The Centre on Thursday released the list of 98 cities making up for 35% of urban population for development under its Smart Cities mission, marking the first major step of the Narendra Modi government for the promised change in the urban landscape of the country.
The central government will provide R48,000 crore to the selected cities (including two more that will be declared soon, making a total of 100 cities) for improving their infrastructure and service delivery over a five-year period.
States and civic bodies concerned are expected to pitch in with matching contribution for the projects. The Centre also expects thousands of crores of investments by private players in such projects, which they will be allowed to recover through the imposition of user charges on facilities including urban water supply and transport.
However, with the private sector already reeling under stressed balance sheets and local civic bodies having far less financial muscle as well as capacity to build even basic infrastructure, much depends on the execution of such projects as well as investments made by both states and the Centre for any success in this regard, said experts.
Private funds would flow in only after their investments are incentivised and returns assured, they said, adding that the fine print of each project holds the key to their implementation.
Releasing the list, urban development minister M Venkaiah Naidu made a strong pitch for private sector investment.
“In a situation such as the recent financial crisis, when private firms are looking for safe investments, I assure them that Smart Cities are a safe investment. The land is going to be readily available and the returns are assured,” he said.
As the country attempts to provide a house for all by 2022 and increase the share of manufacturing in its gross domestic product to 25% by 2025 from 16-17% now, such moves — including the make-in-India concept — are also important to raise the productive capacity of the economy, said analysts.
The smart cities would have core infrastructure such as water and electricity supply, sanitation, public transport, solid waste management and affordable housing apart from robust IT connectivity and digitisation, according to Naidu. The minister sought to temper expectations about the idea of a smart city in the Indian context: “We are not aiming at making our urban landscape look fanciful and flashy. The prime objective is to enhance the quality of urban life by addressing deficiencies in core infrastructure. Expectations in various quarters may be high but the mission is very practical and realistic in its intentions and objectives.”
Naidu said against the central assistance of only Rs 36,000 crore during the last 10 years of Jawaharlal Nehru National Urban Renewal Mission, the Centre would provide about Rs 3 lakh crore under various new urban initiatives. However, he did not give any specific time frame for such a huge allocation, although analysts believe it could be in the next few years, possibly five to six years.
Earlier in June, Modi had launched the ambitious project with the announcement of criteria and guidelines for 100 smart cities to be selected through a city challenge competition.
“The selection of smart cities is a first step. The major challenge is to provide quality urban services such as 24X7 water supply, sanitation, drainage, solid waste management and sewage treatment. Looking at finances of urban local bodies, which are far from healthy, provision of these services will be challenging. Levying of user charges to recover cost of provision of these services will be crucial to maintaining quality of these services,” said Devendra Kumar Pant, chief economist at India Ratings & Research.
Naidu said the next stage is choosing 20 cities in the first lot by the end of the year and 40 cities each in the next two years for receiving central funding of a total of Rs 500 crore spread over five years. He added that the Centre will release Rs 2 crore for each of the 98 cities in the next couple of days for preparation of the Smart City plans.
“The announcement is a positive step forward. The next step would be to identify the first set of 20 cities that will get Rs 500 crore of budgetary support. This money is only seed funding to jump-start the process of transformation of Indian cities. It would be critical to also transform the governance structure at the city level to enable a sustainable city transformation,” said Jaijit Bhattacharya, partner, infrastructure and government services, KPMG India.
Naidu said those cities that are not selected in the first round can again participate in the second and third rounds of the competition by improving their performances. Even states can nominate new names after the elimination of some cities in the final round of selection, he said.