Indian Cities Are No Smarter Even After Two Years Of Modi Government

The prime minister’s much-touted Smart Cities Mission has been suffering from a gross under-allocation of funds and poor implementation.

Launched amidst much fanfare in June 2015 as one of the flagship programmes of the Bharatiya Janata Party-led National Democratic Alliance (NDA) government, the Smart Cities Mission (SCM) has turned out to be a non-starter. As the government completed two years in power this May, the SCM has been suffering from grossly inadequate budgetary allocations and poor implementation, indicating a lack of seriousness on the government’s part.

In 2014-15, the NDA government’s first year of rule, Rs. 7,016 crore was allocated to the SCM as central assistance to the states. However, the government spent only Rs. 924 crore, mostly in pre-existing schemes. Similarly, in its second year, the government allocated only Rs. 143 crore to the mission. A few government officials at the urban development ministry told The Wire that this amount was sufficient as the cities were required to come up with a comprehensive development plan that year. It took almost two years for the government to come up with the initial plan. The beginning of 2016 saw the government selecting 20 cities for the mission and it then allocated Rs. 3,205 crore for their development under the SCM.

Yet, according to Amitabh Kundu, an economist at Delhi Policy Group, the allocations will not meet the requirements of the mission. “The government had planned to bring 100 cities under the SCM. However, the government has begun with only 20 cities. It has promised to give Rs. 200 crore for the first year to each city and Rs. 100 crore annually for the next three years, thus trying to make up for the lost time. Rs. 200 crore for 20 cities in the first year means that the total amount required is Rs. 4000 crore, while the budgetary allocation is less than that, that is, Rs. 3205 crore,” he said.

How will the government raise the remaining funds? What will its immediate priorities in the limited budget be? How will state contribute in the SCM? These are some of the questions that remain unanswered.

The government’s own estimates do not match the allocations. In 2015, the cabinet approved an investment of Rs. 1 lakh crore in urban development, with an individual outlay of Rs. 48,000 crore for the SCM alone. The government has released only a negligible amount of the total estimated expenditure it had originally planned. This means that the success of the SCM, which was visualised as a public-private partnership project, rests heavily on the willingness of the private sector to invest in the scheme.

The SCM was touted as the biggest-ever urban renewal plan by any government till date. Modi launched the mission with the intention of making Indian cities on par with Western ones in terms of infrastructure, automation and service delivery mechanisms, and turning them into ‘growth engines’. However, it looks like the government neither has the funds nor the enthusiasm to pursue the goal.

Lack of interest from private sector

One of the reasons for this is the lacklustre response from the private sector over the last two years. “Private companies have not shown much interest in investing in essential infrastructure like drinking water supply, waste management and affordable health care. At least, the record in the last two years suggest that. They are more interested in developing profit-intensive sectors like digital infrastructure and real estate,” said Kundu.

According to Kundu, a city can be ‘smart’ only when it is inclusive in nature and gives equal space to the poor. But the model visualised by schemes like the SCM seems exclusionary at this stage as the government’s concentration is solely towards making a city business-friendly. “The immediate requirement of our cities is provision of basic essential services. Our cities still lack some of the most basic facilities like clean drinking water. While the government has had a pro-poor stance until now, its actions don’t indicate the same,” said Kundu.

He said that the low allocation of funds for the SCM means that the government is looking to increase private investment in the scheme, but this could spell failure for the ambitious project. “The private sector has failed to fuel social sector schemes like the SCM in the past too. Consider the other grand project that the government has announced – Housing for All by 2022, in which it plans to build two crore houses in cities. 93% of these houses will be built by private developers. I don’t understand how the poor will afford these houses,” said Kundu. He also served as the chairperson of the Central Committee on Urban Housing Shortage, constituted by the housing ministry during the UPA-I government, which had  had estimated that around 18 million houses are required in Indian cities.

Kundu said that 92% of this demand for housing in India comes from the economically weak section and lower income group categories. “The government proposes that the private developers will charge Rs. 1,200 or a little more from these groups as monthly installments in exchange of the houses. How will the poor afford even this amount? Unless the government intervenes directly in the process, I do not think the problem of housing shortage can be solved.”

At present, the urban renewal programmes hinge almost cripplingly upon private investment and have failed to take off given the lack of interest from the private sector. International consultancy group KPMG has estimated that almost two trillion dollars will be required to successfully complete urban renewal programmes like the SCM and the Atal Mission for Rejuvenation and Urban Trasformation. The government originally proposed to spend only 3% of the figure specified by KPMG – one lakh crore or one trillion rupees. “Let us assume an ideal situation. Even if the government spends what it had proposed, 97% of the investment would still have to come from private companies for the SCM to achieve what it has promised. This makes the scheme unviable,” said Kundu.

Recently, the government added another 13 cities to the SCM, raising the total number to 33. However, if budgetary allocations and implementation processes are taken into account, ambitious plans like the SCM only end up sounding like one of the many jumlas of the NDA government.