Project choice key for Urban Challenge Fund

India’s new &1 trillion Urban Challenge Fund (UCF) was announced in the Budget in February and is set to be operationalized.

- VINAYAK CHATTERJEE

It marks a fundamental shift in the Centre’s role in urban financing — from an allocative model to a “challenge fund” format. The UCF offers 25 per cent of project costs on the condition that cities raise at least 50 per cent through public-private partnerships (PPPs) in the form of bonds, debt, or private equity. Therefore, cities will need a new playbook for project selection.

The contribution of PPP to urban projects has historically been low. Between 1990 and 2022, India’s infrastructure sector mobilized substantial private capital, with 1,265 projects attracting over $295 billion (over 224 trillion) of investment — but the bulk was concentrated in transport and energy. PPPatcity-level utilities and “creativecity redevelopment” projects has remained abysmally low.

The UCF’s three pillars — “cities as growth hubs”, “creative redevelopment”, and “water and sanitation systems” — signal bold intent. But intent without rigorous project selection criteria risks diluting the impact. The fund must back projects with clear revenue streams, demonstrable service improvements, and scalability.

On the “cities as growth hubs” front, India’s first urban ropeway project being developed in Varanasi, the Mumbai Trans Harbour Link (Atal Setu), and the Mumbai Coastal Road Project reflect how transport-anchored infrastructure is supporting growth. Projects such as the adoption of Lal Qila by Dalmia Bharat, the restoration of Sunder Nursery in New Delhi by the Aga Khan Foundation, the Dharavi redevelopment in Mumbai as a PPP, and Ahmedabad’s Sabarmati Riverfront illustrate what “creative redevelopment” can achieve.