For the first time, the Ministry of Housing and Urban Affairs is planning to mobilise funds from the market to finance its mega urban schemes, including Housing for All and Smart City projects by 2022.
The Modi Government has committed Central assistance of around Rs 3 lakh crore under various urban missions.
To ensure funds flow for infrastructure projects, the Ministry will opt for public-private participation (PPP) model. The Ministry and State Governments will set up a Special Purpose Vehicles (SPVs) for mega infrastructure projects to get funds from the financial institutions or open markets. The municipal bodies will raise funds by issuing bonds as done by Pune municipality, which recently mobilised Rs 200 crore through the bonds.
Sources in the Ministry said around Rs 1.80 lakh crore would be required as Central assistance for the Pradhan Mantri Awas Yojana-Urban (PMAY-U) by 2022, considering the projection of over one crore affordable houses to be built in the next five years.
As per the Ministry’s data, the Government would contribute Rs 48,000 crore for Smart City Mission, Rs 50,000 crore for Atal Mission for Rejuvenation and Urban Transformation (AMRUT) over the next five years, and Rs 14,650 crore for Swachchh Bharat Mission (Urban) by 2019-20.
Under AMRUT, a total 1.39 crore urban households will be provided with water connections and sewarage networks will be improved from the present 30 per cent to 60 per cent, besides developing 1,900 open spaces and green parks.
“All this needs huge amount. The Centre and State Governments would have to borrow money from the open markets or financial institutions to fulfil these mega missions,” sources said.
On Friday, speaking at a function organised by ‘Public Affairs Forum of India’ on challenges and opportunities of rapid urbanisation, Union Housing and Urban Affairs Minister Hardeep Singh Puri said in order to overcome the severe infrastructure deficit accumulated over long years, huge investment is required.
Hence, he said the Government is considering mobilising resources from the market to incentivise speedy execution of urban infrastructure projects under various new urban missions launched over the last two years.
The Minister, however, did not specify the amount the Government was looking to mobilise from the market.
The Ministry has also prepared an action plan to enable 500 AMRUT cities acquire credit ratings so as to enable them go for issue of municipal bonds to mobilise resources for infrastructure projects.
Besides, new urban planning tools, like Transit Oriented Development, Value Capture Financing and land Pooling, are being implemented to ensure flow of funds. Moreover, while some are greenfield projects, others are retrofits.
Basic amenities such as housing, water, electricity, transport as well as infrastructure remain the major focus, said the Minister, adding that for the sake of analysis, we will classify projects into housing, transport, energy, technology and infrastructure and water and waste management.
Puri said 340 cities, out of 500 selected for AMRUT, have got the credit ratings to enable them issue municipal bonds to mobile resources.
The Centre proposes to develop 100 smart cities over the next five years with overall budgetary plan of about Rs 1,00,000 crore. It will be investing Rs 100 crore every year for the next five years in each of the short-listed 100 cities.
The investments will be routed through special purpose vehicles (SPV), floated in each of these cities. On an average, it currently holds about 20 per cent in such SPVs, for the 90 short-listed cities.
The Minister said this initiative will be supported by the Ministry from the ‘Urban Development Fund’ operated by Delhi Development Authority. “Once the utilisation of funds which are coming from the Centre as planned is over, there is need for additional incentives to go beyond...We require a huge amount of money as against the present trend of budgetary allocation. Money is available in the market,” he said.
Sources said most of the projects, about 85 per cent, are area-centred projects. They focus on local area issues instead of implementing it throughout the city. As per the Ministry of Urban Development, Rs 1,30,000 crore worth of projects have been awarded and are in various stages of implementation.