The urban development ministry’s ambitious proposal to raise a $5-billion loan from the World Bank for its flagship urban infrastructure scheme, the Jawaharlal Nehru National Urban Renewal Mission, has been rebuffed by the finance ministry and the funding has been reduced to just $1 billion, government officials said.

The ministry’s proposal was significantly scaled down as the department of economic affairs raised the issue of reaching the total borrowing limit set by the World Bank. According to the Bank’s country strategy for India, it would lend a total of $14 billion during 2009-12. This is more than double the amount the Bank lent during the previous three years.

This comes as a setback to the urban development minister Jaipal Reddy’s grand plans to give a thrust to urban infrastructure. In fact, Reddy had made an announcement to this effect on day one of his second innings in the ministry.

At that time, he had said that the loan, broad aspects of which have been finalised, was likely to be pumped into the UPA government’s flagship program for improving drinking water supply, sewage and sanitation over the next five years. The $5 billion proposal had also received in-principle approval from the Planning Commission.

It was expected that the infusion of fresh funds would bring about expansion of the flagship scheme, including several new cities and strengthening further the reform agenda. In this context, the World Bank team had visited India in June-July to oversee the formation of a concept paper for the same. urban development secretary M Ramachandran was in Washington to negotiate with the Bank’s top brass on May 12, 2009 to increase the amount to over $5 billion. He also said he will convince the UPA to make a Rs 25,000 crore provision for the flagship Jawaharlal Nehru National Urban Renewal Mission (JNNURM) and bring more cities with population over 5 lakh under the scheme.

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