Rs 1.5 lakh crore infra push: Cabinet clears road, rail & urban projects, launches Urban Challenge Fund
The centerpiece of the package is the proposed Urban Challenge Fund (UCF), which will provide Rs 1 lakh crore in central assistance over five years. The fund will cover up to 25% of project costs, provided that states and urban local agencies raise at least 50% of the funding from the market.
The government said UCF is expected to catalyze investments totaling Rs 4 lakh crore in the urban sector over the next five years. The move signals a shift in India’s urban development model from grant-based financing to a market-linked, reform-oriented and results-oriented framework.
The decisions underline the government’s dual strategy to strengthen the financial architecture to support private enterprise while accelerating infrastructure development. Blending public capital with market-based financing models such as the Hybrid Annuity Model (HAM) and structured funds of funds mechanisms, the package aims to reduce logistics costs, increase urban productivity and deepen capital markets, strengthening infrastructure as the main driver of medium-term growth.
Reducing Congestion
The fund will operate from FY26 to FY31 and the implementation period may be extended up to FY34. It will be used to present budget proposals on positioning cities as growth centers, undertaking creative redevelopment projects and strengthening water and sanitation systems.
Information and Broadcasting Minister Ashwini Vaishnaw said on Friday that the launch took place after “extensive consultations” with states, explaining the gap between the initial announcement and official confirmation. In another important decision, the cabinet approved the construction of a 15.79-km road and rail tunnel under the Brahmaputra in Assam at a cost of Rs 18.662 billion under the engineering, procurement and construction (EPC) model. The project is expected to reduce travel time between key points in the region from approximately six hours to 20 minutes, reducing travel distance from 240 km to approximately 34 km. The government has also approved three national highway projects with a total cost of over Rs 11,000 billion. These include the 107.67 km four-lane highway in Gujarat to be developed under HAM at a capital cost of Rs 4,583.64 billion. Additionally, the cabinet approved the upgradation of 154,635 kilometers of highways in Maharashtra under EPC mode at a cost of Rs 3,320.38 billion. It also approved the widening of NH 167 in Telangana as part of the NH(O) scheme to cover 80.01 km under HAM at a cost of Rs 3,175.08 crore.
In the railway sector, three multi-line projects covering 12 districts in Delhi, Haryana, Maharashtra and Karnataka have been approved at an estimated cost of Rs 18.509 billion. The projects will add approximately 389 km to the existing network of Indian Railways.
The multitrack works are scheduled to be completed by FY31 and are expected to generate direct employment equivalent to approximately 265,000 man days during construction. The added capacity is intended to ease traffic congestion, improve freight movement and increase overall operational efficiency. Urban transportation has also gained momentum with the approval of the 11.6-kilometer extension of the Noida Metro Rail Project from Noida Sector 142 to the Botanical Garden. The elevated corridor will include eight stations and once operational will take the total active metro rail network in Noida and Greater Noida to 61.62 km. The extension is expected to improve last mile connectivity and reduce road congestion in the fast-growing NCR region.
Beyond physical infrastructure, the cabinet approved the Rs 10,000-crore Startup India Fund of Funds (FoF) 2.0, which aims to sustain the momentum in startup financing. The new funding will expand the scope of the previous FoF 1.0 programme. The revamped framework provides greater operational flexibility, including support for larger, longer-term funds and higher government contributions to Alternative Investment Funds (AIFs) focused on deep technology and high-tech manufacturing.
Also, Prime Minister Narendra Modi on Saturday approved the Prime Minister’s RAHAT (Road Accident Victim Hospitalization and Assured Treatment) Scheme, which aims to provide immediate medical assistance to road accident victims.
