Business Today

Essel Infra has tried to decode the governance framework, says CEO Ashok Agarwal

Business Today speaks with Ashok Agarwal, director & CEO, Essel Infraprojects & Essel Utilities, about the company's interest in the government's smart city projects.

twitter-logo Goutam Das        Last Updated: February 27, 2015  | 12:11 IST
Ashok Agarwal, director & CEO, Essel Infraprojects & Essel Utilities
(Photo: Rachit Goswami)

Many companies looking to participate in India's smart city programme say projects will be bankable if the government takes an integrated view of retrofitting a smart city, instead of a piecemeal one. Essel Infraprojects & Essel Utilities want an integrated approach where different projects are all bundled together and given to one large consortium or a master developer. It would de-risk developers because the revenue predictability in projects, such as flyovers, water and waste water, is lower. Ashok Agarwal, Director & CEO, Essel Infraprojects & Essel Utilities, chats with Goutam Das. Excerpts:

Q. What is your definition of a smart city?

A. In the case of urbanisation, unless you prepare an integrated master plan for the long-term, I mean 40 to 50 years, you can't plan an infrastructure to deliver KPIs (key performance indicators), SLAs (service level agreements) or the efficiencies of a smart city. In India, an important aspect is inclusion. We can't build smart cities only for the rich. So how this model is integrated, inclusive and how you eventually deliver transformation in the quality of life. The model also has to be sustainable and competitive - a city should have its own economic activity, which generates self sufficiency. These are the five key words around which we are working - long-term, integrated, inclusive, sustainable and competitive. Unless these five things come together, you cannot transform the quality of urban life.

Q. Can you explain what you mean by long-term?

A. If the utility corridor in a city has to be dug up every second day, then it is not long-term. You have to forecast the growth of economic activity, population, consumption of all the services around infrastructure and utilities and then plan the city. If you do ad hoc flyovers, utility corridors, etc., then we will see what we are seeing today. There has to be a long-term view where you build capacities. And it can be modular. You need not put the entire investment today. But the plan has to provide for the modular approach so that gradually as the city grows, you are able to take care of the growth without compromising on these five things and ensure the quality of life remains as per expected levels.

Q. What is Essel's role in smart cities?

A. We are into power supply distribution. Today, we operate through five cities. Similarly, we have a water project. We have 11 projects on municipal solid waste. We are converting solid waste to energy. We are also a roads developer - we have 14 road projects in PPP (public-private partnership). One of our group companies is into cable and broadband. We are planning to venture into city gas distribution. We are doing most of the components of a smart city in terms of utility corridors, whether it is power, water, waste, city gas, broadband, roads. If we do all these activities in the same city, can we take an integrated view? Majority of the problem is not IT infrastructure. In terms of investment required, it is only five per cent. You have to have roads, you have to manage traffic, you need footpaths, greenery, corridors, etc. The physical infrastructure needs to be planned for the long-term. First invest in the physical infrastructure.

Q. How can an integrated plan be achieved?

A. Our municipal corporations and development authorities have the plans. The major crunch is resources. Why are the resources not there? You have a long list of city taxes - property tax, entry tax, water tax, sewage tax, education tax, etc. But what is the collection efficiency? We can collect that money. That goes into the corpus of the municipal corporation. How do we address the challenges of the federal structure where things like water, municipal waste, waste water and city roads are municipal subjects? Electricity, land revenue, safety and security are state subjects. If you have to clean up the railway station, it is a central subject. How will you integrate this entire thing? The federal structure does not allow integration as such. We have tried to decode the governance framework on how to integrate it. We are saying that if it is a brownfield city, the 'core' contract can be signed with the municipal corporation whereby you (a private company) take over those activities directly. Then you also become the collection agent for taxes. I am not trying to be lawmaker. The corporation decides the laws and the tax rates. I am merely a collection agent; money goes to the escrow account. So we create an investment vehicle below the municipal corporation where the entire money goes back. Better collections will lead to a higher corpus. Then there is land revenue. If land is auctioned, that money should also come to the investment vehicle. Then you define what is a 'core' contract and what is a 'staple' contract. Whatever is not the core subject of municipality but has to be integrated, has to be stapled along with the core contract (such as electricity). Here, the state government has to facilitate. This is how the federal structure issue where the subjects belong to different bodies can come together.

Q. Are you saying all these should come to a single vendor?

A. I am saying that the master developer should be one so that the spirit of integration does not get diluted. When greenfield cities are built, there is one PMC (project management consultant) who works on the entire plan. One PMC plans the entire corridor. They are the master developer. After that I may not be the master of all activities. I should be allowed to subcontract.

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