A total grant of Rs 1 lakh crore, from the Centre, state and ULBs, is likely to account for just 20% of the required funding for the mission, which provides firms like state-owned NBCC various infrastructure development opportunities
Eyeing a share of the pie in the Smart Cities mission, the National Building Construction Corporation (NBCC), the listed Central public sector undertaking, has decided to partner the development of 15 to 20 of the 100 Smart Cities in the country.
The NBCC has already communicated its plans in writing to the 98 Smart City candidates selected so far and have held meetings with a quarter of them. The total grant of Rs 1 lakh crore, from the Centre, state and the urban local bodies (ULBs), will account for merely 20 per cent of the required funding for the mission that is aimed at a better use of technology in basic service and infrastructure provision in 100 chosen cities.
To implement the project, each ULB is expected to form a Special Purpose Vehicle (SPV) with the state government where the two retain a 50 per cent equity share. Stake holding for the remaining half can be with private investors. Anoop Kumar Mittal, NBCC chairman & managing director, said that the agency is looking for a share in the 50 per cent component that will be part of the private investors’ kitty. “Many foreign investors might find it safer to partner with a governmental company,” said Mittal.
NBCC, which is listed on the Bombay Stock Exchange and the National Stock Exchange, has been one of the key beneficiaries of the Smart Cities project with the government company’s shares rallying the day the mission was announced.
Officials said that in cases where it is unable to be part of the SPV, which requires each partner to invest some equity, it might also explore the possibility of being a project management consultant. In such cases, its focus would be mainly on Smart City projects that look at redevelopment or retrofitting models. The NBCC has tie-ups with government bodies such as Korea Land & Housing Corporation and Construction Industry Development Board in Malaysia as well as with technology solution provider IBM which it aims to extend to its involvement in the mission.
Mittal said that the list of partner cities will be selected once the detailed project reports of the Smart Cities are submitted to the Ministry of Urban Development (MoUD) by end of the year. Based on the merit of DPRs, the ministry is expected to choose a maximum of 20 cities for priority funding. “Since our target is at least 15 per cent of the total cities, to begin with, we will take up about three cities from amongst the ones that are chosen in the first phase. We estimate that each Smart City will require an investment of Rs 20,000 crore to Rs 30,000 crore. The way to generate this money is not through user charges or taxes but through land monetisation,” said Mittal.
The much-contentious monetisation of urban land has so far involved auction of public land to private developers or allowing them additional construction rights in exchange of the government charging a premium amount. The NBCC has in recent past resorted to monetisation land in its Delhi-based redevelopment projects. The PSU saw a major shift in its role recently, going from basic road and infrastructure construction to taking up major redevelopment projects in East Kidwai Nagar or New Moti Bagh and the ongoing project of turning Karkardooma in East Delhi into a sub-Smart City.