Urban local bodies that actively work to develop their own resources should be moved up the queue for financial assistance from the Union government and states, said Manohar Lal Khattar, minister of housing and urban affairs. In an interview with HT, he cautioned against the trend of providing free public services and stressed the need to build the capacity of urban local bodies to generate revenue to pay their share of centrally sponsored schemes and to contribute to the recently approved ₹1 lakh crore urban challenge fund. He also made it clear that his ministry would not hesitate to deny approvals to Metro projects that are not financially viable. Edited excerpts:
The Union cabinet recently approved the ₹1 lakh crore Urban Challenge Fund, under which states have to contribute 25%, and 50% has to come from financial institutions. Given the financial constraints of urban local bodies, how many cities will be able to execute bankable projects in the next year or two?
Although this was announced in last year’s budget, long-term schemes—especially five-year plans—require significant time for planning and clearances, including that from the PMO. All planning is now complete, and a nominal amount will be allocated this year to start the scheme, with a full-fledged roll-out next year.
Major projects will focus on a revenue-generating model to ensure repayment, so that investments in these projects can be realised. For example, Integrated Command and Control Centres can use special IDs for households to track and increase property tax collection through digitisation. It is easy to repay the 50% cost from the increased revenue within four to five years. Other examples include parking sites, local markets with rental income, and toll roads. This model ensures participation from the Urban Local Bodies (ULBs), states, and the Centre.
Projects funded solely by the central government often fail due to a lack of maintenance and ownership; therefore, I believe that these projects under the Urban Challenge Fund will be highly successful. So, all the projects of ₹4 lakh crore will be successful
What will be the role of private players? Would they be interested in projects for the public good?
Projects are being built by both the government and the private sector today. Financing can involve bonds, banks, and Non-Banking Financial Institutions (NBFCs). PPP (Public-Private Partnership) projects will continue to attract private players.
Profit is determined during the tendering process; a contractor includes their profit in the one-time costing regardless of the revenue model. For services like sewerage and water, ULBs must implement user charges to ensure the funds can be repaid over a long period, such as 10 to 20 years. Funding can be done both through banking and NBFCs. Whoever gets the contract will make a profit; it may be more or less. Ultimately, it’s the L1 bidder (the lowest bidder) who will get the contract.
The budget for flagship schemes such as AMRUT and Swachh Bharat Abhiyan (aimed at improving the quality of life in urban areas) has decreased from last year. Fund utilisation has been low relative to estimates in recent years. Could there be a change to the design to improve fund utilisation?
These are contributory centrally sponsored schemes in which funding is shared between the Centre and the states. Expenditure depends on the states’ responses and implementation speed. Budgets are estimates based on previous years’ actual spending. We periodically update technology and focus on capacity building for ULBs, as they sometimes lack the capacity to spend available funds.
Challenges include a lack of qualified contractors or sole bidders (for contracts) that lead to retendering, land acquisition hurdles, and difficulties with project conception. We provide guidelines and support through official visits to resolve these state and local-level issues. I have also made two rounds of visits across the country. Primarily, this (performance) is dependent on the states and ULBs and less on us.
Increasingly, the focus is shifting to improving ULBs’ “own source revenue”. Do they have the capacity?
We must encourage and help them. Governments cannot fund everything as public expectations grow. There is a trend toward demanding free services. Then one is looking at how much funds are coming from the Centre and the state. ULBs, as the third tier of government, must raise their own resources under the provisions of the 74th Amendment. But they will implement them only when it becomes a condition for getting financial assistance. It should go to those who actively work to build their own resources.
Are you suggesting stopping the trend of freebies?
We have to stop this. Even the courts are helping us. In a recent case, the court questioned the announcement of free electricity in Tamil Nadu, asking about the source of funding for such declarations. Although you will provide it for free (to people), you’ll still need to pay for it . Where will you get the funds from? This is a cause of concern. As part of good governance, we all have to think about this.
Indore, often showcased as a model city in terms of civic governance, recently reported deaths linked to contaminated drinking water. How could such a serious public health risk go undetected?
Issues such as water and drainage are primarily the responsibility of the municipality and the state. While the incident is tragic and an inquiry is underway, it occurred in an underdeveloped area of the city where (civic) work was still pending.
While we don’t have any direct role in this, we have directed local bodies, both there and nationwide, to replace old water lines.
The Urban Challenge Fund also prioritises the redevelopment of such old neighbourhoods. For example, in Delhi’s Jailorwala Bagh, slum clusters with 2,000 houses were replaced with multi-storey flats, which the Prime Minister inaugurated. Solving problems in centuries-old cities takes time, and while incidents are regrettable, they remain a serious concern.
The results of Peyjal Survekshan (2022-2023), the national water quality survey, were never fully made public. Will the ministry conduct such a survey in the future, and will its results be made public, as it is with the national Swachh Survekshan rankings?
The Swachh Survekshan rankings are made public to inspire and create awareness among citizens. However, water surveys involve internal engineering works and municipal processes. Publicising internal shortcomings might demoralise officials. These surveys are intended as internal tools to alert municipalities about what needs correction. Even if the survey is conducted, the results will not be made public, but they will be shared only with the authorities.
What is the status of the Delhi Master Plan and the National Capital Regional Plan?
The Delhi Master Plan draft is ready and in the final review stages between our department and the Union home ministry. We are confident that within the next two meetings between the ministry, we will be able to finalise it. The NCR Master Plan was delayed due to court decisions, and the (issues related to the) Aravalli region, but many issues have now been resolved. The DDA Chairman now holds charge of the NCR Planning Board, and a meeting will be held soon to finalise it.
What about the scheme to give ownership rights to residents of Delhi’s unauthorised colonies (which was launched in 2019)? Also, you recently announced that Delhi slums will soon be redeveloped. Can you give us the details?
Delhi’s development suffered due to previous friction between the Centre and state, as it is a UT and it cannot run without the support of the central government. We now have a triple-engine government (The BJP is in power in the Centre, Delhi, and the Muncipal Corp. of Delhi). With better coordination, we are implementing PM-UDAY to give land rights to residents of 1,700 colonies. Although the Act was passed in 2019, the previous government did not implement it properly. But we are fast-tracking it. We will not only regularise these colonies but also give them land rights so that they can be redeveloped. We will announce the policy soon.
Regarding slums, the plan is to replace them with in-situ housing or flats within 3 km. We will keep some share and give the rest to the dwellers. The ministry and the Delhi government have made budgetary provisions. A policy will be announced soon.
We have also begun relocating slum residents to unoccupied government houses. Over 700 families from one large settlement have already been allotted houses who were living on Race Course Road (Lok Kalyan Marg).
Why is the uptake of Affordable Rental Housing not seeing traction under Pradhan Mantri Awas Yojana (PMAY 2.0)?
Affordable Rental Housing (ARH) was introduced to help floating populations. Model 1 involves converting vacant government houses, while Model 2 encourages private projects with government assistance. PMAY 2.0 has a special focus on ARH, but currently, states and the private sector are assessing how to implement the projects. So far, only Tamil Nadu, Haryana, Rajasthan, and Gujarat have started adopting it. Often, implementing these schemes takes time as states try to figure out how best to mobilise resources.
In Delhi, we are repairing roughly 40,000 vacant houses to make them liveable for rentals. Those which cannot be repaired will be demolished, and the land will be utilised to build new affordable homes.
Recently, there was a controversy surrounding the rejection of the Metro rail project for Coimbatore.
The data submitted by Tamil Nadu for Coimbatore was found to be inconsistent by the approval committee. There were projections suggesting (ridership) figures that were higher than even those in Chennai. We have to see what the ridership is and what the revenue can be. While one-time capital loss can be managed through loans, recurring losses will be hard to manage. They are getting a fresh survey done.
The population figures available are from the 2011 census. Anything else is the projected population. The new Census figures will be available by 2027. If the new figures make a case (for the Metro in Coimbatore), they will get the approval. I have invited the Tamil Nadu chief minister for a meeting to discuss this.
There are smaller cities where there’s not much demand, but they have the Metro. How viable are those?
There might be one or two such cities, because things are done as per projections. Also, a single line is not viable. It’s only when the network has two or three lines that the ridership increases. As is the case with Delhi.
But people in these smaller cities travel shorter distances…
Many cities see Metro as the sign of progress; it’s a prestige project. But they have to be told that this approach will lead to losses.
But in cities with the Metro, the focus is on creating networks. But we’ll go for shorter lines. Often, there is a focus on connecting the Metro with the airport, but only a small portion of the population (in these cities) goes to the airport. The priority should be to connect the city’s market with heavy footfall and industrial areas via the Metro.
So whatever experience we get is closely considered while looking at new projects. If there’s no financial viability, we won’t hesitate in denying that (approvals).
