News: The total outlay for urban development in FY 2025 stands at ₹96,777 crore, an increase from last year’s ₹82,576.57 crore.
About the Budgetary allocation
- The budget primarily focuses on large-scale infrastructure projects, particularly metro rail expansions, while employment generation and sustainable development receive less attention.
- Key urban infrastructure programs have not received adequate funding, indicating a misalignment between policy goals and actual budgetary support.
Decline in Urban Local Bodies (ULBs) Funding
- Urban development funds are distributed through three key channels:
- Direct transfers to Urban Local Bodies (ULBs)
- Centrally Sponsored Schemes (CSS)
- Central Sector Schemes
- Direct transfers to ULBs have declined from ₹26,653 crore last year to ₹26,158 crore this year.
- The abolition of octroi and the implementation of GST led to a 21% drop in ULB revenue, yet compensation through central devolution has not increased.
- This funding shortfall will force cities to generate their own revenue, potentially increasing local taxes and burdening citizens.
Budget Reductions for Key Urban Schemes
- Centrally Sponsored Schemes (CSS) include key urban programs such as:
- PMAY (Urban) – Budget reduced by 30%.
- AMRUT & Smart Cities Mission – Funding reduced; Smart Cities Mission has almost no funds left.
- Swachh Bharat Mission (Urban) – Allocation remains at ₹5,000 crore, but only ₹2,159 crore (56%) was spent as per RE.
Increased Allocation for Metro and Mass Transit Systems
- Metro rail and rapid transit projects have seen significant budget increases, unlike other urban programs.
- FY 2024-25 Budget for metro projects: ₹21,335.98 crore
- Revised Estimate (RE): ₹24,691.47 crore
- FY 2025-26 Budget proposal: ₹31,239.28 crore (a 46% increase from the previous year).
- This prioritization of metro rail projects over holistic urban mobility raises concerns about inclusive urban development.
New Urban Challenge Fund
- The Urban Challenge Fund of ₹10,000 crore has been introduced to boost urban redevelopment programs.
- The government aims to mobilize ₹1 lakh crore for urban development, with half of this funding expected from private investments.
- Given the limited private sector participation in initiatives like the Smart Cities Mission, this target may be overly ambitious.
