The state government has also requested the Finance Commission to recommend a grant-in-aid package of Rs 2,000 crore for the much-discussed Mumbai Urban Transport Project-II (MUTP) to improve urban infrastructure other than railway systems.

Ravindra Mane, the minister of state for urban development, who represented the state government before the Finance Commission, told The Financial Express that the centre should bear a greater responsibility of maintaining the urban infrastructure in the Mumbai Metropolitan Region (MMR), considering the status of Mumbai as the financial capital of India. "Nearly 30 per cent of the central taxes are collected from the city," he added.

According to the 1991 census, Maharashtra has nearly 39 per cent urban populationagainst the national average of 26 per cent. By the time of the next census, this is expected to cross the 45 per cent mark. "A major reason for Maharashtra's high percentage of urban population is migration from rural centres and other states. This is usually restricted to Mumbai, Pune and the surrounding areas," Mane said.

The Rs 6,433 crore MUTP-II with a rail component of Rs 4,740 crore has been formulated to improve traffic and transportation with financial aid from the World Bank. Under this project, the state government and its agencies have to bear 50 per cent of the cost of railway projects and 100 per cent of non-railway projects, Mane said. "To alleviate the difficulties of the people, the state has been forced to agree to bear 50 per cent of the cost of the railway project, though transport is a subject of the centre," he added.

Mane said that the total income of 15 municipal corporations and 228 municipal councils in the state was nearly Rs 4,800 crore in 1996-97 and the government had giventhem Rs 700 crore as grant-in-aid. However, despite this massive funding, these municipalities were still short of the income required to fulfil their civic obligations by nearly Rs 700 crore.

He said that by 2004-05, these civic bodies were expected to earn an income of Rs 15,200 crore and the government was expected to give grant-in-aid of Rs 2,000 crore. "We look forward to the Finance Commission to suggest enough devolution of funds for municipalities to bridge the projected gap of Rs 2,000 crore. Unless this gap is bridged, the quality of life in urban areas will suffer heavily," he said.

Mane said that the main sector that suffers due to the shortfall in funds was water supply, sewerage, solid waste management, health services, implementation of development plans and urban transport. Though development plans have been sanctioned for all municipalities, they were implemented marginally due to paucity of funds.

He said that the government has been providing an average annual grant of Rs 15 crore forthis purpose. Under the centrally-sponsored integrated scheme for small and medium towns, only 96 were covered. These towns receive about Rs 4 crore, including matching contribution of the state. "However, it is estimated that the annual shortfall of funds for implementation of these development plans will be about Rs 300 crore at 1992-93 prices."

Mane demanded that the Finance Commission suggest an amendment to the constitution for municipalities to levy property taxes on central government properties. "This would help some municipalities increase their revenues marginally," he said.

Till the amendment, Mane said that the centre may be asked to increase the payment of service charges for their properties by at least 50 per cent as an interim measure.