Centre issues guidelines for states to tap into ₹18,000 cr for urban planning reforms in FY26

The Centre’s blueprint suggests states and UTs should invest in building municipal cadres and digital interventions for improved governance. 
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SHIV KUMAR PUSHPAKAR

Pushing all-round urban planning reforms for development across the country, the Centre late last month issued guidelines for states and Union Territories (UT) to seek special assistance of ₹18,000 crore for capital investment in 2025-26. This is aimed at focusing on uplifting governance, finance and urban land, and, for ease of doing business in their respective jurisdictions.

The money will be available to states as per guidelines, as incentives for capital investment on the recommendations of the Ministry of Housing and Urban Development, the Ministry of Finance (MoF) wrote to chief secretaries of states and UTs on May 22. 

For effective implementation, 31 states and UTs have been divided into three categories. 

The Centre’s blueprint suggests states and UTs should invest in building municipal cadres and digital interventions for improved governance. A study across 470 city governments by Janaagraha 2023 shows an average vacancy of 36 in the municipal corporations and town panchayats, severely impacting service delivery. 

Strengthening municipal governance

Therefore, the Centre has advocated the urgent need to strengthen municipal governance by filling up sanctioned posts and creating new posts where required. Appointments on contracts for a minimum of five years are also part of the plan to scale up human resource capacity.

States will be incentivised to create cadres of Municipal Administrative Service, Municipal Finance Service and Municipal Technical Service, said the Centre’s guideline. Attention has been drawn to look for specialists like environment engineers and hydrologists as the waste and water management and air and water quality in urban centres have been a major governance concern.

Similarly, the Ministry of Finance has recommended an integrated property tax portal with unique ID and diversifying revenue sources for generating more capital for growth of the states and UTs.

The GIS based utility mapping of water, sewerage and storm water drainage network have been identified as areas to work for better resource management, improving public health, mitigating environmental impacts and enabling cities to respond effectively to both present needs and future challenges, the MoF communication highlighted.

Only AMRUT (Atal Mission for Rejuvenation and Urban Transformation) cities are eligible under this reform.

Mapping of municipal assets on a geo-spatial database has also been flagged for leveraging land as a resource. The Centre also advised to opt for digital twin modelling, powered by real time data, as it would help in master planning, policy planning and disaster management.

The Centre desires that states and UTs create unified ID through integration of property tax portal, building permission portal and revenue registration portal. Each property will have a unique ID which would be part of the digitised property tax register. Through these initiatives, the states will increase collection of property tax and stamp duty collection , recovery of dues and provide real time land use information for the revenue department.

For urban land and planning reforms, the states have been advised to implement town planning scheme, land pooling scheme, revitalising central business districts, theme-based greenfield cities, transit-oriented development, green city and urban pathways, conservation and rejuvenation of urban waterbodies and inclusion of green building initiatives in building bylaws. 

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Published on June 15, 2025