Viable finance options for India’s smart cities
Smart cities are funded through an allocation of Rs 480 billion from the Central Government towards 109 smart cities, which is to be matched by the respective state governments.
SMART CITIES

Viable finance options for India’s smart cities

Smart cities are funded through an allocation of Rs 480 billion from the Central Government towards 109 smart cities, which is to be matched by the respective state governments.

As R Srinivasan, Executive Vice-President & Head, L&T Smart World and Communication, tells us, “Rs 90 billion was allocated for the selected cities in the Union Budget FY18-19. The balance funds are being mobilised from other convergence funds like the urban rejuvenation mission AMRUT, JNNSM, Swacch Bharat Mission, Disaster Recovery project Funds and ULB funds. Entities such as EESL have been able to raise funds from multilateral agencies towards green energy projects. Further, funds can be raised through municipal bonds and long-term infrastructure loans from ADB, JICA and the World Bank.” 

For his part, Gautam Balakrishnan, Vice President-Smart Cities Business, Smart Cities, Tata Projects, says, “Under the mission, what the Government is funding at present is just a fraction (about 20 per cent) of the total investment required.” He believes the mission can thrive with active participation from private players for large projects. “A radical redesign of PPP to account for regulatory uncertainty and financial risk will help,” he adds. 

Moreover, the Government needs to boost public spending as well as generate revenue on its own, which can be achieved by improving credit worthiness. As Balakrishnan concludes, “Outcome-based funding and the value capture model can also be examined as options.”

However, Pratap Padode, Founder & Executive Director, Smart Cities Council India, adds a note of caution, “Several cities are grappling with ill-conceived projects which are headed nowhere while in several cases cities do not have the money to pay for the work to be done. This is also the case with some infrastructure projects resulting in the contractors taking a back seat in execution since many are worried that the election fortunes may alter the course of this movement.”
 

Smart cities are funded through an allocation of Rs 480 billion from the Central Government towards 109 smart cities, which is to be matched by the respective state governments.As R Srinivasan, Executive Vice-President & Head, L&T Smart World and Communication, tells us, “Rs 90 billion was allocated for the selected cities in the Union Budget FY18-19. The balance funds are being mobilised from other convergence funds like the urban rejuvenation mission AMRUT, JNNSM, Swacch Bharat Mission, Disaster Recovery project Funds and ULB funds. Entities such as EESL have been able to raise funds from multilateral agencies towards green energy projects. Further, funds can be raised through municipal bonds and long-term infrastructure loans from ADB, JICA and the World Bank.” For his part, Gautam Balakrishnan, Vice President-Smart Cities Business, Smart Cities, Tata Projects, says, “Under the mission, what the Government is funding at present is just a fraction (about 20 per cent) of the total investment required.” He believes the mission can thrive with active participation from private players for large projects. “A radical redesign of PPP to account for regulatory uncertainty and financial risk will help,” he adds. Moreover, the Government needs to boost public spending as well as generate revenue on its own, which can be achieved by improving credit worthiness. As Balakrishnan concludes, “Outcome-based funding and the value capture model can also be examined as options.”However, Pratap Padode, Founder & Executive Director, Smart Cities Council India, adds a note of caution, “Several cities are grappling with ill-conceived projects which are headed nowhere while in several cases cities do not have the money to pay for the work to be done. This is also the case with some infrastructure projects resulting in the contractors taking a back seat in execution since many are worried that the election fortunes may alter the course of this movement.” 

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