India's plan to develop smart cities in PPP mode needs more clarity

The grey areas in the PPP model — ownership, security and privacy of data — can risk the entire system
India's plan to develop smart cities in PPP mode needs more clarity
India's plan to develop smart cities in PPP mode needs more clarity

In the recent Budget, Finance Minister Nirmala Sitharaman announced that the government is proposing to develop five new smart cities in collaboration with states in Public Private Partnership (PPP) mode. But, there is a question mark on the ‘public’ involvement here, as there is no increase in the budgetary allocation as compared to the previous year. In 2018-19, Rs 6,169 crore was allocated towards the Smart Cities Mission. The same figure had increased by 7% to Rs 6,450 crore in 2019-20.

The Smart Cities Mission is a central government mission in which 100 cities have been selected to be developed into ‘Smart Cities’. These 100 cities were selected in four rounds based on a Smart City Challenge, in which cities competed on various parameters. In this year’s Budget speech, it was mentioned that the five new smart cities would be chosen considering the best choice that is associated with three principles: upcoming economic corridors, revitalisation of manufacturing activities and technology and demands of aspirational classes. This is unlike the Smart Cities Challenges, were the parameters of city selection were more specific. These three broad concepts outlined by the Finance Minister requires more detailed contextualisation in the event of city selection.

There is no universal definition of what a smart city is. Hence the question of how ‘smart’ our cities are needs to be analysed. One of its major features would include use of technology, information and data in improving infrastructure and service delivery. It remains to be seen if these projects, which are being executed under this mission, are not turning out to be usual infrastructure development due to financial, time and expertise constraints.

While more and more cities are added to this category of aspiring smart cities, the challenges and issues associated with it needs to be analysed and addressed. At present, all the smart cities are being implemented by Special Purpose Vehicles (SPVs). Having another body for executing a city-level project is definitely creating parallel mechanism of governance and undermines the role that a city government (municipal corporations) plays in this context. In the longer run, to make these cities self-sustaining, the city administration should be well prepared. The city should make institutional changes to respond to this changing scenario, where technological interventions will penetrate into more and more urban services. Capacity building, change in skill sets of officials, need for subject-specific experts within the administration, etc. would be some of the aspects that needs to be addressed.

At present, around 21% of funding of the smart cities projects are via the PPP mode. Developing them by involving private sectors will definitely be a win-win situation, as the public sector lacks capital and expertise required in execution and operation of such projects. Right allocations of risks is extremely crucial for attracting private players to participate in such projects, along with strategies to ensure sustained revenue generation. On the other hand, the grey areas here would be ownership, security and privacy of data, which can even risk the entire system.

Sources of funds could be identified for the project but there are many bottlenecks and incapacities with the local government, which is sure to affect the success of the project. For instance, a business ecosystem in a city could be facilitated by the city government. But unfortunately, there is no linkage between chambers of commerce and industries with the local government. It is mostly in the hands of the state and the central government. In such a scenario, how can one expect the smart cities to sustain, even when the Finance Minister was trying to lure investors through her budget speech.

Praseeda Mukundan is Senior Research Associate at the CPPR-Centre for Urban Studies.

Views expressed are the author's own. 

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