The government is moving faster to boost its urban development mission as it plans to splash a whopping Rs 98,000 crore. Today, the cabinet has approved the creation of 100 smart cities with an outlay of Rs 48,000 crore. The projects will be completed by 2022 under the public-private-partnership model.
Not just that, the cabinet also cleared the Atal Mission For Rejuvenation of Urban Transformation or "AMRUT." This will replace the UPA's Jawaharlal Nehru Urban Renewal Mission. The outlay for this programme which will cover 500 cities will be Rs 50,000 crore.
The Centre hopes these moves will provide much needed thrust to its urban development mission. The smart cities project was announced in July 2014 in the Union Budget. Countries such as Singapore, Japan, France and the United States have shown interest in partnering with India on this project.
Pratap Padode, founder & director, Smart Cities Council of India shares his views on the same.
Below is the edited transcript of the interview to CNBC-TV18.
Q: What do you make of both these missions – the Atal Rejuvenation Mission as well as the smart city project? The total allocation – central assistance I am talking about amounts to about Rs 98000 crore over a 5-year period but lets talk specifically about smart cities, 100 smart cities which the government will provide central assistance of Rs 100 crore every year over the next 5 years, too little?
A: I think rather than complain about the fact that it is too little we should say that finally they whole pet project has been flagged off. So, that is a great achievement. Considering the actual requirement which going forward will be required, this is too little. In fact in our estimate nearly 700 million square feet of residential and 900 million square feet of commercial space requires to be built and along which around 8 urban infrastructure core sector needs are there which totally require over a 20 year period around Rs 60 lakh crore. which means Rs 3 lakh crore a year. So, if you do the math we are woefully short but it is a good beginning.
Q: Let me ask you about this business of setting up special purpose vehicles to be created for each city and state governments to ensure this steady stream of resources for SPVs. How feasible is that likely to be and do you believe that private sector participation will be enthusiastic?
A: In the short run already the private sector is showing signs of taking forward the smart city concept which has been seeded by the Prime Minister by actually developing their own 1000 acre and 500 acre kind of townships and smart city concepts. I think those are already in motion. So, what we are going t o see in the short run which is probably in the next 3-5 years a whole lot of such projects coming up parallel which will actually give an indication that there is an opportunity for doing a public private partnership (PPP) provided the government can move forward in actually allocating land.
Q: Why do you feel confident about that? Land of course is a separate issue, we have got the private sector currently dealing with broken balance sheets. We are seeing the private sector withdraw from public private partnerships whether it is the road sector or any of the other infrastructure sectors, why do you feel confident that we will perhaps see the private sector participate as far as these two missions are concerned?
A: Real estate sector development is banking upon any infrastructure project that the government puts up. The moment you have these 100 cities and you satisfy one key infrastructure norm whether it be a bridge or whether it be a water front, the real estate development is going to pan out. For instance the DMIC, DMIC is a good example. You have a DFCC the whole freight corridor coming up and along side a whole lot of cities are going to come up which the government has planned. But no sooner will you see this rail track come up there will be private developments taking shape because they can take decisions much quicker and they don't need to depend upon land acquisition from the government's side.
Q: Let us now talk about the Atal Mission for Rejuvenation and urban transformation which involves 500 cities, this in a sense replaces the UPAs JnNURM scheme with an allocation of about Rs 50000 crore. How significant a move is this going to be and what do you see as being the key challenges that this mission is likely to face?
A: This quite a doable thing in the sense that we are talking about retrofitting the brownfeild cities. Retrofitting a brownfeild city is much more comprehensible and doable in the current norms. Of course there are challenges, there will be just like how Delhi Metro faced in terms of laying out the Delhi Metro line in a live city or the Mumbai Airport when it actually got constructed. However we have seen that there has been a fair amount of success in actually achieving mega projects in busy cities like this. So, I anticipate that in tier II cities and so on that the government will actually come up with we are going to see that this kind of a mission will take place much sooner. Of course there have to be yardsticks which the government will come out and every city has to satisfy certain criteria before which they can be given funds and then obviously the tranches of funds will depend upon their own timely completion and quality checks etc. So, it is going to be a challenge but I see that happening much easier.
Q: In terms of clarity now specifically from an SPV structuring point of view, what is it that you would like to see because the fine print of course hasn't been put out just yet?
A: Two issues prior to that which needs to be addressed, one is, is there an empowerment of mayors to handle these cities because you have Budget, you allot certain Budgets to them but we need a city CEO who is actually accountable and responsible for delivering these projects on the ground. Chief Minister of a state has got far too many compulsions across beyond the city where his time is divided and he cannot narrow this down. So we need one structuring to make us city specific CEO accountable to this.
Second part is organising the balance sheets of these states because finally if they are going to raise funds for cities they need to be able to – somebody who is actually lending money to them should be able to hold somebody accountable. What if things don't work out whom do you hold accountable. So, these two challenges need to be met before which the SPVs would – because the SPVs are going to get otherwise stoned walled by these two real challenges which will come up.
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