On March 14, the Tamil Nadu (TN) government announced the much-awaited budget outlay for the financial year 2025-26. At the state assembly the Honourable Finance Minister Thangam Thennarasu announced the state budget to have an outlay of Rs.57,231 crore. This is nearly 20% more than the 2024-25 budget when Rs.47,681 crore was the total capital expenditure outlay.
We at ITDP India analysed the budget outlay across sectors to understand how much allocations was given for sustainable urban transport and urban development this year. This is a critical exercise to see whether the budgets are in line with the state’s overall commitment to Sustainable Development Goals and its other forward-looking policies like Tamil Nadu EV Policy, city level Non-Motorised Transport Policy and Comprehensive Mobility Plans
Here are some of the key highlights of the allocations, along with our insights and recommendations:
1. Improving Public Transport- Rs.170 crores
The 2025-26 budget provides dedicated allocation for the enhancement of public transport service, operations, and ridership.
- The budget features two Multimodal Transport Terminals to integrate rail, metro and bus transport, at Guindy and Washermanpet , at a cost of Rs.100 crore, featuring “state of the art” passenger amenities. This project shows its commitment to ensuring seamless connectivity across transit modes.
- There is a focus on creating clean and green buses, where the State Transport Corporations will be converting 700 diesel buses to CNG buses at Rs.70 crore and 1125 e-buses will be deployed across Chennai (950), Coimbatore (75), and Madurai (100) for public use starting in 2025-26.
- The Mini-bus scheme is being expanded with revised rules and regulations in around 2,000 routes.
Why we are glad!
With 28.2% of Chennai’s citizens relying on buses, metro, and rail— covering first- and last-mile distances on foot—the investment in two multimodal hubs is a timely and welcome move. These hubs will expand public transport coverage, improve accessibility, reduce travel distances, and times. They will also ensure seamless transfers, integrate information across modes, and provide standardised wayfinding facilities.
Tamil Nadu converting 700 diesel buses to CNG, is a good move as compared to diesel, CNG reduces particulate emissions by up to 70%, improving public health in areas where air quality often exceeds safe limits. Additionally, it aligns with the state’s climate goals, cutting greenhouse gas emissions by 20-25% per bus. This initiative lays the groundwork for scaling up cleaner public transport.
Electric buses further support sustainability efforts. The addition of 1,125 electric buses will save diesel fuel costs and cut down carbon emissions.
However, Tamil Nadu still faces a significant shortfall. Based on MoHUA’s benchmark of 60 buses per lakh population, the state’s eight major cities require 12,900 more buses. Despite this gap, Tamil Nadu is leading the way in electric bus adoption, demonstrating how strategic infrastructure planning can support sustainable transit.
The Mini-bus scheme expansion addresses last-mile connectivity issues in suburban and rural areas, where residents often depend on private vehicles or informal transport. By extending the scheme to 2,000 routes with updated regulations, Tamil Nadu aims to improve service quality and coverage. These regulatory changes are expected to resolve operational challenges, enhancing feeder bus services and creating a more efficient system.
2. Providing Assistance to Transport Undertakings – Rs9,682 crore
The Tamil Nadu State Transport corporations are allocated budget for various kinds of subsidies and funds this year.
- Rs.3,600 crore for Magalir Vidiyal Payanam, for free bus rides for women.
- Rs.1,782 crore for free student bus pass scheme.
- Rs.1,157 crore for diesel subsidy.
- Rs.2,000 crore performance-based incentive fund will also be provided to Transport Corporations in Tami Nadu.
- Over and above these subsidies, Rs.646 crore has also been allocated for MTC Chennai as a viability gap fund.
Why we are glad
This comprehensive allocation addresses multiple challenges facing Tamil Nadu’s public transport system. The free bus passes for women have already shown remarkable success, with women ridership increasing from 40% to 61% since implementation. The economic impact is substantial, with women saving roughly Rs800 monthly through this scheme. The diesel subsidy component helps mitigate fuel price volatility, ensuring transport corporations can maintain service levels.
Viability Gap Funding is crucial for developing new infrastructure projects that might otherwise lack financial sustainability. This holistic approach to transport financing , sets a national precedent for how states can support public transportation through multiple financial mechanisms while addressing social equity and operational sustainability.
Pic: Students await their bus in Chennai
3.Pushing for Electrification – Rs.4 crores
The TN state budget also includes allocation to nudge the adoption of EV by the private sector.
- The Tamil Nadu Platform-Based Gig Workers Welfare Board has been established to promote the welfare of workers. A new scheme has been initiated to support the livelihood of workers registered with the welfare board by providing a subsidy of Rs.20,000 each to 2,000 internet-based service workers for purchasing a new electric vehicle (e-scooter).
- Roadside facilities at 10 selected locations on state highways, including power supply facilities for Electric Vehicles, food stalls, accommodation, rest rooms, first-aid and basic medical facilities, along with shopping malls have been proposed.
Why we are glad:
Tamil Nadu government supports the growing gig economy by addressing transportation challenges for platform-based workers. High upfront costs have been a barrier to e-scooter adoption, but this subsidy shortens the payback period, making EVs more viable. Research indicates that a 1% increase in purchase subsidies can boost EV sales by 1.36%. While this allocation covers 2,000 workers, it lays the groundwork for scaling incentives, reducing the carbon footprint of last-mile deliveries and personal transport.
Additionally, new roadside facilities fill critical infrastructure gaps for long-distance travelers and commercial drivers. By integrating EV charging stations, Tamil Nadu is tackling range anxiety, a key barrier to EV adoption. This initiative aligns with the state’s EV goals, combining amenities with economic opportunities to create a sustainable highway service model. As Tamil Nadu expands its EV network, these facilities set a precedent for boosting electric mobility while enhancing highway infrastructure.
4. Allocating for Climate Resilient and Healthier Public Spaces – Rs.582 crores
The Tamil Nadu government has shown commitment to invest on climate resilient spaces by announcing multiple projects. These include:
- Creation of Climate Resilient Sponge Parks in seven places in Chennai Metropolitan area with allocation of Rs.88 crore.
- A Riverside Development Works project which includes creation of sewage treatment plants, footpaths, streetlights etc. has been announced for Trichy, Madurai, Erode, Coimbatore, and Tirunelveli Corporations. An allocation of Rs.400 crore has been made for the same.
- Blue Flag Certification for six beaches has been announced with allocation of Rs.24 crore.
- Eco Park to be created in the heart Udhagamandalam in Nilgiris district. It will cover an extent of 52 acres and will be established in the Racecourse area. Allocation of Rs.70 crore has been made for the project.
Why we are glad:
Tamil Nadu’s continued focus on flood resilience, climate adaptation, and public health is a step in the right direction! Investments like these also create opportunities to transform public spaces, boost local economies, and create safer, healthier, and more vibrant neighborhoods. When designed well, these spaces can encourage walking, cycling, and community engagement, making cities more livable and sustainable.
Additionally, integrating walking and cycling infrastructure, universal street design, and traffic calming measures as a standard in road improvement projects as per our earlier recommendation, will ensure equitable accessibility for such public spaces, promote modal shift to sustainable transport and help minimise carbon emissions.
5. Investing more in Urban Highways – Rs.4193 crore
The TN State Budget continues to support the expansion of its highway network and industrial corridors. Notably among them are,
- The Tamil Nadu State Highways Authority (TANSHA) has been allocated Rs.2,100 crore for a 14.2 km long four-lane elevated road from Thiruvanmiyur to Uthandi along the East Coast Road.
- Rs.380 crore have been allocated for flyovers in Chennai under the Kalaignar Nagarpura Membattu Thittam.
- Rs.1713 crore of allocation for the construction of 14 bypasses across cities in Tamil Nadu including Coimbatore and Tirunelveli.
What we recommend:
Data shows that widening of roads does not reduce traffic congestion, rather increases it. Wide roads attract more vehicles and high speeds-the biggest reason for road crash deaths in Tamil Nadu. Beyond road engineering solutions, this is an opportunity to prioritise road equity by ensuring a balanced Right of Way for all users—pedestrians, cyclists, and public transport commuters alike.
The funding should therefore support the implementation of traffic calming elements in these corridors with well-designed footpaths and cycle lanes, safer crossings with refuge islands and other facilities for universal access. This is necessary to ensure that the urban highways, flyovers and bypasses are safe and comfortable for everyone to use.
As the State continues to expand its road infrastructure, the focus should shift from merely adding more lanes for private vehicles to building an efficient and reliable public transport system. Dedicated bus lanes have been proven to significantly cut travel times by 20-30% during peak hours, ensuring that buses can move efficiently even in high-traffic corridors. This not only makes public transport more attractive, also boosts ridership and revenue. A great example is Bengaluru’s NIMBUS project, where the introduction of dedicated bus lanes led to a 64% increase in ticketing revenue—a clear indicator of how prioritising buses can transform urban mobility.
6. Making Investments for Road Infrastructure Upgrades – Rs.13,952 crore
In 2025-26 budget as well, TN government continued to invest in multiple road development and road expansion projects. Notably among them were:
- Under the Kalaignar Nagarpura Membattu Thittam scheme a total outlay of Rs2000 crore was seen for various development work. Of this, road works worth Rs.816 crore have been allocated for infrastructure upgrades. These will be taken up across Chennai, Coimbatore and Madurai.
- Road upgradation work got a focus, additionally, under the Nagarpura Salai Membattu Thittam, at a cost of Rs.550 crore.
- The budget also provides a substantial allocation of Rs.9,476 crore under the Comprehensive Road Infrastructure Development Programme to improve roads and bridges, state-wide.
- The city of Chennai is set to receive another allocation of Rs.2,910 crore towards the development of the Peripheral Ring Road Project, a stretch of 132.87km connecting Ennore Port in the north to Poonjeri in the south.
- The budget also provides allocations to the tune of Rs.200 crore for Urban Highways, to implement suitable improvements in high-risk and accident-prone areas, including narrow curves and road junctions.
What we recommend:
Continued investment in road infrastructure upgrades is a positive step towards improving urban mobility.
To make our streets truly inclusive and efficient, it is essential that the government invests not just in carriageway improvements, but beyond. As mentioned above, integrating walking and cycling infrastructure and following universal design practices should be non-negotiable in all road development work initiated by the state.
Including features such as raised crossings, refuge islands, and designated parking can help ensure safer access for all users. We recommend that these critical design elements are integrated into all new road projects.
Other Highlights
It is worth mentioning that there are recurring investments in key areas of urban mobility as well as creation of new projects to enhance urban sustainability and safety:.
- Chennai Metro Rail Project – Phase II gets continued allocation of Rs.4,807 crore.
- Singara Chennai 2.0 – Continued allocation for urban development projects for Chennai city under this scheme with an outlay of Rs.850 crore.
- Global City in Chennai- A new city will be developed near Chennai spread over an extent of 2,000 acres. TIDCO will soon commence the works for the first phase of the ‘Global City’ project, which will offer world-class facilities.
- Safety for Women- The budget has shown a continued commitment towards women safety with this year’s budget earmarking Rs.75 crore for the same in Chennai and four other cities across Tamil Nadu.
By Varsha Vasuhe (Associate Urban Development), Sanchana Sathyanarayan (Associate Healthy Street)
With Inputs from Sooraj EM, Deputy Manager & Venugopal AV, Programme Manager
Edited by Donita Jose and Aangi Shah (Communications)
