A ₹300 crore prototype of the ₹1 lakh crore Urban Challenge Fund (UCF) announced in the February Union Budget has been finalised for cities with populations of 100,000 (as per the 2011 Census) to demonstrate the potential of developing bankable projects, a government official said.
Bankable projects are planned to recover the investments, especially those made through non-grant investments. They are vital for improving municipal governance as they attract investment for urban infrastructure, reduce dependency on government funding, and enhance financial discipline among Urban Local Bodies.
Union housing and urban affairs (MoHUA) ministry additional secretary D Thara said that the pilot is a curtain-raiser under Atal Mission for Rejuvenation and Urban Transformation (AMRUT). “We will provide a credit guarantee for 70% of the funds,” Thara said at a panel discussion, organised by WRI India, on economic strategies for cities on Tuesday.
The UCF, which is yet to be finalised, was proposed as a transformative financing mechanism to support urban development under themes such as “cities as growth hubs” and “creative redevelopment of cities”.
In February, Union finance minister Nirmala Sitharaman said the fund would co-finance up to 25% of bankable projects, contingent on leveraging bonds, bank loans, or public–private partnerships for a minimum of 50% of the remaining funding. Thara said the same principles would apply to the prototype.
{{/usCountry}}In February, Union finance minister Nirmala Sitharaman said the fund would co-finance up to 25% of bankable projects, contingent on leveraging bonds, bank loans, or public–private partnerships for a minimum of 50% of the remaining funding. Thara said the same principles would apply to the prototype.
{{/usCountry}}Thara said that the UCF design is ready and the finance ministry was due to approve it. She added the ministry held multiple talks with financing agencies, including commercial banks.
Thara said reform is built into the scheme as financial discipline, a major lacuna in India’s municipal bodies, has to be improved to raise capital from the markets. She added the UCF guidelines can be modified even after the launch based on the learnings.
A World Bank report released in July estimated India needs $2.4 trillion by 2050 for climate-resilient and low-carbon intensive urban infrastructure. It estimated a conservative scenario of 43% urbanisation by 2050.