Urban local government in India and the US

This post will try to examine some reasons why civic services and amenities are much more efficient in the US than India.

The local government (and other government agencies) in an Indian city delivers the following services directly using its own personnel
1. Sweeping of roads; cleaning drains; and collection, treatment and disposal of solid waste
2. Provision of water supply and maintainance of sewerage facilities
3. Supply of electricity
4. Streetlighting
5. Maintenance of local roads
6. Community amenities like parks, libraries and community halls
7. Schools, hospitals and anganwadi (nutrition) centers
8. Fire Services
9. Maintenance of law and order
10. Regulatory services like town planning, commercial licenses, and birth and death registration

In contrast, in the US the services from Sl Nos 1 to 4 are outsourced (sanitation and streetlighting) or are supplied by private providers (water, sewerage, and electricity). Therefore, while all the major civic services in any Indian city are provided directly by the government, they are delivered by private operators in the US. This frees up the local government to concentrate on more effectively delivering the services from Sl Nos 6 to 10.

The difference in quality is very evident. By outsourcing and privatizing certain services, not only is the delivery of civic services improved, but also the effectiveness of the local government and its agencies in delivering the remaining services. In contrast to India where the local government has spread itself out too thin, in the US it is much more focussed on its core competency.

I am convinced that if the local Government in the US were delivering these basic civic services and utilities, they would do just as bad a job as their Indian counterparts have been doing. It is just that these services are too large and complex to be managed efficiently by the distorted incentive systems of Government agencies. The efficient delivery of these services is to a great extent dependent on the direct accountability of the service providers to the consumers.

Another important reason why civic services are excellent in the US is simply the fact that Americans pay many times more local tax and user charge than Indians do. A comparison of the property tax (assume a 1500-2000 sqft house) and user charges on civic services in Hyderabad and Boston is interesting
Hyderabad suburbs
Property Tax Rs 2000-2500 (annual) ($50-60)
Water and sewerage - Rs 100-200 (monthly)
Electricity - Rs 1000 (monthly)
Cooking gas - Rs 700 (monthly)
Total user charges per month - Rs 2000 (or $50)

Boston suburbs
Property Tax - $4000-5000 (annual) (PPP equivalent of $800-1000)
Water - $20 (per month)
Sewerage - $40-50 (monthly) (note that sewerage is more costlier than water)
Electricity - $100-150 (monthly)
Gas (cooking and heating) - $200-300 (monthly)
Snow removal, cleaning and solid waste collection - $150-200 (monthly)
Total user charges per month - $500-700 (PPP equivalent of $125-175)

Adjusting for PPP (assume conversion factor of 5), the property tax in the US is still 16 to 20 times Indian rates. In other words, the property tax on a 1500-2000 sqft house in the suburbs of Hyderabad will have to be increased from Rs 2000 to atleast Rs 32000 to become equivalent with rates in the US. Interestingly, this would be about 1% of the market value of the Hyderabad house. It is true that police and fire services are not under the local body in India, and teachers salaries are paid by the state government in many states. On the other hand Indian cities do not maintain good libraries and other community amenities, and their civic infrastructure, schools and hospitals are in a bad state of disrepair.

The limited focus of local body functions, private delivery of utility services, and the large property tax rates atleast partially explain the greater efficiency and effectiveness of local governments in the US.