Finance Minister P Chidambaram on Tuesday said funds for infrastructure development and poverty-alleviation programmes would come from the capital markets in future.
He called upon the local bodies to streamline their functioning in order to increase their credit-worthiness so that they could borrow from the markets.
He also called for an overhaul of the municipal governance system in the country terming it "outmoded".
Speaking at the inaugural function of a three-day international conference on the renewal strategies for Mumbai city organised by Bombay First, the finance minister said cities of the size of Mumbai and Delhi needed civic authorities, which were "near sovereign authorities".
Chidambaram said in view of the looming urban crisis, the Centre would focus on empowerment of local bodies and bring in suitable amendments to the model municipal law and draw up guidelines for private participation in urban local bodies.
He reiterated the central government's support for three ongoing city projects -- the Western Express sea link between Bandra and Nariman Point, the Nhava Sheva-Sewree sea link and the east-west rail link between Versova and Ghatkopar. Under the National Urban Renewal Mission, the Centre will give 100 per cent grants for chosen projects in 60 cities across the country.
However, the minister said in order to receive the Rs 1,650 crore (Rs 16.5 billion) grants, the state governments would have to repeal the Urban Land Ceiling Act and Rent Control Act, and rationalise stamp duty.
Besides, they must legislate on a public disclosure law, reform property tax laws, institute user charges on water, electricity and other public goods and put in place an e-governance system.
While he was coming out of the meeting, Chidambaram was mobbed by the activists of the Narmada Bachao Andolan.