Urban Challenge Fund and Urban Local Bodies (ULBs)
The government's updated Urban Challenge Fund aims to address challenges faced by urban local bodies (ULBs) in completing projects under various schemes, including AMRUT, Swachh Bharat Mission Urban 2.0, Smart Cities, and Pradhan Mantri Awas Yojana, which suffer from underutilisation.
Key Features of the Urban Challenge Fund
- The fund is pitched as "market-linked, reform-driven, and outcome-oriented" for urban infrastructure.
- The Centre covers 25% of project costs if cities raise at least 50% through bonds, loans, and PPPs.
- The focus is on incorporating fiscal discipline in a system lacking proper fiscal power devolution to ULBs.
Challenges and Concerns
- Indian cities often cannot borrow credibly due to issues with local taxes and transfers influenced by state-level problems.
- Requiring cities to "earn" their growth may disadvantage weaker cities and shift focus from essential services to monetisable assets.
- The ₹5,000 crore guarantee may help smaller cities borrow, but accounting and administrative capacity remain crucial.
- Eligibility criteria and application processes for the Fund are still under examination, potentially leading to politically influenced spending.
Broader Implications
- Since 2014, the Centre has reduced public support share, encouraging public systems to rely on private finance.
- Examples include the CSIR and public universities, where infrastructure loans led to increased fees affecting poor students.
- Financial management studies of the National Health Mission show delays in fund disbursement, affecting services.
- Audits under the Ujwal DISCOM Assurance Yojana reveal significant non-adherence and gaps in the power sector.
- While private capital is not illegitimate, the Centre increasingly ties public support to market access rather than ensuring minimum service guarantees.
Conclusion
The Fund's instruments are legitimate, but there is a risk of prioritizing "bankability" over essential services if land records are disorganized, ULBs violate master plans, and renters and low-income households lack protections.
