Source: PMI
Subject: Government Scheme
Context: The Union Cabinet has approved the launch of the Urban Challenge Fund (UCF) with ₹1 lakh crore Central assistance to drive market-led urban transformation.
About Urban Challenge Fund (UCF):
What it is?
- The Urban Challenge Fund (UCF) is a Centrally Sponsored Scheme designed to support transformative and bankable urban infrastructure projects through a competitive “challenge mode” framework.
Organisation involved:
- Ministry of Housing and Urban Affairs (MoHUA) – Nodal ministry for implementation and monitoring.
Aim:
- To build resilient, inclusive, productive and climate-responsive cities.
- To mobilise market finance and private participation in urban infrastructure.
- To position cities as growth hubs driving India’s next phase of economic development.
Salient Features of the Urban Challenge Fund:
- ₹1 Lakh Crore Central Assistance: Central share covers 25% of project cost to catalyse investments.
- Market-Linked Financing Model: Minimum 50% project funding must be mobilised from market sources.
- Challenge-Based Selection: Competitive framework prioritising high-impact, reform-oriented proposals.
- Reform-Linked Funding: Fund release tied to governance, financial, planning, and operational reforms.
- ₹5,000 Crore Credit Enhancement Corpus: Strengthens creditworthiness of 4,223 cities, especially Tier-2 & Tier-3.
- Credit Repayment Guarantee Scheme: Provides up to ₹7 crore guarantee for first-time loans to smaller ULBs.
- Operational Period: FY 2025–26 to FY 2030–31 (extendable till 2033–34).
- Project Verticals: Focus on Cities as Growth Hubs, Creative Redevelopment, and Water & Sanitation.
- Digital Monitoring: Paperless tracking via single MoHUA digital portal.
- Outcome-Oriented Evaluation: Projects assessed on economic impact, climate resilience, and service equity.
Significance:
- Catalyses an estimated ₹4 lakh crore total urban investment over five years.
- Encourages fiscal discipline and improves ULB creditworthiness.
- Promotes municipal bonds and PPP ecosystem in urban infrastructure.
