The Smart Cities Mission ensures that systems and regulations that balance growth, business friendliness and public interest are in place, say Upendra Joshi and Shivanshu Thaplyal.
India continues to be one of the fastest growing economies in the world. A significant contribution to the increase in gross domestic product (GDP) rate is made by urban cities. This economic boom has caused immense stress upon the infrastructure of such urban cities.
Therefore, there is an impending need to upgrade basic infrastructure facilities like waste management, sanitation, water supply, power distribution, and public transport with innovative strategies and cutting-edge technology. The Government of India has accordingly taken steps to implement a systematic plan to improve and modernise social and economic infrastructure facilities in the urban cities.
Mission Statement
To assess the investments required for modernisation of urban cities in the infrastructure space, the Ministry of Urban Development constituted a High Powered Expert Committee that released a report titled æIndian Urban Infrastructure and Services’ in 2011 (HPEC Report). Based on the observations and recommendations in the HPEC Report, the government in June 2015 issued the Mission Statement & Guidelines for Smart Cities (Smart Cities Mission & Guidelines).
Through the Smart Cities Mission, the government aims to develop 100 cities in different states within a time span of five financial years ending in 2020. The objective of the guidelines is to improve the standard of living of citizens in urban cities by equipping these cities with core infrastructure facilities, and harnessing technology to the existing infrastructure facilities for smarter solutions.
Some core infrastructure facilities that the Smart City Mission aims to provide include: ô(i) adequate water supply; (ii) assured electricity supply; (iii) improved sanitation, including solid waste management; (iv) efficient urban mobility and public transport; (v) affordable housing, especially for the poor, (vi) robust Internet connectivity and digitalisation; (vii) good governance, especially e-governance and citizen participation; (viii) sustainable environment; (ix) safety and security of citizens, particularly women, children and the elderly and (x) health and education.ö
Smart Solutions
The guidelines also provide an illustrative list of the smart solutions that it aims to provide, viz., smart parking, intelligent traffic management, electronic service delivery, smart meters and management, recycling and reduction of waste, video crime monitoring, tele-medicine and tele-education etc.
The Smart Cities Mission focuses on area-based development which the government plans to achieve by (a) improvising an existing built-up area (retrofitting); (b) replacing an existing built-up area by establishing a new layout with enhanced infrastructure (re-development); (c) developing vacant areas around the city to enable extension of the city (greenfield development) and (d) applying smart solutions driven by technology to the existing city infrastructure (pan-city initiative). The government has proposed to implement the Smart City plan by way of a model involving either retrofitting, re-development or greenfield, or a mix thereof and a pan-city initiative.
The guidelines seek to go a step further and mandate the implementation of the Smart Cities Mission at the city level through a special purpose vehicle (SPV) incorporated as a company. This SPV is intended to have complete operational independence and autonomy in decision making. The public-private partnership model is being encouraged at this level as well and is certainly a bold move aimed at infusing urgency and professionalism into the mission. While the relevant state government along with the concerned Urban Local Bodies (ULBs) must together always hold a majority stake (with each of them holding equally inter se), private participants including financial institutions could hold up to 49 per cent stake in the SPV.
Result-oriented Approach
The effort to ensure that the SPV is driven by a result-oriented approach is indeed encouraging. The requirement to have independent directors on the board of directors of the SPV in addition to directors nominated by the state government and ULBs is an indicator. Further, the powers of the CEO of the SPV should be clearly defined, and he should be in a position to steer the SPV towards successful implementation of each Smart City project.
The HPEC Report had expressed the expectation that the government ought to take a leadership role in financing a major part of the urbanisation programme and at the same time, it ought to facilitate and encourage the involvement of the state governments and ULBs. In terms of the guidelines, the government will provide assistance to the extent of about $30 million in the first year and about $15 million for three subsequent financial years.
What is important is that the fund release for every year after the first will be linked to meeting certain identified conditions, including achieving milestones contained in that city’s proposal. It is clear that the intent is to ensure accountability at all times. It is probably the first time that grants are being given to states on a competitive basis, with clear timelines and performance thresholds.
Growth Drivers
The reason the Smart Cities Mission becomes so important is that it really constitutes a bouquet of growth drivers – renewable energy, urban roads, urban transportation, sanitation including solid waste management, affordable housing, IT and IT-enabled services, health and education and more.
It will be important to ensure that systems and regulations that balance growth, business friendliness and public interest are in place. It is therefore heartening to see that course corrections are being attempted and in a number of cases achieved to get diverse laws in sync.
An example is the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act 2013. Recent amendments to this law appear to signal the desire to move effectively and swiftly on the infrastructure front. The emphasis on solar power and conducive regulatory frameworks being put in place for that, the Clean India (Swachh Bharat) campaign etc., all appear to be tying into the vision of building urban cities for tomorrow. This augurs well for the Smart Cities Mission.
There are however a number of areas that require further work. For example, while the government is keen to promote Metro railways as the preferred mode of public transportation, it is important that this be done in a manner that either reconciles all existing laws that have overlapping applications or creates a regulatory framework afresh so as to avoid any inconsistencies, conflicts, and uncertainties. Furthermore, the government will also have to focus on capacity building and ensure that prior to the development of the Smart Cities, an adept legal framework is adopted in terms of procurement procedures.
This framework must also serve to standardise the model documents, such as the concession agreements (in case of public-private partnerships), engineering, procurement and construction contracts and the operation and maintenance agreements in order to optimise operational efficiencies.
The Smart Cities Mission launched by the Prime Minister of India is now firmly in the implementation phase. More importantly, the success of the Smart Cities Mission will herald growth in other core infrastructure sectors. This will pave the way for formulation and implementation of clear and effective plans that will in turn boost investor confidence in the infrastructure space.
About The Authors
Upendra Joshi and Shivanshu Thaplyal are senior members of Khaitan & Co. Joshi has rich experience in all aspects of law and documentation relating to infrastructure projects including power, telecoms, mining, ports, airports, oil & gas, and project financing and has headed several large infrastructure related matters. Thaplyal regularly represents clients in the infrastructure sector and advises on corporate/commercial matters and policy and regulatory issues. He also has significant experience in corporate transactions and has represented a number of clients in domestic and transnational mergers and acquisitions, takeovers and joint ventures and corporate structuring transactions.
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