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The Census of 2001 places Uttarakhand urban population at 2.18 million including cantonments, (or 1.82 million without), an overall urbanisation rate of 25.5%, compared with a national average of 28%. The rate of population growth varies considerably across different districts and urban areas, but the average urban growth rate of 3.1% exceeds that in rural areas (<2%) and the state capital Dehradun showed an intercensul growth rate averaging over 4% per annum between 1991 and 2001. Urban population is largely concentrated in the larger towns - Dehradun (2006 estimate 576,000) and Haridwar (2006 estimate 190,000) and the towns in the agriculturally rich and industrially active south of the State. Apart from the resident population, the state receives annually a tourist population of 16.4 million (2005 figure), which exerts a high demand on urban services. This `tourist load', in terms of equivalent resident population is as high as 55% of the total state population. Effective urban planning and development is also constrained by the complex institutional landscape which characterizes the urban sector.

The Uttarakhand Urban Development Department (UDD) is the administrative department for local governments, while the Uttarakhand Housing Department is the administrative department of the Urban Development Authorities and the Town and Country Planning Directorate which are responsible for urban planning and development control.

In addition, the Drinking Water (Pey Jal) Department is the administrative department of Uttarakhand Pey Jal Nigam (UPJN) and Jal Sansthan (UJS) which are the providers of water supply, and sewerage and drainage services to the project towns. In addition to this, there are organisations such as the Uttarakhand Environment Protection and Pollution Control Board, Uttarakhand Public Works Department (PWD), and other line agencies whose functions impact on the urban areas. Effective direction and management of the sector is compromised by the lack of an effective mechanism for inter-departmental allocation of business. Operationally, the allied and compatible businesses of these departments are currently not well aligned, preventing achievement of efficient and effective functioning.The urban sector in Uttarakhand continues to operate under local government legislation inherited from its parent state, Uttar Pradesh.