MoRTH Introduces Urban De-Congestion Policy

The Ministry of Road Transport and Highways (MoRTH) has introduced an Urban De-Congestion Policy under which new ring roads and highway bypasses on national highways will be undertaken only where the concerned state government agrees to share a portion of the project cost. The policy marks a significant shift from a predominantly centre-funded model to a collaborative financing framework for urban decongestion infrastructure.

Acknowledging dropping highway transit speeds due to the merging of inter-state freight and local commuter traffic. Going forward, the centre will prioritise new ring roads and bypasses only where states demonstrate financial participation and integration of the proposed corridors with local urban planning.

States may participate through any one of the following four cost-sharing models:

• 50% contribution towards land acquisition costs;
• 25% contribution towards land acquisition costs, together with reimbursement of the State Goods and Services Tax (SGST) component and mineral royalties;
• Provision of encumbrance-free land through land-pooling mechanisms; or
• Value-Capture Financing (VCF), whereby the state monetises increases in land value within a two-kilometre influence zone through instruments such as development charges, betterment levies, land-use conversion fees and additional stamp duties.

To ensure that newly developed corridors remain free from future congestion, all ring roads and bypasses under the policy are required to be developed as fully access-controlled, minimum four-lane highways with closed tolling systems designed to support uninterrupted high-speed movement of passenger and freight traffic.

The policy also introduces significant land-use and planning obligations for state governments. States will be required to notify a 15-metre prohibited development control zone – a green zone on either side of the highway – to prevent ribbon development and preserve corridor efficiency. Development beyond this zone must be regulated through long-term planning frameworks aligned with city master plans and the PM GatiShakti National Master Plan. In addition, projects are required to be planned with a 50-year design horizon, taking into account projected urban growth, traffic demand and future infrastructure requirements.

From a legal perspective, the policy represents a significant evolution in highway procurement by embedding principles of shared fiscal responsibility, integrated land-use planning and value-capture financing within the project development framework. The success of future ring road and bypass projects will increasingly depend on the willingness of state governments to commit financial resources and implement enabling legislative and regulatory measures for land pooling, development control and value-capture mechanisms. The policy is expected to enhance project prioritisation, improve risk allocation between the centre and the states, and support the long-term sustainability of urban transport infrastructure.