Contrary to popular concepts of a predominantly rural India, an increasingly larger percentage of Indian population lives in the Urban areas. Today, India's urban population is second largest in the world after China. Most of the commercial activity  other than agriculture and village merchandise takes place in Urban areas. Expected Contribution of urban sector to national income has increased from 29 in the year 1951 to 55 in 1991 and is projected to reach 60 by 2001 . Therefore, to a large extent, urban India is the engine of productivity and growth in the country. The five fold explosive growth in Urban India has resulted in serious infrastructure constraints. Water, transport, housing, electricity, health & sanitation and education are some of the areas of concern. Infrastructure to meet these  requirements calls for huge investments. Private sector investment for provisions of urban infrastructure can not take place unless a proper legal and regulatory framework for such investment is created and developed which ensures a full cost plus recovery of such investment. This calls for innovative reforms in municipal tax structure and user charges, taking into account poor paying capacity of a sizeable section of urban population.