A year after finance minister Nirmala Sitharaman unveiled a ₹1 lakh crore Urban Challenge Fund, the big-ticket reform idea to transform cities into growth hubs, has remained a non-starter.
The fund, which had an initial allocation of ₹10,000 crore for fiscal 2025-26, has not been operationalised. The ministry of housing and urban affairs had finalised guidelines for the programme in October but they have not passed the mandatory muster of the Cabinet over the last three months.
The FM had laid out broad contours of the fund in her speech: "The government will set up an Urban Challenge Fund of ₹1 lakh crore to implement the proposals for 'cities as growth hubs', 'creative redevelopment of cities' and 'water and sanitation' announced in the July budget. 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."
According to sources, the ministry has prepared the project pipeline and is hoping that once the Cabinet approves the guidelines, the fund will be operationalised. A senior ministry official told ET, "Proposals from at least 15 states are in. We should be able to start the process of fund allocation once the Cabinet approval comes in."
Even if the Cabinet approves the norms, ₹10,000 crore won't be released. A ministry source said, "At best, only about ₹500 crore will be released in the current fiscal if the guidelines are approved. No state will have the capacity to utilise such a huge amount (as initially earmarked)." An email written to the ministry for its response remained unanswered till press time.
This is the second instance when a major urban development initiative remained a nonstarter. Last year, the ministry shelved the plan to develop eight greenfield cities with the 15th finance commission grant of ₹8,000 crore as a performance challenge fund.
The fund, which had an initial allocation of ₹10,000 crore for fiscal 2025-26, has not been operationalised. The ministry of housing and urban affairs had finalised guidelines for the programme in October but they have not passed the mandatory muster of the Cabinet over the last three months.
The FM had laid out broad contours of the fund in her speech: "The government will set up an Urban Challenge Fund of ₹1 lakh crore to implement the proposals for 'cities as growth hubs', 'creative redevelopment of cities' and 'water and sanitation' announced in the July budget. 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."
According to sources, the ministry has prepared the project pipeline and is hoping that once the Cabinet approves the guidelines, the fund will be operationalised. A senior ministry official told ET, "Proposals from at least 15 states are in. We should be able to start the process of fund allocation once the Cabinet approval comes in."
Even if the Cabinet approves the norms, ₹10,000 crore won't be released. A ministry source said, "At best, only about ₹500 crore will be released in the current fiscal if the guidelines are approved. No state will have the capacity to utilise such a huge amount (as initially earmarked)." An email written to the ministry for its response remained unanswered till press time.
This is the second instance when a major urban development initiative remained a nonstarter. Last year, the ministry shelved the plan to develop eight greenfield cities with the 15th finance commission grant of ₹8,000 crore as a performance challenge fund.
