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to service the bond.

iii A number of states have created urban infrastructure financing corporations or trust funds. In Tamil Nadu for example this fund has been created with support from the World Bank and functions at 'armlength' of the state government. In other states this is often not yet the case.

iv The Asian Development Bank helped to restructure these institutions in three Indian states (TCS-HIS, 2000).

vIL&FS and ICICI in particular. IFCI also issued bonds, which would be used mostly for infrastructure.

vi In the reform process four stages can be distinguished (Schwartz and Van Dijk, 2004):

1.Pressure to improve the performance in the sanitation sector

2.Broad sector reform

3.Service provider reform

4.Maintaining progress

vii In the case of Ahmedabad, the Municipal Corporation has been implementing a Slum Networking project in several settlements with the partnership of communities and contributions from industry groups. The Corporation has been playing a pro-active role in developing these partnerships and streamlining and simplifying procedures for implementation of community level projects. The Corporation is currently in the process of scaling up of this activity to all low-income settlements in the city.

viii Seven case studies of wastewater treatment and sanitation (in Comodoro Rivadavia in Argentina, Bangalore in India, Cancun in Mexico, Manila in the Philippines, Dolphin Coast in South Africa, Nyon in Switzerland and Lusaka in Zambia) have been undertaken by members of the Institutional and Management Options (IMO) Working Group of the Water Supply and Sanitation Collaborative Council (WSSCC) invited to participate and by other researchers active in the sector. The cases were studied using a common framework. This provides contextual information, like a brief history of the development of this sector, and an elaboration of each of the five issues mentioned. The final report will be published by the WSSCC, see also Van Dijk (2004b).

ix What is needed at the state level in India is a Co-ordination committee with all state agencies involved, for example under guidance of the Urban Development Department (UDD). The Committee should establish the accounting standards for local government. Accounting reforms has so far taken place in cities in Tamil Nadu, Karnataka (Bangalore) and Maharashtra.

x The preparation of the opening balance is a well-known problem. It is sometimes relatively easy if a good property register exists. Otherwise there is a need for procedures, there are problems of identifica­tion and classification and sometimes legal experts have to come in, or the State government needs to formulate policies.

xi This is a clear difference with the budget system followed so far. There are also controversies, for example what to do with depreciation? There should be a clear policy how different assets will be depreciated.

xii Detailed guidelines and have gone around and been discussed (TCS-IHS, 2000). The result should be something accepted by everybody with statutory responsibilities. However, even then it will still take a long time before every local government is benefiting from it.

xiii The GOI has decided to establish such a demand driven centrally sponsored City Challenge Fund (CCF) to help municipalities to finance their infrastructure. The CCF will assist cities to achieve creditworthiness through structural reform. It will draw from experiences with Challenge Funds worldwide. The fund will assist cities and larger class 1 towns to address the major challenges they face. The CCF will create a competitive process, where cities indicate policy reforms and submit model projects. The CCF is intended as a catalyst for a new generation of urban reform activities that focus on large scale restructuring of existing governance arrangements, of fiscal systems and current urban management practices. On the basis of a number of pre-specified criteria the projects eligible for finance will be selected periodically.

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