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Cities need to get smarter in funding Smart City initiatives

Shrinivas Kowligi     March 1, 2016

Shrinivas Kowligi, Partner - Smart Cities and Urban Transformation, Government and Transaction Advisory Services, Ernst and Young LLP
Many 'Smart City Watchers' (a catchphrase for all those who are following India's Smart City Mission closely) may have been dismayed by the absence of even mention of core urban sector schemes in the Finance Minister's speech. They can take heart that the Union Budget FY 16-17's allocation of Rs. 7296 Cr for Smart City Mission and AMRUT finds mention in the annex, and it is just marginally higher than the previous year.

GoI's Smart City Mission and AMRUT (Atal Mission for Rejuvenation and Urban Transformation) are the two flagship schemes in the urban sector, which support creation of world-class urban environments in select cities to make them competitive, and for a larger set of cities and towns target creation of basic infrastructure services in water supply, sanitation and transport. These two complement the Swacch Bharat Mission and other schemes.

The funding needs of these programs expand telescopically with inclusion of more cities each year, and multi-year implementation cycle of projects kick in. Unfortunately, the budget allocations have not kept apace this year. This move clearly signals the need for urban India to get more 'smart' about the way it funds its infrastructure and service delivery.

Government of India's Smart City Mission just recently announced list of top 20 cities, that competed to gain access to Central funding support. A competitive spirit fostered amongst cities required them to frame visionary while yet cogent and implementable plans to make their cities more liveable.40 more cities are expected to be on-boarded in FY 16-17.

Expectations amongst the digitally connected urban middle-class for sure have risen high. A whole spectrum of industries and technology players, including those from the developed world are hugely excited about the new opportunity set.While the allocations may be disappointing to many - across city leaders and private sector - this may been seen as an opportunity to drive some serious change.

Firstly, urban India needs to seriously evaluate its urban form and ways of optimising infrastructure spends. Cities cannot expand laterally with no constraints, and still hope to find the funds to create greenfield infrastructure.Compacting our cities and creating public spaces should be the approach, moving away from suburban sprawl.

Secondly, 'More from less' - should be the new mantra. Existing infrastructure capacity has to be optimized and debottlenecked, demand patterns better managed, and performance and efficiency considerations prioritized. Digital technologies play a big role in enabling these transformations. Civic infrastructure operations management should receive as much, if not more emphasis than civic infrastructure creation.

Finally, cities will need to innovate and find new ways of creating or leveraging their wealth from within in new forms of public-private partnerships and mechanisms to fund city improvements. Leveraging land, development rights, pursuing transit oriented development, streamlining transportation networks to urban form, mobilising communities into action, improved calibration and collection of local taxes, et al are amongst the many innovations waiting to happen in our cities on a large scale.

While it may be easier to expect the Finance Minister to allocate a larger budget, cities have been shown a more challenging path to follow. Frugal innovation is the need of the hour in our cities. City leaders need to show entrepreneurial zeal and creative leadership in transforming our cities.  Clearly, our journey to get smarter has just begun!

(The author is Partner - Smart Cities and Urban Transformation, Government and Transaction Advisory Services, Ernst and Young LLP)


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