Progress and Problems

Update on the Smart Cities Mission

The Smart Cities Mission (SCM) is one of the most ambitious government programmes for urban renewal and transformation. The mission, launched in 2015 by the Ministry of Housing and Urban Affairs (MoHUA), was envisaged to be implemented through a bottom-up approach, instead of the top-down one followed for most government programmes. The mission got off to a slow start and has faced issues since its inception with regard to the setting up of special purpose vehicles (SPVs), selection of project management consultants and fund generation. Nonetheless, new projects have been sanctioned, technology penetration has increased, and the role of the private sector has evolved. Significant progress has been made with respect to the development of integrated command and control centres (ICCCs), smart roads, smart water networks, solar rooftops and vibrant public spaces. In recent times, housing has also emerged as one of the fastest moving sectors. In a bid to fast-track implementation, the ministry has launched the “Sister Cities” initiative, which involves the 20 best performing cities working with the 20 bottommost cities to improve the performance of the latter.

Progress so far

A total of 100 cities have been selected for development as smart cities over four rounds of competition conducted between January 2016 and June 2018. All the 100 smart cities have incorporated SPVs and city-level advisory forums, and have appointed project management consultants to appraise, approve, implement, manage, operate, monitor and evaluate projects. As of March 2021, a total of 5,591 projects worth Rs 1.73 trillion have been tendered, of which work orders have been issued for 4,886 projects worth Rs 1.4 trillion, while 2,394 projects worth Rs 400.8 billion have been completed. The pace of implementation has increased significantly over the past two and a half years, with an approximate 253 per cent growth in projects tendered, and an approximate 358 per cent growth in projects grounded/completed.

Area-based development (ABD) is a key strategic component of the SCM. Various cities have adopted ABD models, which include city improvement (retrofitting), city renewal (redevelopment) and city extension (greenfield development).

Funding landscape

In terms of sources of financing, the central government is providing financial support to the extent of Rs 480 billion over a period of five years, which comes round to an average of Rs 1 billion per city per year. An equal amount, on a matching basis, is being contributed by the state governments and urban local bodies (ULBs). Apart from these, around Rs 420.28 billion, or 21 per cent of the total investment, is expected from convergence with other missions, Rs 410.22 billion (21 per cent) from public-private partnerships (PPPs), around Rs 98.43 billion (4.8 per cent) from loans, Rs 26.44 billion (1.3 per cent) from the resources of the ULBs, and the remaining amount from other sources. Moreover, in the Union Budget 2021-22, Rs 64.5 billion has been allocated to the SCM. This is an almost 90 per cent increase over the revised budget estimate for 2020-21.

The MoHUA has taken proactive steps to identify various sources of financing for smart city projects including external agencies such as the World Bank, the Asian Development Bank, the Asian Infrastructure Investment Bank, and the Japan International Cooperation Agency. Moreover, some smart cities are receiving technical assistance from various international development agencies. For example, the City Investments to Innovate, Integrate and Sustain (CITIIS) programme was launched in July 2018 with the French Development Agency, the European Union and the National Institute of Urban Affairs for providing technical and financial assistance of Euro 100 million to cities in implementing urban infrastructure projects. A total of 12 smart cities have been selected for funding and technical assistance under the CITIIS Program. The MoHUA has also signed an agreement with the United States Department of the Treasury for provision of technical assistance to Vadodara, Rajkot, Pimpri-Chinchwad, Mysuru, Mangaluru and Faridabad in the issuance of municipal bonds. Similarly, an agreement has been signed with the United States Trade and Development Agency for assistance in the implementation of the National Urban Innovation Program.

Challenges and the way forward

The SCM has been actively providing support for rapid response in Covid-19 management. The ICCCs set up under the mission in cities such as Bengaluru, Pune, Agra and Vadodara, among others, have been transformed into war rooms for real-time monitoring and effective management of the pandemic via technology.

However, while implementation has picked up pace, the mission still faces several challenges. Pan-city development and ABD projects are also often part of other urban missions. The SCM’s convergence with other schemes has resulted in coordination issues between different departments. Besides, although the country has performed well in IT projects, it lacks technical capabilities at the design evaluation stage. Delays have been reported in technical execution due to faulty planning, and there have been issues with the specifications stated in the tender documents. Cities have spent a lot of time in setting up SPVs and finding the right management consultants. The slow pace of implementation can be attributed to the long project planning process, which, on average, takes 15-18 months. Moreover, the majority of the smart cities require a lot of retrofitting of legacy infrastructure, which is a key challenge. Further, the role of PPPs in successfully implementing projects under the mission needs to be re-evaluated. There are some sectors, such as waste management and transportation, where PPPs have done well. But in sectors where it is difficult to generate revenues due to the inability to levy user charges, the scope of private participation remains limited. However, the government’s continued focus on the mission has lent confidence to various stakeholders. It is hoped that with the government focusing on measures to attract private investment and with the enhanced implementation experience, progress in the next few years will be more visible and significant. These projects offer ample opportunities for developers, financiers, and technology and equipment providers.

While there is still a long way to go in terms of the development of urban infrastructure in the selected cities, the SCM has achieved a level of maturity that allows the government to focus on accelerating its pace of implementation. With the closing date of the mission approaching fast, the cities need to pull out all the stops in order to achieve the end goals.

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