Within a year of the Smart City Mission launch in June 2015, 33 cities have been selected through the Smart City Challenge, in which 97 cities competed on clearly defined rules and transparent selection criteria. Each of the winning ‘Lighthouse’ cities establishes a Special Purpose Vehicle (SPV) registered under the Companies Act 2013 to “plan, appraise, approve, release funds, implement, manage, operate, monitor and evaluate the Smart City development projects [and] enter into contracts, partnerships and service delivery arrangements as may be required.”
The funding from the government—Rs.500 crore over five years—is disbursed directly to the SPV. The state government provides a matching grant; thus, each SPV commands Rs.1,000 crore in equity. The Urban Local Body (ULB) may also transfer powers, privileges and obligations to the SPV, to the extent permitted in the state’s Municipal Act.
The Smart City SPVs will implement two types of projects: ‘area-based developments’ (ABDs) to transform contiguous areas of the city through comprehensive renewal of the built environment and public amenities; and ‘pan-city’ solutions that use advanced information & communication technology (ICT)—intelligent transportation systems, safety and security systems, water and waste management systems, etc.—to improve the lives of all city residents.
The first twenty smart cities will retrofit and redevelop over 25,000 acres at an estimated cost of Rs.37,000 crore and will implement pan-city solutions costing about Rs.11,000 crore. Own sources of revenue and mission funding will meet 62% of costs, with 12% coming from the convergence of other central government schemes. That leaves one-fourth of the funding—about Rs.12,000 crore—to be secured through borrowing and public-private partnerships. In just the past three months since the results of the Challenge were announced, the newly established SPVs have initiated the execution of more than 80 projects worth over Rs.2,000 crore. This is clearly a speed and scale with which urban development has seldom moved before.
With speed and scale comes significant risk, which can only be mitigated by skillful application of the mind. Many promises have been made, not least the promise of leapfrogging to a ‘world-class’ scenario in cities where deprivations of various kinds abound. Expectations are high. Over 15 million citizens in 97 cities have participated in multiple rounds of consultation, defining their city’s unique identity and identifying priority projects that will help in achieving goals and outcomes. In some cities, more than half the population has participated. This level of engagement represents a demand for transformation. The participation is a gift that the cities would be wise to nurture.
In addition to managing the entire life-cycle of front-line projects, which may be thirty years or more, each city will need a smart strategy for replicating and scaling the projects it executes within one contiguous ‘area’, to eventually cover the whole city. They must win the confidence of local residents, ensuring that the ABD is not yet another island of excellence in a sea of adversity. As any player of the ancient Chinese board game ‘Go’ will tell you, what looks like consolidation can be isolation, and isolation can be fatal. ‘Replication’ and ‘scaling’ connote an average context everywhere, whereas diversity is a more likely ground condition. Even in cities such as Bhubaneswar, Jaipur and Chandigarh, where the city plan has physically identical blocks, the socio-economic status of residents, the levels of service and their willingness to pay will vary greatly. In cities like Pune and Kochi, which have morphological, geographical as well as socio-economic diversity, the challenge of replication is further compounded.
However, every risk poses an opportunity, as long as the smart cities are agile and learning. If the smart cities can discover the building blocks of urban transformation locally, we can scale the successes nationally. No wonder that the Prime Minister nicknamed the Smart City Mission as ‘Mission Transform-Nation’. The transformation of the nation rests on the transformation of our cities; therefore leave no stone unturned.
While the first 20 ULBs propose to use their start-up equity toward capital expenditure, it is desirable that capital expenditure should draw mostly on convergence funding and the cities should leverage the equity for raising debt and issuing bonds.
Smart cities must be financially healthy in order to attract investments and their health is inherently tied with transparent systems of asset management and valuation. Reliable valuations are essential for implementing land-value capture and unleashing the power of mixed land use. A transparent valuation regime will ensure that windfall gains for the few are minimized and structured gains for the many are maximized. Giving your citizens and the market access to reliable data on public assets, economic performance and availability of resources is a good way to temper transparency with accountability.
However, transparency remains a mirage and does not build trust unless the ULB has fulfilled its obligations to provide for housing, basic services and social infrastructure. The ULB can only be smart if it has already ensured a good measure of sabka-saath-sabka-vikas (development for all).
De-risking and confidence building are also intrinsically linked with integrated planning and management. Smart cities must create three dimensional GIS-based spatial decision support systems, fully loaded with data about city assets, functions, resources, outputs and consumption. A number of cities plan to set up a single-function command centre, either for traffic management, water & sanitation or security.
But cities are quintessentially spatial entities, thus a command centre that starts with geo-referencing of one sector can easily include others. An integrated command centre helps the city strategize and benefit from correlating data across sectors. This is the best way that investments can be converged and the benefits of integrated planning can be realized.
It is widely understood that, while a single network may be prohibitively expensive to execute, if it is bundled with other components, the combined project can become viable. Integrated planning can unleash economies of scale and proximity.
The following scenario is common to all the smart cities. Various networks must be embedded in the streets of the ABD— power lines (high and low voltage) feeding street lights, surveillance equipment and sensors; fibre-optic cables connected to installations on streets (bus-stops, advertisement boards) and inside homes and establishments; water supply and sewage pipes; DTH cables, dedicated lines for disaster management, etcetera. A study of the street cross-section is a study in urban economics. A smart city will generate revenue from almost every square metre of the street. Streets and public places are the defining characteristics of a city, therefore it is natural that the ‘return on investment’ becomes most tangible in such spaces. The command centre is not a mere viewing platform – any large screen computer can suffice for that – but a spatial data management technology that enables informed decision-making and timely action. Now imagine that the revenue gained from every street as well as the expenditure on that street can be correlated. Such a spatial correlation of assets and revenues will enable a healthy attitude towards public private partnership.
While today the SPV may treat the various operators and maintainers of infrastructure as mere service providers, it should instead consider joint ventures with these entities. Instead of viewing these relationships through the lens of procurement, why not view them in the spirit of partnership?
In every smart city, there are local associations of industries and trades and chambers of business that see the value in the smart city mission but find it difficult to contribute their technical, financial and social capital to the enterprise of building their own smart city. This is an irony we must eliminate. Just as the ULB can create an SPV, corporate India can create trusts and associations that can partner with the SPV in forming smaller companies to service specific requirements. In such a scenario, bundling of systems and networks becomes highly productive.
It is smart to unleash the power of partnership because it holds the key to sustainability. It is only when public private partnership is designed to deliver public goods locally—when it generates local jobs, stimulates the local economy and conserves local resources—that it does not look like cronyism and assumes the friendly face of smart urban transformation.
Jagan Shah is an architect by training and an urbanist by choice. He leads India’s premier urban think tank, the National Inst-itute of Urban Affairs, an autonomous body under the urban development ministry.