Smart Cities in India: Opportunities & Challenges in Implementation
India has 40 cities with more than a million people, 397 cities with between 100,000 and 1 million people, and 2500 cities with between 10,000 and 100,000 people. (Source: World Population Review) and is projected to add 300 million urban residents by the year 2050 as per the first 'World Cities Report 2016 – Urbanisation and Development: Emerging Futures' report by UN Habitat. In view of the fact that the existing urban infrastructure and services in Indian cities are already under pressure, the Indian government announced the Smart Cities Mission in June 2015. 100 cities have been taken up for development as smart cities and will be financed with a combination of government funding under this mission, convergence with funding under other schemes, multilateral/bilateral support, internal revenue mobilisation, value capture financing, municipal bond issue and public private partnerships. A total investment of INR 203,979 crore is proposed to be undertaken for the development of 4500 projects across 99 cities. The objective of the Mission is to promote cities that provide core infrastructure, provide a decent quality of life and a clean and sustainable environment to its citizens through application of 'Smart' Solutions. The focus of Smart Cities is on sustainable and inclusive development and the idea is to look at compact areas to create a replicable model which will act like a light house to other aspiring cities. The Smart Cities Mission is meant to set examples that can be replicated both within and outside the Smart City, catalysing the creation of similar Smart Cities in various regions and parts of the country.
The intent has been to leverage these 100 smart cities to catalyse further investments and improvements in Indian urban infrastructure.
Present Status of Implementation of Smart City projects in India
The smart cities mission has come up for significant criticism on account of delayed implementation and lack of ‘tangible progress on the ground’ over the last three years. In this article, I have attempted to look at the long-term opportunity that smart cities represent particularly for technology/smart solution providers, challenges that they could face, ways in which these could be resolved and also the reasons why this sector represents a long-term business opportunity and must be viewed as such.
Smart solutions/technologies will be required across a variety of urban sectors to improve liveability of cities and reduce the increasing pressure on urban infrastructure and civic services.
The Command and Control Centre (CCC) will constitute the backbone of each Smart city, where information from various departments and various applications will be collected, processed and analysed for better planning and delivery of civic services/infrastructure.The CCC therefore aims to achieve the following:
• Single source of information for all civic functions.
• Platform with the ability to receive, intelligently correlate and share information with stakeholders who are into city operations and planning to better predict outcomes.
• Act as the city’s emergency and disaster management platform.
Since Command and Control Centres constitute the heart of any Smart City, they are being operationalised on priority.
Status of development of Command and Control Centres for Smart Cities
The CCC will depend upon real time as well as recorded inputs from various civic departments and these will be available through smart technological solutions implemented in each of these departments. I have listed some of the areas where smart solutions would be required across various sectors in the following graphic:
Although the business opportunity for technology providers is huge, the significantly delayed implementation of various projects under the Smart Cities Mission (SCM) has led to valid concerns among this community.
The Parliamentary Standing Committee on Urban Development has reported that no more than 1.8 per cent of the funds released for Smart Cities Mission (SCM) have been utilised since its launch in 2015.
While the Committee cited shortage of urban planners as one key reason for the delays, the author by virtue of his experience in Smart Cities from conceptualisation to implementation has attempted to identify reasons underlying delayed implementation of Smart City projects at each stage of the project cycle in a more comprehensive manner:
• During stage 1 of the Smart cities challenge: Many Urban Local bodies were not in a position to comply with various requirements (e.g., Online grievance redressal system, recovery of O&M charges for water supply, coverage of toilets, etc), required for shortlisting under stage 1. An effort was however made to shortlist the requisite number of cities per state based on the number allotted to it (the particular state).
• During preparation of smart city proposals (SCPs): Appointment of consultants for preparation of SCPs was mostly on a least cost basis. This factor coupled with the fact that barely four months were given for preparation of SCPs led to compromises in the quality of SCPs. Projects were often included without adequate consideration given to technical and financial feasibility. Interlinkages between projects to be taken up across sectors were not taken into account. Cities which were not selected in the initial rounds continued facing quality issues in subsequent rounds leading to multiple rounds of SCP preparation.
• During implementation of SCPs:
o Selection of Project Management Consultants (PMC): After selection of cities in various rounds of SCPs, there were often delays in selection of Project management consultants (PMCs). Previous rounds of selection through competitive bidding were scrapped and a fresh round taken up when there were changes of government at the state level.
o Delays in mobilisation of team: PMCs faced considerable challenges in mobilising teams with the requisite experience particularly when the cities in question did not have direct air connectivity to the metros where most experienced consultants are based. There were delays in mobilising the team, ensuring the team's continued commitment to the particular smart city (teams continued to be stretched thin with experts shuffling between projects) and ensuring continuity of the respective team member given that these were often changed at regular intervals. In case of cities where PMCs had quoted aggressively, there were challenges in getting the required experts on board at a competitive price given the demand for skilled urban professionals in recent times.
o Unrealistic timelines for project implementation: The timelines given for the implementation were unrealistic in my view to start out with. This was coupled with constant monitoring and reporting at the local, state and central level which led to further compromises in the quality of deliverables. RFPs for selection of contractors were often issued without a judicious estimation of project costs and feasibility.
o Pressure from the media: Delays in project implementation led to the Special Purpose Vehicle (SPV) as well as the PMCs being taken to task by the local media which was in turn instigated by vested interests. Solutions under smart cities are often initially expensive but with a reduced life cycle cost. This comparison is often not understood by laypersons as well as the media which raises allegations. Responding to media articles has led to a further reduction in time given to the PMC for actual work and delivering projects on the ground.
• Challenges at the level of the SPV: SPVs are often inadequately staffed with appointment of the necessary staff taking much longer than prudent and often delayed due to external interference. In some states, the funds provided by the Centre and the state have not been released to the SPV. In many cases, the challenge is prudently utilising the funds made available.
An analysis of the above reasons makes it clear that the reasons for the delays in project implementation so far have been on account of issues that typically occur when taking up any first of its kind initiative. The cities are now higher up the learning curve in the implementation of Smart City projects. There have been no issues with regard to provision of smart solutions per se.
There are no reasons underlying the delay that will impact the long-term business potential of Smart city projects.
Therefore, from a technology providers’ perspective as long as payment related aspects are protected through a robust contractual structure, the following reasons continue to render Smart Cities as a key business opportunity going forward:
o The opportunity inherent in providing smart solutions across various urban sub-sectors across numerous cities is intact given the growing urbanisation, pressure on urban infrastructure and increasing aspiration levels.
o The opportunity to conceptualise innovative solutions to address urban issues which can be showcased elsewhere.
o Adequate funding is available for these projects. Unlike core infrastructure which requires significant investment and which will be funded largely through convergence with other schemes, smart technological interventions will be largely funded through government funding.
o Many of these projects are structured as an EPC prior to completion with an additional O&M contract for the operations stage. The supplier therefore does not bear the revenue risk associated with collection of user charges. Provisions such as escrow accounts are being incorporated to provide the necessary comfort to the private sector.
o Possibility of scaling up the solutions developed in other parts of the same city given that the SCM has started out with only one area within each city for being smartened up under the Area based development.
o Possibility of replicating smart solutions across other cities since there is a likelihood of other cities being developed as Smart cities in addition to the first 99. Specific states are exploring the possibility of smart cities at the state level in addition to those identified under the SCM.
o Extending smart solutions to other private sector clients given that private developers looking at large area based developments such as integrated townships are also exploring the possibility of smart solutions to enhance overall quality of life. Smart solutions in areas such as healthcare and education where there is a significant presence of the private sector can also lend themselves to being marketed to private players.