Shivaji Sarkar
The Union government’s urban development initiatives have hit a roadblock, with spending on key urban schemes reaching only 51% of the Budget Estimates (BE) for the current fiscal year. The Ministry of Housing and Urban Affairs (MoHUA) has cited lack of claims from states and Finance Ministry expenditure guidelines as primary reasons for the underutilization of allocated funds. This sluggish pace raises concerns over the execution of flagship programs like the Smart Cities Mission, AMRUT 2.0, and the Pradhan Mantri Awas Yojana-Urban (PMAY-U), all of which are critical to India’s urban transformation.
Senior officials in MoHUA have pointed out that a significant portion of the funds remains unspent due to states failing to submit utilization certificates (UCs) for previous disbursals. Under central funding mechanisms, fresh installments are contingent upon states providing expenditure records for past allocations. Without timely submission of UCs, the central government is unable to disburse additional funds, resulting in a bureaucratic logjam. However, states have countered these claims, arguing that stringent financial controls imposed by the Finance Ministry, particularly the revised Quarterly Expenditure Plan (QEP) guidelines, have hindered the flow of funds. The Finance Ministry has capped third- and fourth-quarter spending at 25% of the total budget allocation each, restricting the Ministry’s ability to release lump-sum grants towards the end of the fiscal year. This restriction, according to state governments, has disrupted their ability to plan large-scale urban infrastructure projects.
With only half the budgeted funds utilized so far, the fate of critical urban initiatives hangs in the balance. Several cities under the Smart Cities Mission have struggled with project implementation due to delays in fund disbursal. As of the latest data, over 200 Smart City projects remain incomplete, with funding gaps exacerbating delays. The Atal Mission for Rejuvenation and Urban Transformation (AMRUT 2.0), which aims to enhance urban water supply and sanitation, has seen slow progress, especially in smaller cities where municipal bodies rely heavily on central grants. Similarly, the Pradhan Mantri Awas Yojana-Urban (PMAY-U) has been impacted by delays in fund releases to state housing boards, slowing down the construction of affordable housing units. Urban planners and experts warn that if the expenditure backlog is not cleared swiftly, it could lead to a spillover effect, impacting next year’s allocations and project timelines.
The underutilization of urban development funds has also sparked political debate. Opposition-ruled states have accused the central government of deliberately slowing down fund transfers, especially in non-BJP-ruled states. A senior official from the West Bengal government remarked, “The Centre is using procedural hurdles as an excuse to delay funds for critical urban projects. This affects development in opposition-ruled states disproportionately.” On the other hand, BJP-led states have blamed local municipal bodies for inefficiencies, arguing that delays in UCs are due to poor governance at the state level rather than central restrictions.
Experts suggest that the government must undertake urgent reforms to ensure smoother fund utilization. The rigidity in QEP rules should be revisited, allowing higher allocations in the final quarter to facilitate project execution. Many municipal bodies lack the expertise to submit financial reports efficiently, and a dedicated technical support cell for assisting states in compliance could help expedite fund flows. Implementing a centralized digital dashboard for tracking fund utilization at the city level could improve transparency and ensure timely interventions. Some experts have also suggested that instead of routing funds through state governments, direct disbursal to municipal bodies could help bypass bureaucratic delays.
The issue extends beyond just delayed fund allocation. Data from MoHUA indicates that only ₹34,500 crore of the ₹67,500 crore allocated for urban development in 2023-24 has been utilized as of February 2024. This gap highlights systemic inefficiencies in financial management. Commenting on the situation, urban policy expert Dr. Anil Bhardwaj from the Indian Institute of Public Policy stated, “While the central government has its financial control mechanisms in place, the real issue is capacity-building at the state and local levels. Without improving the financial management skills of municipal bodies, fund utilization will always lag.”
Furthermore, delays in flagship programs have had a direct impact on infrastructure projects. According to a recent parliamentary report, the Smart Cities Mission has achieved only 60% project completion against its target despite multiple deadline extensions. Over ₹1.6 lakh crore worth of projects remain pending. Similarly, housing initiatives under PMAY-U are expected to miss their 2024 target of constructing 1.2 crore homes, as only 82 lakh homes have been completed so far.
As the fiscal year nears its end, the government faces a crucial test: Can it push through pending urban infrastructure funds, or will procedural entanglements continue to stall India’s urban transformation? The answer will determine the pace of India’s urban growth in the coming years.
((Author is recognised media commentator the writer is currently serving as a professor at Indian Institute of Mass Communication Delhi).
