Indian cities are expanding both in terms of size and number.  As per the 2011 census, 31% (377 million) of India’s population was living in urban areas, and by 2050 more than 50% of India’s population is estimated to be urban.  Urbanisation is the process of growth of cities (either through a natural increase in population, or migration, or physical expansion).  Urban centres offer opportunities and attract people, capital, and technology due to improved access to services, capital, and knowledge pool.  However, the rapid influx of population and dense settlements leads to several issues in cities such as traffic congestion, environmental pollution, and housing shortage.

The Ministry of Housing and Urban Affairs formulates policies, coordinates activities of various agencies (at the state and municipal level), and monitors programmes in the area of urban development.  It also provides states and urban local bodies (ULBs) with financial assistance through various centrally supported schemes.  Over the past few decades, several schemes have been introduced to ensure that urbanisation is better planned and services provided in cities are of adequate quality.  However, Indian cities continue to face issues mentioned above along with poor infrastructure.

One of the key reasons for poor urban infrastructure is the poor capacity of ULBs and their inability to collect revenue.  The High-Powered Expert Committee for Estimating the Investment Requirements for Urban Infrastructure Services (2011) had estimated a requirement of Rs 39 lakh crore (at 2009-10) prices for the period 2012-2031 for upgrading urban infrastructure.  Hence, budgetary outlays by the centre and states may not be enough to cater to growing demands of urbanisation.  Further, with the current allocation, the funds are not getting utilised by the Ministry.  This affects the implementation of schemes, and consequently the service levels in cities.   There is a need to empower ULBs both in terms of governance and financial capacity.  This would help them decide what projects to prioritise and how to raise the revenue for them, and help improve city governance.

Urban transportation governance is also fragmented at the city level, which leads to issues related to coordination between different agencies and land use planning.  The central government funds metro rail projects in cities.  Several high-level bodies have suggested that before setting up such capital-intensive projects, there may be a need to rethink modes of urban transport based on the spatial pattern of a city. 

This note looks at the expenditure incurred by the Ministry, the status of the various schemes implemented by it, and the issues faced with investment required for urban planning.

2023-24 Budget Speech Highlights[1] An Urban Infrastructure Development Fund will be established for the development of urban infrastructure by public agencies in tier-2 and tier-3 cities.  The Fund will be managed by the National Housing Bank and is expected to have an annual allocation of Rs 10,000 crore. Cities will be incentivised to improve their credit worthiness for municipal bonds through property tax reforms and setting aside user charges. States and cities will be encouraged to undertake urban planning reforms such as efficient use of land resources, transit-oriented development, and enhanced availability and affordability of urban land. All cities and towns will be enabled for 100% mechanical desludging of septic tanks and sewers.  Enhanced focus will be given to scientific management of dry and wet waste.

Overview of Finances[2] 

The total expenditure on the Ministry of Housing and Urban Affairs for 2023-24 is estimated at Rs 76,432 crore.  This is an increase of 2.5% over the revised estimates for 2022-23.  In 2023-24, the revenue expenditure of the Ministry is estimated at Rs 50,434 crore (66% of the total expenditure) and the capital expenditure is estimated at Rs 25,997 crore (34% of the total budget).  The capital expenditure is mainly on metro projects (Rs 23,056 crore).  

Table 1: Ministry of Housing and Urban Affairs 2023-24 Budgetary Allocation (in Rs crore)

	2021-22 Actuals	2022-23 RE	2023-24 BE	% change (RE 2022-23 to BE 2023-24)
Revenue	80,894	50,865	50,434	-1%
Capital	25,946	23,681	25,997	10%
Total	1,06,840	74,546	76,432	2.5%

Note: BE- Budget Estimates; RE- Revised Estimates.
Sources: Demand No. 60, Ministry of Housing and Urban Affairs, Union Budget 2023-24; PRS.

Expenditure across schemes

The Ministry implements several schemes to improve service delivery in urban areas.  These include: (i) Pradhan Mantri Awas Yojana – Urban (PMAY-U), (ii) Atal Mission for Rejuvenation and Urban Transformation (AMRUT), (iii) 100 Smart Cities Mission, (iv) Swachh Bharat Mission – Urban (SBM-U), and (iv) PM Street Vendor’s Atmanirbhar Nidhi (PM SVANIDHI).  The Ministry also implements metro projects across states/UTs.

Figure 1: PMAY (Urban) allocated highest amount followed by Metro projects in 2023-24

 

Note: MRTS- Mass Rapid Transit System.
Sources: Demand No. 60, Ministry of Housing and Urban Affairs, Union Budget 2023-24; PRS.

Table 2: Key Allocations to the Ministry

	2021-22 Actuals	2022-23 RE	2023-24 BE	% change (RE 2022-23 to BE 2023-24)
PMAY (Urban)	59,963	28,708	25,103	-12.6%
MRTS and Metro	23,473	20,401	23,175	13.6%
AMRUT	7,280	6,500	8,000	23.1%
Smart Cities	6,588	8,800	8,000	-9.1%
SBM (Urban)	1,952	2,000	5,000	150.0%
PM-SVANIDHI	298	434	468	7.8%
DAY-NULM	794	550	0.01	-100.0%
Others	6,492	7,153	6,686	-6.5%
Total	1,06,840	74,546	76,432	2.5%

Note: BE- Budget Estimates; RE- Revised Estimates.
Sources: Demand No. 60, Ministry of Housing and Urban Affairs, Union Budget 2023-24; PRS.

The 2023-24 allocation of the Ministry is lower than the amount spent two years earlier by Rs 30,408 crore; the reduction is mainly due to a cut in PMAY-U by Rs 34,860 crore.  The 2021-22 spending on PMAY-U is significantly higher than the earlier years (and 7.5 times the budget estimate for that year).  See Page 5 for a detailed discussion on PMAY-U.  Deendayal Antyodaya Yojana-National Urban Livelihood Mission (DAY-NULM) has been allocated a token amount of Rs 10 lakh, compared to Rs 550 crore in 2022-23 revised estimate; this was also 39% lower than the originally budgeted amount of Rs 900 crore in 2022-23.

Trends in Expenditure  

During 2013-14 to 2023-24, the Ministry’s expenditure has increased at an annual average rate of 22% (See Figure 2).  While allocation to the Ministry has been increasing, the Ministry has not been able to utilise all the funds allocated (See Figure 3).  The Standing Committee on Urban Development (2021) also highlighted this issue and recommended the Ministry to avoid such underutilisation of funds.[3]  Consistent underutilisation may affect progress of key schemes, as well as future allocation of funds.

Figure 2: Trend in expenditure (in Rs crore)

Note: For the years 2012-13 till 2015-16, the figures are a combination of the erstwhile Ministry of Housing and Urban Poverty Alleviation, and the Ministry of Urban Development.  Values for 2022-23 and 2023-24 are Revised and Budget Estimates respectively.  All other figures are Actuals.
Sources: Demand for Grants of Ministry of Housing and Urban Poverty Alleviation, and the Ministry of Urban Development from 2011-12 to 2015-16; Demand for Grants of Ministry of Housing and Urban Affairs from 2013-14 to 2023-24; PRS.

In 2016-17, the actual expenditure on metro projects, AMRUT, and Smart Cities Mission were higher than the budget estimates.  Further, in 2021-22 the actual expenditure on PMAY-U was 650% higher than the estimates (Budget Estimates- Rs 8,000 crore and Actuals- Rs 59,963 crore).    

Figure 3: Utilisation of funds by the Ministry

 

Note: For the years 2012-13 till 2015-16, the figures are a combination of the erstwhile Ministry of Housing and Urban Poverty Alleviation, and the Ministry of Urban Development.
Sources: Demand for Grants (2012-13 to 2023-24), Ministry of Housing and Urban Affairs; PRS.

Issues to consider

Financing required

Urban infrastructure projects tend to be capital intensive and not only require upfront capital investment but also annually recurring operations and maintenance expenditures.  With the current rate of urbanisation, the High-Powered Expert Committee (HPEC) for Estimating the Investment Requirements for Urban Infrastructure Services (2011) had estimated a requirement of Rs 39 lakh crore (at 2009-10) prices for the period 2012-2031.[4]  As per their framework, the investment in urban infrastructure should increase from 0.7% of GDP in 2011-12 to 1.1% of GDP by 2031-32. In 2021-22, total expenditure on urban development by states and centre is estimated to be 0.7% of GDP.[5]^,[6]  The Ministry of Finance (2017) had noted that only budgetary outlays will not be enough to cater the growing demands on local governments for improving their infrastructure.[7]  Allocation by the central government will have to be supported with other sources of financing to meet the funding gap.  

There have been attempts to explore alternative measures for meeting expenditure requirements.  Schemes such as Smart Cities Mission, AMRUT seek to meet their financing requirements through a mix of sources such as municipal bonds and public private partnership.   The Ministry of Housing and Urban Affairs also provides financial incentives to ULBs for issuance of municipal bonds.[8]  The Standing Committee on Housing and Urban Affairs (2022) noted that some municipal corporations like Lucknow and Ghaziabad have undergone credit rating evaluation and have successfully raised funds from the market.[9]  

Several cities not credit worthy

One of the reforms under AMRUT is to have credit ratings for cities.  Credit rating is a pre-requisite for ULBs to raise money from the market and financial institutions.[10]  The Ministry (2018) noted that the municipal bond market has great potential to fulfil the financial requirements of cities.10  However, it remains untapped.  As of December 2022, credit rating work has been completed in 470 cities and 164 cities (35%) have received investible credit rating (enables ULBs to float municipal bonds).[11]

High reliance on government transfers

ULBs in India are amongst the weakest globally in terms of fiscal autonomy with state government control on their authority to levy taxes.[12]  The 74^th Constitutional Amendment allows state governments to authorise ULBs to levy, collect and appropriate certain taxes, duties, tolls and fees.  Such funds collected by the state government must be assigned to ULBs.  States are also required to constitute State Finance Commissions (SFCs) to recommend devolution of tax revenues and grants-in-aids to ULBs.[13]  However, RBI (2022) noted that transfer of revenue collecting powers from states to ULBs has been limited.12  Sources of revenue for ULBs include user fees, property sales, and licenses and permits.   The share of own revenue (tax and non-tax) in total revenue of ULBs has declined over time indicating fiscal dependency on government transfers.12  With GST subsuming certain taxes earlier levied by ULBs (such as octroi tax, local body tax), there is greater dependence on transfers.  Property tax remains the only major tax source for ULBs.  Among the BRICS nations, local governments in Brazil and Russia mostly rely on government grants while those in China and South Africa are less dependent on transfers for their finances.12 

SFCs and ULBs Article 243I of the Constitution requires the state governments to appoint SFC from 1994 after every five years.[14]  The 15th Finance Commission observed that most state governments did not constitute SFCs in time and have not given due importance to the recommendations of the SFCs.[15]  In states where SFCs have recommended devolution to ULBs, there have been variations among states.[16]  For instance, 4th SFC of Karnataka recommended 10.7 of the divisible pool for ULBs while the 5th SFC of Kerala recommended 5.5% and 1% by the 4th SFC of West Bengal.

Table 3: Share of own revenue in total expenditure of urban local governments (in Rs crore)

Year	Total Municipal Expenditure	Total own revenue	Share of own revenue in total expenditure
2010-11	64,193	37,304	58%
2011-12	70,380	42,633	61%
2012-13	82,702	52,543	64%
2013-14	93,298	58,249	62%
2014-15	1,06,917	63,418	59%
2015-16	1,18,938	70,223	59%
2016-17	1,24,007	72,067	58%
2017-18	1,32,553	73,331	55%

Sources: State of Municipal Finances in India, ICRIER, A Study commissioned by 15th Finance Commission; PRS.

Figure 4: Municipal Own Revenue as % of GDP

Sources: State of Municipal Finances in India, ICRIER, A Study commissioned by 15th Finance Commission; PRS.

Figure 5: Share of own revenue coming down in the past few years

Sources: State of Municipal Finances in India, ICRIER, A Study commissioned by 15th Finance Commission; PRS.

Low property tax collection

Property tax for local governments is one of the most important sources for raising revenue globally (See Figure 7).12  In India it was around 60% of the municipal tax revenue in 2017-18.16  Compared to other countries, property tax collection in India is much lower due to several reasons such as property undervaluation and ineffective administration.   Smaller municipal corporations, lack institutional capacity to undertake reforms to increase property tax collection and may require state government’s assistance.12  For larger corporations, expansion of tax base and increasing efficiency of tax collection can be done through use of technologies such as satellite photography.12  

The 15^th Finance Commission (2021-26) has recommended grants worth Rs 1.21 lakh crore over five years for urban local bodies.15  To receive grants from the year 2022-23 onwards, states will need to show consistent improvement in property tax collection.  To meet the eligibility criteria, the property tax in the previous year should grow in tandem with the average growth rate of the state’s own GSDP in the most recent five years.    

Figure 6: Share of Property Tax in Total Municipal Revenue (in %)

 

Sources: State of Municipal Finances in India, ICRIER, A Study commissioned by 15th Finance Commission; PRS.

Figure 7: Property Tax as % of GDP in 2016

Sources: World Bank; PRS.

Absence of financial transparency in ULBs

RBI (2022) observed that the balance sheets of most municipalities in India are not publicly available and many of them continue to follow cash accounting system.12  Municipal laws do not prescribe any uniform accounting standards to be followed, resulting municipal accounts incomparable across states and within states.12  In order to ensure correct, complete, and accurate record keeping of municipal transactions and to produce financial reports, a Task Force for ULBs was constituted by Comptroller and Auditor General of India (CAG) in February 2022, based on recommendations of the 11^th Finance Commission.12  The Task Force recommended an accounting system which led to the National Municipal Accounts Manual (NMAM) in December 2004.  RBI noted that only in 9 of the 14 states (for which information pertaining to adoption of State municipal accounts manual is available in the CAG reports), a municipal accounts manual has been approved by the respective state government.12  Thus, there is a need to implement a uniform accounting framework across states.12  

Capacity for municipal governance

ULBs play a key role in city governance by providing essential services like housing, water, sanitation, electricity, and transportation.  The HPEC for Estimating the Investment Requirements for Urban Infrastructure Services (2011) had noted that the state of service delivery in Indian cities and towns is inadequate compared to desirable levels.  The Standing Committee on Urban Development (2021) highlighted that while ULBs have done reasonably well in implementing targeted schemes like SBM-U, they have not been able to implement schemes like Smart Cities Mission where most planning decisions are left to them.3  The Committee highlighted that ULBs are not ready to take up such projects like Smart Cities Mission.      

ULBs not empowered

While the Ministry has introduced several schemes for improving service delivery such as Smart Cities Mission, and PMAY-U, the quality of such services still remains inadequate.   One of the key reasons behind such state of affairs may be lack of capacity of ULBs.  The 74^th Constitutional Amendment allowed state governments to devolve certain functions relating to urban development (such as urban sanitation, water supply, and roads and bridges) to ULBs.[17]  HPEC (2011) noted that the Amendment left it to the discretion of the state legislature to devolve these functions to ULBs.4  It had observed that states have only partially complied with devolution.  

For instance, the CAG (2020 and 2021) noted that Karnataka and Rajasthan had transferred 17 and 16 functions out of 18 functions (specified in the 12^th Schedule) respectively.[18]^,[19]  In Karnataka, of the functions devolved, ULBs had no role in urban planning and slum improvement which are functions to be devolved to them.  For functions like water supply, public health, and urban amenities, ULBs had either a minimal role or overlapping jurisdictions with other agencies.  In Rajasthan, ULBs had a minimal role or overlapping jurisdictions for water supply, urban planning, roads and bridges, and public health sanitation.  The CAG recommended respective state governments to ensure that ULBs have adequate degree of autonomy with respect to functions assigned to it.

Housing 

PMAY-U

The central government had launched PMAY-U in June 2015 to provide ‘housing for all’ within urban areas.  The scheme was earlier applicable till March 31, 2022.  In August 2022, the scheme was extended up to December 31, 2024, due to some states submitting proposals for constructing houses in the last two years of the scheme.   In 2023-24, PMAY-U has been allocated Rs 25,103 crore (highest allocation of the Ministry) which is a decrease of 12.6% from 2022-23 revised estimates.  In 2021-22, the actual allocation towards PMAY-U was Rs 59,963 crore, which is an increase of 650% from 2021-22 budget estimates (Rs 8,000 crore).  This is on account of a sharp increase of 4,447% of expenditure (Rs 33,329 crore) on ‘other items of central component’ which includes establishment expenses, capacity building, and other expenses for PMAY-U.

The scheme comprises four components: (i) in-situ rehabilitation of existing slum dwellers (using the existing land under slums to provide houses to slum dwellers) through private participation, (ii) credit linked subsidy scheme (CLSS) for Economically Weaker Sections (EWS), Lower Income Groups (LIG), and middle-income group (MIG), (iii) affordable housing in partnership (AHP), and (iv) subsidy for beneficiary-led individual house construction. 

Several houses grounded but not completed: The Standing Committee on Housing and Urban Affairs (2022), while analysing the progress of PMAY-U, observed that no strict timelines have been provided for the completion of houses.9  In some states, even the land required for construction has not been acquired.  The number of houses grounded for construction (construction going on) are more than the completed houses.  For instance, in Andhra Pradesh, as on January 23, 2023, out of 21 lakh sanctioned houses, 19 lakh houses were grounded (93%), and about 7 lakh houses were completed/ delivered (32%).[20]  In Maharashtra. out of 15 lakh sanctioned houses, 10 lakh (69%) were grounded and 7 lakh (49%) were completed/ delivered.  It recommended the Ministry to provide strict timelines for completion of under construction houses. 

Figure 8: After 7 years of PMAY-U, out of 120 lakh sanctioned houses, 68 lakh (56%) completed

 

Sources: Pradhan Mantri Awas Yojana (Urban) - Housing for All (HFA) States/UTs wise Progress, as on January 23, 2023; PRS. 

Poor quality of houses: As per PMAY-U guidelines, all houses constructed under slum rehabilitation and AHP components, should have basic civic infrastructure like water, sanitation, sewerage, and electricity.[21]  ULBs should ensure that individual houses under CLSS and beneficiary-led verticals have access to basic services.  The Standing Committee on Housing and Urban Affairs (2022) highlighted that several houses constructed under PMAY-U are not in liveable condition with windows and doors missing.9  As a response to houses not being liveable, Ministry stated that about 96,000 houses under the erstwhile Jawaharlal Nehru National Urban Renewal Mission (JnNURM) are lying vacant due to which they are in a bad shape.31  The Ministry has requested respective states/UTs to repair these houses and allot them to beneficiaries or convert them into Affordable Rental Housing Complexes (ARHCs) for rental purposes for urban migrants/poor.  The CAG (2022) while auditing houses constructed under PMAY(U) in Karnataka observed that some houses constructed under AHP vertical were unoccupied due to lack of facilities such as water, sewerage, and electricity.[22]  This was due to non-release of funds by the concerned ULBs. 

Implementation issues in allocating houses PMAY-U guidelines prescribe certain standards to identify eligible beneficiaries such as a beneficiary family should comprise husband, wife and unmarried sons and/ or unmarried daughters.[23]  Further, the family should not own a pucca house.  There have been some irregularities in identification of beneficiaries.  For instance, in Madhya Pradesh 16 beneficiaries who were provided the benefit of PMAY-U were not approved by the District Collector.[24]  The beneficiaries later returned the grant amount given to them to the concerned ULB.     Further, the CAG (2022) noted several issues related to allocation of beneficiaries under PMAY-U in Karnataka which include (i) beneficiaries getting multiple benefits under same/ different verticals, and (ii) benefits extended to ineligible people.[25]

Urban transportation

Fragmented approach to urban transport

The Ministry of Housing and Urban Affairs is the nodal ministry for looking after urban transport at the central level.  As urban development being a state subject, the primary responsibility for urban transport infrastructure and service delivery lies with state governments and local bodies.      

The National Transport Development Policy Committee (NTDPC), 2013 observed that India’s transport policy is fragmented between different level of government.[26]  Such an arrangement adversely affects intermodal planning and execution at all levels of government and has led to several inefficiencies.  These include: (i) rail networks not linking with road networks for last-mile delivery of goods, (ii) bus and metro systems in urban areas not exchanging people, and (iii) ports not always having infrastructure for evacuation of goods.  At the city level, several agencies are involved in managing components of urban transportation.[27]   For instance, Mumbai’s transportation system is overseen by a combination of municipal/metropolitan authorities, state and central government agencies.  For instance, the road system is managed by multiple agencies including the Mumbai Metropolitan Development Authority and Maharashtra State Road Development Corporation.  The lack of an integrated approach to urban transport also affects prospects for coordinated land use planning.  

The National Urban Transport Policy, 2006, noted that the current system governing transport does not provide for coordination among agencies.[28]  It recommended setting up Unified Metropolitan Transport Authority (UMTA) in all million-plus cities to facilitate coordinated planning and implementation of urban transport programs and projects, and integrated management of urban transport systems.  The Metro Rail Policy, 2017 provides that state governments should constitute UMTAs as statutory bodies.[29]  The Standing Committee on Housing and Urban Affairs (2022) had noted that only a few cities such as Bengaluru, Kochi, Pune, and Chennai have set up their respective UMTAs.[30]  

Urban transport focused on metro projects 

Investment in metro projects in cities forms one of the biggest expenditures made by the Ministry on urban transport.  Some of the major metro projects include Chennai, Delhi, Bangalore, and Mumbai metros. Investments in these projects are made in various forms including grants, equity investments, debt, and pass-through assistance (grants given to the government which can be awarded to other organisations) for externally aided projects.  In 2023-24, metro projects have been allocated Rs 23,175 crore, an increase of 13.6% over the revised estimates of 2022-23.    

Need to enhance revenue from non- fare sources: Sources of revenue for metro projects are of two types- fare box (sale of tickets) and non-fare box (such as commercial development of land, advertising revenues).  The Metro Rail Policy, 2017 provides that the Detailed Project Report for metro projects must provide for enhancing non-fare box revenue.29  The respective state government should provide a policy framework and required permissions, and licenses for enabling metro projects to explore various types of non-fare box revenue.29

A major portion of the total revenue generated by Indian metro rail systems consists of fare revenue.  For instance, the proportion of total revenue generated from fare box by Delhi Metro ranged from 24% in 2005-16 to 57% in 2019-20.  For Kochi Metro it was 78% in 2017-18 and 60% in 2019-20.30  Mumbai Metro Line 1 generated 86-89% of its revenue from fare box since 2014-15 from fares (barring COVID-19 year).30  According to the Standing Committee on Housing and Urban Affairs (2022), maximising revenue from fare collection may negatively impact ridership and it may prevent metro from becoming a mass transportation system.30  It recommended the Ministry to persuade metro projects to explore avenues of non-fare box collection.  Property development and setting up commercial establishments at stations has been a key source of revenue for metro projects.30  Notable examples of using property development and commercial establishments for generating revenue are Hong Kong and Tokyo.29     

In the case of Delhi Metro, the Committee (2022) noted that it is incurring net losses despite meeting targets for average daily earnings required for breakeven and increase in average daily ridership (See Figure 9).30  It recommended the Delhi Metro to enhance non-fare revenue.  The Ministry informed the Committee (2022) that it has requested metro rail corporations to increase revenue from non-fare sources.[31]  It also informed the Committee that Delhi Metro has taken and is planning several measures which include: (i) co-branding of metro stations, (ii) licensing of spaces at stations for shops, ATMs, kiosks, offices, and (iii) exploring digital advertisement panels inside tunnels.31     

Figure 9: Losses after taxes for Delhi Metro (in Rs crore)

Sources: Report No. 12: Implementation of Metro Rail Projects - An Appraisal, Standing Committee on Housing and Urban Affairs, April 7, 2022; PRS.

Highly capital-intensive nature of Metro: Metro projects are highly capital intensive in nature.  Capital expenditure on metro projects in 2023-24 is estimated to be Rs 23,056 crore which is 89% of the total capital expenditure by the Ministry (Rs 25,997 crore).  The per km cost of constructing metro ranges from Rs 37 crore to Rs 1,126 crore depending on the metro system.30  While observing the losses made by Delhi Metro, the Standing Committee on Housing and Urban Affairs (2022) noted that metro projects should not be assessed only on economic considerations given the benefits it has such as reducing pollution and traffic, and providing affordable transport solutions.30    

The Metro Policy 2017, notes that before setting up metro, an unbiased analysis of different alternatives should be carried out.29  Cities with a well spread-out spatial pattern may not have sufficient number of corridors with adequate density to justify investments in metro.  Cities with a linear spatial pattern are more suited for metro projects.  Indian cities have developed in a way that allow neighbourhoods to provide for residences, workplaces, and social and educational facilities.27  This results in minimising trip lengths leading to less dependency on motorised urban transport.27  The average trip length in medium and small Indian cities is less than 5 km making non-motorised transport the preferred mode of commute.  Metro rail systems are efficient when the average trip distance is greater than 12 km.27  The Standing Committee on Housing and Urban Affairs (2022) recommended the Ministry to promote MetroLite and MetroNeo systems in smaller cities due to their lesser capital, operation, and maintenance costs.30  These systems can be constructed at about 25-40% cost of regular metro.  Further, it recommended the Ministry to approve and fund only those projects that are using the most feasible metro technology (such as MetroLite and MetroNeo) for a city taking into account its population and traffic needs.30    

NTDPC recommended that metro rail projects should initially be limited to cities with population more than five million.  These cities should be able to cover all costs through user charges or fiscal costs.   Further it recommended that Indian cities should focus on improving their existing bus systems, adding bus rapid transit systems, and improving non-motorised transport. However, over the past few years, metro projects have expanded from the larger metropolises such as Delhi and Mumbai to other relatively smaller cities such as Kochi, Lucknow, Bhopal, Jaipur, and Indore.  

Figure 10: Jaipur Metro not able get the ridership required for breakeven (in lakh)

Sources: Report No. 12: Implementation of Metro Rail Projects - An Appraisal, Standing Committee on Housing and Urban Affairs, April 7, 2022; PRS.

Basic services

Atal Mission for Rejuvenation and Urban Transformation (AMRUT)

AMRUT, launched in June 2015 in select 500 cities, seeks to focus on developing basic infrastructure related to several services such as water supply, sewerage, and non-motorised urban transport.[32]  AMRUT 2.0 was launched in October 2021 for five years (2021-22 to 2025-26).  AMRUT 2.0 seeks to provide water supply to households.  In 2023-24, AMRUT has been allocated Rs 8,000 crore, an increase of 23% over 2022-23 revised estimates. 

Irregularities in implementation: The Standing Committee on Urban Development (2019, 2020) has highlighted several irregularities with the scheme.  For instance, tenders for projects being continuously awarded to a single person, unnecessary projects being taken up, and tenders being awarded at high cost when cheaper options were available.3^,[33]  In 2020, the Committee noted that implementation of projects has been below target.  As of December 2022, 134 lakh (96%) water tap connections and 102 lakh (70%) sewer connections have been provided against the target of 139 lakh and 145 lakh respectively.32 

Table 4: Allocation to AMRUT (in Rs crore)

Year	Budget	Actuals	Utilised
2015-16	3,919	2,702	69%
2016-17	4,080	4,864	119%
2017-18	5,000	4,936	99%
2018-19	6,000	6,183	103%
2019-20	7,300	6,391	88%
2020-21	7,300	6,448	88%
2021-22	7,300	7,280	100%
2022-23	7,300	6,500	89%
2023-24	8,000	-	-
Total	56,199	45,304	81%

Note: Actuals for 2022-23 are Revised Estimates.
Sources: Demand for Grants, Ministry of Housing and Urban Affairs (2015-16 to 2023-24); PRS.

Table 5: Progress under AMRUT (as of December 2022)

	Total	Completed	%	Ongoing	%
Projects	5,873	4,676	80	1,197	20
Cost (Rs crore)	82,222	32,793	40	49,430	60

Sources: Unstarred Question No. 1424, Lok Sabha, Ministry of Housing and Urban Affairs, December 15, 2022; PRS.

Smart Cities Mission

The Smart Cities Mission, launched in June 2015 for five years, seeks to promote 100 smart cities that provide core infrastructure (such as water and electricity supply, sanitation, and public transport).  The scheme has been extended to June 2023.[34]  In 2023-24, the Mission has been allocated Rs 8,000 crore, a decrease of 9% over 2022-23 revised estimates (Rs 8,800 crore).  The Standing Committee on Urban Development (2021) noted that the amount allocated to the Smart Cities Mission has been less than the proposed amount (See Table 6).

Table 6:  Budgeted allocation less than proposed amount for Smart Cities Mission (in Rs crore)

Year	Proposed	Budgeted
2017-18	13,648	4,000
2018-19	9,810	6,169
2019-20	13,971	6,450
2020-21	13,543	6,450
2021-22	10,000	6,450

Sources: Report No.5: Ministry of Housing and Urban Affairs, Demand for Grants 2021-22, Standing Committee on Urban Development, March 8, 2021; PRS. 

Capacity of ULBs to implement the Mission: Each smart city has a Special Purpose Vehicle (SPV), responsible for the implementation of the Mission at the city level.  ULBs are responsible for planning and implementing the projects and also providing funds (alongside the central government).  The Standing Committee on Urban Development (2021) observed that economically backward states have not been able to provide their share of financial contribution under the Mission.3   The Committee also highlighted that ULBs have not been able to implement schemes like Smart Cities Mission where everything is left to them (such as making plan, choosing projects).  It remarked that ULBs may not be ready to take up such Missions.    This may be due to the limited technical and financial capacity of ULBs, as discussed on Page 3 and 4.      

Deficiencies in implementation: Under the Mission, multiple projects related to infrastructure and service delivery such as sanitation, water supply, are taken up in the select cities.   Seven years since the launch of the Mission, 33% of projects are still ongoing (See Table 7).   The Standing Committee on Urban Development (2021) also highlighted the slow pace of project completion.  It recommended the Ministry to ensure timely completion to avoid cost overruns.  The Committee also highlighted several irregularities in implementation of Smart Cities works which include: (i) frequent dropping of projects after finalising proposals, (ii) redoing of the same work again, and (iii) project costs being higher than market rate.  Further, the Committee observed that the Geospatial Management Information System (real time monitoring system) has not been able to adequately monitor projects.   

Table 7: Seven years of Smart Cities Mission; several projects still ongoing

Projects	Total	Completed		%	Ongoing	%
	7,804		5,322	68	2,558	33
Cost (Rs crore)	1,81,322	1,00,273		55	82,526	46

Sources: Smart Cities Mission Dashboard (as on January 30, 2023), as accessed on February 4, 2023; PRS.

Swachh Bharat Mission – Urban (SBM-U)

SBM-U has been allocated Rs 5,000 crore in 2023-24, an increase of 150% over 2022-23 revised estimates.  Launched in October 2014, SBM-U seeks to: (i) make all urban areas open defecation free (ODF), and (ii) achieve 100% scientific management of municipal solid waste (MSW).  SBM-U 2.0 was launched in October 2021.  It focuses on source segregation of solid waste at source, scientific processing of waste, and improving dumpsites for solid waste management.  

Progress may not be adequate: In 2019, all urban areas were declared open defecation free (ODF).[35] However, according to the National Family Health Survey 5 (2019-21), 19.5% of urban households do not have access to an improved sanitation facility (includes flush to piped sewer system, flush to septic tank, twin pit/composting toilet, which is not shared with any other household).[36]  Under the Mission, individual household and community toilets are constructed across states.  However, the construction varies across states.  In some states like Maharashtra and Gujarat, targets have been overshot, and some such as West Bengal and Meghalaya where the targets have not been met.  For instance, as on January 25, 2023, in West Bengal 55% of individual household latrines have been constructed and 22% public toilets have been constructed (See Table 8 in the Annexure for state wise details on number of toilets constructed).

Figure 11: Targets for constructing toilets not met in few states (as on January 25, 2023)

  

Sources: SBM (U) Dashboard, Ministry of Housing and Urban Affairs, as accessed on January 25, 2023; PRS.  

Underutilisation of funds for inducing behavioural change: Apart from constructing toilets, SBM-U also focuses on behavioural change to eradicate open defecation, and spreading awareness around hygiene practices, proper use and maintenance of toilets etc.[37]  Accordingly funds are allocated for advertisement and publicity of the mission.   However, the Standing Committee on Housing and Urban Affairs (2022) highlighted that there has been underutilisation of funds for advertising and publicity (See Figure 12).[38]  Advertising and publicity are key factors for inducing behavioural change.  In 2020-21 and 2021-22, almost none of the funds allocated were utilised.  The Standing Committee on Housing and Urban Affairs (2022) noted that declaring cities as ODF is not enough and the Ministry must persist in spreading awareness about the Mission.9  The Ministry highlighted that such underutilisation of funds is due to the Ministry not receiving demand proposals from states for advertising and publicity.

Figure 12: Utilisation of funds for advertising and publicity for SBM-U

Note: Data for 2021-22 is as on December 31, 2021.
Sources: Report No. 12: Ministry of Housing and Urban Affairs Demand for Grants (2022-23), Standing Committee on Housing and Urban Affairs, March 24, 2022; PRS.   

Annexure

Table 8: Toilets constructed under SBM-U (as on January 25, 2023)

State/UT	Target		Constructed
	Individual Household Latrine	Community and Public Toilets	Individual Household Latrine	Community and Public Toilets	Individual household latrine target met (%)	Community and public toilets target met (%)
Andaman and Nicobar Islands	336	126	336	609	100	483
Andhra Pradesh	1,93,426	21,464	2,43,764	17,799	126	83
Arunachal Pradesh	12,252	387	9,743	46	80	12
Assam	75,720	3,554	78,137	3,356	103	94
Bihar	3,83,079	26,439	3,93,613	27,820	103	105
Chandigarh	4,282	976	6,117	2,512	143	257
Chhattisgarh	3,00,000	17,796	3,26,428	18,832	109	106
Delhi	5,000	11,138	725	28,256	15	254
Goa	8,020	507	3,800	1,270	47	250
Gujarat	4,06,388	31,010	5,60,046	24,149	138	78
Haryana	71,000	10,393	66,638	11,374	94	109
Himachal Pradesh	11,266	876	6,743	1,700	60	194
Jammu and Kashmir	59,600	3,585	51,246	3,451	86	96
Jharkhand	1,61,713	12,366	2,18,686	9,643	135	78
Karnataka	3,50,000	34,839	3,93,278	36,556	112	105
Kerala	29,578	4,801	37,207	2,872	126	60
Ladakh	400	194	400	194	100	100
Madhya Pradesh	5,12,380	40,230	5,79,541	20,343	113	51
Maharashtra	6,29,819	59,706	7,14,978	1,66,465	114	279
Manipur	43,644	620	39,240	581	90	94
Meghalaya	5,066	362	1,604	152	32	42
Mizoram	16,441	491	12,373	1,324	75	270
Nagaland	23,427	478	19,847	238	85	50
Odisha	1,32,509	17,800	1,42,551	12,211	108	69
Puducherry	5,681	1,204	5,162	836	91	69
Punjab	1,02,000	10,924	1,03,683	11,522	102	105
Rajasthan	3,61,753	26,364	3,68,515	31,300	102	119
Sikkim	1,587	142	1,398	268	88	189
Tamil Nadu	4,37,543	59,921	5,08,562	92,744	116	155
Telangana	1,63,508	15,543	1,57,165	15,465	96	99
Tripura	19,464	586	20,935	1,089	108	186
Uttar Pradesh	8,28,237	63,451	8,97,697	70,370	108	111
Uttarakhand	27,640	2,611	24,000	4,642	87	178
West Bengal	5,15,000	26,484	2,82,542	5,746	55	22
Total	58,97,759	5,07,368	62,76,700	6,25,735	106	123

Sources: Swachh Bharat Mission (Urban) Dashboard, as accessed on January 25, 2023; PRS.

Table 9: Progress of PMAY-U as on January 23, 2023

State/ UT	Physical Progress of Houses			Financial Progress (in Rs crore)
	Sanctioned	Grounded*(under construction)	Completed/ Delivered*	Investment	Central Assistance
					Sanctioned	Released
Andaman and Nicobar Island	378	378	47	96	6	2
Andhra Pradesh	20,74,765	19,25,908	6,67,334	89,212	31,622	17,803
Arunachal Pradesh	9,002	8,570	5,610	511	190	146
Assam	1,61,476	1,50,799	71,466	4,931	2,446	1,314
Bihar	3,27,315	3,09,603	1,01,567	18,540	5,153	2,571
Chandigarh	1,271	1,202	1,202	262	29	28
Chhattisgarh	3,06,034	2,61,890	1,60,957	13,833	4,850	3,513
Delhi	30,194	28,709	28,683	5,645	697	660
Dadra and Nagar Haveli and Daman and Diu	10,480	9,852	8,368	941	222	192
Goa	3,150	2,995	2,987	692	75	71
Gujarat	10,60,376	9,40,724	7,92,574	1,05,706	21,913	17,126
Haryana	1,66,671	91,982	58,697	15,750	2,954	1,426
Himachal Pradesh	13,249	12,880	8,863	910	241	179
Jammu and Kashmir	49,146	47,376	16,673	2,695	756	369
Jharkhand	2,34,369	2,08,787	1,17,559	11,646	3,687	2,535
Karnataka	7,06,320	5,72,101	2,94,209	51,984	11,588	6,257
Kerala	1,66,661	1,34,089	1,06,998	8,928	2,760	1,936
Ladakh	1,366	1,015	647	68	31	22
Madhya Pradesh	9,60,256	9,05,806	5,93,867	54,059	15,823	12,894
Maharashtra	15,11,989	10,38,133	7,34,673	1,88,340	27,691	16,356
Manipur	56,037	47,352	9,427	1,446	841	436
Meghalaya	4,759	3,780	1,101	187	72	30
Mizoram	40,756	38,710	6,102	950	625	206
Nagaland	32,335	31,880	11,339	1,050	511	307
Odisha	2,13,845	1,70,518	1,19,377	9,874	3,344	2,091
Puducherry	16,394	16,036	7,662	948	258	173
Punjab	1,32,895	1,05,882	63,851	9,240	2,339	1,546
Rajasthan	2,76,746	2,00,245	1,58,326	23,429	5,263	3,780
Sikkim	704	592	209	35	12	7
Tamil Nadu	6,88,854	6,32,765	4,93,176	48,883	11,253	8,885
Telangana	2,49,465	2,40,454	2,18,362	30,701	4,466	3,146
Tripura	94,162	82,643	63,038	2,988	1,514	1,146
Uttar Pradesh	16,89,673	15,39,266	11,99,343	83,665	26,638	21,018
Uttarakhand	62,762	48,453	27,292	4,885	1,159	732
West Bengal	6,91,146	5,42,425	3,09,258	38,339	11,094	6,627
Total	120 lakh**	108 lakh*	68 lakh*	8 lakh crore.	2 lakh crore	1 lakh crore

Note: * includes completed (3.41 lakh)/ grounded (4.01 lakh) houses of Jawaharlal Nehru National Urban Renewal Mission during mission period; ** Out of 122.69 lakh houses sanctioned as on March JNU31, 2022, 2.24 lakh non-starter houses have been curtailed by some sates against which States to put up new proposals by March 2023.
Sources: Pradhan Mantri Awas Yojana (Urban) - Housing for All (HFA) States/UTs wise Progress, as on January 23, 2023; PRS.

Table 10: status of devolution of functions (as of March 2020)

State/UT	No. of functions devolved	State/UT	No. of functions devolved
Andhra Pradesh	17	Madhya Pradesh	18*
Arunachal Pradesh	13*	Maharashtra	18
Assam	12	Manipur	07*
Bihar	7	Meghalaya	16*
Chandigarh	13*	Mizoram	12*
Chhattisgarh	18	Nagaland	03*
Dadra and Nagar Haveli	11	Odisha	18
Daman and Diu	16	Puducherry	17
Delhi	13	Punjab	18
Goa	10*	Rajasthan	18
Gujarat	16	Sikkim	6
Haryana	18	Tamil Nadu	17
Himachal Pradesh	16	Telangana	18
Jammu and Kashmir and Ladakh	18	Tripura	15*
Jharkhand	14	Uttar Pradesh	8
Karnataka	17	Uttarakhand	14*
Kerala	18	West Bengal	16*

Note: * as per the Reform Appraisal Reports Jawaharlal Nehru National Urban Renewal Mission, March 2014.
Sources: Unstarred Question No. 4211, Lok Sabha, Ministry Housing and Urban Affairs, March 19, 2020; PRS.

 

[2] Note on Demands for Grants 2023-24, Demand No. 60, Ministry of Housing and Urban Affairs, https://www.indiabudget.gov.in/doc/eb/sbe60.pdf. 

[3] Report No. 5: Ministry of Housing and Urban Affairs, Demand for Grants 2021-22, Standing Committee on Urban Development, March 8, 2021, https://loksabhadocs.nic.in/lsscommittee/Housing%20and%20Urban%20Affairs/17_Urban_Development_5.pdf. 

[4] “Report on Indian Infrastructure and Services”, High Powered Expert Committee for estimating the investment requirement for urban infrastructure services, March 2011, https://icrier.org/pdf/FinalReport-hpec.pdf. 

[5] Annual Financial Statement of the central government, 2022- 23, Government of India, https://www.indiabudget.gov.in/doc/AFS/allafs.pdf. 

[6] State Finances: A Study of Budgets 2021-22, Reserve Bank of India, November 30, 2021, https://rbi.org.in/Scripts/AnnualPublications.aspx?head=State%20Finances%20:%20A%20Study%20of%20Budgets.

[7] “Guidance on use of Municipal Bond Financing for Infrastructure projects”, Department of Economic Affairs, Ministry of Finance, September 2017, https://www.pppinindia.gov.in/documents/20181/33749/Guidance+on+use+of+Municipal+Bonds+for+PPP+projects.pdf/037cb143-8305-4c57-8f3c-32e5a329297f. 

[9] Report No. 12: Ministry of Housing and Urban Affairs, Demand for Grants 2022-23, Standing Committee on Housing and Urban Affairs, March 24, 2022,  https://loksabhadocs.nic.in/lsscommittee/Housing%20and%20Urban%20Affairs/17_Housing_and_Urban_Affairs_12.pdf. 

[10] “Subject- Incentive to Urban Local Bodies (ULBs), which are covered under Atal Mission for Rejuvenation and Urban Transformation (AMRUT) for issuance of Municipal Bonds”, Letter to Principal Secretaries of states/UTs, Ministry of Housing and Urban Affairs, March 23, 2018, http://amrut.gov.in/upload/oms/5ad83b6e6e622bondletter2018.pdf.  

[11] Unstarred Question No. 1336, Rajya Sabha, Ministry of Housing and Urban Affairs, December 19, 2022, https://pqars.nic.in/annex/258/AU1336.pdf. 

[13] Article 243Y, The Constitution of India, https://legislative.gov.in/sites/default/files/COI.pdf.  

[15] Volume 1, Report of the 15th Finance Commission for 2021-26, February 2021, https://fincomindia.nic.in/writereaddata/html_en_files/fincom15/Reports/XVFC%20VOL%20I%20Main%20Report.pdf.

[16] State of Municipal Finances in India, ICRIER, A Study commissioned by 15th Finance Commission, March 2019, https://fincomindia.nic.in/ShowContentOne.aspx?id=27&Section=1.  

[18] “Performance audit of Implementation of 74th Constitutional Amendment Act”, Government of Karnataka Report No. 2 of the year 2020, Comptroller and Auditor General of India, https://cag.gov.in/uploads/download_audit_report/2020/Full%20report%20%20English-05f757c1f8c7e46.52858465.pdf. 

[19] “Performance Audit on Efficacy of implementation of 74th Constitutional Amendment Act,” Government of Rajasthan Report No. 5 of the year 2021, Comptroller and Auditor General of India, https://cag.gov.in/uploads/download_audit_report/2021/Full%20Report-English-74th%20CAA-0622b24e8505c47.07308141.pdf. 

[21] Starred Question No. 58, Rajya Sabha, Ministry of Housing and Urban Affairs, December 12, 2022,   https://pqars.nic.in/annex/258/AS58.pdf. 

[22] Report of the Comptroller and Auditor General of India, Performance Audit of Implementation of Housing Schemes for Urban Poor in Karnataka, Comptroller and Auditor General of India, https://cag.gov.in/uploads/download_audit_report/2021/HFA%20ENGLISH-06334255952f936.86422917.pdf. 

[23] Pradhan Mantri Awas Yojana (Urban), Scheme Guidelines, January 2021, Ministry of Housing and Urban Affairs, https://pmay-urban.gov.in/uploads/guidelines/62381c744c188-Updated-guidelines-of-PMAY-U.pdf. 

[25] Performance Audit of Implementation of Housing Schemes for Urban Poor in Karnataka, Government of Karnataka, Report No. 4 of 2022, https://cag.gov.in/uploads/download_audit_report/2021/HFA%20ENGLISH-06334255952f936.86422917.pdf.

[27] Chapter 5- Urban Transport, National Transport Development Policy Committee, 2013, http://www.aitd.net.in/NTDPC/voulme3_p2/urban_v3_p2.pdf.  

[29] Metro Rail Policy, 2017, https://mohua.gov.in/upload/whatsnew/59a3f7f130eecMetro_Rail_Policy_2017.pdf. 

[30] Report No. 13: Implementation of Metro Rail Projects - An Appraisal, Standing Committee on Housing and Urban Affairs, April 7, 2022, https://loksabhadocs.nic.in/lsscommittee/Housing%20and%20Urban%20Affairs/17_Housing_and_Urban_Affairs_13.pdf. 

[31] Report No. 16: Action Taken by the Government on the recommendations contained in the Thirteenth Report (Seventeenth Lok Sabha) of the Standing Committee on Housing and Urban Affairs (2021-2022) on the subject, ‘Implementation of Metro Rail Projects – An Appraisal’, Standing Committee on Housing and Urban Affairs, December 20, 2022, https://loksabhadocs.nic.in/lsscommittee/Housing%20and%20Urban%20Affairs/17_Housing_and_Urban_Affairs_16.pdf. 

[32] “AMRUT Scheme” Press Information Bureau, Ministry of Housing and Urban Affairs, December 22, 2022, https://pib.gov.in/PressReleasePage.aspx?PRID=1885837#:~:text=Atal%20Mission%20for%20Rejuvenation%20and,and%20towns%20across%20the%20country. 

[33] Report No. 5: Demands For Grants (2020-2021), Ministry of Housing and Urban Affairs, Standing Committee on Urban Development, March 3, 2020, https://loksabhadocs.nic.in/lsscommittee/Housing%20and%20Urban%20Affairs/17_Urban_Development_2.pdf. 

[34] “3,131 Smart City projects worth ₹ 53,175 crore have been completed”, Press Information Bureau, Ministry of Housing and Urban Affairs, November 29, 2021, https://pib.gov.in/PressReleasePage.aspx?PRID=1776077. 

[35] “Cabinet approves the continuation of Swachh Bharat Mission (Urban) (SBM U) till 2025-26 for sustainable outcomes” Press Information Bureau, Union Cabinet, October 12, 2021, https://pib.gov.in/PressReleasePage.aspx?PRID=1763354. 

[36] National Family Health Survey - 5 2019-21, India Fact Sheet, Ministry of Health and Family Welfare, http://rchiips.org/nfhs/NFHS-5_FCTS/India.pdf. 

[38] Report No. 15: Action Taken by the Government on the Recommendations contained in the Twelfth Report (Seventeenth Lok Sabha) of the Standing Committee on Housing and Urban Affairs on the 'Demands for Grants (2022-23) of the Ministry of Housing and Urban Affairs’, Standing Committee on Housing and Urban Affairs, Standing Committee on Housing and Urban Affairs, August 8, 2022, https://loksabhadocs.nic.in/lsscommittee/Housing%20and%20Urban%20Affairs/17_Housing_and_Urban_Affairs_15.pdf.  

 

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