Bhopal (Madhya Pradesh): Madhya Pradesh is gearing up to submit what could be the largest proposal in the country to secure a significant share in the Central Government’s Rs1 lakh crore Urban Challenge Fund (UCF), with a strong emphasis on water supply and sewerage projects across all 413 Urban Local Bodies (ULBs).
The move comes in the aftermath of the Bhagirathpura water contamination tragedy in Indore, prompting both the state and Centre to prioritise critical urban water infrastructure.
Launched by the Central Government in February, the UCF aims to catalyse nearly Rs 4 lakh crore in total urban investment between FY 2025–26 and FY 2030–31, positioning cities as engines of economic growth through infrastructure upgrades and financial reforms. According to officials, following the Indore incident, the Centre has indicated that water-related projects will be prioritised.
A recent investigation by the Urban Administration Department (UAD) revealed alarming gaps in existing systems, with over 62,000 leakages detected across 16 municipal corporations. Officials attributed this to ageing pipeline networks and poor maintenance, underscoring the urgent need for large-scale upgrades.
Funding model
A defining feature of the scheme is its market-driven funding structure. ULBs must arrange:
* 50% of project cost through market sources such as municipal bonds, loans, or PPP models
* 25% contribution from the Centre
* 25% from ULBs themselves
Rs 90,000 crore for core infrastructure
Out of the total outlay:
* Rs 90,000 crore (90%) is earmarked for core infrastructure projects
* Rs 5,000 crore (5%) for project preparation and capacity building
* Rs 5,000 crore (5%) for credit guarantees to support weaker ULBs
Coverage across cities and sectors
The fund will cover cities of all sizes, including metros, state capitals, industrial towns, and smaller urban centres. Investments will span 22 sectors, such as water supply, sewerage, urban transport and roads, solid waste management and redevelopment along with slum housing.
Strict criteria
Projects must meet 14 mandatory conditions, including multi-sector integration, city-wide impact, and financial sustainability. UAD officials revealed that the states must utilise at least 25% of allocated funds within six months, with performance-based reallocations after two years.
Phased funding
* 30% on approval
* 50% after 40% completion
* 20% after 75% progress
A game changer
Speaking with Free Press, UAD Commissioner Sanket Bhondwe said the state is mobilising proposals from all ULBs to craft a comprehensive, high-impact submission. “We have invited the best proposals from across the state. The final consolidated proposal will be a game changer and aims to secure the highest allocation for Madhya Pradesh,” Bhondwe said.
