Why in news?
The government has approved a ₹1 lakh crore Urban Challenge Fund to spur transformative infrastructure projects in Indian cities. The fund will be disbursed through a competitive process, encouraging cities to propose innovative projects that improve urban living while leveraging market financing.
Background
India’s rapid urbanisation has strained city infrastructure, leading to congestion, inadequate sanitation and poor housing. The Urban Challenge Fund addresses this gap by offering central assistance to urban local bodies that propose reforms‑oriented projects. The scheme draws inspiration from global challenge funds and aligns with the National Urban Digital Mission and AMRUT.
Key provisions
- Large corpus: The fund provides ₹1 lakh crore in central assistance over five years. Cities must raise at least 50 % of project costs through municipal bonds, bank loans or public–private partnerships.
- Competitive selection: Projects will be chosen via a challenge method, rewarding proposals that demonstrate reforms, financial sustainability and high social impact.
- Reform‑linked grants: Funding is tied to governance reforms, property tax collection, user charges, urban planning and improved service delivery.
- Credit guarantee: A ₹5,000 crore credit‑guarantee facility will help smaller cities and hill states access loans by assuring lenders.
- Broad eligibility: Cities with populations over 10 lakh, state capitals and major industrial cities are eligible. Smaller towns may participate through pooled projects.
- Focus areas: Projects can include transit‑oriented development, water supply, waste management, heritage conservation, climate resilience, and creation of vibrant public spaces.
Expected outcomes
- Modern urban infrastructure: The fund aims to deliver sustainable transport, affordable housing and improved sanitation.
- Market discipline: By requiring cities to mobilise half the funds from the market, the scheme encourages financial discipline and better project planning.
- Balanced development: Differential incentives for smaller and hill towns ensure that benefits reach diverse urban areas, not just metro cities.
Source: Press Information Bureau
