Central funding will not pay for smart city infrastructure: Experts

Experts are questioning the central funding for the smart city project since the Union Cabinet earlier this week allotted Rs 100 crore per city per year for five years.

A total of Rs 98,000 crore was approved by the Cabinet for 100 smart cities and rejuvenation of 500 others. The two schemes, Smart City Mission and Atal Mission for Rejuvenation and Urban Transformation, may merge at some point.

Prime Minister Narendra Modi is expected to announce the guidelines for smart cities at a function within a week, but experts and analysts are sighting chinks in the policy.

The 100 smart cities project was formally announced in the Budget in July 2014 with an allocation of Rs 7,016 crore, but the government's latest financial backing for the ambitious scheme has fallen short of expectation.

"The scope of improvement under the Smart City Mission includes water supply, sanitation, waste management, transportation, housing for poor, and power supply,'' said Gulam Zia, executive director, Knight Frank India.

For a mid-sized city like Varanasi or Vishakhapatnam these could be undertaken within the average budgetary allocation of Rs 500 crore, he pointed out. ''But for Mumbai, where the Trans Harbour Link or the Metro Phase 3 cost over Rs 10,000 crore each, the amount may not suffice for a fraction of the interest cost of these projects,'' Zia said.

Koichiro Koide, India managing director at the Japanese conglomerate NEC (earlier Nippon Electric Company), recently told Business Standard the biggest challenge in the smart city project was investment.

Consultants split the project into three components, basic infrastructure such as water pipelines, network level sensors to monitor water flow and prevent leakage, and infotech solutions for data mining. ''For the last two, the central outlay is reasonable, if not adequate,'' said Arindam Guha, senior director, Deloitte in India.

But basic infrastructure project project costs would be at least 10 times the sanctioned amount, Guha said. The gap would have to be met by states, urban bodies and companies. Companies were unlikely to come forward if their assessment of the business was not rewarding enough, he added.

A recent Deloitte study on smart cities found Meerut needed Rs 200-300 crore for the project, barring basic infrastructure. With basic infrastructure, the cost would increase to Rs 2,000-3,000 crore.

Other constraints included the lack of engineering, finance, and project management skills to execute giant projects like smart cities, consultants pointed out.

Zia also feared real estate development could take precedence over the broader economic growth agenda.