Urban Infrastructure Development Fund To Be Allocated Rs 10,000 Crore Annually, Finance Minister Nirmala Sitharaman

A Urban Infrastructure Development Fund (UIDF) will be set up to ramp up infrastructure in tier-2 and tier-3 cities with an annual allocation of Rs 10,000 crore, Union Finance Minister Nirmala Sitharaman announced Wednesday. Presenting the Union Budget 2023-24, Sitharaman said states will be encouraged to leverage resources from the grants of the 15th Finance Commission, as well as existing schemes, to adopt appropriate user charges while accessing the UIDF.

"Like the RIDF, an Urban Infrastructure Development Fund will be established through the use of priority sector lending shortfall," she said. The UIDF, which will be managed by the National Housing Bank, will be established on the lines of the Rural Infrastructure Development Fund (RIDF) The Union finance minister said the funds will be used by public agencies to create urban infrastructure in tier-2 and tier-3 cities.

Cities having a population between 50,000 and 1,00,000 are classified as tier-2 cities while those with a population of 20,000 to 50,000 are known as tier-3 cities. Sitharaman also announced that urban planning reforms will be encouraged to facilitate transformation into "sustainable cities of tomorrow."

"This means efficient use of land resources, adequate resources for urban infrastructure, transit-oriented development, enhanced availability and affordability of urban land, and opportunities for all," she said.

The finance minister said all cities and towns will be enabled for 100 per cent mechanical desludging of septic tanks and sewers to transition from manhole to machine-hole mode. "Enhanced focus will be provided for scientific management of dry and wet waste," she said. Sitharaman said that through property tax governance reforms and ring-fencing user charges on urban infrastructure, cities will be incentivised to improve their creditworthiness for municipal bonds.

As many as 500 new "waste-to-wealth" plants under GOBARdhan (Galvanizing Organic Bio-Agro Resources Dhan) scheme will be established for promoting a circular economy, she announced. These will include 200 compressed biogas plants, including 75 plants in urban areas and 300 community or cluster-based plants at a total investment of Rs 10,000 crore. "In due course, a 5 per cent compressed bio-gas mandate will be introduced for all organisations marketing natural and bio-gas. For the collection of bio-mass and distribution of bio-manure, appropriate fiscal support will be provided," Sitharaman added.