Under the new scheme announced by the Centre for the development of facilities in cities and towns, at least 50% of the cost of projects will have to be raised from the market. These funds can be raised through the issuance of municipal bonds, bank loans, and PPP mode. The remaining share will be provided by state governments and urban local bodies. According to the 2025 estimates, the scheme will be applicable to all cities with a population of 10 lakhs and above, state capitals, major industrial cities with a population of more than one lakh, and all urban local bodies in hilly/northeastern states. In total, all cities will be covered.
@ Projects will be selected in a transparent and challenge-based manner. Proposals that have a greater impact on the life of the city and have priority in reforms will be given priority.
@ Private participation will be encouraged by setting risk-sharing rules and benchmarks for civil services provided to the people.
Loan repayment guarantee for small cities:
The Centre will guarantee the repayment of loans taken by small cities in the Northeast and hilly regions and other states with a population of less than one lakh to enable them to raise financial resources from the markets. For this, a special fund of Rs. 5,000 crore is being set up. The Central Government will provide a guarantee for the first loan taken by small cities up to Rs. 7 crore, or up to 70% of the loan taken (whichever is less). If the first loan taken is repaid, a guarantee will be provided for subsequent loans up to Rs. 7 crore, or up to 50% of the loan amount. The Centre said that this will enable small cities to raise financial resources from the market to undertake projects up to Rs. 20 crore for the first time and up to Rs. 28 crore for the second time. This will be useful in increasing the lending capacity of 4,223 cities across the country, including tier-II and tier-III cities.
What should be done:
@ Repair and upgrade the legacy infrastructure in cities to meet current needs.
@ Establishment of transit corridors, urban mobility centers, economic corridors
@ Restoration/revitalization of major commercial areas/important heritage centers
@ Redevelopment of brownfield areas to meet current needs
@ Development of greenfield/semi-greenfield and major infrastructure to transform the city into a growth hub
@ Modernization of sewage and rainwater harvesting systems. Construction of water bridges.
@ Priority for solid and liquid waste management. Removal of hilly dumping yards. Integration of waste treatment can be done.
What reforms should be brought in:
Local bodies should undertake several reforms to get assistance under the Urban Challenge Fund. The main reforms to be implemented include market and financial reforms to enhance governance, digitalization, and debt repayment capacity. The efficiency of public services and consumer services should be increased. Reforms should be undertaken in urban planning, housing, and job creation. Green infrastructure should be provided.
@ Projects undertaken with these funds will have to determine 'key performance indicators' and complete them within a specific time frame. Whether they have been completed within the specified time frame according to specific standards or not will be checked by a third party.
@ The central government has stated that there is a possibility of large amounts of private investment under the scheme, thereby strengthening urban governance. It is believed that this will enable cities to be adapted to future needs in line with national development priorities.