Yes, Roll-out Of Smart Cities Mission Is Delayed, But That Is The Nature Of The Beast

Judging the progress of the Smart Cities Mission (SCM) is a bit like deciding whether the glass is half empty or half full. It may also depend on your proclivity toward the Bharatiya Janata Party (BJP) government at the centre, or even be decided by what agenda you are pursuing. Most news reports on the progress of India’s smart cities will tell you how tardy the implementation is – and somehow, it is the fault of the central government. Bureaucrats in charge and the Union Minister of Housing and Urban Affairs (MoHUA) insist critics must visit the cities to see just how much is happening on the ground.

Reports on the subject by international consultants like McKinsey and Price Waterhouse Coopers (PwC) paint differing pictures, and there are organisations that point out how human rights violations are innate to this mission.

Objective judging on the basis of numbers is difficult, as most reports have non-comparable parameters. To make things worse, the government website, though helpful in parts, has many pages that were updated only till the early months of 2017. In short, no one knows what exactly is happening on the Smart Cities front.

As per the SCM dashboard of the Government of India and figures taken from an interview of the Secretary, Urban Development, in 2017, these are the current statistical highlights:

There are no details on progress city-wise, or on how the programme was envisioned to be implemented.

A Mission Needs To Be Smart All The Way

An absolute must-have for a mission of this variety and magnitude – with 100 cities across states that are diverse in every way, with the freedom to decide their own priorities and projects – is smart tracking.

That would begin with smart and well-thought-out parameters on the Smart Cities Mission website. This would serve the purpose of being hard-hitting reminders to states and cities, of ‘naming and shaming’, and thus, actually increase healthy competition. The page that has ‘City-wise projects’, for instance, can further have a timeline against all projects, and a requirement of ticking boxes by states. Perhaps, a kind of an ‘SCM progress index’ can also be made.

A 2017 report by Deloitte, which tied together the company’s client cities’ experiences, had, in the case of India, placed the onus on the monitoring of the central government, as it said: “The Smart Cities Mission finds itself at a crossroads today. The government structure, financing, participant cities, and smart city projects are all in place. However, the success of the programme will hinge on how cities and the Government of India are able to track and monitor progress. This is where the Central Mission Management Agency (MMA) under the MHoUA plays a role.”

In theory, the MMA is supposed to monitor progress of all participant cities, keep track of the appointed project management consultants (PMCs) in each city, provide knowledge-sharing on best practices, and help resolve specific implementation challenges. It is also supposed to track progress against the projects clubbed under area-based (ABD) projects as well as pan-city initiatives – as well as suggest course correction.

An active MMA is indispensable if the government does want to make a success of this Smart Cities Mission, as it would be able to go past the regular constraints that have in the past slowed the progress of urban local bodies (ULBs), the municipal authorities, the compulsions involving the construction sector and politicians, and so on.

When the centre is providing funds, it must exercise its authority in monitoring their utilisation. This becomes all the more important as the projects are diverse and the agencies involved working at varying levels of efficiency. There are also, of course, the regular legacies of municipal bodies – delays, malfunction, quality issues, corruption, and political interference.

Status on Projects in Lighthouse Smart Cities

Eight months ago, a report by PWC was released which studied, for the American Chamber of Commerce in India, the status on Lighthouse Smart Cities. The data is not exactly the latest, but a close analysis serves to adequately demonstrate the lack of homogeneity in data available across cities and, perhaps, also the responses of the ULBs: the blanks in the table below confirm this; for instance, only Chennai and Ludhiana had entries in the “DPR approved” category.

The figures also don’t add up. Of the total number of projects, only those under seven solution areas (mobility and transport being one, safety and security being another, and so on) were chosen for the study. So, for instance, though Jabalpur has a total of 101 projects, we have status updates on only 12 projects. Thus, ironically, a report on “status” of the cities turns out to be insufficient to judge progress. What one can make out is that work is happening; but the rate and proportion of progress is not quantified – or possibly not sought to be revealed by the city.

From the government website, in trying to see what the status of special purpose vehicles (SPVs) were, and whether all cities had got their PMCs in place, we did come across the list of shortlisted consulting firms for each region. However, city-wise, which PMC was finally selected, and helping with what, is not known.

The case would have been different if the mission to create smart cities – along the lines of International Smart Cities – was done from scratch. Dholera in Gujarat is an example of a greenfield city, an industrial township that will accommodate workers, and is being set up as an area that would deliver all services efficiently, with carefully designed neighbourhoods, social infrastructure, green transport, and mobility. Dholera is expected to, as per news reports, achieve completion by 2019.

But, otherwise, most smart cities are not classic smart cities in that sense. Indian smart cities are mostly about renewal and ‘retrofitting’, with projects that make them citizen-friendly and sustainable. There are different kinds of projects across smart cities, some are termed ‘area-based development’, where areas are re-developed, and this includes slums. The other category is pan-city initiatives that use smart solutions for delivery of infrastructure and services, which could include city surveillance, smart parking, citizen engagement platforms, and intelligent traffic management systems.

With a mission that has disparate projects, it can take up to eternity to achieve all objectives. How has accountability been built in is the question. With private sector assistance and international funding being sought for implementation, it is imperative that the programme not fall into the usual rut of time – and hence, cost escalations. Especially, given that the helming body is the SPV, which cannot extricate itself from the efficiency of the municipal authority.

The need for this is especially critical, given the rapid pace at which populations are moving to cities. Smart solutions are needed to not only improve quality of life and be sustainable and inclusive in the long run, but also generate employment and income enhancement for all.

Some More Perspective on the ‘Delays’

Then, let us remember the agencies that are primarily responsible for the execution are the same municipal bodies that we have known all along. After the acceptance of proposals of a city by the central government, then begins the task of implementation of the projects that were proposed. This implementation is the job of a specially created company SPV, an incorporated entity with stakes held by and funding coming from the local municipal authority, the state government and the centre. The SPV is supposed to then get down to the business of making those proposed projects a reality. For this, it hires PMCs for the design and development and then getting the jobs of construction, operation, etc, done.

The central government itself does not have a role to play in the actual implementation of the process, apart from regular monitoring, fund release, and other formalities. Yes, the target-setting may have been faulty, which underestimated the time that would be needed – probably for want of complete inputs, and without adequately visualising the entire process. Thus, the finances were expected to begin flowing in 2017, and cities beginning to take shape in 2022.

Experts say that cities globally have taken around 15 years to progress to smart cities. And here, we are talking about slow-paced, idyllic towns like Jabalpur or Shillong; or crowded, noisy lanes of, say, Gwalior or Amritsar. Can the process of converting parts of these into swanky oases, with buildings of steel and glass, and everything from transport to security to water supply to healthcare to be run on integrated communication technology (ICT), and also be integrated by it, be anything but a long process?

Apart from the fact that this is a new realm we’re venturing into, even the tendering process is time-consuming and complex in the case of smart cities. Additional secretary in-charge of the Smart Cities programme, Sameer Sharma, told a newspaper sometime back that the normal tendering – where the lowest bidder is awarded the project – could not be followed, because the lowest bidder might not have the requisite expertise to carry out a smart-city project.

The Funding

Since work is still underway, obviously fund utilisation would also proceed accordingly.

A report on the financing of smart cities on the official website, however, raises some important points on financing. We know that financing was to come from first the central government and then the following:

a) the state/ULB’s own funds, from user charges, fees, land monetisation, etc

b) National Investment and Infrastructure Fund

c) Private-sector investments through public-private partnerships (PPPs)

d) Borrowings from bilateral and multilateral institutions and other domestic and international sources

e) Municipal bonds

f) Other central government schemes such as Swachh Bharat Mission, AMRUT, HRIDAY, etc

Now, central government funding is in order. The status of funds released by the Government of India under the Smart Cities Mission is given here.

But the remaining funds still remain a question mark. The report referenced above, prepared by Kumar V Pratap, Economic Advisor in the MoHUA, indicates some problems that are likely to arise. For instance, how user charges in India are way below cost recovery in urban infrastructure.

Just to give an idea, average cost recovery of selected ULBs in 2007-08 was as follows:

Thus, at these levels, user charges would be abysmally insufficient in financing cities’ projects. For them to make meaningful contribution, the politically sensitive decision to increase them is needed. Then, within user charges, parking fees has the potential to be a big contributor. But again, current parking fee rates in Indian cities are very low – at roughly 20 per cent of those prevalent in Dubai, 4 per cent of those in Hong Kong, and at 3 per cent of New York rates.

The recommendations in the study were to increase these to at least cover operation and maintenance costs, and also link them to usage (rather than levy as taxes) and index them to inflation. Importantly, they need to be linked to quality of service, said the report.

Coming to PPPs. The report also talks about why PPP models often fail in urban infrastructure – because of inadequate cost recovery. Political sensitivity is a big issue. Add to that the issue of operating in cities with poor infrastructure – broken roads, poor telecom signals, to name a few; why would private players want to enter at all?

Municipal bonds, the other panacea, didn’t take off because of the low credit ratings that cities received owing again to financial viability. This is the classic chicken-and-egg situation, and obviously one that requires a different set of solutions. There were also issues getting tax-free status for the bonds; finally, only two cities have been able to go ahead with issuing bonds – Pune and Hyderabad.

What, then, is the solution? The central government, on its part, tried yet another ploy last month when it announced a new challenge – Cities Investment To Innovate, Integrate and Sustain (CITIIS) – to identify top projects in 15 of the 100 selected smart cities, which will then receive an additional funding of approximately Rs 80 crore each. This would be financed by a 100 million euro loan from a French international development agency.

It must be recalled that external aid, from Asian Development Bank, World Bank, and so on, though available, comes at a very high cost, and with their set of conditionalities.

Finding Alternative Funding Solutions

Could a possible solution be one involving the local private sector in smart cities through the corporate social responsibility (CSR) route? CSR initiatives in the country are currently stand-alone projects. Going into details of how this could be done is beyond the scope of this article; but, roughly, could the SPVs in cities become nodal agencies for CSR initiatives? This would make sure that that their mandatory 2 per cent amount is used for coherent and serious purposes, especially if tied together meaningfully for the smart cities projects. This also has the potential to enhance accountability of SPVs.

Self-Financing: The Case of the Sabarmati Riverfront in Ahmedabad.

This one project – an area-based development project – has multiple objectives of reduction in erosion and floods, sewage diversion, rehabilitation of riverbed dwellers, creation of parks and public spaces, and revitalisation of neighbourhoods. As per the project website, this revitalisation of neighbourhoods is done by gradual upgrading of the reclaimed lands – and this is about “promoting integrated, high-density growth, with a focus on walkability and public transportation.” All buzzwords in the smart cities discourse prevalent today.

The best feature of the projects is its self-financing aspect. It achieves its goals without relying on any funding from the government. A small portion of the reclaimed land will be sold for commercial development, to generate sufficient enough resources to pay for developing and managing the riverfront.

The project needs to be a must-study for all cities in India, especially given that most cities have rivers.

Meanwhile, if indeed the progress on SCM is slow, it could be a blessing: a time for cities to sit back and reflect once again. For instance, from what’s now trending, have cities included ICT-backed projects for disaster management – floods, earthquakes, fires? And even disease prevention for dengue, malaria, and the like?

It could be that more pressing requirements have been overlooked, which are different from those of international aspiring smart cities. The solutions would accordingly be different. It’s we the people who need to smarten up first, and adopt a need-based, thought-through, organic approach to the process of developing our cities, rather than a mere projects-based approach.