How will an SPVin a smart city work?

A spe­cial pur­pose ve­hi­cle will de­velop a site and, af­ter earn­ing the req­ui­site div­i­dend, will exit the project

HT Estates - - HTESTATES - Sachin Sand­hir

Akey ques­tion that has arisen in the process of de­vel­op­ment of the smart city scheme in In­dia is whether mu­nic­i­pal bod­ies are in­deed ca­pa­ble of meet­ing the chal­lenges posed by new de­vel­op­ment de­mands. The Gov­ern­ment of In­dia has taken a view to let the de­vel­op­ment of smart cities be taken up by spe­cial pur­pose ve­hi­cles (SPVs) – com­pa­nies cre­ated by the state and mu­nic­i­pal bod­ies to ex­pe­dite the process of de­vel­op­ment.

Cer­tain sec­tions of civil so­ci­ety have been view­ing this as a ways to side­step the nor­ma­tive process of us­ing elected lo­cal self gov­ern­ments to drive a broader agenda – es­sen­tially set­ting a trend to un­der­mine lo­cal self gover­nance by re­plac­ing them with sim­i­lar en­ti­ties in fu­ture de­vel­op­ments.

This ar­gu­ment is also re­in­forced by stip­u­la­tions where elected lo­cal self gov­ern­ments are en­cour­aged to del­e­gate the rights and obli­ga­tions of the mu­nic­i­pal coun­cil with re­spect to the smart city project to the SPV.

The chief ex­ec­u­tive of­fi­cer of this SPV, usu­ally a se­nior bu­reau­crat ap­pointed by the state gov­ern­ment has a fixed ten­ure of three years and can­not be changed with­out the au­tho­ri­sa­tion of the gov­ern­ment of In­dia.

The struc­ture would or­di­nar­ily ap­pear to be in­flu­enced by in­dus­trial town­ship au­thor­i­ties ( en­shrined in the mu­nic­i­pal law, but with­out any elected mem­bers) and SPV based gover­nance struc­tures in pri­vate town­ships as pro­moted by sev­eral state gov­ern­ments to pro­mote pri­vate sec­tor investment.

How­ever, a quick pe­rusal of the smart city obli­ga­tions would in­di­cate that the process of de­vel­op­ment of a smart city com­prises of func­tions which have tra­di­tion­ally never vested with mu­nic­i­pal bod­ies.

The bulk of smart city ini­tia­tives in In­dia are based on area based de­vel­op­ment, ie de­vel­op­ment of new real es­tate – a func­tion that is not within the oblig­a­tory or dis­cre­tionary func­tion of a mu­nic­i­pal body as per the 12th sched­ule. Es­sen­tially, the SPV would work as a mas­ter de­vel­oper, en­ter­ing into ar­range­ments with other de­vel­op­ers to de­velop the site for re­de­vel­op­ment, new de­vel­op­ment or retrofitting, and there­after ex­it­ing the project, hav­ing earned its req­ui­site div­i­dend/ ex­pended the amounts for cap­i­tal works.

Be­ing a sep­a­rate body cor­po­rate ( typ­i­cally un­der the Com­pa­nies Act, 2013), it can take up pro­cesses, works and mech­a­nisms which the mu­nic­i­pal body may not be em­pow­ered to do in terms of law or its pro­cesses, such as be­ing able to raise large amounts of debt, en­ter into joint ven­ture ar­range­ments, lease, pur­chase or sell as­sets – most of which, for mu­nic­i­pal­i­ties – need sep­a­rate sanc­tion from the state gov­ern­ment.

Mu­nic­i­pal­i­ties in In­dia have largely re­mained the same in terms of struc­ture, func­tion and functionaries since in­de­pen­dence, cater­ing largely to day to day civic func­tions such as street sweep­ing, man­ag­ing garbage and street lights.

Smart cities, apart f rom these func­tions – also deal with use of data and be­ing able to en­vi­sion a city in terms of its fu­ture. This would re­quire a body cor­po­rate that is not tied down by its his­tor­i­cal or le­gal lim­i­ta­tions – and be open to new ways of work­ing.

In the case of a smart city, tax based fi­nanc­ing is be­ing stated as a key source of funds to meet debt and re­cur­ring costs of the smart city, and mu­nic­i­pal bod­ies are con­sti­tu­tion­ally au­tho­rised to levy and col­lect land based tax.

The gen­eral idea is to ex­hibit a high per­form­ing ur­ban sys­tem that can be used as an inspiration by the mu­nic­i­pal body to ex­tend to other parts its juris­dic­tion. The SPVs are also able to en­gage with cit­i­zens in ways and means that mu­nic­i­pal bod­ies are not or­di­nar­ily able to – par­tic­u­larly us­ing so­cial me­dia.

Un­like mu­nic­i­pal bod­ies, where pro­fes­sional cadres have been gen­er­ally lack­ing on ac­count of a per­pet­ual mis­match be­tween fund, func­tion and func­tionary, the SPVs are much more busi­ness ori­ented and have staffing that is com­men­su­rate with their func­tions.

Cities go­ing smart will also at­tract in­vestors be­cause of im­proved in­fra­struc­ture – trans­porta­tion, waste wa­ter man­age­ment, tech­nol­ogy in­fra­struc­ture and pub­lic ser­vices. “It will def­i­nitely lead to in­creased ab­sorp­tion, bet­ter qual­ity of ser­vices and even lead to peo­ple want­ing to pay a premium for a bet­ter qual­ity of life. That will bring in the rev­enue,” says Aamer Azeemi, smart cities ad­vi­sor.

Im­proved fa­cil­i­ties in an area will by de­fault im­pact real es­tate val­ues in an area. Res­i­den­tial or com­mer­cial units retailing at ₹ X will by de­fault be sold at ₹ 5X over a few years with im­prove­ments in in­fra­struc­ture kick­ing in and de­pend­ing on mar­ket con­di­tions, say ex­perts.

Ex­perts also say that smart city plans by them­selves at this point in time do not mean much, and have to be trans­lated to de­tailed ABD­plans­base­donex­ist­ing state laws – it is only then that spe­cific de­tails re­gard­ing amount of built-up area will emerge. Also, gov­ern­ment­fundswill­not­beused in all of the de­vel­op­ment; the pri­vate sec­tor is ex­pected to par­take sig­nif­i­cantly in de­liv­ery – so who does what and how much is also some­thing that will emerge in the months to come.

men­tion new tech­nol­ogy, make cities more liv­able and pre­vent Chen­nai-like disas­ters?

Out of the 33 cities se­lected un­der the Smart Cities Mis­sion so f ar, 70% have pro­posed im­prov­ing ba­sic in­fra­struc­ture and pro­vid­ing so­lu­tions to prob­lems such as wa­ter­log­ging, says Jitesh Brahmk­sha­triya, gen­eral man­ager, head mas­ter plan­ning, Tata Con­sult­ing En­gi­neers Lim­ited.

Ac­cord­ing to Aamer Azeemi, a smart cities ad­vi­sor, roads in de­vel­oped coun­tries are made of good ma­te­rial and peak on top, let­ting rain­wa­ter to flow off and not col­lect on top and dam­age them. In In­dia roads are badly built with no scope for drainage.

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