Smart cities: Approval in, time for a concrete plan of action

By: | Published: May 2, 2015 12:52 PM

Narendra Modi led govt on Wednesday approved building of 100 smart cities and upgradation of basic infrastructure.

Narendra modi smart city missionNarendra Modi led govt on Wednesday approved building of 100 smart cities and upgradation of basic infrastructure. (Thinkstock)

With the country aspiring for a manufacturing-led rebound in GDP growth, experts feel that making cities smart, with adequate infra support, could be the game changer.  And, if implemented well, the project is likely to attract private sector investments.

Given the fact that urbanisation level in India is still at just around 31 per cent, much lower than China’s 53.7 per cent, Brazil’s 90 per cent and over 80 per cent in other developed economies, the NDA government’s policy thrust on upgrading urban infrastructure appears to be a step in the right direction.

As a concrete move in this direction, the Union Cabinet on Wednesday approved building of 100 smart cities and upgradation of basic infrastructure — Atal Mission for Rejuvenation and Urban Transformation (AMRUT) — across 500 cities with outlays of Rs 48,000 crore and Rs 50,000 crore, respectively.

With the country aspiring for a manufacturing-led rebound in GDP growth rate, it is imperative that cities prepare themselves for more people moving into the cities. Experts feel that making them ‘smart’, with adequate core infrastructure — clean water supply, efficient public transportation, affordable housing, power supply, robust IT connectivity, better health and education and sustainable urban environment — could make a big difference and, if implemented well, the sector could attract private sector investments. Along with this, a push from state governments and urban local bodies could ensure that the sector has the potential to ensure an economic revival across the country and generate incremental employment.

In his Budget 2015-16 speech finance minister Arun Jaitley said, “As the fruits of development reach an increasingly large number of people, the pace of migration from the rural areas to the cities is increasing … Unless, new cities are developed to accommodate the burgeoning number of people, the existing cities would soon become unliveable. The Prime Minister has a vision of developing 100 smart cities, as satellite towns of larger cities and by modernising the existing mid-sized cities.” The activity seems to have already picked up. Ever since the announcement, several IT, technology and advisory firms, urban planners and engineering majors have expressed willingness to associate themselves with the project.

Need for smart cities

The draft concept note on smart cities prepared by the ministry of urban development highlights the importance of urbanisation and its greater contribution to the GDP.

While urban areas provide the agglomerations that industrial and service sectors need, with just 31 per cent of the total population of the country, urban areas currently account for 60 per cent of the GDP.

This is further expected to rise to 75 per cent over the next 15 years. So, while cities will be the engine of growth, it is important to ensure that they function efficiently. “India is at a point of transition where the pace of urbanisation will speed up.

The relatively low base allows us to plan our urbanisation strategy in the right direction by taking advantage of the latest developments in technology especially in ICT (information and communication technology),” said the note.

While, Delhi NCR boasts an urban population of 97.5 per cent, 97.25 per cent of Chandigarh’s population resides in urban areas. Among states, Goa has an urban population of 62.2 per cent followed by Kerala at 47.7 per cent.

Though the cities to be turned smart are yet to be named, the government has stated that each selected city would receive Central assistance of Rs 100 crore per year for five years. It has been also stated that an area-based approach would be adopted and will consist of — retrofitting, redevelopment, pan-city initiatives and also development of new cities.

Special purpose vehicles (SPVs) will be created for each city to implement smart city action plans and state governments are required to ensure the resources for SPVs, experts say that it is very important that the state governments and urban local bodies are willing to take it up and implement the same.

“While the Centre is creating the guideline and the incentive structure, the challenge will be to get the urban local bodies and the state government’s to come on board and implement them properly,” said an economist who did not wish to be named.

There are others who feel that both AMRUT and smart city project are synchronised. “You can’t have a smart city where the basic infrastructure is not in order,” said Arindam Guha, senior director, Deloitte.

Economic benefits

While the basic amenities for people and the quality of life will certainly get lifted, the two projects that will see Rs 98,000 crore investment by the Central government over the five year period along with investment by the state government, municipal bodies and the private sector, have the potential to lift economy of cities across the country.

The Cabinet note approved on Wednesday said that, a minimum investment of over Rs 2 lakh crore would flow into urban areas over the next five years as states and urban local bodies would mobilise matching resources. It also said that substantial private investments would be mobilised by states and urban local bodies through public-private partnership (PPP) model as required to meet project costs.

Experts, however, point that the private investment across these projects will depend on state governments’ and municipal corporations’ ability to monetise the investment and make people pay for the services being offered to them.

If that does not happen then private sector investment may not come in a big way. There are some who also point at the potential of employment generation only if the two projects — AMRUT and smart city — is implemented as per plan.

“There will be opportunities for firms operating in engineering, construction, IT and other sectors as the work begins on these smart cities. To accomplish the projects, you need different kinds of expertise across areas of basic infrastructure work,” said Guha.

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