Urban Challenge Fund (UCF)

Why in News?

Recently, the Union Cabinet has approved the ₹1 lakh crore Urban Challenge Fund.

• UCF is a new Centrally Sponsored Scheme.
• Aim – To support urban infrastructure projects and boost market-driven urban development.
• Nodal Ministry – Ministry of Housing and Urban Affairs.
• Objectives – Leverage market finance and private participation.
• Promote citizen-centric urban reforms.
• Build resilient, productive, inclusive and climate-responsive cities.
• Position cities as drivers of the next phase of economic growth.

Urbanisation is the process by which a society shifts from rural to urban, marked by a growing proportion of the population in cities and towns, along with physical, social, economic, and cultural transformations.

• Pillars – It consists of 3 focus areas.
• Cities as Growth Hubs – Focus on urban mobility, economic infrastructure, and productivity enhancement.
• Creative Redevelopment of Cities – Retrofitting legacy infrastructure and urban renewal/regeneration.
• Water & Sanitation Infrastructure – Upgrading water supply networks, sewerage, and waste management.
• Key Features – Provides Rs. 1 lakh crore Central assistance for projects/total investments worth Rs. 4 lakh crores.
• Funding (The 25-50-25 Model) – The Centre will cover 25% of the project cost.
• Cities must raise at least 50% cost via municipal bonds, bank loans, and public-private partnerships (PPP).
• Remaining 25% funds to come from the Urban local bodies/state governments’ own sources.
• Duration – Operational from 2025–26 to 2030–31, extendable to 2033–34.
• Project selection – Through a challenge-based framework.
• Exclusion Clause – Projects already funded under AMRUT 2.0 or Swachh Bharat Mission (SBM) 2.0 are not eligible for assistance under the UCF.
• Special Provisions – Credit guarantee support for the North-Eastern & hilly states and cities with population <1 lakh.
  • It is a Rs. 5,000 crore repayment guarantee scheme.
• Central guarantee – Up to Rs. 7 crore or 70% of the loan (whichever is lower).

References

1. IE | Urban Challenge Fund (UCF)
2. IE | Urban Challenge Fund