Just within two months of Yogi Adityanath led BJP coming to power in Uttar Pradesh, the state has seen commendable changes in regards to adopting policies for urbanization. Uttar Pradesh has taken the lead among all states with 61 cities opting for value capture financing to fund infrastructure projects.
Two months back finance ministry had directed all central ministries and state governments to tap into the value that infrastructure creation generates for land owners, 163 cities across 17 states and two union territories have decided to opt for the initiative with UP leading the pack.
61 cities have decided to frame value capture financing (VCF) policies in Uttar Pradesh, followed by 33 cities in Andhra Pradesh planning to frame VCF policies and Gujarat with 32 cities.
The basic agenda of the VCF is that the government makes large investments in developing public infrastructure leading to rapid economic development in those areas and a hike in land prices. This would lead to additional taxes and then using these finances to fund future infrastructure projects in the same area.
All 61 cities have appointed consultants to guide them in framing VCF policies. These include Amroha, Banda, Baraut, Chandausi, Kasganj, Maunath Bhanjan, Sitapur and Varanasi.
According to the Urban Development Ministry, most of the cities will be using this tool for the first time, which will also help in deciding best-suited VCF tool as per different cities. Till now only Maharashtra and Andra Pradesh were using the VCF tools, but that was on ly on a case to case basis. None of the states so far had adopted it as a policy.
The Urban Development official said, “The main point of a policy would be that whenever there is a new project, an urban local body would know how much it can tap from it and use the additional funds to finance a future project in the same area. The consultants would also help a city in identifying specific zones where these tools can be used.”
The response of cities to this scheme has boosted the Modi government’s urban reforms agenda to a higher level. The finance ministry had notified VCF guidelines in March and made it mandatory for central ministries from April this year. It had laid down that each project proposal put before the Public Investment Board and the Delegated Investment Board will contain which VCF tool is most feasible.