Flexible PPP pact to woo industry for smart city
The government is yet to decide on the project cost or on the list of cities that will be converted into 'smart cities'
Sep 18, 2014
Source : Business Standard
Narendra Modi


New Delhi: The government is working on a “flexible” (public-private partnership) model and efficient urban mobility schemes such as metro and monorail as the primary peg to realise its ambitious project to develop 100 smart cities.

“There should be room to deviate from the agreement on technical grounds to make the project attractive for private players,” a top official in the urban development ministry, handling the plan, told Business Standard.

Without significant participation and funding by the industry, the smart city project, a part of Modi’s vision of achche din (good days), runs the risk of falling apart.

It’s a long-term project and even officials connected with it are still trying to understand the nuances of a smart city. But the Prime Minister’s Office (PMO) is learnt to be closely tracking the progress of the plan with regular meetings on the subject, to ensure it’s delivered as promised in the Bharatiya Janata Party (BJP) manifesto and reiterated in the first Union Budget of the current government. Although no formal deadline has been set for the rollout, 100 smart cities in 10 years is being seen as a “practical goal’’. But many in the government and industry think it’s a much longer-term project and can take anything from 15 to 20 years, with challenges such as power outages, poor infrastructure and dearth of clean drinking water coming in the way.

Officials working on the policy, however, sounded gung-ho about making it happen, though underscoring two concerns. First, getting a holistic team to work on a project of this nature is not easy. The Centre is consulting states, industry, consultants and academicians for coming out with a set of guidelines; and it must be a seamless team, they said.

The second concern is over financing: Although the private sector (both domestic and international players) has shown enthusiasm about engaging in the smart city project, the industry is seeking assurance about return on investment. For instance, the industry wants confidence from the government that policies will not change mid-way and they are seeking room for flexibility in the terms of agreement, while a project is in progress. Along with that, the government is learnt to be looking at a massive expansion of the Metro rail across the country to make smart cities feasible.

The government is yet to decide on the project cost or on the list of cities that will be converted into “smart”. An initial estimate had put the figure at Rs 35,000 crore as the annual cost for the project but in the Budget, Finance Minister Arun Jaitley allocated Rs 7,060 crore for it (Rs 70 crore each for a city). The rest is expected to come from the private sector. The genesis of the Rs 35,000 crore figure was a high power expert committee on investment estimates in urban infrastructure, that assessed a per capita investment cost of Rs 43,386 for a 20-year period. The estimates covered water supply, sewerage, sanitation and transportation related infrastructure.

The smart city proposal has to deal with the financing details and the PPP modalities before it reaches the Cabinet for a clearance, an official said, without giving any timeline. But he said only existing cities will be taken up for developing into smart cities. “This is a brownfield project.” There’s been some talk about rolling out new model smart cities earlier, but that’s not what the government is aiming for. Apart from metros and bigger cities, those with potential to grow into investment hubs might also be considered for the leap.            

Smart cities are broadly defined as urban spaces that are technologically integrated, well-planned and environment-friendly.

According to the Smart Cities Council, these are cities that leverage data gathered from smart sensors through a smart grid to create a city that is livable, workable and sustainable. Although there’s no city in India that has been classified as smart yet, companies such as Cisco, IBM and Microsoft have been working on cities based on smart-grids where all the utilities are integrated with data.

Also, there are projects being developed as “safe cities” as well. Surat in Gujarat is among those being developed as safe cities. Safe cities are those with intelligent surveillance systems, while smart cities are more about sustainability and comfortable living.

Itai Elata, a top representative of Verint, a multinational solution provider associated with safe cities in India including in Surat where two phases of the project are over, said the company would soon start work on another safe city, refusing to name it. "We take full ownership in technology and critical infrastructure matters in such projects,"' Elata said, while pointing out that a safe city could mean investment of a few millions to hundreds of millions of dollar, depending on the size and scope of the project. It involves installing video surveillance cameras along with command centres through cities, while working with state civil authorities and police. In Surat for instance, 650 surveillance cameras have already been installed along with 100 monitoring junctions.

According to Anshuman Magazine, CMD (South Asia) of CBRE, an international consultancy, smart cities are not a new concept and that several existing government schemes, including JNNURM and Rajiv Aawas Yojana are in someways smart city projects. "Smart is not just about technology-enabled, but also about power, water, transportation, solid waste management and sewerage. While smart city is an area of opportunity for infrastructure companies and developers, it's a long-term project that will take no less than 20 years."

Many countries have shown interest already including Japan, which is keen on developing Varanasi as a smart city, and Singapore, which has indicated Andhra Pradesh's new capital as its choice. France, UK and the US are keen too, it is learnt. Will government officials travel to other countries to learn more about the concept of smart cities? "They will whenever there's any need," said an urban development ministry official.

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