Smart Cities Mission: Ambitious at the outset, progress slow after 4 years

Lack of definition of a 'smart city', inadequate initial outlay and funding issues were some of the biggest roadblocks to its success

It was one of the most high-profile initiatives during Prime Minister Narendra Modi’s first term, holding much promise and bringing hope that it would be the reason for the overhaul and modernisation of Indian cities still ailing from sub-standard infrastructure and amenities, and lack of planning.

Today, however, one hears very little about the 100 Smart Cities initiative anymore, and the Prime Minister’s vision to bring a 100 cities up to standard by 2020 now seems like an insurmountable challenge. Launched in June 2015, the cabinet had then approved a total spending of around Rs 48,000 crore for the 100 Smart Cities initiative, and Rs 50,000 crore for its sister scheme, the Atal Mission for Rejuvenation and Urban Transformation (AMRUT).

If one checks the website of the Smart Cities Mission, it has not been updated since mid-2018, and there is no data of real-time monitoring of the projects. The data of total funds released for the smart cities projects has only been updated till March 2018. It shows that the centre released a little more than Rs 10,400 crore to states and union territories till that time. Publicly available data shows that only around Rs 6,000 crore of that has actually been utilised.

As per the 2019-20 budget documents, the allocation for Smart Cities is Rs 6,450 crore, up from 2018-19 revised estimate of Rs 6,169 crore and 2017-18 actuals of Rs 4,526 crore.

Under the Smart Cities Mission, around 5,000 projects were conceptualised, of which only around 60 per cent are active. As per a report released by the Ministry of Urban and Housing Affairs, around 150 projects have been completed till date, some 400 projects have started work, and another 240 projects are in the process of issuing tenders.

What went wrong?

Sectoral experts say the biggest drawback of the initiative is a lack of common parameters or definitions. There is no definition of a ‘smart city’ and the initiative is project-based. Hence it encompasses a lot of different kinds of public work, from riverfront development to e-rickshaw, from affordable housing to 24-hour water supply, and from electric buses and affordable housing to footpath widening. The thing is, a lot of these projects are being carried out under other existing schemes, which gives Smart Cities a vague ‘umbrella’ status like ‘Make in India’, thus making it difficult to quantify successes.

“There was initial euphoria regarding this initiative. But then they had chosen the cities and it was supposed to be a partnership between centre and states. Some states were not very forthcoming,” said Shubham Jain, senior vice-president at Icra.

Jain said one reason was the initial outlay planned, of Rs 100 crore per smart city, turned out to be unrealistic. “If you want to change the entire information and communication technology network, if you want to change how mobility works, you need a bigger outlay. Rs 100 crore will just be the capital expenditure to change LED bulbs in the entire city. That was where people and administration lost interest,” he said.

Private sector participation has also been very subdued. Jain said that while there have been some townships which the private sector has been developing on its own, these just have the tag of ‘smart cities’ as they are integrated townships with connected mobility. “But in terms of private sector developing smart cities for the government, that hasn’t generated much interest.”

Another problem has been funding. When the government launched the Smart Cities initiative, it also planned to go big on municipal bonds.

The market for municipal bonds has existed in India from 1998, when Ahmedabad became the first Indian city to issue municipal bonds. However, in the past 16 years, 25 municipal bond issues in the country have garnered about $300 million. The amount is just a fraction of what it is in developed markets like the US, where the municipal bond market is worth more than $3 trillion.

“It is a vicious cycle. The cities could not raise funds hence that has slowed down progress. The other thing is people are reluctant to invest in such bonds, as they don’t see real infrastructure work being generated from it,” said Jain.

Looking forward, Jain said that the initiative can still be salvaged. “Better focus on implementation and more funding commitments from the government is required. It cannot be working on a leverage model.”