Involving Private Players

Investment scenario and PPP potential in smart cities

The Ministry of Housing and Urban Affairs (MoHUA) has taken proactive steps to id­en­tify potential sources of funding for sm­art city projects, including from external agencies such as the World Bank, Asian Develop­me­nt Bank (ADB), Asian Infrastructure Investment Bank (AIIB), Japan International Cooperation Ag­en­cy (JICA), Agence Française de Dévelop­pe­ment (AFD) and the European Union (EU).

In a recent development, ADB has au­tho­rised a $76.25 million, or Rs 5.51 billi­on, loan for three projects under Agartala Sma­rt City Limited. It has agreed to fund retrofitting of 23 km of roads (15 stretches) at a cost of Rs 4.44 billion, revival of lakes and waterbodies at the Maharaja Bir Bikram College and its surrounding areas at a cost of Rs 0.3 billion, and renovation and restoration of Ujjayanta Palace and its vicinity at a cost of Rs 0.35 billion in the current financial year.

Further, AIIB has sanctioned the $150 million Chennai City Partnership: Sustainable Urban Services Program aimed at strengthening in­stitutions and enhancing the quality and fi­nancial viability of selected urban services in Ch­ennai. International development agencies such as Deutsche Gesellschaft für Interna­tionale Zu­sammenarbeit, the United Nations Environ­me­nt Program, the United Nations Development Program, the International Finance Corporation (IFC) and the United States Department of the Treasury (US Treasury) also provide technical assistance to some smart cities.

The City Investments to Innovate, In­te­gra­te, and Sustain (CITIIS) Program was la­unched in July 2018 in collaborative efforts with AFD, the EU and the Na­tional Institute of Urban Affairs with the objective of providing technical and financial as­sistance totalling Euro 100 million to cities for the implementation of integrated, innovation-driven and sustainable urban infrastructure projects.

Agartala, Amravati, Amritsar, Bhuban­eswar, Ch­ennai, Dehradun, Hubbali-Dharwad, Kochi, Pu­­­­­­du­­cherry, Surat, Ujjain and Visakhapatnam ha­ve been selected for funding and technical as­sistance under the CITIIS Program through a challenge process. MoHUA has also signed an agreement with the US Treasury to provide technical assistance to the cities of Vadodara, Rajkot, Pimpri-Chinchwad, Mysuru, Mangaluru and Fa­ri­dabad in issuing municipal bonds. An MoU has be­en signed with the United States Trade and De­­­ve­lopment Agency for the purpose of im­ple­menting the National Urban Innovation Program.

PPP prospects and promise 

With the focus of the Smart Cities Mission (SCM) shifting from durability to sustainability, the government is actively pushing private sector involvement in smart city initiatives through consultancy, construction and operation. The SCM is banking on the possibility of private finance. The mission has proposed a target of 20 per cent private sector investment in smart city projects.

The mission aims to increase private participation, particularly in innovation, data management and start-ups that can address urban concerns through cutting-edge solutions.

Smart city proposals highlight the heterogeneity of the PPP criteria. For instance, private sector participation is necessary for projects in­volving land monetisation, such as waterfront development, redevelopment and transit-oriented development. Private funds are being used to finance rooftop solar, parking and street lighting systems. Service delivery programmes include water supply and smart metering, wastewater re­cycling and waste collection. Cycle sharing, IT-enabled solutions and smart parking are a few examples of technology ventures.

Smart cities have immense PPP potential, and their success necessitates clarity of purpo­se, application in all initiatives, adequate pre­paration and learning from experience.

MoHUA and Invest India recently conducted a virtual roadshow to highlight PPP opportunities under the SCM. This was the first investor roadshow of its kind, allowing various smart city CEOs to directly pitch private in­ves­tors and start-ups on PPP prospects in their communities. The mission has completed 228 PPP projects worth $220 billion in more than 60 cities with the help of the private sector, demonstrating the importance of finding new app­roa­ches to urban development.

As of February 2022, around 160 PPP early-stage projects worth Rs 150 billion have benefited from private sector investment and deve­lop­me­nt. Indore Smart City won the Public-Private Part­nership Innovative Award for two of its efforts, namely, She Kunj, and Innovative Smart Parking for multilevel parking of two-wheelers.

There is PPP potential in urban transport, co­mmercial infrastructure, hospitality, education, and energy. Some rece­nt initiatives include the development of multimodal transportation hubs such as Sa­nyojit Kashi in Varanasi, multilevel sm­a­rt parking structures such as Jammu and Kashmir’s City Chowk, market re­deve­lopment, urban mobility, solar energy ge­neration, and the establishment of educational hubs.

 

 

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