State and Local Government Roles in Implementing Central Urban Schemes

Flagship urban schemes like the Pradhan Mantri Awas Yojana-Urban (PMAY-U), the Atal Mission for Rejuvenation and Urban Transformation (AMRUT), and the Smart Cities Mission may be designed in New Delhi, but they come alive in the lanes of Pune, the wards of Bhubaneswar, and the slums of Lucknow. The Centre provides the vision and the funds; state governments and Urban Local Bodies (ULBs) shoulder the harder task of turning those blueprints into water taps, pucca houses, and redesigned public spaces. Understanding how these three tiers interact is essential to understanding why some cities race ahead on urban transformation while others lag behind.

Why the three-tier model matters 🔗

Urban development in India is a classic example of cooperative federalism. The Centre launches a scheme and sets broad guidelines, but land, town planning, water supply, and public health are state and municipal subjects under the Constitution’s Seventh Schedule. That means no scheme can succeed without willing partners at the state capital and city hall. The three flagship missions launched on 25 June 2015 – PMAY-U, AMRUT, and the Smart Cities Mission – were designed with this reality in mind, building explicit roles for states and ULBs into their very architecture.

This structure was also a deliberate shift from earlier centrally-driven schemes. AMRUT, for instance, treats states and ULBs as equal partners in planning and implementation, approving annual state-level action plans rather than handing down project-by-project sanctions from Delhi. That subtle change in process has reshaped how urban governance now functions on the ground.

The principle of convergence 🔗

The three missions are not meant to run on parallel tracks. The Smart Cities Mission explicitly encourages convergence with AMRUT, Swachh Bharat Mission, Housing for All, Digital India, and HRIDAY at the planning stage itself. A state or ULB that can intelligently weave funding streams from multiple missions into one coherent city plan delivers more bang for every rupee spent.

The role of state governments 🔗

States sit at the crucial middle rung. They translate central guidelines into local conditions, mobilise matching funds, approve projects, and hold ULBs accountable for delivery. For missions of this scale, this supervisory role is formalised through dedicated institutional bodies.

The State Level High Powered Steering Committee (SHPSC) 🔗

The SHPSC is arguably the most important state-level body for urban missions. Under AMRUT, the SHPSC is chaired by the State Chief Secretary and steers the mission programme in its entirety. Its membership includes principal secretaries of urban development, finance, public health engineering, housing, and environment – effectively every department that touches city life.

The committee’s responsibilities are substantial. It identifies infrastructure gaps, prepares the State Annual Action Plan (SAAP) based on Service Level Improvement Plans submitted by ULBs, and approves projects after technical appraisal. Crucially, all project approvals are made at the state level – no project needs to be referred back to the Ministry of Housing and Urban Affairs for sanction. This single provision shifts enormous decision-making power from the Centre to the states.

Under AMRUT 2.0, launched in October 2021, the SHPSC’s role has been reinforced. The revised guidelines have specific provisions for the SHPSC, headed by the Chief Secretary, to monitor and supervise the scheme at the State/UT level, with technical support from the State Level Technical Committee (SLTC) headed by the Secretary of Urban Development.

The State Mission Director 🔗

While the SHPSC meets periodically, day-to-day leadership falls on the State Mission Director – an officer not below the rank of Secretary to the State Government, supported by a Programme Management Unit and a Project Development and Management Consultant. This officer is the single point of accountability for the mission’s progress in the state. They coordinate with ULBs, resolve bottlenecks, manage fund flows, and report to both the Chief Secretary and the Union Ministry.

Financial partnership and matching contributions 🔗

State governments are not just supervisors – they are co-financiers. The Smart Cities Mission operates as a Centrally Sponsored Scheme where state governments and ULBs must contribute an equal matching amount to the Centre’s funding. In the original mission, this translated to roughly ₹1 lakh crore combined over five years.

In practice, this matching commitment has been uneven. Only 28 cities received their full share from states and ULBs, and 14 cities got less than 60% of the expected funds. That gap between promise and delivery explains many of the delays visible on the ground.

The role of Urban Local Bodies 🔗

If states are the architects, ULBs are the builders. Every sewer line laid, every house handed over, and every smart pole installed is ultimately the responsibility of a municipal corporation, municipality, or nagar panchayat. The 74th Constitutional Amendment gave ULBs their mandate, and the flagship urban missions are where that mandate is tested.

Preparing Detailed Project Reports 🔗

The first task for a ULB is converting a broad scheme objective into a bankable project. The Municipal Commissioner ensures timely preparation of the Service Level Improvement Plan, and the ULB develops Detailed Project Reports and bid documents for projects included in the approved SAAP. DPRs are technical documents that specify costs, engineering designs, timelines, and operational plans. A poorly-drafted DPR can delay a project for years.

Once a DPR is ready, the ULB routes it through the State Level Technical Committee for technical appraisal and then to the SHPSC for administrative sanction. After approval, ULBs procure implementation agencies following applicable financial rules, and once work is awarded, they are responsible for ensuring its timely completion without cost escalation.

Coordination, supervision, and reform 🔗

Timely project completion requires more than technical skills – it requires local political will and inter-agency coordination. ULBs must work with state electricity boards, water utilities, traffic police, and sometimes multiple contractors simultaneously. Stakeholder coordination is often cited as the single biggest determinant of on-ground progress.

ULBs also drive the reform agenda built into these missions. AMRUT’s reform package focuses on e-governance, energy audit, credit rating of ULBs, efficient town planning, online building permission systems, and raising funds through municipal bonds. Through these reforms, the mission is not just building infrastructure – it is slowly reshaping municipal institutions to become more transparent and creditworthy.

The Special Purpose Vehicle under Smart Cities Mission 🔗

The Smart Cities Mission uses a different implementation model. Each Smart City has a Special Purpose Vehicle, a limited company incorporated under the Companies Act 2013, with the State/UT and ULB as promoters holding 50:50 equity shareholding. The SPV plans, appraises, approves, releases funds, implements, manages, operates, monitors, and evaluates every Smart City project.

The SPV is typically headed by the Municipal Commissioner serving as full-time CEO, with nominees from the Central Government, State Government, and ULB on its board. This model gives the Smart City project operational autonomy and shields it from routine municipal constraints, allowing faster decision-making.

Where the model works, and where it struggles 🔗

The institutional design looks neat on paper, but outcomes vary dramatically across states and cities. This variation tells us where the model is succeeding and where it needs attention.

The SPV debate 🔗

The SPV model has invited sharp criticism. A PRS Legislative Research summary notes that frequent transfers of CEOs and the lack of clear guidelines are major challenges for SPVs, along with issues around representation of elected councillors. Critics argue that placing implementation in a corporate vehicle bypasses the spirit of the 74th Amendment, which sought to empower elected municipal bodies. The SPV structure has been called too top-down, often sidelining local elected councils as SPVs were typically led by bureaucrats or corporate representatives.

Capacity asymmetries 🔗

ULBs in bigger, wealthier cities have in-house planning departments, consultancies on retainer, and officers experienced in handling large contracts. Smaller municipalities often do not. The PRS evaluation observed that many smart cities did not have the capacity to plan and spend thousand-crore projects, and eight out of the 15 bottom-ranking cities on mission progress are from the North-East. Scheme guidelines try to compensate through City Level Technical Cells, Project Development and Management Consultants, and capacity-building funds, but the gap between states remains wide.

Progress on the ground 🔗

Despite these challenges, aggregate numbers are significant. As of mid-2024, PMAY-U had grounded 114 lakh houses for construction while more than 84 lakh houses had been completed and delivered to beneficiaries. Under AMRUT, 58.66 lakh households have received tap connections and 37.49 lakh households have been connected to sewerage systems. The Smart Cities Mission has enabled over 8,000 projects worth about ₹1.6 lakh crore across 100 cities. None of these numbers would exist without functioning SHPSCs and active ULBs.

Lessons for the next generation of urban schemes 🔗

The experience of the last decade offers clear pointers for designing the next wave of urban missions. First, institutional depth matters more than institutional design – a well-drafted SHPSC guideline means little if the committee meets irregularly. Second, capacity building must precede funding, because ULBs cannot absorb large grants without trained staff and modern project management systems. Third, reform cannot be an afterthought – credit ratings, online permission systems, and transparent procurement are what make a ULB genuinely investible over the long term.

The relationship between the Centre, states, and ULBs is ultimately one of mutual dependence. The Centre controls the purse but not the ground. States control the statute but not always the will. ULBs control the site but not always the resources. The flagship schemes work best where all three rungs take ownership – not just of implementation targets, but of the cities they are building.

What do you think? Should the next generation of urban schemes route funds directly to ULBs to strengthen local democratic accountability, or does the current state-led model offer the coordination and oversight that smaller municipalities still need? And where does your own city stand on the spectrum between administrative capacity and political will?

References

1. https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2028584
2. https://oidaijsd.com/wp-content/uploads/2019/03/11-10-05.pdf
3. https://www.ibef.org/government-schemes/smart-cities-mission
4. http://amrut.gov.in/content/innerpage/programme-management.php
5. https://amrutkerala.org/shpsc/
6. https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=2078409
7. https://universalinstitutions.com/an-overview-of-the-smart-cities-mission/
8. https://pib.gov.in/PressReleasePage.aspx?PRID=1730341
9. https://smartcities.gov.in/implementation
10. https://prsindia.org/policy/report-summaries/smart-cities-mission-an-evaluation
11. https://www.civilsdaily.com/story/urban-transformation/
12. https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=2028584