Abstract
The main objective of the paper is to assess the performance of urban local governments in India taking the physical levels of services provided by them as the ‘outputs’ and the expenditures on resources to provide these services as ‘inputs’ in an integrated framework and pinpoint some possible sources of mis-utilization of resources. We use nonparametric two-stage data envelopment analysis technique to derive the efficiency scores, with a subsequent analysis of slacks associated with the optimization exercise which quantifies the extent of mis-utilization of resources. The main findings suggest that the city governments can provide the same levels of services by using resources lesser by 27 % of what they currently use. We also find that the extent of unproductive spending and under-provision of services are more pronounced in smaller cities. Mis-utilization of resources in factors like establishment and laborcost is more pronounced as the establishment expenditures and contractual payments in the laborcost component involve more leakages.
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Notes
Actually the study comprises of 215 urban local governments but data for two ULBs were not sufficient to apply the methodology.
Census towns and notified areas are small but separate ‘geographical entities’ in urban areas, but they are not separate units of ‘urban local governments’ who perform certain functions for the citizens. As a result of this, they do not have budgets or statements to expenditures. Similarly, there are certain geographical areas—mostly having military establishments—called cantonment areas governed by a board–which function in a very different way than a town or a city. These boards are centrally administered by Ministry of Defense. There is only one cantonment board in the state of Karnataka. Keeping in mind these considerations, we can rationalize the omission of these units.
It is to be noted that the analysis is subject to some data constraints. We cannot verify the street lighting physical norms as the data on distance between two poles for the ULBs are not available. For financial norms, we only confine ourselves to O&M norms as the capital expenditure data as annual expenditures are not recorded as they are lumpy in nature and are incurred generally on specific project-related outlays.
The case for street lighting is different as we find that the expenditures incurred are 1051 % more than that prescribed by norms. This can be attributed to the fact that the state is changing over to the low-energy-intensive bulbs for street lighting. As the ONM includes the cost of bulbs, we get such unusually high figures for expenditures in this transition period as the low-energy bulbs cost on an average 20 times more than the usual ones and the norms do not include additional costs of changing over from high-energy-consuming bulbs to low-energy-consuming bulbs.
Estimating expenditure functions and expenditure needs has many data-related and methodological problems. So we have to rely on expert judgment approach which has been used for many US and Australian cities for specific services (Reschovsky 2007).
It is to be noted that the input slack in percentages cannot exceed 100 as the optimization exercise in production involves minimization of inputs and the potential reduction in inputs cannot exceed the amounts of inputs used in the model, whereas output slacks can exceed 100 as output expansions are determined from the model and the potential expansion can exceed the amount of outputs produced.
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Bandyopadhyay, S. Financial management and service delivery: a nonparametric analysis for Indian cities. Ann Reg Sci 54, 721–751 (2015). https://doi.org/10.1007/s00168-015-0673-1
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DOI: https://doi.org/10.1007/s00168-015-0673-1