Steady March: Smart Cities Mission makes consistent progress

Smart Cities Mission makes consistent progress

One of the most ambitious programmes of the central government, the Smart Cities Mission (SCM) was launched in July 2015 with the aim of providing core infrastructure in cities. It aims to ensure a reasonable quality of life for citizens, and a clean and sustainable environment, through the deployment of smart and innovative solutions. A slow starter, the SCM has picked up pace in recent years. New projects have been sanctioned, technology penetration has increased and the role of the private sector has evolved. Besides, significant progress has been made with respect to the development of integrated command and control centres, smart roads, smart water systems, solar rooftop projects and vibrant public spaces.

Progress so far

A total of 100 cities have been selected in four rounds of bidding under the SCM. As of September 2020, a total of 4,903 projects worth over Rs 1.68 trillion have been identified for implementation. Of these, 17 per cent of the projects worth Rs 369.42 billion have been tendered out, work orders have been issued for 47 per cent of the projects worth Rs 1,034.8 billion, and work on the remaining 36 per cent stands completed (Rs 283.12 billion). Regular performance monitoring has ensured a considerable improvement in project execution. There has been a 237 per cent growth in projects tendered and a 327 per cent growth in projects grounded/completed in the past two years.

City-wise, Indore has outperformed other cities in terms of project completion, where 172 projects entailing an investment of around Rs 30 billion stand completed. With regard to commencement of construction works, Belagavi has taken the lead and issued work orders for 83 projects worth Rs 13.68 billion.

The latest smart city rankings announced by the Ministry of Housing and Urban Affairs have been a cause for cheer for Uttar Pradesh, as three of the state’s cities made it to the list of the top 10 smart cities. Agra ranked second in the list, and Kanpur and Varanasi secured third and seventh ranks respectively. Lucknow’s rank improved from 41 in 2019 to 12 in 2020 while Nagpur slipped from rank one to rank 28.

In order to bridge the gap between the top-performing and bottom-performing cities, the central government has set a 100-day challenge and devised a 20:20 model for smart cities. As per the challenge, the top 20 cities will support the bottom 20. The top 20 cities, which are the ones that have done better by leveraging the latest technologies, will share their know-how of implementing these technologies, and undertaking financial management, detailed project reports, feasibility studies and impact assessments with the bottom 20 cities. As per the model, each city will sign an MoU for a period of one year with its sister city. The cities will troubleshoot together, try to kick-start projects and, in turn, improve the ranking of the laggard city.

Further, in line with its efforts to address climate change issues, the central government launched the Climate Smart Cities Assessment Framework (CSCAF) 2.0 on September 11, 2020. The CSCAF aims to provide cities with a clear road map for combating climate change while planning and implementing projects. The framework has 28 indicators spread across five categories – energy and green buildings; urban planning; green cover and biodiversity; mobility and air quality; and water and waste management – for cities to adopt and implement climate actions.

Financing landscape

With regard to sources of financing, the central government extends financial support to the extent of Rs 480 billion over a period of five years, that is, about Rs 5 billion per city over the mission period. An equal amount, on a matching basis, is to be provided by the state/urban local bodies (ULBs).

Apart from this, around Rs 420.28 billion (21 per cent) is expected from convergence with other missions and programmes, Rs 410.22 billion (21 per cent) from public-private partnerships (PPPs), Rs 98.43 billion (4.8 per cent) from loans, Rs 26.44 billion (1.3 per cent) from ULBs’ own resources and the remaining funds from other sources.

Given the size of the SCM and the fact that most ULBs continue to struggle to generate funds, the states are being encouraged to raise the rest of the funds independently. They may raise funds through user charges, PPPs, borrowings from financial bodies, land monetisation, non-tax revenues, municipal bond issues and through convergence with other schemes. So far, nine cities have floated municipal bonds raising about Rs 34 billion. The success of the Pune, Greater Hyderabad, Bhopal, Amaravati, Ahmedabad and Indore municipal bond issuances indicates an appetite for financing well-managed municipal bodies. Meanwhile, arrangements are being made with multilateral and bilateral agencies such as the Japan International Cooperation Agency, the Asian Development Bank, the Asian Infrastructure Investment Bank, the UK Department for International Development, and the World Bank for soft loans.

Since the launch of the mission, the utilisation rate of funds sanctioned under the SCM budget has improved. The smart cities have been taking steps to increase the pace of project execution. As a result of these efforts, for the first time since the mission was launched, the amount of funds utilised exceeded the funds unutilised.

As of September 11, 2020, the central government released funds totalling Rs 210.53 billion to the states and union territories. Of this, Rs 152.32 billion has been utilised by the smart cities. While the 2020-21 budget has not stated any particular increment for the SCM, the 2019-20 budget had allocated Rs 64.5 billion for the mission against Rs 61.69 billion in 2018-19, representing a 4.5 per cent hike over the previous year.

Pain points and future outlook

While implementation has picked up pace, the mission continues to be fraught with issues. Although significant progress has been registered in terms of IT projects, the country still lacks technical capability at the design evaluation level. As SCM projects converge with different programmes, ensuring collaboration with different entities and agencies has become a challenging task. A number of projects involve the retrofitting of legacy infrastructure in cities, and this is a key hurdle. Further, a number of ULBs lack credible and updated data on existing infrastructure facilities, making performance comparison nearly impossible. The Covid-induced nationwide lockdown has also impacted project execution. While with the gradual easing of lockdown restrictions most cities have now recommenced work, projects are expected to be delayed by a few months.

That said, the government’s focus has lent confidence to various stakeholders. The 20:20 model is expected to help cities in improving their overall ranking considerably.

Despite achieving a level of maturity, the SCM still has a long way to go in developing urban infrastructure of the selected cities. Going forward, in the wake of the current Covid crisis, it is essential to build resilient smart cities with the aim of aligning project implementation with the current situation.