The Budget proposes an Urban Challenge Fund (UCF) of Rs 1 lakh crore to encourage states to think innovatively towards attaining sustainable urbanisation and redevelopment goals in existing cities.
The grant is expected to infuse around Rs 4 lakh crore for infrastructure development, achieving saturation and implementing redevelopment projects.
"This fund will finance up to 25% of the cost of bankable projects with a stipulation that at least 50% of the cost is funded from bonds, bank loans and PPPs.
An allocation of Rs 10,000 crore is proposed for 2025-'26," FM Nirmala Sitharaman said in her speech.
UCF would help implement proposals for 'Cities as Growth Hubs', 'Creative Redevelopment of Cities' and 'Water and Sanitation' proposals, the FM said.
In the first year itself, cities that qualify would have to fund another Rs 30,000 crore for projects that would be identified, a source stated, adding that the grant would be for both new and existing cities.
Persuading states to take innovative steps towards intensive urban development by improving physical and social infrastructure has become urgent, considering that most cities, including Tier-2 and -3 ones, have witnessed unregulated growth, with inefficient use of land that is already scarce.
TOI had first reported on Jan 13 that Prime Minister Narendra Modi, while reviewing the urban development sector, had tasked officials to focus more on creating facilities, amenities and better transport networks in zones in cities that naturally attract people and businesses, than develop new cities that push horizontal growth.
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