Technology in logistics will be key to the cities we’re building

The DMIC is poised to be India’s biggest urbanisation project. Can its model be adopted across the country? Amitabh Kant, MD and CEO, DMICDC, shares his vision for the project with Shashidhar Nanjundaiah and Pratap V Padode, and emphasises the vast and unique opportunities that go with using PPP to build seven new cities and manufacturing hubs along the corridor.

By when do you see the Delhi-Mumbai Industrial Corridor (DMIC) and Dedicated Freight Corridor operational?
I expect the bids will go out by this year and the project to be executed by 2017. The obj­ective of the Delhi-Mumbai Corridor is to develop areas on either side of the Corridor for the purposes of manufacturing. The idea is to help an 8-9 percent per annum growth sus­tained over a 30-year period. And only if it continues to grow at that rate will we be able to lift vast segments above the poverty level.

For the first time in India there will be a container train from Dadri (UP) to Mumbai. This container train will run at high speed carrying double and triple con­tainer stacks. Currently, 70 percent of the luggage from northern India is transported by trucks, with high CO2 emissions. For the first time, goods that took about 12-13 days to reach the ports in western India will reach within 24 hours, and therefore the cost of logistics, will come down, efficiency will be greater and there will be faster movement. Since this is a completely new route, touching new regions for development, the Corridor will greatly boost them, with special emphasis on manufacturing.

Because of the saving in time, the government stands to also gain since the transport charges would be the same as before but the turnover would be several times than before. Do you have any quantified amount as to how much of the load will go off the highways?
Yes. At the moment there is about 68 percent of the traffic travelling on these roads are of transport. But you cannot draw out a differential as such because you will be charging a differential. The objective of the DFC should be to improve the logistic movement not only just run trains, but a clearinghouse through new multimodal logistic hubs connected to the DFCs. These hubs do value-added packaging, and then goods are taken to the ports. There is a very good logistics data bank which tells you which trucker is delaying delivery of goods, at which Inland Container Depot (ICD) there is congestion that is holding up roads and so on. Actually, the problem is that there are so many players that there is a need for logistics to be efficient through the use of information tech­nology (IT).

Stakeholders in the logistics sector use different
IT systems. So we need to provide an overarching layer (for compatibility), and then the importer or the exp­orter should be taking informed decisions. If goods are getting delayed at a particular port, a user should be able to switch over to a different port or trucker or another ICD. But because of lack of information flow, informed decisions cannot be made because of the absence of a logistics data bank. Although we are buil­ding a system for a logistic data bank, DMIC’s true obj­ective is to create new manufacturing hubs.

How are you planning the urbanisation along DMIC?
We are planning greenfield, large manufacturing cities. Such manufacturing cities have never been well planned in India. The traditional manufacturing hubs were located in large or growing cities with industrial strength or state capitals. Such large manufacturing cities had manufacturing as a chief driver of growth. Therefore, we need to plan for cities that cater not
only to industries but to life and work and play, the way Mumbai, Chennai and Kolkata were planned. Earlier Mumbai was a textile city, but now after 300 years it is shif­ting to other activities. Similarly, Kolkata was a manu­fac­turing city and so was Chennai. We’re planning for cities of that nature, and that presents a complex challenge.

Good planning is essential for cities such as those, and is as important to work with the globally best plan­ners, as we do with good technologies. We must under­stand that manufacturing has backward and for­ward integration with organisations. So across America and Europe, sprawling cities were built at a time when land, water and gas were cheaply available. Because of that affordability, you could live in New Jersey and commute to New York conveniently. But today these commodities are fast becoming scarce. Today’s cities are very dense and very vertical. They have to grow on the strength of public transportation system, with neigh­bourhoods on either side of that system. Cities need to be planned around multimodal integrated transport systems. So for the cities we have planned, technology and integration of technology will be the key driver.

When cities were made across America, they were essentially built for cars; but today, the US cities are made with public transport and a city framework put on top. Without that foundation, retro-fitting becomes very difficult, as our country has experienced. Secondly, India has been a very reluctant urbanisation, largely because we believe the communities live in the Gandhian rural philosophy. But so are the Chinese, based in their hist­oric peasantry-led movements. However, in the 1970s, the Chinese realised that the country must be driven by manufacturing, so they went in for heavy manufacturing. This included creating 100-odd new cities, which led to a shift of population from the rural to the urban areas.

The new cities the DMIC is developing are com­pact, dense, vertical, with use of recycled water and digi­tal technology. In other words, we’re employing the con­cept of what are being called interconnected smart cities. We carry out a detailed exercise of geographical planning, on top of which we overlay digital planning and imp­lement the plans.

What is the delivery model for building the cities?
The model of delivery of these projects is that the federal government partners with the states, which owns the land. But states often find it difficult to implement large projects, given lack of resources, so the central government will put in money for trunk infrastructure, including land levelling, internal roads, sewage, drainage water supply, and utility corridors. This is about 35 percent of the expenditure, but as you are aware, these are all non-viable activities. This amount, which the central government will put in, is to the tune of Rs 2,500-3,000 crore across the seven cities. That is a stage when we can truly monetise the land values, and the values shoot up. It is at this stage that the government can award the remaining 65 percent of the projects on a public-private partnership (PPP).

So that’s how the cities is built with Special Purpose Vehicles (SPVs) between the Centre and the states, with the state facilitating the land, the Centre providing the trunk infrastructure money, and then throwing it open to PPP. In addition, there are several early bird projects such as logistic hubs and power projects, which cut across the cities. Those projects will be driven by the Delhi-Mumbai corridor. The Government of India has created a revolving fund, and then a trust can raise more money from banks, capital markets, World Bank, ADB, and so on. DMICDC is a project development company that is developing the projects through SPVs. The trust funds these projects. Many of these projects will cut acr­oss the cities in the Corridor. Land for these projects is brought in by the state governments and the long-term equity and debt is provided from the trusts directly.

What is the current status of the project?
We are at a stage now where the master planning from some of the best planners in the world, the iden­tification of the land and the financial structuring is over. The Japanese government has also put in resources in this structuring through the corpus that the central government has created. The intention is to monetise land values well enough to be able to break even in
12-13 years.

The key challenge in urbanisation is how moneti­sation of the land values is captured by the city to drive the city forward essentially through building the trunk infrastructure beforehand. I don’t think India can afford to build cities any longer without the trunk infrastructure. A city should not be done completely under PPP: the trunk infrastructure must be created in order to enable the balance of the project under PPP.

But because the PPPs will then ride on the trunk infrastructure, do you think the government should also gain from that trunk infrastructure later?
Of course. The government needs to capture the values and the values will shoot up. All over the world, cities have been developed by monetisation of land value. It has not been done so far in India.

Can you throw some light on the recently announced Eco City that you would be building with association of Japan External Trade Organisation?
One of the key drivers of cities is the use of tech­nology, and Japan has a lot of experience in this direction, since it industrialised first in the 1970s and cities such as Kitakyushu and Yokoyama quickly became two of the most polluted cities in the world. Then, in the late 1980s the Japan government took it as a challenge to clean up its cities. In Kitakyushu, every major consumable item is recycled, including water, (solid) waste, bulb, lighting, computers and cars. It is now one of the finest cities of the world. So there is a huge Japanese experience in terms of this backward integration of recycling. That is why the four Japanese consortiums led by Mitsubishi, Hitachi, Toshiba and JVC are working on four existing industrial areas in Maharashtra, Haryana and two in Gujarat to create smart cities. In the existing cities we also work with IBM, Cisco and Accenture to gain good digital technology and we can have the overlay of tech­nology beforehand so that sensors are placed and there could be real time control of the order.