The component will provide incentive grants to the participating ULBs for activities to improve SWM services. Grants will be provided over and above their existing plan fund allocations, based on a two-tranche system, comprising a basic grant (BG) and an incentive grant (IG). Grants will be allocated to ULBs on a per-capita basis. 40 percent will be allocated as BGs and 60 percent as IGs according to the agreed eligibility criteria presented in the PAD. BG and IG will be used to finance two separate set of SWM investment activities at the local level – (a) Track I (T1) activities will be funded by BG and comprise investments that can be initiated by ULBs upon signing the Participation Agreement (PA)- for expanding the coverage of decentralized BDW management systems, upgrading the existing MCFs/RRFs, closure remediation of existing dumpsites and development of incremental disposal cells as interim facility, routine public space cleaning/sanitization and other waste management activities related to COVID-19, O&M support for tipping fee for regional disposal facilities, and (b) Track II (T2) activities will be funded by IG and comprise investments that can be initiated only when the ULBs have achieved the eligibility criteria,– these would include establishing/strengthening primary waste collection and transportation systems, developing new waste management/processing facilities and new MRFs/recycling facilities for NBDW.