-bid consultations, which are beneficial for identifying suppliers early in the process.

To assess the effectiveness of the framework, we evaluate the procurement processes of the National Highways Authority of India (NHAI), India's largest public procuring entity, with tenders worth over 3,70,000 crore rupees (USD 44.5 billion). Its parent ministry, the Ministry of Road Transport and Highways, accounts for over half of India's capital expenditure on procurement. This operational experience should have endowed NHAI with expertise that reflects a spectrum of procurement processes and methodologies. Furthermore, the government's focus on infrastructure development, especially in road transport, underscores the NHAI's role as a driver of public procurement by the Indian state. Thus, evaluating NHAI can provide insights into public procurement processes in large-scale procuring entities and the efficacy of our framework.

Through this first-of-its-kind and illustrative evaluation, we identify several areas for improving India's public procurement system, thus optimising the allocation of public resources, curtailing opportunities for rent-seeking, and fortifying public trust. This includes better estimation of project timelines, improving the role of independent monitoring, and conducting performance evaluations. It also highlights that procuring entities need to enhance transparency not just in their operational processes but also in their data collection and reporting practices. These results validate the efficacy of our evaluation framework. Its comprehensive nature, encompassing a range of benchmarks, allows for a detailed evaluation of public procurement processes. Its application to NHAI demonstrates its potential to evaluate and improve procurement processes across procuring entities.

Extending this evaluation framework is essential to building on this foundational work. The task now involves evaluating other large-scale procuring entities. This endeavour is about identifying areas for improvement and understanding the patterns that define public procurement processes. The insights from this work can inform policy-making and catalyse systemic improvements, contributing to enhancing and refining the public procurement system.

References

Anirudh Burman and Pavithra Manivannan, Delays in government contracting: A tale of two metros, Leap Blog, 23 December 2022.

Anjali Sharma and Susan Thomas, The footprint of union government procurement in India, XKDR Working Paper No 10 of 2021.

Charmi Mehta and Diya Uday, How competitive is bidding in infrastructure public procurement? A study of road and water projects in five Indian states, Leap Blog, 29 March 2022.

Karan Gulati and Anjali Sharma, An evaluation framework for public procurement processes, TrustBridge Rule of Law Foundation Working Paper No 4 of 2024.

Prasanta Sahu, Forget stimulus, clear your dues: Rs 7 lakh crore unpaid dues to industry by central govt depts and PSUs, Financial Express, 8 September 2020.

Shubho Roy and Anjali Sharma, What ails public procurement: an analysis of tender modifications in the pre-award process, Leap Blog, 26 November 2020.

Yugank Goyal, How Governments Promote Monopolies: Public Procurement in India, The American Journal of Economics and Sociology, 26 November 2019.

The authors are researchers at the TrustBridge Rule of Law Foundation. We are grateful to Akshay Jaitly, Renuka Sane, Charmi Mehta, and participants at the Joint Field Workshop on Public Procurement for their valuable comments. Views are personal.

Offshore wind in Tamil Nadu: from potential to reality

by Akshay Jaitly, Charmi Mehta, Renuka Sane and Ajay Shah.

Foundations

The world of renewables is comprised primarily of solar and wind. Of these, solar electricity suffers from the limitation of dwindling away in the evening, at precisely the time at which electricity demand rises. This makes wind particularly important. There is a good deal of onshore wind generation in India. What is different and potentially superior about offshore wind?

1. Wind speeds tend to be higher offshore than on land. A wind turbine operating at a wind speed of 24 kph can generate twice as much energy as a turbine operating at a wind speed of 19 kph (American Geosciences Institute, 2023).
2. The wind offshore tends to be more consistent, with higher power capture for a greater number of hours per day.
3. Onshore wind requires land resources. Offshore wind is built in the open sea where land rights are cheaper, and it is easier to go to bigger blades.
4. Offshore wind does not impose noise pollution upon the human population.

These benefits, of course, come with a problem, that construction of windmills in the high seas is more difficult when compared with building on land. Windmills are best placed at locations with high wind. Figure 1 shows that Tamil Nadu is a hot spot for offshore wind in India. It is interesting to notice that Sri Lanka is also a hotspot for offshore wind (Figure 2).

Figure 1: Wind speeds off the Indian coast

Source: India Wind Potential Atlas (NIWE, 2019).

Figure 2: Wind speeds off Sri Lanka.

Source: Technical Assessment by World Bank, IFC and ESMAP (2020).

There is an analogy between offshore wind in Sri Lanka, and hydel resources in Nepal and Bhutan. Given the correct arrangement of foreign policy (Subramanian, 2023), the Indian private sector can possibly play a leadership role in building electricity generation in Sri Lanka, as has been the case with Bhutan.

Putting these facts together, there is an important natural resource in Tamil Nadu, and its vicinity, through which vast renewable electricity generation can become possible, given the correct configuration of policies and state institutions that create conditions of investibility. We can dare to hope that very large offshore wind generation can take place off the coast of Tamil Nadu, which would attract energy-intensive firms to operate in the region, and enabling sale of electricity into locations far from Tamil Nadu.

Public economics for offshore wind

We can imagine an uncoordinated rush by the private sector to venture out into the seas and put up wind turbines. They would jostle with each other to build on the best sites. Each wind turbine would have to face the problem of transmitting energy to the mainland. There are three areas where policy makers can be useful:

1. Ownership of the sea-bed and property rights: In a world without clarity on property rights, the private sector would experience conflicts when building wind turbines. There is a negative externality as multiple construction projects which are physically near each other impose a certain amount of chaos upon each other, and the presence of a windmill diminishes the energy production of nearby windmills.The sea-bed should be treated as a scarce natural resource, akin to the electromagnetic spectrum. There is a role for the state in establishing property rights, and auctioning off ownership of the sea-bed to private persons. The coercive power of the state would be used to create property rights for private persons, following which private persons would trade in blocks of sea-bed (akin to transactions in privately owned land or on the electromagnetic spectrum), and the government would enforce against encroachment. The negative externality problem during construction can be addressed by modified property rights which decongest each construction site for the construction period, by expanding the notion of property rights associated with each geographical location, to exclude other persons for the period of construction.
2. Economics of transmission: Each wind turbine would have to face the problem of transmitting energy to the mainland. Every generation company would benefit from more convenient access to high capacity transmission lines. There is a natural monopoly problem in the transmission infrastructure - it is likely that a single transmission company will emerge within each geographical area. There is merit in using state power to coerce this firm on open-access rules (so it cannot deny transportation to any private person) and on price regulation.
3. Data as a public good: The government can add value by spending taxpayer money to construct a dataset on wind speed and releasing this into the public domain. This activity involves no use of coercive power, other than the coercion that undergirds taxation. The government would merely release data on a website as a public good, and in no way preclude private persons from expending resources to create data on their own. For the government released data to be credible, it would have to be collected by trusted agencies, experienced in offshore wind data collection; the role for the government should be one of only contracting-out the construction of the data.

While electricity in India is largely a state subject, the sea-bed falls under the union government jurisdiction through Article 297 of the Indian Constitution through which the Parliament has enacted the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976. Thus we can envision a two-part policy story for offshore wind, where the union government auctions off blocks of sea-bed, and the state government deals with everything connected with electricity. Once the energy reaches landing stations at the shore, it is just ordinary electricity and fits into the mainstream electricity market exactly as with onshore wind turbines.

How the Indian journey has unfolded

The union government has decided that offshore wind production will commence in Gujarat and Tamil Nadu. A union government agency named the National Institute of Wind Energy (NIWE) plays an important role in this field including that of being the designated counterparty for contracts. It plays a expansive role, akin to an offshore wind central planner. Transmission will be run by a union government PSU, the Power Grid Corporation of India Limited (PGCIL). No role is envisaged for state governments.

In 2018, NIWE published its first tender for an offshore wind block auction off the Gujarat coast. However, it did not receive bids and consequently had to be called off after multiple extensions (Deshpande, 2021). Since 2022, the Union Government has released (i) a national Strategy Paper for the Establishment of Offshore Wind Energy Projects and (ii) a draft tender for Sea bed leasing for offshore wind energy projects which pertains to locations off the coast of Tamil Nadu. These releases help improve policy predictability.

The proposed contracting model

Project costs in offshore wind are high, particularly in contrast to developing renewable energy plants onshore. Costs also vary as per the depth of waters and distance from shore. Operating offshore wind turbines involves higher maintenance requirements (Koch, 2012). First movers face higher costs on account of uncertainty and the inevitable mistakes.

NIWE has proposed three alternative contracting models in its strategy paper. Model A is for projects where surveys and assessments have been completed, and the site is ready for development. Model B is model A without viability gap funding ("VGF?). Model C is a fully bundled model with end-to-end responsibility placed upon the project developer, including site identification. The tender released (for the sea bed off the coast of Tamil Nadu) follows model A (NIWE, 2023). Table 1 summarises this proposed contract design.

Table 1: Risk-responsibility allocation across proposed offshore wind contracting models

Factors	Risks/responsibility	Model A
Government support	Bridging financing gaps	VGF (Union; unallocated)
	Transmission charges	Waived
Strategic and commercial risks	Identifying sites for offshore wind farms	Gov (Union)
	Site assessment surveys	Gov (Union)
Local factors	Transmission infrastructure	Gov (PGCIL)
	Evacuation of power	Gov (PGCIL)
	Licenses	Private
	Power offtake guarantees	None

Site characteristics have a substantial impact upon the prospective return on equity. The MNRE/NIWE supplies its assessment of each site. A careful examination of the data released by MNRE/NIWE is required. Potential developers may invest significant time and resources in constructing private sector data if there are limitations in the government-released data.

The selected bidder must set up the turbines offshore and connect each turbine to the offshore agglomeration facility (which will be constructed and managed by PGCIL). While the model mentions accessing VGF from the union government, the mechanism is not adequately spelled out. Is this policy strategy conducive to investibility?

i. Site selection and exclusivity:

Site selection is best done by potential wind farm developers. Developers face the consequences of, and are best placed to take decisions on sites when faced with a certain amount of data. They will commission the creation of additional data optimally. Under Model A, sites have been selected by NIWE. We expect that serious developers will construct their own datasets and may chafe at the locations pinned down by NIWE.

The next issue is that of exclusivity. Developers like to have a certain exclusive period, where no other construction takes place, in order to reduce the complexities of coordination across multiple construction projects. The exclusivity period for the sea-bed is set to five years, with a maximum extension of one year. The average time taken to set up a mid-size offshore wind farm, globally, is four years. In India, this is likely to attain a higher value (MOSPI, 2023).

Auctioning the exclusivity period itself can be a way to decide what a 'sufficient' period should be. In countries where confidence in offshore projects has been high, auctions are witnessing site tenures being awarded based on an auction in which the highest bidder wins the site (Exeter, 2022). For example, the Round 4 auction for sites (held in 2021) in England and Wales saw the highest bidder paying Euro 1bn upwards in option fees, payable annually (for ten years) for exclusive sea-bed rights on an 8 GW of offshore wind.

ii. The problem of transmission:

In offshore wind contracts in Northern Europe, the evacuation infrastructure for the electricity is generally created by the developer (and in some cases such as in the UK, later carved out and sold to a third party) or contracted out (separate from the offshore windfarm contract) to a private transmission service provider. Under Model A, this function has been assigned fully to the state-owned transmission company - PGCIL. PGCIL has no prior experience in developing transmission for offshore wind and it carries the burden of being a public sector organisation.

Whether managed by PGCIL or some other firm, regulation is required so that future developers are provided access to non-discriminatory evacuation infrastructure and services, perhaps using common carrier principles. While one block / site is up for auction today, numerous offshore plants will come up in the future in close vicinity. There may be shortages or exorbitant pricing of transmission, particularly in the absence of non-discriminatory access.

In addition to the risks from power evacuation, risks from unscheduled downtimes can induce losses, and contract terms will determine who bears this risk. For example, in Germany, the costs of curtailments/incapacities were transferred to the consumer. In contrast, costs remained with the project owner in China despite their lack of control over the risk (Gatzert, 2016). The government's decision to manage the complete evacuation responsibility may prove problematic in the event that higher transmission losses or shutouts imposes important risks upon the developer. If the preference is for power evacuation to be managed by PGCIL, contractual provisions on liquidated damages must adequately cover for downtimes that are not caused by the fault of the developer and other transmission losses.

iii. Regulatory burdens

Unlike transmission and distribution, power generation has no market failure problem. It is hence important to envisage a contract design that harnesses private sector expertise, without added layers of government involvement. At present, establishing an offshore wind farm will require a set of seventeen different clearances and licences from a host of ministries, including the prerequisite of block approval from the Ministry of Defence. Seven of the seventeen clearances are necessary even before one can make a bid, and the rest are post-award. The sector also includes a specific licensing regime that extends to how new offshore assets connect and interact with the grid. This requirement for multiple permissions detract from the vision of property rights in the hands of a private person.

Further, approvals and no-objection certificates may be required from State Governments for transmission and evacuation infrastructure-related provisioning and any other clearances as may be legally required to establish and operate offshore power plants - as in the case of oil and gas pipelines (NIWE, 2022a, NIWE, 2022b).

It might be useful to consider if some project-related (as opposed to bidder related) approvals can be obtained ahead of time and made part of the bid package. This will reduce risk for bidders and may lead to more attractive bids.

Lastly, as with any nascent industry, policy and regulatory frameworks are likely to evolve and change over time - and existing concessionaires should be contractually protected from this through adequate 'change in law' and 'change of scope' provisions.

Under the present policy strategy, offshore wind generation requires the firm to have a high level of government engagement, and exposure to policy risk. This problem may encourage foreign firms to find local partners and enhance the required rate of return, i.e. hamper investibility.

iv. The role of the union government:

The present policy strategy suggests a offshore wind industry that is run out of the union government. This vision will sit uneasily with the primary role of the state government in electricity regulation and the electricity business once the energy hits the shore. Since vessel availability and transport infrastructure are critical to offshore wind farm development and often contribute to delays, cost overruns ((Koch, 2012), and litigation, the State's port infrastructure can be adapted to facilitate project management. Proximity of the Thoothukudi port to the proposed site is an advantage, and logistics facilities such as (i) storage areas for component assembly and manufacturing, and (ii) berth infrastructure can be developed to support upcoming offshore wind plants (Auroville Consulting, 2022). Such thinking is downplayed in a union-dominated policy process.

Assessing the outlook

Our analysis suggests that there is a considerable gap between the natural resource potential for offshore wind in South Asia and its tangible translation into RE capacity. The sea-bed lease tender was released in September 2023 with a deadline of 28 November 2023. In our knowledge, no bids have emerged.

Electricity is a concurrent list subject under the Indian Constitution, with both the union government and the state government having the right to make law over aspects of the sector. Sea-bed jurisdiction appears to clearly lie with the union. It would make sense to rely on the state government to a greater extent.

There are significant manufacturing and transportation challenges associated with the bulky parts of offshore wind facilities. Both Tamil Nadu and Gujarat are strong in manufacturing, and are natural sites where a private industry could develop that will undertake this manufacturing, and play a role in offshore wind sites hundreds of kilometres away.

The arguments presented earlier in this article show that thinking from first principles, the role of the state in this field is (a) Establishing property rights with auctions of chunks of sea-bed, including a special kind of exclusivity during construction; (b) Ensuring open access and price regulation for the natural monopoly of transmission; (c) Possibly adding value by constructing and releasing a robust dataset with wind speed. There is merit in evolving the policy strategy towards these three pillars.

References

American Geosciences Institute. 2023. What are the advantages and disadvantages of offshore wind farms?, National Academy of Sciences.

Deshpande, T. 2021. Why India's Offshore Wind Energy Potential Remains Untapped, IndiaSpend. 26 November 2021.

NIWE. 2023. Strategy for Establishment of Offshore Wind Energy Projects, Ministry of New and Renewable Energy, Government of India. September 2023.

Koch, C. 2012. Contested overruns and performance of offshore wind power plants, Construction Management and Economics, 30:8, 609-622.

Infrastructure and Project Management Division, Ministry of Statistics and Programme Implementation. 2023. Quarterly Report on Mega Projects.

Laido et al. 2022. Impacts of Competitive Seabed Allocation for Offshore Wind Energy, University of Exeter. April 2022.

Gatzert et al. 2016. Risks and risk management of renewable energy projects: The case of onshore and offshore wind parks, Renewable and Sustainable Energy Reviews, Volume 60. July 2016.

Auroville Consulting. 2022. Unlocking Offshore Wind in Tamil Nadu. Sustainable Energy Transformation Series.

Subramanian, A. 2023. Answers in the offshore wind.The Indian Express. 23 March 2023.

Akshay Jaitly and Renuka Sane are Co-founder and Research Director, respectively, at TrustBridge Rule of Law Foundation; Charmi Mehta and Ajay Shah are Research Associate and Co-founder, respectively, at XKDR Forum.

The difficulties of asset monetisation in the transmission sector

by Akshay Jaitly, Charmi Mehta, Rishika R, and Ajay Shah.

Introduction

About 95% of nationwide transmission assets in India are presently owned by the government company, Power Grid Corporation of India Limited (PGCIL). A transformation of electricity transmission systems is required to achieve decarbonisation, reflecting the distributed geography of renewables generation in India, and the eventual de-commissioning of present coal-based power generation. Several estimates suggest a total required investment, for electricity transmission, of over INR 2 trillion over the next five years.

Given the public finance and managerial constraints in the Indian state, private investment is critical to achieve the required investments. Land, compliances and clearances impede pure private greenfield transmission projects, so one method there is for the government to do development and then monetise the assets. Existing assets are relatively straightforward to operate and risk-free, with a steady stream of user charges, where private sector participation is then readily achieved.

While attempts at attracting private investment in this field have taken place from 2006, the outcomes so far have been poor. One response to this was in October 2022, where the Ministry of Power issued guiding principles for states to monetise 14% of transmission assets that are currently owned and operated by state-owned transmission utilities. This involved a new contracting mechanism: the "Acquire, Operate, Maintain and Transfer (AOMT) model".

This is the temporary transfer of asset ownership (i.e. not a sale) to private firms in exchange of an upfront payment. Firms are expected obtain cash from the operations (user charges) of the asset, depending on the model deployed for monetisation. Asset monetisation has twin benefits for governments - first, it provides short-term liquidity to the public sector entity in the form of upfront payment for the asset(s); and second, it allows the government to delegate the operations and maintenance (O&M) to the private sector, enabling public sector entities to harness private sector capabilities and reduce their scope.

How previous asset monetisation models worked

Asset monetisation has been used as a contracting model for O&M since 2018 when the National Highways Authority of India (NHAI) began using the toll-operate-transfer (TOT) model, which draws on ideas from Australia, North America and Europe. Besides this, InvITs have been used in the transmission sector. There is significant knowledge and experience around InvITs and TOT contracts in India: they constitute the baseline against which the new AOMT can be understood. Table 1 provides a comparison of the three models on key features.

Table 1: A comparison of key features across contracting models - InvITs, TOT and AOMT.

	InvITs	Toll Operate Transfer	AOMT
Description	Transfer of assets to listed registered trusts regulated by Securities Exchange Board of India which issues units to multiple investors. Comparable to equity for a limited time period.	Temporary transfer of asset ownership for an upfront payment from the private party who is granted this concession. The private party is also granted rights to collect user charges, and other charges to finance the O&M of the asset.	Temporary transfer of ownership of assets for upfront payment from the private party, in turn allowing them to operate and maintain the asset, and generate revenue from it.
Regulation of investment vehicle	Trust to be registered by SEBI; existing licences applicable	SPV/ investor entity regulated by contract terms	Transmission licence transfer/re-registration to be approved by State electricity regulator
Regulation of user charges	Approved by electricity regulator and governed by Transmission Service Agreement	As per National Highway Toll Determination Rules	Approved by electricity regulator and governed by Transmission Service Agreement
Mode of returns	Returns from dividends, interest and capital gains on units	Toll charges	Transmission charges (varied across states)
O&M	Public	Private	Private
Ownership	Pooled; investors	Single or consortium	Single or consortium

The Toll-Operate-Transfer model in Indian Highways

In 2018, the NHAI bundled approximately 500 km of highways for the first auction, and potential investors were to bid the upfront payment they would make for the bundle. In return, investors receive the right to operate the highway and collect tolls generated from it during the concession period. This model provides the awarded party autonomy on operations and revenue generation, eliminating the involvement of the public authority in O&M.

The NHAI has so far attempted to monetise ten bundles (rounds) of assets with varied rates of success. The lack of bids, undervalued bids, and low price recovery led to auctions being stalled, bids annulled and fresh auctions being called, several times. Most recently, the 9th and 10th TOT bundles up for auction were halted as they did not meet the reserve price set by NHAI. Despite using a familiar model, the implementation has not yielded positive outcomes. Large value disputes in highway contracting, low standards of public disclosure and the inability to make accurate revenue growth projections are some of the reasons for its substandard outcomes.

The InvIT model in the transmission sector

In 2020, the PGCIL became the first publicly owned company to set up its own investment trust (InvIT). The PGCIL InvIT holds transmission assets worth INR 7500 crores and it opened for subscription in early 2021. Within two days of the offer, 59% of the units were subscribed. When the session was closed, PGCIL benefited from a 3% premium over the issue price and the initial public offer was subscribed 4.83 times. During this period, investor perception was also positive with analysts predicting that the InvIT would yield steady long-term returns. PGCIL eventually auctioned 27.41 crore units, earning INR 2,736.02 crore in May 2021. However, concerns with the lack of transparent price discovery and taxation norms on long-term capital investments have prompted PGCIL to rethink its InvIT plans. Additionally, the retention of O&M as a function of the public sector entity may create a hesitation to investment by private entities.

Neither of the two distinct asset monetisation models that India has experimented with achieved the outcomes it set out to achieve. On one hand, InvIT provides a diversification of risk but O&M remains with the government. On the other hand, TOT provides autonomy over O&M but ownership is not diversified. This serves as a case study for the design of new models for asset monetisation, and whether it can address the concerns of previous models used.

There is no reason why an InvIT structure cannot be augmented to also include the contracting out of O&M functions to a private entity. This will bring in private sector efficiency and allay the fears of investors. There are two ways in which the InvIT could be presently undertaking O&M: (i) it is possible that PGCIL is charging the InvIT a fee and doing the O&M, or (ii) O&M staff may have been transferred with the assets and the InvIT is doing its own O&M. Either way the function is retained with the government, making it a potential point of concern for investors. To eliminate this friction, a third model is preferable, where O&M functions of an InvIT are contracted out. This could have been a plausible design option since InvITs have been around for a while, instead of opting for a fully different model.

Concerns about the AOMT

The importance of private investment in transmission is well taken. The question lies in the pathway to a solution. We recognise the immense complexities of getting up to a well-functioning institutional mechanism. We also recognise that different sectors may warrant different approaches to doing the same things. There are two main concerns with the AOMT model:

1. The contract design is not suited to state government assets due to problems of state-level electricity governance; the overall lack of control on streams and decisions of revenue (user charges) is a factor that models should solve for; and
2. The unfamiliarity with the model among state governments (and asset monetisation generally). There are two existing mechanisms for doing this, with precedents and understanding within infrastructure, finance and government establishments: InvIT and TOT. These represent natural pathways to take for electricity transmission assets.

It has been over one year since the introduction of the model and it has seen no uptake from states so far. States have expressed concerns with the design and feasibility of the model. When the Ministry of Power proposed AOMT, there was a need for a first principles argument and public consultation, about why a third strategy was proposed. They needed to show the difficulties that would arise through the three existing pathways, and how the modifications chosen under the AOMT model addressed these difficulties.

References

Ministry of Power, Guiding principles for Asset Monetisation in the Transmission sector for state governments, October 2022.

Utpal Bhaskar, Power firms finalize models for asset monetisation plan, Livemint, 2022.

KPMG, Global Infrastructure Asset Recycling and Infrastructure Capital, June 2020.

Charmi Mehta and Bhargavi Zaveri, Monetisation lessons from NHAI, The Business Standard, March 2021.

Surya Sarathi Ray, NHAI cancels two projects on low bids, Financial Express, March 2022.

P Manoj, NHAI annuls highest bid of Sekura Roads for ToT Bundle 10 as it was below reserve price, The Economic Times, Sept 2022.

Charmi Mehta and Susan Thomas, Identifying roadblocks in highway contracting: lessons from NHAI litigation, The LEAP Blog, July 2022.

Shreya Jai, PowerGrid's asset monetisation via InvITs gets Cabinet go-ahead, Business Standard, Sept 2020.

Sundar Sethuraman, PowerGrid Infrastructure Investment Trust ends debut trade at 3% premium, Business Standard, May 2021.

Sunil Shankar Matkar, PowerGrid InvIT IPO opens: Should you subscribe?, MoneyControl, April 2021.

Utpal Bhaskar, PGCIL drops second InvIT tranche plan, LiveMint, Jan 2023.

Akshay Jaitly is co-founder of Trustbridge Rule of Law Foundation and Trilegal, Charmi Mehta is a researcher with XKDR Forum, Rishika R is a researcher with Trustbridge Rule of Law Foundation, and Ajay Shah is co-founder of XKDR Forum.

How elements of the Indian state purchase drugs

by Harleen Kaur, Ajay Shah, Siddhartha Srivastava.

There is one well known problem in India: the problem of drug quality. A significant fraction of the drugs purchased and consumed are sub-standard.

There is another well known problem in India: the difficulties of government contracting. When state organisations choose to buy instead of make, they face difficulties in the entire pipeline from bid preparation to tendering to contract disputes to contract renegotiation to payments. Weaknesses in government contracting are a cross-cutting problem that hamper the emergence of state capacity in all fields.

Research on government drug purchase thus lies at the intersection of two literatures: the drug quality literature in the field of health and the government contracting literature in the field of public administration.

Government purchase of drugs is particularly important for three reasons:

1. The government is a large buyer of drugs, and the people would become more healthy if the quality of government-purchased drugs could go up.
2. If procedures for drug purchase by the government are improved, this could potentially have an impact on the optimisation of an important subset of firms who may then improve their quality standards, and this would impose positive externalities upon private buyers of drugs.
3. There are some policy pathways based on information about government testing of drugs, where the release of test data into the public domain, as a side effect of a well structured government purchase procedure, can also reshape the incentives of private firms in favour of higher quality.

A research literature on government drug purchase is required. For all researchers looking at this field, obtaining basic institutional knowledge is a bottleneck. A first building block of this is a description of how various elements of the Indian state buys drugs. This is the kind of paper that everyone wants to read but nobody wants to write. We have made a first attempt at this descriptive paper.

Measuring institutional capacity in property tax systems: A case study of ten cities in India

by Diya Uday.

Property tax is ubiquitous with municipal finance. It provides local governments with the means to execute development strategies. In theory, property tax is an ideal candidate for supporting fiscal strategies in decentralised economies because the tax base is immobile making base identification and enforcement relatively easy (Kelly 2013). There are indications, however, that in India, we have not succeeded in doing property taxation well.

A national-level indicator of the performance of property taxes is the percentage of revenue generated from property taxes to the national GDP. Studies indicate that the proportion of revenues from property tax to GDP in India is low when compared with other countries. At the state-level, where property tax is a major source of revenue, there is evidence of revenue shortfalls, indicating the need for reforms. The policy responses for increasing revenues from property taxation, include increasing tax rates, revising taxation criteria and suggesting floor tax rates. But will these interventions be successful in improving the performance of the property tax system in cities?

A key factor in determining the success or failure of any policy intervention is institutional capacity. Policy interventions such as increases in property tax rates assume that ULBs are operating at optimal levels of institutional capacity and therefore increases in tax rates, property values or even improvements in tech infrastructure will optimise revenues from property taxes. In particular, these policies are founded on two main assumptions:

• that ULBs have adequate human resources and the technical capacity to assess and demand taxes correctly;
• having assessed taxes correctly, ULBs have the enforcement capacity to collect the entire tax demanded.

To achieve revenue optimisation from property tax it is important to first get tax administration right. Without this, it is unlikely that local governments will be able to capture the full extent of the property tax potential even with tax rate increases or technological interventions. This raises the important question: what is the current capacity of ULBs in property taxation?

In the literature we see indications of deficiencies in the institutional capacity of ULBs in performing some major tax functions like tax collections (World Bank 2004; Mathur et. al 2009; Bandyopadhyay 2014). While these studies give us valuable insights, this literature is not recent. Institutional capacity may have improved over time given the recent concentration of schemes to improve local governance such as the Smart Cities Mission and the Jawaharlal Nehru National Urban Renewal Mission (JNNURM). There is a need for new studies that will give us insights into the current state of institutional capacity.

In this article, we therefore measure the institutional capacity of some property tax functions in a sample set of cities in India. Our aim in doing so is two fold:

• to gain insights on the current level of institutional capacity in some property tax functions in a sample set of cities.
• in doing so we attempt to demonstrate that policy interventions must not presume the existence of adequate institutional capacity.

Our findings contribute to the existing literature on the state of property tax administration in India. In addition to this, we question the current approach to measuring administrative functions in the property tax system. We suggest an alternative approach for a more accurate diagnosis of the problems in administration.

A case study of ULB capacity in ten cities

We undertake two levels of analysis. We first examine the institutional capacity of ULBs in property tax collections in a sample set of cities. We then analyse the human resource allocation in the property tax departments in some ULBs. We use our findings to gain insights on institutional capacity in ULBs in a set of sample cities.

Sample selection: Our selection of the cities was driven by the location of the city and the availability of data. Our final selection includes a list of metropolitan and tier-2 cities located across ten different states in India. The selected cities are Chennai, Pune, Indore, Vishakapatnam, Shivamoga, Varanasi, Surat, Warangal, Kota and Bilaspur.

1. Measuring collection capacity

Methodology: We measure collections by calculating the Tax Collection Ratio (TCR), a commonly used method for measuring tax collections. Applying this method, we calculate the TCR as the difference between the tax demand made and the actual tax collected across each of the five years for which the data was available in each of the sample cities (2013-2018). We then calculate the TCR as a percentage value. We use this percentage value as a proxy to demonstrate the level of administrative capacity of a given city by taking 100 per cent as the benchmark. For instance, if the TCR percentage of a given city is 90 per cent, we interpret this to mean that the city has 90 per cent institutional capacity. Such a city has a higher level of institutional capacity when compared with a city in which the TCR percentage is 80 per cent, indicating a higher deficit in tax collections.

Table 1 sets out (i) the average property tax collected in ten cities across five years and (ii) the minimum and the maximum property tax collection across years in the period of study.

Table 1: City-wise average property tax collections (2013-2018)

City	State	Average TCR (%)	Minimum tax collection (as a % of tax demanded in that year)	Maximum collection (as a % of tax demanded in that year)
Chennai	Tamil Nadu	90	74 (2013-14)	106.60 (2017-18)
Pune	Maharashtra	96.36	87 (2017-18)	109.77 (2015-16)
Indore	Madhya Pradesh	80.25	72.16 (2014-15)	106.48 (2016-17)
Vishakapatnam	Andhra Pradesh	114.29	24.42 (2017-18)	265.52 (2015-16)
Shivamoga	Karnataka	98.36	97.86 (2014-15)	99.30 (2016-17)
Varanasi	Uttar Pradesh	96	92 (2013-14)	98.97 (2017-18)
Surat	Gujarat	84.65	76.65 (2015-16)	84.21 (2014-15)
Warangal	Telangana	79.87	75.12 (2013-14)	82.75 (2016-17)
Kota	Rajasthan	58.86	37.04 (2013-14)	96.14 (2016-17)
Bilaspur	Chattisgarh	90.2	75.52 (2017-18)	122.95 (2013-14)

Source: Author's calculations from Smart Cities Mission data

Findings: We find that no city in the sample has achieved 100 per cent TCR. Only one city i.e. Shivamoga has close to 100 per cent of tax collections. There is a deficit in property tax collection across all the cities in the sample (distance from 100 per cent collection of tax demanded). We do find, however, that half the ULBs in the samples have achieved the goal of 90 per cent efficiency as set by the JNNURM. We also find that there are variations in property tax collection across cities. While in some cities the collections are below sixty per cent (Kota), others have a much higher percentage of collection (Shivamoga and Pune).

We also see a variation in the TCR within the same city. For instance, Kota has a maximum TCR of 96.14 per cent in one year (2016-17) but a low TCR of 37.04 per cent in another (2013-14). Similarly, Vishakpatnam has an over collection of 265.52 per cent in the year 2015-16 but under collection of 24.42 per cent in 2017-18. Even in cities like Pune or Chennai, which have a high average TCR across five years (column 3), the minimum TCR (column 4) and maximum TCR (column 5) vary. In half of the cities in the sample, we also see tax collection exceeding the maximum tax demand in a single year (column 4) for Chennai, Pune, Indore, Vishakapatnam and Bilaspur.

2. Examining human resource allocation

Our second level of analysis examines the human resource capacity in the property tax departments in a set of sample cities. The human resources could affect the TCR in two ways: First, the technical capacity of the human resources to apply the rules correctly. For instance, the ability to correctly identify taxable properties, ascertain property values, apply the assessment formula to a given assessee and determine amounts due. Second, the number of personnel in the department could potentially affect the level of accuracy in tax functions. For instance, an inadequate number of resources could increase inaccuracies. In this analysis, we focus on the second aspect of human resources, the number the personnel to examine whether a higher number officers alone leads to a better TCR.

Methodology: We collected data on the number of officers in the property tax department in the sample cities for which this data was readily available. The cities for which this data was readily available were Chennai, Pune, Vishakapatnam, Shivamoga, Varanasi, Warangal and Bilaspur.

Given the paucity of data on the number of taxable properties in the city, we device an indicator to estimate the number of taxable properties in the city using proxies. For this, we first collect Census 2011 data on the number of households living in permanent structures within the municipal area. We then calculated the number of officers per 10,000 households. We also collect data on the total area (sq. km) of the city and compare this to the administrative strength.

Table 2 sets out the administrative strength of the property tax department, the number of households living in permanent structures within the municipal area, the estimated officer to households ratio (per 10,000 households) and the city area in the sample cities for which this data was available.

Table 2: Comparing city-wise human resource allocation and TCR

City	State	Average TCR (%)	Adminis-trative strength (no. of officers)	No. of households in permanent structures	Allocation of officers (per 10,000 households)	City area (sq. km)
Chennai	Tamil Nadu	90	276	10,40,948	3	1,189
Pune	Maharashtra	96.36	41	6,83,267	1	7,256.46
Vishakapatnam	Andhra Pradesh	114.29	56	4,25,409	1	6,501
Shivamoga	Karnataka	98.36	125	58,826	21	8,477.84
Varanasi	Uttar Pradesh	96	321	1,64,014	19	1,535
Warangal	Telangana	79.87	68	1,41,750	5	406
Bilaspur	Chattisgarh	90.2	80	57,292	14	6,377

Source: City municipal websites and Census 2011

Findings: We find that some cities with higher a TCR, also have a higher officer to households ratio. For instance, Shivamoga has the highest TCR and the highest level of administrative strength. However, we see that cities with a low TCR, do not have the lowest administrative strength. For instance, Warangal is has the lowest TCR in the sample, but not the lowest officer to households ratio.

We observe that cities with similar TCR scores do not have similar personnel to households ratios. For instance, the officer to household ratios for similar TCR cities such as Varanasi and Pune or Chennai and Bilaspur are false, demonstrating a variation in human resource allocation even across cities with the same TCR levels. Further, cities with a larger area also do not always have a higher allocation of officers. For instance, Varanasi has a smaller area than Vishakapatnam, but a higher number of officers. Chennai has a smaller area than Shivamoga, but a higher number of officers than Shivamogga. We find not consistent pattern in the manner in which human resource allocation is done across cities.

Limitations: (i) We use the number of households living in permanent structures within the municipal limit as a proxy for the number of taxable properties in a city. This does not take into account the commercial property coverage of a city. (ii) Another proxy for the number of properties in a city is the area of a city, however, a larger city may be less dense and have fewer properties than a smaller and more dense city which may have a larger number of properties (iii) The estimates are only as accurate as the data available on government websites.

Learnings for property tax reforms

The findings from our case study offer insights for property tax policy reforms in ULBs:

Presumption of adequate capacity: Our study finds deficiencies in institutional capacity in tax collections across ULBs. From a reforms perspective, even if tax rates are increased, unless the present institutional capacity is improved, revenues from property taxes might continue to be affected. Further, while our study examines the institutional capacity in one tax function - tax collections, it is likely that there are deficiencies even across other functions. This may affect the outcomes from the current set of policy interventions which focus on increasing revenues by changing the design of the tax system rather than fixing the problems in the administration.

Effect of variation across ULBs: Our findings demonstrate a variation in the capacity of ULBs to carry out property taxation. We are therefore likely to see varying levels of success even for the same set of reforms across ULBs because of the different levels of institutional capacity.

Inconsistencies within ULBs: We not only see a variation in the TCR across ULBs, we also see variation in the TCR within the same ULB across different years. This is demonstrated by the variation in the minimum and maximum collection ratios of cities in our sample. This means that even cities with an overall higher average capacity might have low or high collections in a given year. For instance, the minimum TCR in Vishakapatnam is 24.42 per cent across five years and the maximum is 265.52 per cent. Similarly, the minimum TCR in Kota across five years is 37.04 and the maximum is 96.14 indicating a wide variation in the tax collections even by the same authority. While it is unclear why this is the case, this indicates some inconsistencies in capacity levels.

Management of human resources: Our findings indicate that the institutional capacity in property tax systems is not only a function of administrative capacity in terms of the number of personnel. For instance, while we see that Shivamoga has the highest officer to households ratio and the highest TCR, Pune had a lower officer to households ratio but has the second highest TCR. Similarly, despite having a similar TCR, Chennai and Bilaspur have very different human resource allocations. Therefore, increasing the strength of the administration alone may not yield better outcomes in the assessment and collection of property taxes. Instead, improving the technical capabilities of the administration or effective utilisation of the existing human resource capacity by ULBs might yield results. For instance, Bahl et. al 2013, suggest that tax authorities in developing countries are unable to capture economies of scale.

A new approach to measurement

In the course of this study, we found that the existing approach to the measurement of tax functions in the literature has two main problems. First, studies examine tax collections as an isolated administrative function and not as a product of the preceding tax functions. Second, because of this, these studies tacitly assume that the administrative processes that precede tax collections, such as the tax assessment and all the processes that make up tax assessment are accurately done. This in turn affects the diagnosis of the problems in administration.

We posit instead, that the property tax system comprises of a series of interconnected administrative processes that determine the overall outcome of revenue generation from property tax. Each process determines the success of the next. Errors in administering one process will have repercussions for the accuracy and success of the processes and functions that follow. For instance, tax collection is not just a product of the enforcement function of the ULBs. It is also a function of accurately assessing taxes due. Similarly, the accuracy of the tax assessment function is determined by (i) the maintenance of a database of all taxable properties in the city (ii) regular updation of this database, (iii) correct valuation of the properties in the database, (iv) correct application of the tax formula for these valued properties and (v) determining permitted exemptions. Table 3 set outs an indicative list of the functions that work to together form a chain of administrative processes which ultimately determine tax collections.

Table 3: Indicative list of processes involved in tax assessment and collection

Function	Processes
A. Accurate tax assessment	i. Maintaining a property records database of all taxable properties
	ii. Updating the property records database
	iii. Correct valuation of properties in the database
	iv. Correct application of the tax formula
	v. Correct determination of exemptions and concessions
B. Accurate tax collection	i. Making a correct tax demand (= Ai+Aii+Aii+Aiv+Av)
	ii. Enforcement to collect tax demanded

When we break down administrative functions into smaller processes and view each function as being linked to the next, the result of measuring of any one administrative function will provide us with insights on the accuracy of not just the function being measured but also the previous functions in the chain of administration. For instance, the TCR of a ULB is an indication of the institutional capacity of not only tax collection but also of assessing tax correctly and getting the processes associated with the functions of assessment and then collection right. In this view, a TCR of 90 per cent potentially indicates not only a failure by the ULB to recover 10 per cent of the tax demanded but also potential inaccuracies in assessment for 10 per cent of the tax demanded, leading to appeals and pending cases on account of which payment might not have been done by assesses.

Our learnings from the case study, therefore, are not indicative of capacity issues just in tax collection, but could also be on account of inaccurate tax assessments. This analysis, in line with reports on poor tax assessments in ULBs.

This approach has two advantages over the traditional approach. It breaks down and highlights all the processes involved in property tax administration. In doing so, it allows us to more accurately diagnose the specific function at which the process fails.

Conclusion

We carried out this case study to demonstrate the importance of institutional capacity in the property tax system of ULBs. We have two main findings which are as follows:

First, we demonstrate that the problems in institutional capacity exist across a majority of our sample cities. This signals that there are potential capacity problems in many if not all cities across India. It is unclear therefore whether the present set of interventions to increase property tax revenues will yield optimum outcomes. Our findings demonstrate that it is important to precede policy interventions with the measurement of institutional capacity in the property tax system. We cannot presume the existence of adequate institutional capacity. This is in line with the literature that suggests that infrastructure and institutions are the foundation for achieving effective policy outcomes (Kelkar and Shah 2019, Pritchett et al 2012, Subramaniam and Felman 2021).

Second, deficits in the TCR are not just signals for improving capacity in tax collections and enforcement but also in tax assessment and all allied administrative processes. It is therefore difficult to diagnose which part of the property tax administration requires reform. A failure at any one point of the system has repercussions for the remaining functions. We, therefore, need a comprehensive framework for measuring institutional capacity at the level of each process of the property tax system, some of which are illustrated in Table 3.

Our study also demonstrates that while most cities have some way to go, some cities have achieved higher levels of TCR than others, indicating that they have perhaps learnt to do assessments and collections better than others. We also see that some cities appear to have achieved better utilisation of administrative strength than others. There are perhaps lessons in tax assessment and collection in these cities that other ULBs in India can learn from. A case study of the good practices in collection and assessment in these cities might offer insights for better property tax administration in other cities in India.

References

Arvind Subramaniam and Josh Felman, The Economy and Budget: Diagnosis and Suggestions, January 2021.

Matt Andrews, Lant Pritchett, Michael Woolcock, Looking Like a State: Techniques of Persistent Failure in State Capability for Implementation, CID Working Paper No. 239 June 2012.

O. P Mathur, Debdulal Thakur and Nilesh Rajyadhyaksha, Urban Property Tax Potential in India, National Institute of Public Finance and Policy, 2009.

Roy W. Bahl, Johannes F. Linn and Deborah L. Wetzel, Governing and Financing Metropolitan Areas in the Developing World, Lincoln Institute of Land Policy, Pages 1-30, 2013.

Simanti Bandyopadhyay, Municipal Finance in India: Some Critical Issues, ICPP Working Papers 14-21. May 2014.

Roy Kelly, Making the Property Tax Work, ICEPP Working Papers. 42, 2013.

Vijay Kelkar, Ajay Shah, In Service of the Republic: The Art and Science of Economic Policy, 2019.

World Bank, India: Urban Property Taxes in Selected States, 2004.

Diya Uday is a senior researcher at the Finance Research Group, Mumbai. The author would like to thank Ajay Shah, Susan Thomas and the anonymous referee for their valuable insights, comments and guidance for this work.

The three tiers of government in public health

by K. P. Krishnan.

The Covid-19 pandemic has provided us with fresh insights on health policy in India. One key element of this thinking lies in a careful understanding of what elements of public health are best done at the city/district level, at the state level or at the union government. The Constitution of India has allocated the tasks in some detail. Considerable policy research work is now required, to bring life to the Constitutional scheme, based on a first principles understanding of the work that is required in public health, drawing on our experiences of 2020.

Market failure in health policy

There are great insights that can be obtained in the field of health policy by applying the toolkit of market failure. It is best to define the task of government as addressing market failure, and market failure comes in four categories: concentration of market power, presence of positive or negative externalities, presence of information asymmetry, and the need to provide public goods. There is a neat split in the field of health: public health is about public goods and externalities, while health care may contain market power and asymmetric information.

Public goods are a compelling example where the government is central, and the things that are not done by the government are hard to achieve through purely private initiatives other than pure philanthropy. Knowledge is the ultimate public good -- once a research paper is released on a website it is non-rival and non-excludable -- and we need public funding for research. When one person coughs and communicates Covid-19 to another, this is a negative externality, and there is some role for the government in reducing this externality. The main task of health policy thinking lies in analysing the landscape of public health, identifying the market failures (public goods and externalities), defining the tasks of the government, and finding a path to achieving state capacity on these functions.

Where should each function be placed?

Once we have a picture of the various functions which have to be performed in public health, we come to the question of the best place where it should be performed: the union government or the state government or the local government. The famous `Subsidiarity principle' of public economics asserts that every function should be placed at the lowest level of government where it can possibly be performed.

As an example, Amy Harman and Farah Stockman have an article in the New York Times which describes the treatment of travellers from China into the US. The federal government (which we in India call the union government) is the right agency to track flights and obtain lists of passengers. After this, there is a handover of information, that person x flew in from China, to the local government where that person resides. At this point, the local government is the one best equipped to work on contact tracing, testing, and isolation. This is an optimal allocation of the two tasks. It is hard for a local government to keep track of who flew in from China. It is hard for the union government to manage front line staff in a city or a district.

It is interesting and important to think about the elements of a public health system, and to think about the optimal placement of each of these elements, between the union, state and local governments. However, we do not engage in policy thinking on a tabula rasa. We do policy thinking in India where the Constitution of India has a well-developed point of view on these questions, and amendments to the Constitution on this aspect are rare. Hence, our puzzle in thinking about public health in India lies in taking full cognisance of the Constitutional scheme and best adapting it for our present understanding.

Health in the Indian Constitution

The distribution of subjects in the Constitution is reasonably elaborate. It sets up a division of labour between different levels of government, viz, the union, state, panchayat (rural local bodies), and municipalities through a list of subjects which are enumerated in its schedules VII, XI, and XII.

The Seventh Schedule of the Constitution lists the distribution of the subjects between the union and the states, while the eleventh and twelfth schedules deal with the distribution of responsibilities at the local level, i.e., panchayats and municipalities. Every policy thinker in India needs to fully understand these three schedules. Table 1 summarises the distribution of subjects in the domain of public health.

Table 1: Distribution of 'health' related subjects in the Indian Constitution

Government	Subject	Reference
Union	Port Quarantine	Schedule VII, List I, Item 28
Union	Union agencies and institutions for professional, vocational or technical training, etc.	Schedule VII, List I, Item 65
Union	Co-ordination and determination of standards in institutions for higher education or research and scientific and technical institutions	Schedule VII, List I, Item 66
Union	Inter-state migration and inter-state quarantine	Schedule VII, List I, Item 81
State	Public health and sanitation; hospitals and dispensaries	Schedule VII, List II, Item 6
Concurrent (both union and state subjects)	Lunacy and mental deficiency, including places for reception or treatment of lunatics and mental deficients	Schedule VII, List III, Item 16
Concurrent	Medical education and profession	Schedule VII, List III, Items 25 and 26
Concurrent	Prevention of the extension from one State to another of infectious or contagious diseases	Schedule VII, List III, Item 29
Panchayat	Health and sanitation, including hospitals, primary health centres and dispensaries	Schedule XI, Item 23
Panchayat	Family welfare, women and child development	Schedule XI, Items 24 and 25
Panchayat	Social welfare, including welfare of the handicapped and mentally retarded	Schedule XI, Item 26
Municipality	Public health, sanitation conservancy and solid waste management	Schedule XII, Item 6
Municipality	Safeguarding the interests of weaker sections of society, including the handicapped and mentally retarded	Schedule XII, Item 9

There is a significant role of union government in subjects relating to contagious diseases and pandemics. It is also responsible for setting standards of medical education and profession along with the state government. On the other hand, state and local bodies are responsible for most public health functions such as sanitisation and family welfare.

A simple reading of the distribution of functions induces many questions. For instance, vaccination is a public health function which is a part of state list under the Constitution. This is logical, given that immunisation programs require a large front-line workforce that interacts with the population. However, the design of the standard package of vaccinations for all kids, and envisioning ambitious projects like the eradication of smallpox or polio, require thinking and coordinating by the union government.

Similarly, in a public health crisis such as COVID-19 all levels of government are required to perform their specific functions that are elements of the overall public health response. These elements include tasks such as planning, funding, managing and on-ground implementation. These elements are not described in detail in the Constitution but are an important part of the legal and policy mechanisms adopted by the government.

There is at present relatively little in place, in India, by way of Parliamentary law which shapes and circumscribes the work of public health. The British-era Epidemic Diseases Act, 1897, has many problems. The legal framework under which India is responding to the COVID-19 crisis is the Disaster Management Act, 2005 which sets up a National Authority whose role is briefly discussed below.

The role of the National Authority

The Disaster Management Act, 2005 is the union law that was used by the union government in its Covid-19 response. In this Act, a disaster is defined to be:

a catastrophe, mishap, calamity or grave occurrence in any area, arising from natural or man-made causes, or by accident or negligence which results in substantial loss of life or human suffering or damage to, and destruction of, property, or damage to, or degradation of, environment, and is of such a nature or magnitude as to be beyond the coping capacity of the community of the affected area;

Under this law, the National Authority is responsible for drawing a national plan for disaster mitigation, prevention, and preparedness. This plan is to be reviewed and updated periodically. The law also recognises the role of multi-level governments as it sets up the national, state and district level authorities which are responsible to follow the guidelines of the National Authority.

The National Disaster Management Plan in India was last updated in November 2019, its only revision after the first plan was released in 2016. While the plan deals with Biological and Public Health Emergencies (BPHE), it does not provide detailed guidelines on the structural frameworks required for dealing with a global pandemic at the scale of COVID-19. In this sense, India does not have a national plan to deal with the COVID-19 crisis as of now. It would be useful to design a national plan which guides the government in undertaking a well-coordinated action to deal with the crisis. The national plan should be mindful of the spatial element of the public health interventions in COVID-19 such as:

1. Inter-state migrations, operations of flights require intervention by the union government.
2. Hospital preparedness, such as the presence of an adequate number of hospital beds, medical equipment such as ventilators and oxygen etc. require intervention at the state level.
3. Contact tracing and quarantine enforcement require intervention at the municipal or local level.

A guidance document by the National Authority with conceptual clarity about the elements of public health will be useful to minimise policy failures in COVID-19 management. At present, some clear policy failures in COVID-19 management are being observed. These failures are at all levels of the government, the union, state, and local levels. Some of them are described below as illustrations:

Union-state coordination

Actions taken by the government during a pandemic have political repercussions and therefore, a tension between the state and union government priorities can exist. For instance, in Delhi, the elected government and the Lieutenant governor had disagreed on the conditions being imposed on businesses during the lockdown period leading to uncertainty for the public.

Varying state priorities

Border state conflicts relating to inter-state travel of persons became common in the early period of the COVID-19 pandemic. In the first week of April, Karnataka state sought intervention of the Supreme Court to resolve a dispute regarding border movement with the neighbouring state of Kerala during lockdown imposed due to COVID-19. This was after the Kerala High Court passed a verdict asking Karnataka to allow movement of persons between the states. Eventually, the union government was involved in reaching an amicable settlement between the states regarding conditions of movement of persons during the lockdown.

Varying priorities of local bodies

The local bodies are empowered to take action in public interest under the Disaster Management Act. During the COVID-19 crisis, it was observed that local bodies failed to take into consideration the impact of their decision on neighbouring districts. For instance, the Noida district administration barred entry of persons from the Delhi border without a pass issued by them. This caused trouble to essential workers such as doctors and nurses who worked across the district border who would be left stuck at the border without knowledge of requirements for such a pass.

Heterogeneity within the vast country

There is great heterogeneity within the 3.3 million square kilometres of India, in the state of the epidemic, in trade-offs between mobility and disease control, and in state capacity. There is great value in having democratic legitimacy in each city or each district in choosing the optimal path.

While working through the Disaster Management Act was expedient when faced with the pandemic, as the dust settles, there is a need for health policy thinkers to envision a public health system for India. It is important to, lay this on sound legal foundations, whereby the Disaster Management Act is ultimately focused on natural disasters like earthquakes, and public health has its own legal and institutional architecture that is fit for this purpose.

Conclusion

There is a need to bring greater coherence to all the elements of state power that are in play in the response to Covid-19. This has led to twin challenges of a) micromanagement by the union bodies, and b) excessive delegation of powers to the state and local governments without adequate checks and balances. For instance, approval for Covid-19 testing labs throughout the country is done by a single body, the ICMR, an approach that has difficulties. Similarly, certain orders by district and state authorities have also been criticised during the course of the pandemic for being arbitrary.

We should utilise our fresh understanding of the present problems, to build a body of knowledge on (a) What are the tasks of public health in India (b) What is the role of the union / state / local government in each of these and (c) How to achieve state capacity on each of these components?

K. P. Krishnan is Professor at National Council of Applied Economic Research (NCAER).