Urbanisation Drive

Update on the Smart Cities Mission

Urbanisation is inevitable in a growing economy. India too is in the middle of a massive transition, from being primarily rural to becoming primarily urban. While 30 per cent of the Indian population currently lives in cities, the cities contribute well over 60 per cent of the GDP.  By 2031, about 40 per cent of the population will be urbanised and cities will generate over 75 per cent of the GDP.

This rapid expansion necessitates a comprehensive development of physical, institutional, social and economic infrastructure for improving quality of life and attracting more investments. A densely populated urban centre creates huge demands, ranging from housing needs to reliable power supply, water supply and sewage/sanitation services. Above all, urban areas need smart solutions. The development of smart cities is a step in this direction. It is meant to set an example that can be replicated by both small and large cities, catalysing the creation of similar smart cities in various regions across the country.

Key focus areas

The Smart Cities Mission is one class of a project that aims to improve efficiency and transparency in the provision of civic services like electricity, water, transportation and security. The core infrastructure elements in a smart city are adequate and assured water and electricity supply, efficient sewage and solid waste management, efficient urban mobility and public transport, affordable housing, robust information technology connectivity and digitisation, good governance (especially e-governance and citizen participation), a

sustainable environment, safety and security of citizens (particularly women, children and the elderly), and health and education facilities.

Progress so far

Launched in July 2015, the Smart Cities Mission aims at developing an urban ecosystem for making cities more liveable, smart and sustainable. It will cover 97 cities over a period of five years, from 2015-16 to 2019-20.

In the past year, several important steps have been taken towards the development of smart cities. In January 2016, the government annou-

nced the first batch of 20 cities. Of these, 17 have formed special purpose vehicles to implement projects. These cities were the first to receive funding from the ministry, with the release of

Rs 30 billion in grants. This seed capital will act as a catalyst for the private sector to step in and invest in public-private partnership (PPP) projects planned by these cities. In addition, 13 cities were selected in May 2016 in the fast-track competition to give wider coverage and representation to states. These cities improved their smart city plans by identifying infrastructural gaps and alternative sources for resource mobilisation.

In the second round of the smart city competition held in September 2016, the government announced a list of 27 more cities to be developed under the mission. Amritsar topped the list, while Vadodara secured the last rank. State-wise, Maharashtra with five cities, and Tamil Nadu and Karnataka with four cities each were among the frontrunners. With this, a total of 60 cities have been selected under the mission and a total investment of Rs 1.45 trillion has been proposed by them.

The remaining cities will participate in Round 3 with their upgraded smart city proposals. Round 3 started on January 1, 2017 and will end on March 31, 2017. With regard to the development of projects, 87 projects involving an investment of more than Rs 58 billion are under execution in 19 cities. Of these, seven projects have already been completed. Another 80 projects with an investment of Rs 44.48 billion will be awarded in the next six to seven months.

Financing

The central government will provide financial support of Rs 480 billion over five years, that is, Rs 1 billion per city per annum on an average. An equal amount, on a matching basis, will be contributed by the state/urban local bodies (ULBs). In the first year, the government will provide a grant of Rs 1.94 billion, followed by Rs 980 million every year for the next three years. So far, a total of Rs 45.72 billion has been released to these cities under the Smart Cities Mission during 2015-16 and 2016-17.

Further, state governments are receiving assistance from foreign agencies/institutions. In January 2015, the governments of Andhra Pradesh, Uttar Pradesh and Rajasthan entered into an MoU with the US Trade and Development Agency for the development of smart city projects in Visakhapatnam, Allahabad and Ajmer. Later, in January 2016, the Maharashtra, Chandigarh and Puducherry governments signed MoUs with the French Agency for Development for the development of Nagpur, Chandigarh and Oulgaret. Moreover, various countries such as Spain, Canada, Germany, China, Singapore, the UK, South Korea and Japan have also shown interest in participating in the development of smart cities.

Conclusion

The project pipeline of the selected cities presents significant opportunities for infrastructure developers as well as technology and solution providers. The next step will be the timely execution and monitoring of these projects. On the funding front, new and innovative sources will be explored. Long-term debt like municipal bonds is likely to be explored in the future. Efficiency in the collection of user charges coupled with extensive tapping of revenue sources such as property taxes and advertisements will be the key to improving the financial capacity of ULBs.

Further, higher reliance on information, communication and technology will complement urban transformation and improve the quality of governance and public services. Going forward, digital disruptions such as mobility, internet of things, cloud and big data will be a key enabler for the creation of smart cities.

That said, issues such as lack of city-specific master plans, delays in the clearance and ap-

proval of projects, insufficient horizontal and vertical coordination between different agencies and ministries, and lack of investments in capacity building need to be urgently addressed for the timely execution of projects.

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