Centre establishes Rs 100 billion Urban Infra Fund

27 Jun 2023 CW Team

The Urban Infrastructure Development Fund (UIDF) has been created by the Centre, with a total allocation of Rs 100 billion from the corpus of priority sector lending shortfall. The National Housing Bank (NHB) will be responsible for managing the fund.

The fund has been established by infusing Rs 100 billion under the National Housing Bank, and guidelines are being developed by the NHB and the Ministry of Housing and Urban Affairs (MoHU) to identify infrastructure projects in tier II and tier III cities.

The announcement of the fund was made in this year's budget by Finance Minister Nirmala Sitharaman. In her speech, the finance minister stated, "An Urban Infrastructure Development Fund (UIDF) will be established, similar to the Rural Infrastructure Development Fund (RIDF), through the use of priority sector lending shortfalls."

The RIDF, which was created by the government in 1995-96 with an initial allocation of Rs 2,000 crore, served as a model for UIDF. In the 2022-23 fiscal year, the government allocated Rs 400 billion for RIDF.

In April, the Minister of State for Housing & Urban Affairs, Kaushal Kishore, stated in a written reply to the Lok Sabha that states would be encouraged to utilise resources from the grants of the 15th Finance Commission and existing schemes, along with implementing appropriate user charges, while accessing the UIDF. The minister further mentioned that the UIDF would be operationalized in a manner similar to the existing Rural Infrastructure Development Fund.

During the announcement of the Union Budget 2023-24, Sitharaman highlighted that cities would be incentivized to enhance their creditworthiness for municipal bonds. This would be achieved through governance reforms in property tax and protecting user charges for urban infrastructure.

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