The Race for 100 Smart Cities of India – Financing

The Race for 100 Smart Cities of India – Financing

 WHAT IS REQUIRED?

Third part of this blog presented rating of some of the probable cities on some important parameters and benchmarks indicated in the concept paper of MoUD on smart cities. Similar and more complete data for each of the selected city is required to estimate the investment required to develop it as smart city.The investment requirement varies very widely, depending on its priorities based on the level of bench mark for various parameters of various services expected of a smart city.

Green-field smart cities such as Tianjin Eco-City in China, Songdo in Korea, GIFT City in Gujarat are estimated to cost around R70,000-150,000 crore for a target population of around 5 to 10 lakh. The total investment in a brown-field smart city like Amsterdam (population: 7.5 lakh) is lower at R1,500 crore. Investment for smart components such asa) phase I of the Ahmedabad Bus Rapid Transit System (BRTS), covering about1 million of Ahmedabad’s population, was around R500 crore and around R20 crore was needed for SCADA-based water supply and waste-water recycling monitoring mechanism at PimpriChinchwad in Pune1.

The concept note of MoUD on smart cities estimates an annual requirement of Rs 35,000 crores for services covered by HPEC.

WHO WILL FINANCE?

Central and state Governments:The Government of India has allocatedRs. 7060 cores towards developing 100 smart cities in India.This is expected to be the seed capital for smart cities. The contributions from the Govt. of India and States/ULBs/parastatal will be largely by way of Viability Gap Support (VGF).

The Centre and the states may opt for new taxes such as green tax on fuel purchase, betterment charges payable on sale of property, urban tax on purchase of new vehicles, etc. to raise finances for smart cities.

Urban Local Bodies (ULBs):First prerequisite is that the ULBs of cities which aspire to be ‘smart’ need to ensure that their finances are represented accurately.

Raising the major part of the finances required for smart cities rests with the local bodies of the city selected. Some of the options include municipal bonds, Infrastructure Debt Funds (IDFs), user charges etc..According to the 13th Finance Commission proper accounting and audit mechanisms and adequate transparency would be critical for the success of the municipal bond issues.

Private sector:It is expected that most of the infrastructure will be taken up either as complete private investment or through PPPs.

International Cooperation: A number of international Governments and organizationshaveshown interest in development of smart cities. Their contribution can be financial and technical.

  • CISCOSystems, a global networking products major, proposes to develop the Electronics City in south Bangalore into a smart city2.
  • Varanasi is to get cooperation from Kyoto, the Japanese ‘smart city’ which is a confluence of heritage and modernity3.
  • A Dubai based firm is to partner with the Madhya Pradesh to promote a Smart City project to be developed between Indore and Bhopal4.
  • French Consul General for Western India indicated interest in helping make Nagpur a ‘smart city, during his two-day visit to Nagpur in September 20145.
  • Japan preferred Ponneri as smart city as it was closer toEnnore port and most of the Japanese companies are located in and around north Chennai. Japan International Co-operation Agency is preparing the master plan for the Chennai-Bangalore Industrial Corridor6.
  • The former Prime Minister, Singapore suggested that the new capital of Andhra Pradesh could become a model for replication and this could be up in a government-to-government cooperation mode that would include the governments of India7.

Smartcitiescounciland Center for Urban Innovation at Arizona State University developed the Smart Cities Financing Guide. It provides detailed, expert analysis of 28 municipal finance tools and examples of financing options cities around the world are using to pay for smart infrastructure.  Many of the tools represent alternatives to the traditional funding mechanisms municipalities have used for decades.8

REFERENCES

  1. http://www.financialexpress.com/news/funding-smart-cities/1289855. Accessed on 17 September 2014.
  2. http://gadgets.ndtv.com/internet/news/cisco-to-transform-bangalores-electronics-city-into-a-smart-city-551864. Accessed on 20 August 2014.
  3. http://epaper.dnaindia.com/story.aspx?id=70191&boxid=26174&ed_date=2014-08-31&ed_code=820009&ed_page=10. Accessed on 15 September 2014.
  4. http://www.business-standard.com/article/companies/dubai-firm-may-partner-in-developing-smart-city-in-mp-114082101091_1.html. Accessed on 17 September 2014.
  5. http://www.dnaindia.com/india/report-france-indicates-interest-to-help-make-nagpur-a-smart-city-2018598. Accessed on 17 September 2014.
  6. http://www.thehindu.com/news/national/tamil-nadu/ponneri-all-set-to-become-smart-city/article6200461.ece. Accessed on 21 August 2014.
  7. http://articles.economictimes.indiatimes.com/2014-09-11/news/53811444_1_smart-cities-goh-chok-tong-new-capital. Accessed on 17 September 2014.
  8. http://smartcitiescouncil.com/article/old-funding-mechanism-may-jumpstart-indias-new-smart-cities

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