Urban Infrastructure Development Fund

Disclaimer: Copyright infringement not intended.

Context

• Guidelines have been released for operationalizing the UIDF scheme.

Urban Infrastructure Development Fund

• In Budget 2023-24 Smt. Sitharaman mentioned that an Urban Infrastructure Development Fund (UIDF) will be established through use of priority sector lending shortfall. Annual allocation - ₹10,000 crore.
• This will be managed by the National Housing Bank and will be used by public agencies to create urban infrastructure in Tier 2 and Tier 3 cities.

Note: 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.

Making Cities Ready for Municipal Bonds

• The cities will be incentivized to improve their creditworthiness for municipal bonds.
• This will be done through property tax governance reforms and ring-fencing user charges on urban infrastructure.

Urban Sanitation

• 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.

Guidelines issued

• 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.
• 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 prioritizing lower-cost high-impact urban projects, for wider coverage under the Fund.
• 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.
• 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 incentivized to improve their creditworthiness for municipal bonds through property tax governance reforms and ring-fencing user charges on urban infrastructure.

https://www.thehindu.com/news/national/guidelines-for-uidf-scheme-soon/article66583968.ece