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The budget has proposed a Shyama Prasad Mukherji Rurban Mission which would provide integrated project-based infrastructure in rural areas. Photo: Mint
The budget has proposed a Shyama Prasad Mukherji Rurban Mission which would provide integrated project-based infrastructure in rural areas. Photo: Mint

Urban India awaits a facelift

Budget allocates `7,060 crore to develop 100 satellite towns to promote balanced regional development

New Delhi: Urbanisation received a boost on Thursday with finance minister Arun Jaitley allocating 7,060 crore to develop 100 so-called smart cities, promised in the ruling Bharatiya Janata Party’s (BJP) election manifesto. The cities will be developed as satellite towns of larger cities and by modernizing existing mid-sized cities.

Jaitley said unless new cities were developed to accommodate migration from rural areas, existing cities would soon become unliveable.

Debolina Kundu, associate professor at the National Institute of Urban Affairs, called it a paradigm shift in the government’s outlook. “In all these nine years, we were looking only at big cities and there was a bias towards them. It is very encouraging for urban India to get a face lift through the development of smart cities," she said. Such cities would promote balanced regional development, she added.

Neel Ratan, executive director (government and public sector) at PwC India, said that it was important to invest in new cities to sustain the urban migration trend. “These new cities need to focus on leveraging technology to improve service delivery, quality of life and at the same time, optimise the usage of resources. Although actual creation for 100 new cities will require large financial outlays, however, the current budget allocation is a step in the right direction."

Jaitley said foreign direct investment (FDI) will be encouraged in building these cities. Kundu welcomed the move, saying it will help satellite towns strengthen their municipal finances in order to adhere to the norms of the proposed FDI.

Urban local bodies (ULBs) or municipal bodies are the lowest tier of urban governance and are often cash-strapped. Keeping this in mind, the budgetary provision for the pooled municipal debt obligation facility, which was set up in 2006 with the participation of several banks to promote and finance infrastructure projects in urban areas on shared risk basis, has been enhanced from 5,000 crore to 50,000 crore. The facility has also been extended by five years till 31 March 2019.

Strengthening local financial foundations of local bodies is a prerequisite to access funds through the debt obligation facility, Kundu said. “It is important for such ULBs to have alternate sources of funding from either grants or low interest loans to operate their regular functions."

The budget has proposed a Shyama Prasad Mukherji Rurban Mission which would provide integrated project-based infrastructure in rural areas. President Pranab Mukherjee had, in his address to the Parliament, said that the government would strive to end the rural-urban divide by providing urban amenities to rural areas while preserving the ethos of the villages. The budget proposal comes as a step in that direction.

The government is trying to focus on peri-urban areas, said Kundu. “The process of degenerated peripheralisation is evident and they are trying to correct it."

Providing good infrastructure in urban areas including public transport, solid waste disposal, sewerage treatment and drinking water were mentioned as thrust areas for the government.

Jaitley said 500 urban habitations will get support for providing safe drinking water and sewerage management, using recycled water to grow organic fruits and vegetables, solid waste management and digital connectivity. This will be done while harnessing private capital and expertise through public-private partnerships (PPPs), to renew their infrastructure and services in the next 10 years.

A sum of 100 crore has been allocated for metro projects in Lucknow and Ahmedabad. Jaitley said that government will support the development of metro rail systems, including light rail systems via PPPs.

The budget also proposed a Mission on Low Cost Affordable Housing, which will aim at ensuring housing for all by 2022. Under this, it will extend additional tax incentive on home loans to encourage people, especially the young, to own houses. This will be anchored by the National Housing Bank (NHB). 4,000 crore has been allocated to the NHB to increase the flow of cheaper credit for affordable housing to the urban poor/economically weaker section (EWS)/lower income group (LIG) segment.

Urban development and housing minister M. Venkaiah Naidu said the budget seeks to revive the nation’s economy by addressing various bottlenecks.

“Emphasis on building of smart cities, urban renewal, provision of basic amenities in urban areas and promoting affordable housing in urban areas is the need of the hour as it is required to meet the aspirations of the countrymen for better urban living," Naidu added.

Slum redevelopment will be included in the list of corporate social responsibility activities, to encourage the private sector to contribute more towards it.

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