State Govt Aims to Secure Rs.40,000cr UCF Funds from Centre for Urban Infra Projects

Hyderabad: The state government has pitched projects worth nearly Rs.40,000 crore for support from the Urban Challenge Fund (UCF), announced by the Centre in the Union Budget with a Rs.1 lakh-crore corpus. The municipal administration and urban development (MAUD) department topped the list with proposals of Rs.14,000 crore.

This is followed by the HMWS&SB tops the state list (₹12,030 crore) and the HMDA (₹12,000 crore). The HMWS&SB’s proposals focus mainly on drinking water supply augmentation, pipeline modernisation, sewage treatment and reduction of water losses in Hyderabad and surrounding areas.

The government has already begun leveraging the UCF funding for key projects. In March, it sanctioned ₹5,257.20 crore for the first phase of a comprehensive underground drainage system in the Greater Warangal Municipal Corporation area covering the tri-cities of Warangal, Hanamkonda and Kazipet. The project aims to address chronic waterlogging, improve sanitation and replace incomplete drainage works executed under earlier schemes.

Official sources said the Warangal project follows the UCF funding model, with about ₹1,314 crore expected as Central support, a matching contribution from the state government, and the remaining amount through external assistance or loans.

Karimnagar Municipal Corporation also submitted proposals worth ₹895 crore under UCF. The corporation sought funds for construction of model roads, junctions, skywalks, foot over bridges, create non-motorised transport facilities etc.

Apart from UCF, the state government is also attempting to secure funds under central schemes such as SASKI, Swachh Bharat Mission (SBM) and AMRUT 2.0.

The Special Assistance to States for Capital Investment (SASCI) scheme provides 50-year interest-free loans to states for capital projects.. It aims to boost economic growth, infrastructure, and tourism, often focusing on developing iconic tourist centres to a global scale

Special emphasis has been laid on obtaining financial support for completion of the Godavari Drinking Water Supply Phase-II and Phase-III projects aimed at addressing Hyderabad’s growing drinking water requirements.

Officials said the Centre’s UCF guidelines require a 25 per cent contribution from the Centre, 25 per cent from the state government or implementing agency, while the remaining 50 per cent has to be mobilised through loans or borne by the executing agency.

As part of the ambitious Musi rejuvenation programme, the state government has also decided to divert 20 tmc ft of water from Mallannasagar through Phase-II and Phase-III of the Godavari drinking water project to ensure long-term drinking water security for Hyderabad. Construction works are progressing rapidly under the hybrid annuity model (HAM).

The project has been divided into two packages with a total estimated cost of ₹ 5,383.67 crore. Of this, the first package is valued at ₹ 3,330.95 crore and the second at ₹ 2,052.72 crore. Under the hybrid annuity model, 40 per cent of the cost amounting to ₹ 2,153.468 crore will be borne by the government, while the remaining 60 per cent, estimated at ₹ 3,230.202 crore, will be invested by the executing agency. The HMWSSB has decided to raise a loan of ₹ 2,000 crore from HUDCO to meet the government’s share.

Officials said proposals worth ₹ 7,360 crore have already been submitted to the Centre for the Godavari Phase-II and III drinking water projects, with expectations that the projects would qualify for UCF assistance because of their large-scale urban infrastructure and sustainability components. The HMWSSB is targeting completion of the projects within two years.

In addition to the Godavari projects, the HMWSSB has sought ₹ 2,363 crore for supplying treated water from sewage treatment plants (STPs) to the Chandanvelly Industrial Park as part of the STP Water Circular Economy initiative.

The HMWSSB has also proposed `282 crore for replacement of the 27 million gallons a day (MGD) Osmansagar pipeline system, ₹722 crore for modernisation of Manjira Phase-I and Phase-II pipelines, and ₹ 550 crore for projects aimed at reducing non-revenue water (NRW) losses in Hyderabad city.

All the proposals have been forwarded to the Central government through the MAUD department, with the state government hopeful of securing substantial assistance under the UCF and other urban infrastructure schemes.

The UCF, planned for the period 2025–31, is a competitive and reform-linked mechanism for large-scale urban infrastructure development. Under the funding structure, the Centre provides 25 per cent of the project cost as a grant, the state contributes another 25 per cent, while the remaining 50 per cent must be mobilised through market-linked sources such as municipal bonds or public-private partnerships.

The UCF is a ₹1 lakh crore centrally sponsored scheme aiming to catalyse ₹4 lakh crore in total urban investments. To qualify, at least 50 per cent of the cost must be mobilised from the market (e.g., bank loans, municipal bonds, Public-Private Partnerships).Challenge-Based Selection: States and Urban Local Bodies (ULBs) compete by submitting highly bankable, reform-oriented project proposals. It targets projects under three verticals: Cities as Growth Hubs, Creative Redevelopment of Cities, and Water and Sanitation.