FCC

Centre Drops Greenfield Cities Plan, Redirects Rs 80 Bn

2025-06-27

The Union government has quietly shelved the Fifteenth Finance Commission’s proposal to incubate eight new greenfield cities, reallocating the Rs 80 billion set aside for the venture to a forthcoming urban-development scheme. According to senior officials at the Ministry of Housing and Urban Affairs (MoHUA), the new initiative is being shaped in consultation with NITI Aayog and the Asian Development Bank to bolster infrastructure in towns with populations below one lakh.

The decision, taken at the behest of the Prime Minister’s Office, follows presentations for the government’s 100-day agenda that urged channeling investment into existing urban centres rather than creating cities from scratch. As a result, 26 state proposals—including plans for Ayodhya, Jagiroad and an expanded GIFT City—have been put on ice despite preliminary state-level spending.

For the current fiscal year, the Centre is promoting planned townships through its Special Assistance to States for Capital Investment programme, which offers 50-year interest-free loans tied to sectoral reforms. Meanwhile, MoHUA is drafting the contours of an “urban challenge” fund announced in the Budget, likely to target towns of 50,000–100,000 inhabitants and carry an outlay of about Rs 1,000 billion.

Urban experts welcome the pivot. They argue that densifying city cores and upgrading peri-urban areas will yield stronger economic returns than creating “artificial” cities such as Lavasa or Naya Raipur, which have struggled to attract residents.

Success, they add, hinges on clear legal frameworks that let states tailor priorities while the Centre sets common standards.