Gandhinagar: As the Union govt prepares to roll out the Rs 1 lakh crore Urban Challenge Fund (UCF) from April 1, the Gujarat govt has intensified its efforts to position urban local bodies (ULBs) to secure the highest possible share of this ambitious national programme. Recognizing that access to the UCF will depend heavily on readiness, financial capacity, and the ability to design robust urban-development proposals, the state has allocated Rs 200 crore in the 2026-27 budget specifically to assist local bodies in meeting the required project-preparation standards and strengthening their borrowing capabilities. A key eligibility condition under the UCF is that at least 50% of a project’s financing must come from market-based sources. These may include municipal bonds, bank loans, and public-private partnership (PPP) models. The state govt has directed all municipal corporations to thoroughly examine the qualification criteria issued by the Centre and to identify areas where they can scale up their market-borrowing capacity. Senior officials emphasized that each corporation must strengthen financial discipline, enhance creditworthiness, and adopt transparent financial-practice reforms to ensure competitiveness in the UCF’s challenge-based selection process. To support cities with weaker financial footing, the state govt has also committed to offering viability gap funding. The Rs 200 crore provision in the state budget will serve as an enabling cushion, helping ULBs meet funding requirements and reduce the burden of debt servicing. Officials noted that without such assistance, many smaller or mid-tier cities would struggle to participate in large-scale projects envisioned under the fund. Recently, the Union cabinet approved the UCF with a total central assistance (CA) of Rs 1 lakh crore. CA will cover 25% of the project cost, subject to raising a minimum of 50% of the project cost from the market. The Union govt aims to bring in an investment of Rs 4 lakh crore in the urban sector in the next five years.The fund will be open to all cities with a population of 10 lakh or more, state and UT capitals, and industrial cities with populations above one lakh — making Gujarat’s major urban clusters strong contenders for sizeable funding.Info boxFund factsState allocates Rs 200 crore to support UCF-related project preparationMunicipal bodies instructed to expand market borrowing capacity promptlyUrban Challenge Fund requires 50% of project cost raised from market sourcesCentre to fund 25% of projects via competitive challenge modeScheme targets Rs 4 lakh crore urban investment over five years
