7 cities, 2,000 sq km, Rs 325,000 crore

Written by Sunil Jain | Updated: Oct 7 2010, 15:29pm hrs
The Delhi Mumbai Industrial Corridor Development Corporation (DMICDC), a joint venture between the Government of India and IL&FS and IDFC, is the only developer of new cities of any serious size in India. As per the plan, it will develop 24 industrial cities (cities with a large focus on industrial activity) over 5,000-5,500 sq km in area in the DMIC region that accounts for 43% of Indias GDP, 45% of its current factories and 57% of its exports. By way of contrast, Hindustan Construction Companys Lavasa, near Pune, is around 60 sq km. DMICDCs CEO & MD Amitabh Kant spoke to Sunil Jain about the first phase to develop 7 cities over 2,000 sq km and at a cost of Rs 325,000 crore by 2018.

What will be the cost of these cities

The overall plan is to develop 24 cities along the 1,483 km Delhi-Mumbai corridor by 2040. The first phase has 7 cities over 2,000 sq km and a cost of around Rs 325,000 crore. To put this in perspective, Delhi is around 700 sq km and the new Lavasa is around 60 sq km. The costs differ. Dholera will be around 540 sq km and the cost is around Rs 60,000 crore. Dighi is 230 sq km and will cost Rs 44,000 crore; Manesar-Bawals 380 sq km should cost Rs 70,000 crore...

All of these will be developed on a PPP basis

All the cities, but not all parts of them. The problem that you see with a city like Gurgaon is the lack of sewerage due to the unplanned nature. Our plan is to do detailed master-planning of the city and then develop the trunk infrastructure, the roads, the power plants, the sewerage and stuff like that. We will use PPPs to do all this, but we will do this before bidding out the city.

About a third of the cost of a city is trunk infrastructure, the rest can be PPPd. And even this trunk infrastructure can be PPPdlike the way the NHAI is getting work donebut it has to be readied before the residential/commercial/industrial areas of the city are put out on bid. In Dholera, of the Rs 60,000 crore cost, roughly Rs 17,000 crore will be the trunk infrastructure that we need to develop; the city developers will not do it as, in itself, this is not a profitable venture.

Once you do proper master-planning, like ensuring the city has a Bus Rapid Transport corridor going through it, that people live close to their work and so on, this reduces energy consumption by around 40%. No amount of energy-efficient buildings can substitute for this. Worker housing is critical to this piece without it, youll just have urban slums. And you need to get the water and energy part worked out cities need water and energy, and the idea is to see how to reduce both and to control the pollution both result in.

...What IBM calls a smarter planet

Absolutely! Ive visited cities in Japan, China, Korea cities that have had yellow rivers and grey skies due to industrial pollution and today have almost everything being recycledthey have blue skies and blue waters now. But for all this, we have to lay down the specifications and then not allow the developer to deviate from the plan. In Asia, a lot of smart cities are based on technology solutions provided by the likes of IBM; in Korea the drivers are telcos. Eventually, one central command room has to allow you to look at whats happening on water, on energy, on effluents and so on.

So how are you planning to do this here

By March, well have consultant feasibility reports on how to green four existing citiesManesar,

Dahej, Changodar-Sanand and Shendra. These will be then given out on PPP and well study the results before seeing how to apply them in our new cities. Mitsubishi, Toshiba, Hitachi and JGC are heading the consortium that is doing the detailed studies.

How do you plan to fund these 7 cities

What Ive done is to see how a DLF or a Unitech would finance a project, though this is on a dramatically different scale. They develop one block, sell some part of it first and then get higher values for the rest and then move on to the next phase, right Well do that as well. Say we need a trunk BRT of 55 km, we wont do all 55 on Day 1. Well do 8 or 10, then land values will rise around this; this money will then go into the project and will be used to develop the next phase.

Who runs the project, DMICDC

Each city project will be run through an SPV, equally owned by central and state governmentsprior to this, 5% of the equity of the SPV will be given to land-losers, to ensure they have a stake in the city over the 20-30 years that it takes to get completed. The state government will buy all the land needed and that will be its equity in the project. In addition to the 5% equity, weve tied up with GTZ of Germany, the worlds best skill developers... the idea is that each family of land-losers will get trained in 16 skills, which will make them employable anywhere in the country.

So the city project is fully funded from day one

Our calculations show there will be a fund mismatch for the first 12-13 years, after which the city makes lots of money. So we are asking the central government to make available a corpus to bridge this gap.

How much does that work out to

It differs from city to city, so the final figure will only be known when were developing the city, but were not asking for all the money upfront. We want Rs 3,000 crore for Dholera and around Rs 2,500-2,800 crore for each of the others. Were saying well use this to do the detailed master-planning, then develop, say, part of the trunk infrastructure; once the value of land around this rises, the SPV sells off part of the land it owns; and the money goes back to the SPV; this then helps finance the next phase. In fact, ideally, after the cities have developed and the Centre has made money, it should use this to develop other cities.

Why do you call them industrial cities

If you look at economic growth, it has all been powered by cities whether youre talking of a Shuzou or Lingang in China or an Iskandar in Malaysia. But you cant set up an industrial area in a vacuum, the young managers want schools, entertainment and so on. It has to be around a vibrant city life, so thats what we are doing. Once the project is done, by 2040, our consultants estimate that industrial output in the DMIC area will go up by a multiple of 1.6 times as compared to a situation where there was no DMIC.

Whats your experience in big infrastructure projects

I was collector in Calicut in 1991 when we came up with the idea of expanding the runway there to 12,000 feet so that all the Malayalees who wanted to go to the Gulf didnt have to go via Mumbai and spend valuable time and money. AAI told us they would do it by 2012. We formed a society, took loans and developed the airport in 28 monthswe charged a user fee of Rs 500 which was rejected thrice by the centre!and repaid all loans. This was Indias first use of user charges to develop infrastructure. I developed the first bridge in the state on a user-fee basis as well as Keralas first PPP power plant.