₹10,000 cr allocated for urban infrastructure development fund: FM Sitharaman | Latest News India | Times Of Ahmedabad

Union finance minister Nirmala Sitharaman on Wednesday announced the setting up of an Urban Infrastructure Development Fund to create infrastructure in Tier-2 and Tier-3 cities, for which ₹10,000 crore will be allocated annually.

Sitharaman, like last year, stressed the need for states to focus on urban planning and reforms to transform Indian cities into “cities of tomorrow”.

The minister said the outlay for the Pradhan Mantri Awas Yojana (PMAY) has been enhanced 66% to ₹79,000 crore in Budget 2023-24.

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In Budget 2022-23, the government allocated ₹48,000 crore for the completion of 8 million houses under the scheme.

While presenting the Budget for 2023-24, Sitharaman said, “Like the Rural Infrastructure Development Fund (RIDF), an Urban Infrastructure Development Fund (UIDF) will be established through the use of priority sector lending shortfall. This will be managed by the National Housing Bank, and will be used by public agencies to create urban infrastructure in Tier-2 and Tier-3 cities.”

She said the states will be encouraged to leverage resources from the grants of the 15th Finance Commission, as well as existing schemes, to adopt appropriate user charges while accessing the UIDF.

“We expect to make available ₹10,000 crore per annum for this purpose,” she said.

The minister said the government will incentivise cities to improve their finances and make them ready for municipal bonds. “Through property tax governance reforms and ring-fencing user charges on urban infrastructure, cities will be incentivised to improve their credit-worthiness for municipal bonds.”

Sitharaman also focused on urban sanitation in her speech and said, “All cities and towns will be enabled for 100% mechanical desludging of septic tanks and sewers to transition from manhole to machine-hole mode. Enhanced focus will be provided for scientific management of dry and wet waste.”

Urban development experts have welcomed the announcement and said the fund will help urban local bodies improve their finances and access municipal borrowings of Tier-2 and Tier-3 cities.

Srikanth Viswanathan, chief executive officer, Janaagraha, an urban affairs think tank and advocacy group, said, “This is a step in the right direction, as the urban infrastructure development fund is very important to enable local bodies and other city authorities to start accessing municipal borrowings. Until now municipalities have been substantially dependent on grants from the Union and state. It is important that in addition to focusing on user charges and property tax collections, municipalities should be encouraged to tap into market capital.”

He said there is a need for local bodies to start leveraging their land and properties and other assets to raise more capital from the private sector and build infrastructure and services. “It (the fund) will contribute in a big way to further expanding the list of cities that are able to tap into the market,” he said.

Though it was not immediately clear how municipalities will be able to make use of this fund, Viswanathan said, “My expectation is that this fund will not be used to give direct loans to municipalities but to strengthen the capabilities of the municipalities to raise borrowings. We have to wait for the details.”

Like last year, the government has stressed the need for urban planning reforms for sustainable development of cities as nearly half the country’s population is expected to be living in cities by 2047, when India will celebrate 100 years of Independence.

In this budget, too, the government has emphasised on the need for urban planning reforms.

“States and cities will be encouraged to undertake urban planning reforms and actions to transform our cities into ‘sustainable cities of tomorrow’. This means efficient use of land resources, adequate resources for urban infrastructure, transit-oriented development, enhanced availability and affordability of urban land, and opportunities for all,” Sitharaman said.

In Budget 2022-23, the government stressed the need for orderly development of mega cities and for Tier-2-and Tier-3 cities to gear up to be future-ready. The government had announced a slew of measures and schemes to ensure planned development and implementation of urban planning reforms.

The ministry of housing and urban affairs is in the process of finalising schemes proposed in Budget 2022-23 to bring about a paradigm shift in urban planning. According to senior ministry officials, the schemes identified are: modernisation of building bye-laws, transit-oriented development, allowing transferable development rights, preparation of local area plans and town planning schemes, and creation of sponge cities by integrating blue and green infrastructure.

Urban planner R Sriniwas, a professor at the School of Planning and Architecture and a former town and country planner, said, “Like in the last Budget, the government has focused on urban planning reforms that are essential for planned development of cities, especially Tier-2 and Tier-3. There is a need for having outcome-based incentive schemes.”