New Delhi: The central government last month operationalised the Rs 10,000-crore Urban Infrastructure Development Fund (UIDF) — announced in this year’s Union Budget — for creation of infrastructure in tier-2 and tier-3 cities.
Under this initiative, state governments and Union territories have been asked to submit proposals for projects worth Rs 5 crore to Rs 100 crore by September-end, officials from the Ministry of Housing and Urban Affairs said.
Modelled on the Rural Infrastructure Development Fund (RIDF), the UIDF allows an annual allocation of Rs 10,000 crore for infrastructure development. It currently covers 459 tier-2 cities and 580 tier-3 cities. The National Housing Bank (NHB), the nodal agency for the implementation of the fund, defines tier-2 cities as those with a population ranging between 1 lakh and 99,99,999, and tier-3 cities as those between 50,000 and 99,999.
Given as a loan to states, the fund can be used for 11 types of infrastructure projects, including setting up of water supply network, sewerage network, solid waste management plant, construction of underpasses and bridges and comprehensive area development projects, according to the NHB.
A senior official from the ministry of housing and urban affairs told ThePrint: “There are several missions such as Swachh Bharat, smart cities, AMRUT Scheme, etc, under which cities are getting funds for upgrading or developing new infrastructure. But the UIDF is especially for tier-2 and tier-3 cities, where infrastructure development has not kept pace with the increase in population.”
The NHB, which comes under the housing ministry, has worked out state-wise allocation of funds based on the number of eligible tier-2 and tier-3 cities and their population, according to the official.
Another senior ministry official told ThePrint, “States have been informed about the funds that will be available to them. We have asked them to submit infrastructure development proposals by September so that money can be allotted to them after assessment of the projects. States can propose ongoing projects and also club proposals to avail of the fund.”
While urban development and governance experts have welcomed the central government’s move to focus on the much-needed infrastructure development in tier-2 and tier-3 cities, they advised that cities be given more flexibility in using the UIDF and states need to plan better in order to utilise the fund for economic development.
Speaking to ThePrint, Srikanth Viswanathan, chief executive officer of Janaagraha, a Bengaluru-based think tank, said: “State governments should expeditiously put together bankable and investable projects in tier-2 and tier-3 cities which will come in handy not just for the UIDF but other municipal borrowings as well.”
He also advised that the central government should focus on leverage instruments like credit guarantees “rather than plain vanilla loans”.
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Provisions of the fund
According to UIDF guidelines, the focus will be on mid-sized cities to “develop them into regional economic hubs”.
States can propose projects worth Rs 5 crore to Rs 100 crore related to 11 types of works, for which loan will be provided between 75 per cent and 90 per cent of the total project cost. The cost escalation in approved projects has to be borne by the state governments, which can repay the UIDF loan in five equal instalments within seven years, state the guidelines.
Housing, transport, education, health infrastructure and administrative expenses, among others, have been kept out of the ambit of the fund.
The loan under UIDF comes with strict norms, including time-bound implementation of the project.
A project will be categorised as “non-starter” if not begun within 12 months of date of sanction and be withdrawn if not started within 18 months of the date of sanction. All approved projects have to be completed within three to five years, the guidelines add.
The states are assessing their projects and how much money they want to borrow from the Centre under the UIDF.
A senior urban development official from Sikkim told ThePrint: “We have to assess our borrowing capacity, as funds have been taken for rural development under the RIDF and other schemes. We will propose projects once we get a clear idea about our borrowing capacity. The finance department is working on it.”
A senior official from the Uttarakhand government said the state has been allocated close to Rs 135 crore under the UIDF.
“We have asked urban local bodies in cities to send project proposals for which they require funding. There are more than 35 tier-2 and tier-3 cities in the state. We will prioritise projects after a detailed assessment,” the official explained.
According to Viswanathan, tier-2 and tier-3 cities “need to be given flexibility in utilising funds”.
“Not allowing for adequate administrative expenses and operation and maintenance expenses is not useful in the long run. Accountability is better exacted through service delivery targets than through restrictions on end-use,” he said.
‘Planning is key’
With the expansion of the road network across India, tier 2 and 3 cities, especially census towns — areas which are not statutorily notified and administered as a town, but whose population has attained urban characteristics — have witnessed a surge in development, but mostly in a haphazard manner. The pressure on the existing infrastructure in these cities has thus increased manifold.
Urban development experts told ThePrint that state governments should carefully plan for development — not just infrastructure but economic as well — of these cities so that they become centres of economic growth. This will help in reducing the burden on tier-1 cities.
Among the permissible activities under the UIDF is ‘comprehensive area development project’, under which five types of works can be sanctioned — transit-oriented development (TOD), heritage conservation, preparation of local area plan for decongestion, planning of greenfield areas and setting up of parks and open gyms.
N. Sridharan, former director of School of Planning and Architecture, Bhopal, advised that the UIDF should be used to support economic development in smaller cities.
“While basic infrastructure upgradation is needed, it should be done in such a way that it helps in local economic development. For example, focus on infrastructure upgradation around a business hub. For this, the state governments along with cities should prepare a comprehensive urban strategy to identify what kind of infrastructure is needed and how it can help in economic development,” he said.
“TOD and town-planning schemes are a good way to push economic development,” he added.
With the problem of urban flooding becoming rampant in cities, including small ones, there is an urgent need to upgrade the drainage network and also focus on urban planning.
According to NITI Aayog’s report ‘Reforms in Urban Planning Capacity in India’, which was released September 2021, 65 per cent of 7,933 towns and cities in the country don’t have a master plan.
Dr K. Rajeswara Rao, former special secretary at NITI Aayog who was instrumental in the preparation of the report, told ThePrint: “The challenges cities face today, such as urban flooding, traffic congestion, etc, are all because of lack of urban planning. It is about time we focused on planned development.”
“The state government should prepare detailed plans while proposing projects to avail of UIDF funds. Just randomly taking up projects will not serve the purpose. Cities where large-scale investment in infrastructure is being done should have a master plan, including a plan for drainage and other services,” he said.
To further bolster infrastructure in tier-2 and tier-3 cities, the Centre is aiming to launch a city bus augmentation scheme, under which funds of Rs 18,000 crore will be provided to procure 20,000 buses to bolster public transport.
Senior housing ministry officials said the Union Cabinet’s approval will soon be sought for the scheme.
(Edited by Nida Fatima Siddiqui)
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