Finance Commission's Recommendations for Urbanisation and Wastewater Management
The 16th Finance Commission has highlighted the urgent need to improve urban drainage systems and accelerate the process of urbanisation in India. It has made several key financial recommendations to address these issues.
Key Financial Recommendations
- Total Grant Allocation: Rs 56,100 crore dedicated to wastewater management projects in selected cities.
- Urbanisation Premium: A Rs 10,000 crore premium to encourage urbanisation.
Focus on Drainage System Revamp
There is an urgent requirement to revamp the drainage systems in Indian cities, particularly in smaller cities that lack sufficient fiscal resources. The Finance Commission has suggested funding for middle-level municipalities on a cost-sharing basis.
Special Infrastructure Component
- Allocation: Rs 56,100 crore for wastewater management projects.
- Eligible Cities: 22 cities including Pune, Jaipur, Lucknow, Kanpur, Nagpur, Patna, Rajkot, Amritsar, Madurai, and Howrah.
- Model Example: Indore's successful wastewater management, achieving the number one rank in Swachh Survekshan for seven consecutive years through efficient liquid waste management.
Challenges in Urbanisation
The report observes delays in granting statutory urban status to areas with urban characteristics, resulting in continued governance by rural local bodies (RLBs) that are ill-equipped to handle urban demands.
Incentivising Urbanisation
To address slow urbanisation, a Rs 10,000 crore urbanisation premium is recommended to encourage the transition of rural areas with urban features into adjacent municipal bodies.
Overall Financial Allocation for Urban Local Bodies (2026-2027 to 2030-2031)
- Total Allocation: Rs 3,56,257 crore.
- Basic Grant: Rs 2,32,125 crore.
- ULB Performance Component: Rs 29,016 crore.
- Special Infrastructure Component: Rs 56,100 crore.
- Urbanisation Premium: Rs 10,000 crore.
