Urban Infrastructure Development Scheme for Small and
Medium Towns (UIDSSMT) Guidelines
1.1 Urban infrastructure Development Scheme for
Small & Medium Towns aims at improvement in urban
infrastructure in towns and cities in a planned manner.
It shall subsume the existing schemes of Integrated
Development of Small and Medium Towns (IDSMT) and
Accelerated Urban Water Supply Programme (AUWSP).
objectives of the scheme are to:
Improve infrastructural facilities and help create
durable public assets and quality oriented services in
cities & towns
Enhance public-private-partnership in infrastructural
promote planned integrated development of towns and
3. DURATION OF THE SCHEME
duration of the Scheme will be for seven years
beginning from 2005-06. An evaluation of the outcomes
of the Scheme will be undertaken before the commencement
of the 11th Five Year Plan and, if necessary, the scheme
would be suitably calibrated.
4.1 The scheme will apply to all cities/towns
as per 2001 census, excepting cities/towns covered under
Jawaharlal Nehru National Urban Renewal Mission (JNNURM)
4.2 Allocation of funds among states will be
on the basis of the state’s urban population
(excluding cities covered under JNNURM) to total urban
population in the country (excluding cities covered
4.3 States may allocate funds to towns/cities
based on similar formula. However, funds would be
provided to only those towns and cities where elections
to local bodies have been held and elected bodies are in
4.4 The State Governments may prioritize towns
and cities on the basis of their felt-need. While
prioritizing towns, States would take into account
existing infrastructure, population of Scheduled
Castes/Scheduled Tribes and special problems like hilly
5.1 The components for assistance under the
scheme will include all urban infrastructure development
projects including water supply and sewerage. Land
cost will not be financed except for acquisition
of private land for schemes/
projects in the North Eastern States & hilly
States viz. Himachal Pradesh, Uttaranchal and
Jammu & Kashmir.
Admissible Components:- The Scheme will cover the
Renewal i.e redevelopment of inner (old) city areas
[this would include items like widening of narrow
streets, shifting of industrial/commercial
establishments from non-conforming (inner-city) to
`conforming’ (outer-city) areas to reduce congestion,
replacement of old and worn-out water pipes by
new/higher capacity ones, renewal of
sewerage/drainage/solid waste disposal systems, etc.
Supply (including de-salination plants) and sanitation
Sewerage and Solid Waste Management
Construction and improvement of drains/storm water
Construction/Upgradation of roads, highways/expressways
Parking lots/spaces on Public Private Partnership basis
Development of heritage areas
Prevention & rehabilitation of soil erosion/landslides
only in case of Special Category States where such
problems are common and
Preservation of water bodies.
5.1.2 Inadmissible Items
and telecommunication works,
stock like buses and trams,
and educational institutions,
Transport (MRTS, LRTS etc.)
employment programme and staff component
5.2 While sanctioning projects for
slum improvement, State Level Sanctioning Committee
would ensure that there has not been any duplication of
efforts from other sources. For this purpose the
implementing agencies are required to submit requisite
6. FINANCING PATTERN
6.1 The sharing of funds would be in
the ratio of 80:10 between Central Government & State
Government and the balance 10% could be raised by the
nodal/implementing agencies from the financial
institutions. Implementing agencies may substitute
internal resources for funds to be raised from financial
institutions. However, in case of cities/towns in North
Eastern States and Jammu & Kashmir sharing of funds
would be in the ratio of 90:10 between Central & State
6.2 The State Level Sanctioning Committee may
sanction projects upto 3 times of central share subject
to availability of funds. The Committee would assign
higher priority to projects of (i) Water Supply
(including de-salination plants) and sanitation, (ii)
Sewerage and Solid Waste Management, (iii) Road Network
and (iv) Construction and improvement of drains/storm
6.3 Cities/towns/Parastatals will be
sanctioned project-based grants/loans which in turn
would leverage, to the extent feasible, additional
resources from financial institutions/private
6.4 Funds from MPLAD/MLALAD could be used
towards project cost and to that extent, the loan
component/state share could be suitably reduced.
6.5 The scheme will be implemented through a
designated State level nodal agency.
7. RELEASE OF CENTRAL ASSISTANCE
7.1 Central assistance (grant) released will
go directly to the nodal agencies identified by the
State government as Additional Central Assistance.
7.2 Release of Central share to nodal agency
will be in two instalments and will depend on
availability of State share and submission of
utilization certificates within 12 months of the closure
of the financial year in accordance with the provisions
of General Financial Rules.
7.3 The criteria for release of funds will be
50% of the Central share will be released on
signing of Memorandum of Agreement to the State
nodal agency, after ascertaining availability
of State share.
Balance 50% of the central share
would be released on submission of
Utilisation Certificates by nodal agency for 70%
of funds (Central & State grants) released
State level nodal agency will, however, release
funds in the following manner:
- 25% of
Central grant on ascertaining availability of State
Central grant after release of State grant and after
assessment of progress of implementation of reforms.
8.1 The grant from Government of India and
State Government will flow to the nodal agency
designated by State Government. The nodal agency will
disburse central assistance to ULBs or para-statal
agencies as the case may be, as soft loan or
grant-cum-loan or grant. However, in case of sanction
of loan or grant-cum-loan, the same may be sanctioned in
such a manner that 25% of central and state grant put
together is recovered and ploughed into Revolving Fund
to leverage market funds for financing further
investment in infrastructure projects. At the end of
the Scheme period, the Revolving Fund may be graduated
to a State Urban Infrastructure Fund.
8.2 State Level Sanctioning Committee would
decide period of plough back of grant into the Revolving
8.3 State Level Sanctioning Committee would
sanction projects for infrastructural development of
cities and towns out of revolving fund in the same
manner as projects are sanctioned out of corpus created
out of Central and State grants.
due assessment of status of implementation of activities
for which incentives are sought, State Level Sanctioning
Committee may sanction additional central grant upto a
maximum of 5% to incentivise implementing agencies as
1.5% for preparation of Detailed Project Report
1.5% for training and capacity building relating
to project/ scheme
for bringing about efficiencies in the projects
for adoption of innovative approaches and
adoption of proven and appropriate technologies
10. STATE LEVEL NODAL AGENCY
10.1 The State Government may designate any
existing institution as nodal agency for implementation
of the scheme.
10.2 The nodal agency will be responsible for
(i) Inviting project proposals from
Techno-economic appraisal of the projects either through
in-house expertise or by outside agencies through
Management of funds received from Central and
Disbursement of the funds as per the financing
pattern given in the guidelines;
Furnishing of utilization certificates within 12 months
of the closure of the financial year and quarterly
physical & financial progress reports to the Ministry of
(vi) Maintenance of audited accounts of funds released
to ULBs and implementing agencies
(vii) Monitoring of implementation of reforms and
11. PROJECT APPRAISAL
11.1 Urban Local Bodies and implementing
agencies including para-statal agencies, will submit
detailed project reports to the designated State Level
nodal agencies for appraisal.
11.2 The State Level nodal agency will forward
the appraised projects to MOUD, Planning Commission and
TCPO so as to reach at least 15 days before the meeting
of State Level Sanctioning Committee for enabling their
representatives to offer their comments/views on the
projects in the meeting.
12 STATE LEVEL SANCTIONING COMMITTEE (SLSC):
12.1 The composition of the State Level
Sanctioning Committee (SLSC) may be as follows:
Urban Development /Municipal -
Admn./Local self Governments
Secretary, Works/ Engineer-in-Chief
Director (Town & Country Planning)/
Chief Town Planner of the state
Director, Municipal Administration.
Representative of M/o Urban Development
Representative of I.F. Division, M/o Urban Dev
Representative of Planning Commission
Representative of TCPO
Representative of NCR Planning Board, New Delhi
(in case of States of Haryana, Uttar Pradesh and
Chief Executive of the State Level Nodal Agency -
12.2 SLSC will ensure the following:
Examine and approve project reports submitted by the
local bodies/implementing agencies including para-statal
agencies, taking into account the appraisal reports;
The Committee will assign higher priority to projects
relating to water supply including sanitation, sewerage,
solid waste management, road network and drainage.
Periodically monitor the progress of sanctioned
projects/ schemes including funds mobilization from
the implementation of the scheme keeping in view its
broad objectives and ensure that the programmes taken up
are in accordance with the guidelines laid down.
the progress of urban reforms being undertaken by
12.3 SLSC shall meet as often as required but
shall meet at least thrice in a year without fail and
review the progress of ongoing projects and sanction new
13. URBAN REFORMS
main thrust of the revised strategy of urban renewal is
to ensure improvement in urban governance so that Urban
Local Bodies (ULBs) and para-statal agencies become
financially sound with enhanced credit rating and
ability to access market capital for undertaking new
programmes and expansion of services. In this improved
environment, public-private participation models for
provisioning of various services would also become
feasible. To achieve this objective, State Governments,
Urban Local Bodies and para-statal agencies will be
required to accept implementation of an agenda of
reforms. The proposed reforms shall broadly fall into
i) Mandatory reforms
ii) Optional reforms
All the mandatory and optional reforms shall
be implemented by the State/ULB/Para-Statals within the
There will be two sets of mandatory
reforms. Core reforms at ULB/Parastatal level aim at
process re-engineering through deployment of technology
to enable more efficient, reliable, timely services in a
transparent manner. The other set of reforms are
framework related at State level.
13.1.1 Reforms at Urban Local Body / Parastatal
Adoption of modern, accrual-based double entry system of
accounting in Urban Local Bodies / Parastatals
Introduction of system of e-governance using IT
applications like, GIS and MIS for various services
provided by ULBs / Parastatals.
Reform of property tax with GIS, so that it becomes
major source of revenue for Urban Local Bodies (ULBs)
and arrangements for its effective implementation so
that collection efficiency reaches at least 85% within
next seven years.
of reasonable user charges by ULBs/Para-statals with
the objective that full cost of operation and
maintenance or recurring cost is collected within next
seven years. However, cities/towns in North East and
other special category States may recover at least 50%
of operation & maintenance charges initially. These
cities/towns should graduate to full O&M cost recovery
in a phased manner.
Internal earmarking within local body, budgets for
basic services to the urban poor.
Provision of basic services to urban poor including
security of tenure at affordable prices, improved
housing, water supply, sanitation and ensuing delivery
of other already existing universal services of the
Government for education, health and social security.
13.1.2 Reforms at State Level
Implementation of decentralization measures as envisaged
in 74th Constitution Amendment Act. States should
ensure meaningful association/engagement of ULBs in
planning function of para-statals as well as delivery of
services to the citizens.
Repeal of Urban Land Ceiling and Regulation Act.
Reform of Rent Control Laws balancing the interests of
landlords and tenants.
Rationalisation of Stamp Duty to bring it down to no
more than 5% within next seven years.
Enactment of Public Disclosure Law to ensure preparation
of medium-term fiscal plan of ULBs/Parastatals and
release of quarterly performance information to all
Enactment of Community Participation Law to
institutionalize citizen participation and introducing
the concept of Area Sabha in urban areas.
Assigning or associating elected ULBs with “city
planning function”. Over a period of seven years,
transferring all special agencies that deliver civic
services in urban areas to ULBs and creating
accountability platforms for all urban civic service
providers in transition.
Note: In respect of schemes relating to
water supply and sanitation, the under mentioned State
level mandatory reforms may be taken as optional
i. Repeal of Urban Land
ii. Reform of Rent
14. OPTIONAL REFORMS (State and
Revision of bye-laws to streamline the approval process
for construction of buildings, development of sites etc.
Simplification of legal and procedural frameworks for
conversion of agricultural land for non-agricultural
Introduction of Property Title Certification System in
Earmarking at least 20-25% of developed land in all
housing projects (both Public and Private Agencies) for
EWS/LIG category with a system of cross subsidization.
Introduction of computerized process of registration of
land and property.
Revision of bye-laws to make rain water harvesting
mandatory in all buildings and adoption of water
Bye-laws for reuse of recycled water.
Administrative reforms i.e. reduction in establishment
by bringing out voluntary retirement schemes,
non-filling up of posts falling vacant due to retirement
etc., and achieving specified milestones in this regard.
Encouraging Public Private Partnership
Note: Any two optional reforms to be
implemented together by State & ULBs/Parastatals in each
Ministry of Urban Development will periodically monitor
the scheme through designated Officer of this Ministry
for each State/UT.
level nodal agency would send quarterly progress report
to the Ministry of Urban Development through TCPO.
would ensure quarterly monitoring of various projects
sanctioned under the programme.
Monitoring Committee under the chairmanship of Joint
Secretary (Urban Development) in the Ministry of Urban
Development would monitor the progress every quarter.
Secretary (UD) would review progress of the programme
twice a year.
will be responsible for preparing a status report on the
scheme in consultation with MOUD every year (by 31st
May).All the mandatory and optional reforms shall be
implemented by the State/ULB/Para-Statals within the
16. TRAINING AND CAPACITY BUILDING
Central and State Governments will make continuous
efforts for training and up-gradation of the skills of
the personnel responsible for the project and the
elected representatives. State Government may organize
suitable training as well as capacity building
programmes through reputed institutions in the field.
The same will form part of DPR to be submitted by
17. MEMORANDUM OF AGREEMENT (MoA)
Implementation of all mandatory and at least two
optional reforms in each year of the Scheme by
cities/towns will be a condition precedent to access
central grant under the scheme. All the reforms
(mandatory as well as optional) shall be required to be
implemented during the scheme period i.e seven years.
The State Governments/ State level nodal agencies will
execute Memorandum of Agreement (MoA) with Government of
India indicating their commitment to implement
identified reforms. MoA would spell out specific
milestones to be achieved for each item of reform.
Signing of MoA will be a necessary condition to access
Central assistance. ULBs/Para-statals will sign MoA
with State Level Nodal Agency. The MoA shall be
submitted along with the Detailed Project Report.
18. OUTCOMES OF THE SCHEME
On completion of the Scheme period of
seven years, it is expected that ULBs/Parastatals will
achieve the following outcomes:-
and transparent budgeting, accounting, financial
management systems, designed and adopted for all urban
services and governance functions
City-wide framework for planning and governance will be
established and become operational
urban residents will be able to obtain access to a basic
level of urban services
Financially self-sustaining agencies for urban
governance and service delivery will be established,
through reforms to major revenue instruments
services and governance will be conducted in a manner
that is transparent and accountable to citizens
e-Governance applications will be introduced in core
functions of ULBs/para-statals resulting in reduced cost
and time of service delivery processes.
will be the responsibility of Urban Local Bodies/Para-statals
and implementing agencies to keep an inventory of
assets created and also to maintain and operate the
assets and facilities created.
implementing agencies at the ULB/Para-statal level will
be required to open and maintain separate bank account
for each project in a commercial bank for receipt and
expenditure of all money to be received and spent. ULBs/Parastatal/implementing
agencies should maintain registers for utilization of
funds separately for Central and State share and loan
from financial institutions.
nodal agency will maintain institution-wise and
project-wise accounts under the scheme.
Projects taken up under the on-going schemes during last
five years beginning from 2000-2001 will continue to be
funded as per the existing guidelines of IDSMT & AUWSP
Schemes till completion of those projects.
Ministry of Urban Development in consultation with
Ministry of Finance and Planning Commission may effect
changes in the scheme guidelines, other than those
affecting the financing pattern as the scheme progress,
if such changes are considered necessary.