Budget 2023: States will develop urban reforms

Budget 2023: States will develop urban reforms

Additional financial assistance and incentives for state governments to implement urban reforms are anticipated to be included in the budget for FY24. The Center allocated Rs 11,000 crore for FY23 as funding support for the states, of which Rs 6,000 crore (which is a portion of Rs 1 trillion, 50-year interest-free capital expenditure loans to states in FY23) was allocated for urban reforms like drafting building bylaws, town planning plans, transit oriented development, and transferable development rights. States have put aside Capex loans of Rs 5,000 crore for the sale of assets in FY23.

The Centre will likely further expand the incentives for states for undertaking asset monetization and urban reforms planning as part of the long-term interest-free Capex loans in FY24 too, sources said. The Centre might continue the special Capex loan scheme for states in FY24 with an outlay of Rs 1 trillion or thereabouts.

“Most urban bodies are plagued with problems such as inefficient planning, poor project structuring, land and clearance delays, restrictive regulatory framework, and inadequate financing. The Centre will extend necessary support, including financial and technical support, the states need to take the lead.” According to United Nations projections, the urban population in India is projected to increase from 461 million in 2018 to 877 million in 2050.

Since 2014, the Narendra Modi government has launched several centrally sponsored schemes such as Smart Cities Mission, Atal Mission for Urban Rejuvenation and Urban Transformation (AMRUT), Pradhan Mantri Awas Yojana-Urban (PMAY-U) and Swachh Bharat Mission-Urban (SBM-U). During these nine years, these schemes have yielded a total investment of Rs 16.4 trillion ($23.5 billion) including government (in a 6:4 ratio between the Centre and states) and private sector investments, according to government data.

As per a recent World Bank report, to efficiently meet the demand of the growing population, India will need approximately $840 billion in investment in urban infrastructure over the next 15 years. Of this, $450 billion investment needs are in basic municipal services such as water supply, sewerage, municipal solid waste management, stormwater drainage, urban roads and streetlighting). A balance of $300 billion is needed for mass transit systems.

For FY23, the Centre has provided Rs 28,000 crore for PMAY-U, Rs 8,300 crore for the Smart Cities Mission, Rs 7,600 crore for AMRUT and Rs 2,300 crore for SBM-U. Given that these funding requirements are significantly higher than current levels of investment, the Centre wants to intensify collaboration and partnership with states and local bodies to rope in the private sector through a public-private partnership, sources said.

The Centre launched PMAY-U in 2015 to provide housing for all. It assists implementing agencies through States/ UTs in providing houses to eligible economically weaker section, low-income group and middle-income group beneficiaries. Out of Rs 2 trillion in central assistance committed, it has already released Rs 1.28 trillion since 2015 for 12.27 million housing units.

With a rising urban population, there is a proportionate rise in the demand for urban services such as urban transport, sanitation, drinking water, housing, urban amenities, etc. While urban areas constitute only about 3% of the total land area, they contribute to over 70% of the GDP.