Union Budget – What’s in it for the cities?

The Union Budget for the Financial Year 2023-2024 was announced on February 1, 2023. It is being touted as the first ‘Amrit Kaal’ budget since it marks the start of the 25-year period leading to ‘India@100. The budget was divided into seven priority areas namely Inclusive Development, Reaching the Last Mile, Infrastructure and Investment, Unleashing the Potential, Green Growth, Youth Power and Financial Sector. Urban development has received good thrust this year. “States and cities will be encouraged to undertake urban planning reforms and actions to transform our cities into ‘sustainable cities of tomorrow’. This means efficient use of land resources, adequate resources for urban infrastructure, transit-oriented development, enhanced availability and affordability of urban land, and opportunities for all,” said Nirmala Sitharaman, Minister of Finance, Government of India. The budget expenditure for the Ministry of Housing and Urban Affairs is estimated to be `76,432 crore which is a 2.5 per cent increase from last year’s revised estimates.

Urban Infrastructure Development Fund

In last year’s budget, Sitharaman had expressed the intention to invest in the development of Tier-2 and Tier-3 cities, for the purpose of which a high-level committee including urban planners, urban economists and institutions would be established to make recommendations on urban sector policies, capacity building, planning, implementation and governance. The highlight for the urban sector in this year’s budget was the Urban Infrastructure Development Fund (UIDF).
Established on the lines of Rural Infrastructure Development Fund (RIDF) `10,000 will be allocated to this fund annually for developing infrastructure through priority sector lending shortfall. Public agencies will use this to build urban infrastructure in Tier 2 and Tier 3 cities, and the National Housing Bank will oversee it. States will be urged to use funding from the 15th Finance Commission’s grants and other programmes to implement reasonable user fees while accessing the UIDF.

PM Awas Yojana

The outlay for PM Awas Yojana is being enhanced by 66 per cent to over 79,000 crore. Last year it was48,000. The scheme identifies poor beneficiaries in rural and urban areas and provides them with houses.

Making Cities ready for Municipal Bonds

Cities can improve credit worthiness through property tax governance reforms and user charges. Improving financial status of municipalities has been an ongoing conversation in India, especially since the recent report by RBI mentioned that the total revenue of municipalities in India is close to one per cent. A municipal bond is a type of debt instrument that corporations can issue with state government approval. The money raised can be utilised in infrastructural activities like building bridges, schools, and hospitals.

Urban Sanitation

According to the budget, all cities and municipalities will be allowed to switch from manhole to machine-hole mode for the complete mechanical desludging of septic tanks and sewers. A stronger emphasis will be placed on scientific waste management of both dry and wet waste.

Urban Mobility

Transportation is one of the most crucial aspects of a city and an indicator for a thriving, inclusive and sustainable urban agglomeration. Inclusive and easy mobility is the backbone of good public transportation. In 2023-24, metro projects have received 23,175 crore from20,401 cr last year. In keeping with the commitment to net-zero carbon emissions, allocation to the scheme for Faster Adoption and Manufacturing of EVs (FAME) has increased to 5,172 cr from2,908 cr last year.

Green Growth

A major challenge to urban development or development activities in general is achieving sustainability. Climate Change is the most intractable problem we face today and undoubtedly the most urgent one to deal with. Recently, there has been a push in government policies towards more eco-friendly choices. This year too the budget includes many aspects to promote green transition. In fact, one entire priority area has been dedicated to ‘green growth’ objectives.
The Green Hydrogen Mission, which was launched recently, with an outlay of 19,700 cr has a target of achieving an annual production of 5 MMT by 2030. The budget has allotted35,000 crore for priority capital investments towards energy transition and net zero objectives, and energy security.
In order to promote a circular economy, 500 new ‘waste to wealth’ plants will be established under GOBARdhan Galvanizing Organic Bio-Agro Resources Dhan) scheme. This includes 200 compressed biogas (CBG) plants, including 75 plants in urban areas, and 300 community or cluster-based plants at a total investment of Rs 10,000 crore.
A Green Credit Program will be announced in accordance with the Environment (Protection) Act in order to promote behavioral change. This will encourage environmentally responsible behavior on the part of businesses, people, and local organizations while also assisting in the mobilisation of additional resources for such actions. The initiative of replacing old vehicles was also furthered this year.
Overall, the budget has focussed on urban planning and is increasingly focussing on greening the economy too. According to a recent World Bank assessment, India will need to invest $840 billion on urban infrastructure over the next 15 years, or $55 billion a year, in order to successfully satisfy the needs of its rapidly expanding urban population. Although such a massive shift cannot happen in a short span of time, the cities have to become a focus area.