While Maharashtra’s new chief minister has been talking of his grand plans to develop Mumbai’s infrastructure, including a new sea-link and a coastal road, sceptics wonder where the money is going to come from, especially given the fragile balance sheets of most of India’s top developers. Apart from the fact, as Devendra Fadnavis has pointed out, that there is a lot of money available from Japanese lenders, a lot depends upon how the project is conceived. And this is what sets apart India’s most ambitious urbanisation project ever—the first phase of the 24-city-5,500 square km Delhi Mumbai Industrial Corridor Development Corporation (DMICDC) project is to cost R3.25 lakh crore; this phase will include 7 cities, 5 multi-modal logistics hubs, 2 airports, 1 desalination plant and 3 small townships. DMICDC’s beauty lies in its conceptualisation and planning—master-planning has been done for each of the projects that are taking off now, and by involving some of the best firms in the world for this.
More important is the manner in which DMICDC has approached its risk, and financing. The riskiest part of any project is the land acquisition and getting the main trunk infrastructure—the roads, the sewerage, the effluent treatment plants, the power plants and transmission lines—in place. Once this is in place, getting private builders to construct apartment complexes, office space, hotels, etc, is not too difficult. So, DMICDC’s model is to do very detailed master planning first, and to construct the trunk infrastructure on its balance sheet. This roughly works out to a cost of R4,000-5,000 crore for each city—the state governments’ contribute equally to the SPV which will build the city by way of buying the land. Even here, the idea is to build part of the trunk infrastructure and then sell the land around it—its value will now have gone up—and use this money to finance the next leg of the infrastructure.
Even after this, the perfect city can get into trouble if project plans are not approved, if the city is to be dependent upon power supplies from bankrupt SEBs. This is where there has been more innovative thinking. As FE reported last week, each city is to be recognised as a governing unit under Article 243Q of the Constitution. Each will have a CEO-mayor with specified powers to, for instance, approve building plans and set up power transmission and distribution businesses. A detailed State Support Agreement is to be signed with the 7 states through which the DMICDC project goes through, clearly delineating the responsibility of each party like notifying the SPV as a special planning authority, for instance. A very concessional Japanese government loan has been tied up at an interest rate of 0.1% per annum, a 10-year moratorium on repaying the principal and a 40-year tenure—the loan is partially tied and negotiations are on to make this less onerous. While that will happen, the big lesson is planning and conceptualising of a project determine its success.