Lok Sabha Question No. 798 (UNSTARRED), answered on 2025-12-04
Subject: Allocation of Funds under Urban Development Schemes
Ministry: HOUSING AND URBAN AFFAIRS
Asked by: Shri  Radhakrishna

## GOVERNMENT OF INDIA

## MINISTRY OF HOUSING AND URBAN AFFAIRS

## LOK SABHA

## UNSTARRED QUESTION NO. 798 TO BE ANSWERED ON DECEMBER 04, 2025

## ALLOCATION OF FUNDS UNDER URBAN DEVELOPMENT SCHEMES

NO. 798.      SHRI RADHAKRISHNA:

Will the Minister of HOUSING AND URBAN AFFAIRS be pleased to state:

- (a) whether the Government has assessed the extent to which allocations under various urban development schemes, such as AMRUT, Smart Cities Mission (SCM) and Swachh Bharat Mission - Urban (SBM-U) are being directed to parastatal agencies instead of elected Urban Local Bodies (ULB);
- (b) if  so,  the  details  of  such  allocations  during  each  of  the  last  five  years, scheme and State/UT-wise;
- (c) whether the Government has examined the impact of this practice on local self-governance, accountability and participatory urban planning and if so, the details thereof; and
- (d) the  measures  proposed  to  ensure  that  elected  municipal  bodies  retain financial and administrative control over urban development functions as envisaged under the 74th Constitutional Amendment?

## ANSWER THE MINISTER OF STATE IN THE MINISTRY OF HOUSING AND URBAN AFFAIRS (SHRI TOKHAN SAHU)

- (a)  to  (c):  As  per  the  provisions  of  Article  243W  of  the  Constitution,  in conjunction with the Seventh and Twelfth Schedules, matters relating to urban  development  fall  within  the  purview  of  States/Urban  Local  Bodies (ULBs). However, Ministry of Housing and Urban Affairs (MoHUA) provides programmatic support to the States/Union Territories (UTs) in their urban development agenda through its various flagship Missions/Programmes viz. Atal  Mission  for  Rejuvenation  &  Urban  Transformation  2.0  (AMRUT  2.0), Pradhan  Mantri  Awas  Yojana  -  Urban  2.0  (PMAY-U  2.0),  Swachh  Bharat Mission - Urban 2.0 (SBM - U 2.0), Smart Cities Mission (SCM), etc.

Through  these  Missions/Schemes,  the  Central  Government  approves  the State  Plans  and  provides  the  Central  Assistance  (CA)  to  the  States.  The projects are selected, designed, approved and executed by the States/UTs and the cities. The State Governments release funds to the cities/districts.

AMRUT 2.0: Under AMRUT 2.0 Mission, States/UTs are empowered to select appraise, propose and implement projects. As per AMRUT 2.0 guideline, the projects  as  per  approved  State  Water  Action  Plan  (SWAP)  are  planned, tendered,  awarded  and  implemented  by  ULBs.  Where  ULBs  do  not  have adequate capacity, specialized parastatal agencies implement the projects. Further, under AMRUT 2.0, central share of funds is allocated/released/sanctioned  to  States/  UTs  and  not  to  the  parastatal agencies/ city/ ULB. States/ UTs further disburse the funds to the ULBs/ parastatal agencies.

SBM-U: Sanitation is a State subject under 7th schedule of the constitution and by the 74th amendment of the Constitution of India the devolution of power has been made to the ULBs for water and sanitation services. It is the responsibility of State/ULBs to plan, design, execute and operate sanitation projects in the urban areas of the country. Under SBM-U, Central Share of funds  are  released  to  the  States/UTs  on  the  basis  of  demand  made  by States/UTs in the form of complete proposals duly approved by State Level Technical Committee (SLTC) which are further transmitted to ULBs by the concerned State/UT as per the State Action Plan.

(d) Article 243W of Part-IXA of the Constitution empowers state legislatures to  endow  the  Municipalities  with  such  powers  and  authority  as  may  be necessary to enable them to function as institutions of self-government. This law may contain provision for the devolution of powers and responsibilities upon  Municipalities,  subject  to  such  conditions  as  may  be  prescribed therein,  which,  inter  alia,  includes  (i)  preparation  of  plans  for  economic development and social justice; and (ii) the performance of functions and the implementation of schemes as may be entrusted to them including those in relation to the matters listed in the Twelfth schedule. It is, therefore, the primary responsibility of the State Government to make adequate provision for devolution of the 3Fs (Functions, Funds and Functionaries) to the ULBs. However, MoHUA initiated reform-linked funding under flagship missions like AMRUT. The Mission mandated a set of 11 Reforms such as E- Governance, Constitution & Professionalization of Municipal Cadre, Augmenting double entry accounting, Urban Planning and City level plans, Devolution of funds & …3/-

Functions, Review of Building Bye-Laws, Setting up Financial Intermediaries at  State  Level,  Credit  Rating  of  the  ULBs,  Municipal  Tax  and  Fees improvement  and  improvement  in  levy  and  collection  of  user  charges, Energy and Water Audit and SBM. AMRUT 2.0 Mission has also attached mandatory reforms on property tax and user charges and incentive-based reforms on water conservation, urban governance and energy efficiency.

The Fifteenth Finance Commission (XV FC) had also, in its recommendations,  underscored  the  need  to  strengthen  the  fiscal  and institutional capacities of ULBs with a view to enhancing service delivery, accountability and transparency in urban governance. In pursuance of these recommendations, MoHUA, in coordination with the Department of Expenditure (DoE), has undertaken a series of reforms aimed at improving the  financial  management  systems  and  governance  frameworks  of  ULBs across  the  country.  These  reforms  include  property  tax  reforms,  fiscal transparency and accountability, fund flow and PFMS integration, Governance and Institutional  Strengthening,  digital  governance  and  data systems,  performance-based  reforms  for  Million-plus  cities  and  Capacity Building and Institutional support. The presence of duly elected ULBs has been made a per-condition for receipt of XV FC grants. States were also advised to constitute and operationalize State Finance Commission (SFCs) as per prescribed timelines.

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