Decoding The Union Budget 2024-25 For Cities: Prospects And Challenges

The union budget 2024 presented by the Finance Minister Nirmala Sitharaman in the Lok Sabha on Tuesday envisages an allocation of INR 82576.57 crores equalling almost 19 percent increase over the revised estimates of INR 69270.72 crores in 2023-24 which is promising. But a substantial proportion of urban poor, especially those living in the slums, do not have land title. So, they have remained outside the PMAY(U) net is a major challenge. Writes Soumyadip Chattopadhyay.

India is poised for massive urban transformation, expecting an addition of 416 million people to its cities by 2050. Our Finance Minister, in her Budget Speech, envisages cities as ‘growth hubs’ to play a preeminent role in the country’s overall development trajectory. However, apart from the chronic problem of poverty and economic inequality, infrastructure and service deficits also pervade our cities. Weak urban governance capacity only exacerbates the cities' potential of becoming the ‘growth hubs’.

Acknowledging the need for a sustainable urban development strategy, the Union Budget of the last few years has provided for increasing budgetary allocations for urban development. In conformity with this trend, the full budget for 2024-25 marks urban development as one of its priorities to contribute to the pursuits of ‘Viksit Bharat’.

Enhancing Budgetry Provisions Promising

The Ministry of Housing and Urban Affairs (MoHUA) receives an allocation of INR 82576.57 crores equalling almost 19 percent increase over the revised estimates of INR 69270.72 crores in 2023-24. Given the myriad challenges of sustainable urban development, such an increase in budgetary provisions is apparently praiseworthy.

Nonetheless, a comparison of the revised estimates of 2023-24 and the budget estimates of 2024-25 across different schemes reveals interesting insights. Both for central sector schemes and centrally sponsored schemes, there are increases in budgetary provisions in 2024-25 of about 9.5 percent and 26 percent respectively. The Prime Minister Awas Yojna (Urban) accounts for 62 percent of the budgetary allocations for the centrally sponsored schemes.

PMAY And The Limitations

The PMAY(U) has been given INR 30170.61 crores as against INR 22103.03 crores in 2023-24. The re-introduction of the Credit Linked Subsidy Scheme component with budgetary provisions of INR 3000 crores for the economically weaker sections/lower income group people and INR 1000 crores for the middle-income group would partly be useful for addressing their housing needs.

Moreover, with a share of 63 percent of the total houses grounded, the Beneficiary Led Construction (BLC) component has been the most successful component of the PMAY (U). The Insitu re-development of slums (ISSR) component has huge potential for addressing housing shortages of the slum dwellers but it accounts for only 2.5 percent of the total houses grounded under the scheme.

Quite a substantial proportion of the urban poor, especially those living in the slums, do not have land titles. So, they have remained outside the PMAY(U) net. It seems that the PMAY(U) scheme has benefited middle and high-income group people more than the urban poor. In this context, the digitalization of land records with GIS mapping, if implemented properly, would ease the administrative difficulties in providing land titles to the poor. Proper urban planning coupled with reforms in land development regulations, as envisaged in the Budget, would also facilitate an adequate supply of urban land for housing.

PPP Mode Housing In Budget 2024

Given the majority of the urban resident’s lack of affordability to own a house, rental housing can potentially cater to the increasing demand for housing. So, the budget proposal of rental housing, specifically the dorm-like accommodations in PPP (Public-Private Partnership) mode for industrial workers, is a timely intervention. Earlier, in 2020, the central government experimented with the Affordable Rental Housing Complexes (ARHCs) as a sub-scheme under PMAY- (U) to respond to the housing needs of the urban poor, especially the migrants who were hard hit by COVID-19.

There were provisions for repurposing the vacant houses in the cities into rentals through PPPs and developing rental housing by public or private entities on their available vacant land. However, the housing units constructed under the ARHC scheme experienced multiple problems in terms of poor location, non-availability of basic urban services and rents often exceeding the prevailing private rental market rent.

Despite the concessions including tax rebates, project loan at lower interest rate, additional Floor Area Ratio (FAR)/ Floor Space Index (FSI), provision of trunk infrastructure, the private sector response to this scheme was lukewarm. In majority of cases, the access to rental houses is tied to beneficiaries’ ability to pay rent and, in case of employer-provided housing, their continuation in employment. Given these complexities, the budget document underscores the import of the enabling policies and regulations for efficient and transparent rental housing markets. Fast-tracking the implementation of the Model Tenancy Act with provisions for safeguarding the interests of the vulnerable sections and setting up professional rental management committees to manage the renting practices can help bring efficiency and transparency in the rental housing market in India.

Decrease In Outlay For Smart Cities Mission

The outlay for the Smart Cities Mission has decreased from revised estimate of INR 8000 crores in 2023-24 to a budget estimate of INR 2400 crores in 2024-25. The proposed outlay for AMRUT scheme for 500 cities is INR 8000 crores – an increase of about 54 percent of the revised estimate of INR 5200 crores in 2023-24. Similarly, in comparison to the revised allocation of Rs 2550 crores in 2023-24, the current budget has proposed Rs 5000 crores for Swachh Bharat Mission (Urban). According to the World Bank study (2022), Indian cities need an investment of $840 billion over the next 15 years, out of which $450 billion has been estimated to cover the investment needs for basic services including water supply and sewerage. Moreover, service deficits prevail in both large and small cities in India, but tend to be more pronounced in smaller cities as well as poorer localities within cities.

Basic Infrastructure And AMRUT

So, with the AMRUT’s focus on the development of basic infrastructure (i.e. water supply, sewerage, drainage, green spaces, non-motorised transport), the increases in budgetary allocation might help narrow the prevailing service deficits. In addition, the budget proposes to promote bankable water supply, sewage treatment and solid waste management projects and services for 100 large cities in partnership with the State Governments and Multilateral Development Banks. However, even after three decades of the 74th Constitutional Act, very few cities in India have control over the provision of urban basic services. The multiplicity of agencies with overlapping jurisdictions and fragmented roles and responsibilities at the city level has been a major factor behind the poor delivery of urban services. Revenue models have largely been non-existent for urban infrastructure projects. The World Bank study (2022) has shown that water and sewerage utilities in Indian cities recovered only 55% of their operating costs on average. Indian cities operate within the vicious cycle of poor revenue generation and inadequate availability of basic services. This necessitates the empowerment of the city governments as financially empowered city governments with clear functional domains and adequate institutional capacity can conceive bankable projects at the city level.

Budget Disappoints Urban Poor:

One concerning aspect of the current budget is that the livelihood of the urban poor has received less attention. Budgetary allocation for the National Urban Livelihoods Mission (NULM) programme has been reduced to INR 300 crores from the revised estimates of INR 523 crores in 2023-24. Even the PM SVANidhi (Prime Minister Street Vendor’s AtmaNirbhar Nidhi) sees a cut of INR 141.68 crores in 2024-25. The provision of 100 weekly ‘haats’ or street food hubs in select cities would hardly be able to address the livelihood challenges of millions of urban informal workers including street vendors. The Budget has continued its focus on MRTS and metro rail projects as they account for 83 per cent of the central sector schemes in urban development. The Budget also envisions transit-oriented development plans for 14 large cities with a population above 30 lakh. The big-ticket metro projects, although appealing to the popular imagination, hardly benefit the majority of people both in terms of accessibility and affordability. On a positive note, the increased budgetary allocation of INR 1300 crores for 2024-25 as against the revised estimate of INR 20 crore in 2023-24 under the PM e Bus Sewa Scheme could potentially augment the city bus services and improve peoples’ mobility.

Finally, past performances of the urban development schemes indicate a general trend of slow progress and underutilization of funds. Conceiving bankable and needs-based urban projects demands institutional capability and the efficiency of existing governance procedures. It is not too late to rethink on urban policy making and institutional strengthening of the city governments to build cities for ‘Viksit Bharat’.

Disclaimer: The opinions expressed in this article are of the writer. The facts and opinions expressed here do not reflect the views of ETV Bharat.

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