Cities of debt: On the Urban Challenge Fund

The government’s updated ‘Urban Challenge Fund’ has rendered the attention of urban local bodies (ULB) an even more precious resource as they struggle to complete unfinished work under other schemes, including AMRUT, Swachh Bharat Mission Urban 2.0, ‘Smart Cities’, and Pradhan Mantri Awas Yojana, which also suffer from chronic underutilisation. The government has pitched the fund as a move towards “market-linked, reform-driven and outcome-oriented” urban infrastructure, with the Centre covering 25% of project cost if cities raise at least 50% through bonds, loans, and PPPs. The ₹5,000 crore guarantee may ease borrowing for smaller cities, but proper accounting and administrative capacity are essential. Across sectors, the Centre has, since 2014, increasingly reduced the share of public support while asking public systems to fill the gap using private finance. Private capital is not illegitimate and public systems should sometimes raise revenues; the issue is that the Centre increasingly conditions public support on market access instead of ensuring minimum service guarantees first.