JNNURM versus the Smart Cities Mission
Four government schemes on infrastruct ure provisioning i n urban areas – Jawaharlal Nehru National Urban Renewal Mission (JNNURM), Integrated development of s m a l l a n d m e d i u m t own s (IDSMT), Urban infrastructure Development Scheme for Small & Medium Towns (UIDSSMT) and Accelerated Urban Water Supply Programme (AUWSP) have all focused on creation of capital assets.
T h e y h ave essentially focused on replacing dilapidated assets or where demand had outgrown capacity, or creating new assets where none existed – paying little or no regard to how the cities work on an overall basis.
Smart cities change this paradigm to a significant extent – the Smart Cities mission will look at how cities (are supposed to) work, and allows for adapting infrastructure (hard assets) using an appropriate mix of information and technologies.
As on date, about 33 cities have been selected to receive benefits under the Smart Cities Mission. While 20 were selected through a competition, another 13 were recently added through a fast track process. The scheme encourages cities to carry out comprehensive development with a choice of retrofitting, redeveloping or developing a previously undeveloped part of the city (greenfield).
Unlike the JNNURM, the Smart Cities Mission talks of cities taking up one area development project and one pan city project. The implementation of the scheme will be routed through a special purpose vehicle (SPV) that will have control over the use of funds and be accountable for how the project is being executed. An SPV will work as a master developer, enter into arrangements with other developers to develop the site for redevelopment, new development or retrofitting and thereafter exit the project after having earned a requisite dividend.
The biggest lacunae of the JNNURM scheme was that it was not implemented right and some projects did not even get public support. In many cities funds were used to pay salaries to employees for which there was no accountability, says Amit Bhatt, strategy head, urban transport, EMBARQ India.
Also, while t he creation of SPVs will ensure greater accountability of funds and control by the Central government, the biggest challenge will be faced by cities that have multiple authorities, say experts.
In Ahmedabad for instance, the municipal corporation is the biggest and the only entity that looks after water, sewage, transport. The head of the municipality or the municipal commissioner is the senior most IAS officer and reports directly to the chief minister. It is also the first city to float municipal bonds and raise money for projects.
Another challenge will be to replicate this micro project (are development project) at the macro (city) level, says Bhatt.
Sunil Agarwal, managing director, Black Olive Realty Ventures LLP, says that an SPV will attract funds depending on the performance of cities. Citing the example of Denver Urban Renewal Authority (DURA), he says that the county of Denver floated an SPV when it shut down its airport. The land was used to redevelop residential and commercial. The SPV that DURA created was different because it had the ability to issue bonds in the capital markets.