"Finance Commission Proposes Rs 66,100-cr for Urban Development and Drainage Improvement"

16th Finance Commission Recommends Rs 56,100 Crore Grant for Urban Wastewater Management Projects

The 16th Finance Commission presented its comprehensive report in the Parliament, emphasizing the crucial need for accelerating urbanization. In light of the urgent requirement to enhance city drainage systems and the slow pace of urban development, the commission has proposed a substantial Rs 56,100 crore grant for wastewater management initiatives across selected cities. Additionally, a Rs 10,000 crore urbanization premium has been suggested to further propel urban growth.

The report highlighted the critical necessity for revamping drainage systems in Indian cities. While major metropolitan areas possess the ability to generate their fiscal resources for this purpose, the same caot be said for smaller cities. Recognizing the limited availability of resources, the commission has recommended the allocation of fiscal resources to revamp drainage systems in intermediate municipalities through a cost-sharing approach.

Under the proposed recommendations, a Special Infrastructure Component of Rs 56,100 crore has been earmarked for wastewater projects in select cities. Notably, 22 cities, including Pune, Jaipur, Lucknow, Kanpur, and others, qualify for this component.

The report highlighted the success story of Indore in wastewater management, citing its transformation and consistent top ranking in the Swachh Survekshan for seven consecutive years. The city's efficient liquid waste management was lauded, emphasizing the interception of household and greywater sewage outfalls into rivers and stormwater drains, along with the establishment of a robust sewerage network.

The report also underscored the prolonged process of urbanization in India, citing delays in conferring urban status on areas exhibiting urban characteristics. To incentivize the transition from rural to urban, the commission recommended a Rs 10,000 crore urbanization premium. It further proposed incorporating peri-urban areas into adjacent municipal bodies to streamline urban growth.

The Finance Commission recommended a total allocation of Rs 3,56,257 crore for urban local bodies from 2026-2027 to 2030-2031. This includes Rs 2,32,125 crore as the basic grant, Rs 29,016 crore for the ULB performance component, Rs 56,100 crore for the Special Infrastructure Component, and Rs 10,000 crore for the urbanization premium.

The Union Budget 2026-27 has responded to crucial demands, including support for tariff-vulnerable sectors and tax holidays for foreign cloud service providers. Additionally, measures have been introduced to bolster the domestic textile sector and ease duties for labor-intensive industries.

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