Context:

India's urbanisation journey is marked by significant changes in land use and occupational patterns, shifting from agrarian to urban activities. This transformation has led to the growth of urban centres and a rise in population, placing immense pressure on urban governance institutions. The 2024-25 Budget, presented by Finance Minister Nirmala Sitharaman, outlines various initiatives and financial allocations aimed at addressing urban development challenges through the Ministry of Housing and Urban Affairs (MoHUA).

Budget Allocations for Urban Initiatives

For the 2024-25 fiscal year, the Ministry of Housing and Urban Affairs (MoHUA) has been allocated INR 825.76 billion, with a focus on several key areas.

• Priority on Housing and Urban Transport: The Pradhan Mantri Awas Yojana (Urban) (PMAY-U) receives the highest allocation at 36.5% to address housing needs. This is followed by a 30% allocation for metro rail projects aimed at expanding and improving urban public transportation.
• Allocations for Urban Rejuvenation and Sanitation: The Atal Mission for Rejuvenation and Urban Transformation (AMRUT) is allocated 10%, while the Swachh Bharat Mission (Urban) (SBM-U) receives 6% to enhance sanitation infrastructure.
• Investments in Smart Cities and Green Transport: The Smart Cities Mission is allocated 3% to support ongoing urban development projects, and the Pradhan Mantri-eBus Sewa Scheme receives 1.6% to promote green public transport.
• Focus on Digital Infrastructure and Urban Livelihoods: Additionally, the National Urban Digital Mission is allocated 1.4% to boost digital infrastructure in cities, the Deendayal Antyodaya Yojana - National Urban Livelihood Mission gets 0.36% to support urban livelihoods, and the City Investment to Innovate, Integrate, and Sustain 2.0 is allocated 0.3% for urban innovation.
• Remaining Funds and Overall Budget Emphasis: The remaining funds are earmarked for the operation of various government offices. This distribution highlights a significant emphasis on housing and metro rail projects in the current budget.

Sector-Specific Proposals and Progress

• Housing Initiatives : Urban housing remains a priority due to the challenges faced by slum dwellers and lower-income groups in accessing affordable housing. The 2024-25 Budget aims to address the housing needs of 10 million urban poor and middle-class families by offering an interest subsidy to facilitate affordable housing loans. Efforts are also underway to develop rental housing markets through suitable policies and regulations.

Under PMAY-U, approximately 2.9 million slum dwellers have benefitted over the past decade, improving their housing conditions. In Delhi, for example, nearly 30,000 beneficiaries received an interest subsidy totaling INR 6.92 billion. Additionally, the Delhi government operates its own housing scheme, the Chief Minister Awas Yojana, to meet slum dwellers' needs. However, the central government is concerned about some state governments' reluctance to seek central financial assistance for housing development.

• Metro Rail Development : The demand for metro rail systems in cities is growing, and this service is now operational in 20 Indian cities as of October 2023. Expansion is planned in both new and existing cities. The central and state governments equally share the project costs (20% each), with the remainder funded by external sources such as loans from the Japan International Cooperation Agency (JICA) and the Asian Development Bank (ADB).

Metro rail development requires significant investments but effectively alleviates commuting challenges, reduces traffic congestion, and lowers air pollution. For instance, in the second phase of Chennai's metro rail project, the central government provided a guarantee, enabling the Tamil Nadu government to secure loans from foreign agencies.

• Water Supply, Sanitation, and Drainage : Water and sanitation projects under AMRUT and Swachh Bharat Mission (Urban) continue to be a priority. The 2024-25 plan focuses on promoting bankable projects for water supply, sewage treatment, and solid waste management in 100 large cities. Presently, 70% of urban populations have water connections. Under AMRUT's second phase, 18 million new connections are planned, with 70,000 km of water pipelines already approved.

Projects worth INR 344 billion have been initiated to develop sewerage infrastructure, resulting in 14.7 million sewerage connections. For wastewater treatment, sewage treatment plants with a capacity of 4,174 million litres per day (mld) have been built under AMRUT, with plans to expand capacity to 6,232 mld. The MoHUA is also encouraging state governments to develop stormwater management plans, acknowledging cities' lack of preparedness for managing high volumes of rainwater.

• Smart Cities Mission : The budget for the Smart Cities Mission has significantly decreased from INR 80 billion in 2023-24 to INR 24 billion in 2024-25. This reduction is due to the nearing completion of mission activities, with 90% of projects (7,239 projects worth INR 1452.93 billion) already implemented across 100 cities as of August 2024. The remaining 10% of work will be completed with the allocated INR 24 billion.
• Livelihood Support for Street Vendors : The MoHUA plans to support street vendors by developing 100 weekly haats or street food hubs in select cities over the next five years. This initiative addresses challenges street vendors face in securing legal vending spaces and obtaining vending certificates. Similar projects have been undertaken in states like Haryana, where three markets have been developed for street vendors. To address delays in issuing vending certificates, letters of recommendation have been issued to allow street vendors to apply for loans.

Other Priority Areas

Reform Focus Areas

The annual Budget and the parliamentary speech provide a comprehensive overview of the government's expenditure plans, financial transfers to states and union territories, and key focus areas for reform. For the fiscal year 2024-25, the Budget addresses several urbanisation challenges and outlines strategies to tackle them. These challenges include housing shortages, public transport inadequacies, water supply issues, sanitation problems, and urban livelihoods. It also proposes solutions to emerging issues like air pollution, fossil fuel burning, and climate change hazards.

Urban Development and Resilience

The Ministry of Housing and Urban Affairs (MoHUA) has outlined several additional proposals for the 2024-25 fiscal year to enhance urban development and resilience. These include developing cities as growth hubs and ensuring orderly development in peri-urban areas. There is also a focus on the creative redevelopment of existing cities through supportive policies, market-based mechanisms, and regulations. The ministry plans to formulate transit-oriented development plans for 14 large cities and encourages states to adopt moderate stamp duty rates, offering lower rates for properties purchased by women.

Efforts to support energy transition are emphasised, including promoting rooftop solar installations. To address climate resilience, MoHUA proposes financial assistance for building flood control structures in flood-prone states and ensuring capital availability for climate adaptation and mitigation. Additional proposals involve promoting comprehensive development of tourist destinations, providing financial support for research and development, and incentivizing the digitization of land records.

Conclusion

To achieve effective urban transformation, the national government must urgently address the concerns of state and local governments. Despite policy and budgetary support from the central government leading to successful implementation of various development projects and governance initiatives, several proposed ideas and projects remain unrealized due to governance and financial challenges. Concerns include inadequate funding for employment creation and basic facilities in smaller towns, delays in fund disbursement from the centre, underutilization of funds, and insufficient private investment and capacity-building support for functionaries. To achieve effective urban transformation, the national government must address these concerns urgently to maximise the impact of its policies and initiatives on state and local governments.

Source: ORF India