‘Urgent need to revamp drainage system’: 16th Finance Commission recommends Rs 56,100 crore for wastewater management

The Finance Commission recommended a Special Infrastructure Component of Rs 56,100 crore for wastewater projects in selected cities. A total of 22 cities, including Pune, Jaipur, Lucknow, Kanpur, Nagpur, Patna, Rajkot, Amritsar, Madurai and Howrah, are eligible for this component.

The Indore model

The report highlighted the example of Indore’s wastewater management as a successful model, saying it had transformed itself, ranking number one in the Swachh Survekshan for seven consecutive years. Incidentally, Indore has seen a spate of deaths of residents who drank contaminated water in the past month.

“Efficient liquid waste management was achieved through comprehensive interception of household and grey water sewage outfalls into rivers and stormwater drains, coupled with the establishment of a robust sewerage network,” it said of Indore.

The report also noted that the process of urbanisation was taking too long. “Second, we have observed that there are unusually long delays in conferring a statutory urban status on areas that come to exhibit all urban characteristics. India’s urbanisation process remains constrained by the slow and ad‑hoc conversion of census towns into statutory towns and the hesitant merger of peri‑urban areas into nearby urban local bodies (ULBs). Such areas continue to be governed by rural local bodies (RLBs), which are ill‑equipped to manage the burgeoning demands of an urbanising population,” the report said.

Incentivising transition to urban area

It recommended a Rs 10,000 crore urbanisation premium to incentivise the transition from rural to urban. The report recommended the incorporation of peri-urban areas, or rural areas that have acquired substantial urban features, into the adjacent municipal bodies.

The Finance Commission recommended a total of Rs 3,56,257 crore for urban local bodies from 2026-2027 to 2030-2031, of which Rs 2,32,125 crore is the basic grant, Rs 29,016 crore is ULB performance component, Rs 56,100 crore is Special Infrastructure Component and Rs 10,000 crore is the urbanisation premium.