A substantial grant of ₹8,000 crore, earmarked by the Fifteenth Finance Commission (FC) in 2021 to develop eight new greenfield cities, remains unutilized as the Commission's term nears its end. The grant, conceived as a performance-based challenge fund, aimed to stimulate planned urbanization and reduce the strain on existing metropolitan areas.
The Ministry of Housing and Urban Affairs (MoHUA) was designated as the nodal entity for this initiative. Following the Finance Commission's recommendation, MoHUA established an expert committee to define bid parameters for the selection of new cities. The committee finalized eligibility conditions and bid parameters, and a Request for Proposal (RfP) was circulated to all states. By January 2023, the ministry had received 26 proposals from 21 states. To encourage participation from the North East, the ministry extended another opportunity for revised proposals, resulting in a final list of 28 proposals from 23 states.
Despite the selection process being completed in 2023, MoHUA has yet to finalize the list of eight cities. With the Fifteenth Finance Commission's term concluding on March 31, 2026, the allocated grant is set to lapse.
Even if the new cities were to be selected immediately, officials express concerns about the feasibility of utilizing the entire grant within the remaining year. Experts suggest that spending ₹1,000 crore in a year to incubate a new city poses significant challenges, including land acquisition and obtaining necessary clearances.
An expert privy to the deliberations of the Sixteenth Finance Commission, led by Arvind Panagariya, indicated a shift in focus towards improving existing urban areas rather than creating new ones, citing Naya Raipur as a cautionary example.
The lack of progress extends to initiatives aimed at curbing air pollution in cities with a million-plus population. The 15th FC had allocated funds for air quality improvement in 131 cities, but fund utilization has been critically low in many areas.
The delay in utilizing the allocated funds highlights the challenges in India's urban development planning and execution. The failure to finalize the selection of new cities and the slow progress in addressing air pollution raise concerns about the effectiveness of urban development initiatives.
