The Urban Infrastructure Development Fund, created for the growth of Tier II and Tier III cities, should focus on the ongoing projects for the effective utilisation of funds; must provide for basic services; and encourage projects with lower carbon footprints.
These are among the slew of likely guidelines to be released for operationalising the UIDF scheme, which was announced in this year’s General Budget with an annual allocation of ₹10,000 crore.
The guidelines envisage keeping funding for administrative expenses and maintenance out of the purview of the UIDF, and asking States to adopt appropriate service charges while accessing the UIDF. States may also consider prioritising lower-cost high-impact urban projects, for wider coverage under the Fund.
Union Finance Minister Nirmala Sitharaman had announced in her Budget speech that the UIDF would be established through the use of priority sector lending shortfall, and it would be managed by the National Housing Bank.
While Tier II cities are those which have a population range of 50,000 to 100,000, Tier III cities are classified as those with a population of 20,000 to 50,000.
The States would 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.
The guidelines say that the Urban Local Bodies may be encouraged to apply appropriate user charges to make the UIDF project self-sustainable.
While the guidelines, which are likely to be given by the National Housing Bank, the RBI and the Urban Affairs Ministry, would be issued by the end of March, a tentative corpus would be allocated to the States by June for the initiation of the scheme.
Sources said the guidelines are being formulated based on the recommendations made by experts and stakeholders at a post-Budget webinar on Urban Development, held last week.
The recommendations also include guidelines for implementing the municipal bonds scheme, which was another Budget announcement.
The recommendations say that the authority for approving municipal borrowings should be at the Commissioner level. The municipal bodies should look at innovative modes of raising funds such as Pooled Funds and Infrastructure Investment Trusts to be explored. They also advise the pooling of resources for smaller Urban Local Bodies.
The 2023-24 Budget document envisaged making cities ready for municipal bonds. It said cities would be incentivised to improve their credit worthiness for municipal bonds through property tax governance reforms and ring-fencing user charges on urban infrastructure.