States to decide which city should be smart city: Venkaiah Naidu

The ambitious programme to build 100 smart cities is one of the top priorities for Prime Minister Narendra Modi-led government. In a conversation with BUSINESS TODAY, Minister of Urban Development M. Venkaiah Naidu discussed the progress of this grand scheme. Excerpts:

Q. In the last budget, some Rs 7,060 crore was set aside for smart cities. How much money have you spent so far?

A. That is for smart cities and urban rejuvenation of 500 cities which have one-lakh-plus [population]. We have not launched the scheme yet so there is no question of any expenditure. It is a new concept and various stakeholders have to be taken on board.

Q. How much have we progressed in terms of identifying what should be considered a smart city? Will it be a central government initiative or will state certifications be required?

A. The cities are the prime centres of economic activities and 60 per cent of the GDP comes from cities. At the present rate of urbanisation, this may go up to 80 per cent. Keeping that in mind, the PM has given this concept of 100 smart cities. Smart city is making lives of people in a particular city more comfortable and liveable. To make a city smart, you need smart leadership. Not in physical terms but in terms of vision and taking bold decisions. For example, correcting service charges requires political stamina for a leader because all these years, we are used to free services. We made people to think sab kaam sarkar karegi, hum bekaar baithe toh chalega. We have to change the mindset. The PM told us people should be central to the smart city concept.

Smart cities [has] to demonstrate good urban governance. That is also the purpose of the government under models of inclusive urban development. People come to cities for the sake of education, employment, entertainment and economic activity. Along with that, people need better health facilities. So all these things should be the components of urban cities concept. That's how we are planning.

With regards to the expenditure, there is a huge requirement. If you conceptualise smart cities and then count it in academic terms, our rough estimates, for 100 cities itself, you will need around Rs 40 lakh crore in 20 years to ensure basic infrastructure in all urban areas, including 500 cities and smart cities. The government alone cannot provide this [money]. So we are going for the PPP model (public-private partnership) by involving the private sector in a big way.

The selection criteria are at the final stage of approval. In the coming days, before March, we will go to Expenditure Finance Committee (EFC) and then to the Cabinet. It will be rolled around March end. [Smart cities] selection will be [done] through competition. The willingness of the city and its  leadership to take reforms and take bold actions [will be assessed]. A detailed project report and appraisal approved by the government will follow once this competition is over. [Michael] Bloomberg who called on the Prime Minister the other day, and met me also said they will be helping us in competition to identify smart cities. We will take their support, [but] at the end of the day, it is the central government, state governments and urban local bodies [who] will be involved in finally identifying the cities. I am also planning to have gradation of each city based on sanitation, infrastructure, transport, education facilities, open public space and credit worthiness.

Q. Who will do that - Centre or separate agencies?

A. How can our officers do it? We will be engaging CRISIL and a lot of organisations. For example, certain states already have credit ratings, like Maharashtra.

Q. So the central funding will be based on the ratings?

A. Naturally. [It is their] willingness to reform. These challenges will be designed in such a way that it will incentivise more cities to participate.

Q. Is there any cap on the 100 smart cities?

A. As of now, it is 100. If you have more money, then you can go for more [cities].

Q. Does this include greenfield and brownfield cities?

A. Yes. Construction of greenfield cities is a little more tough as you need huge money and land. Land is a rare commodity nowadays. Still, there is a scope for small greenfield cities. Starting from 2015, we may think of 20 cities. In the next year, we will go for 40 cities and then 40 cities in the year after that. We must create some models, some pilot projects that will inspire others to join this.

People's aspirations are growing. They know what is happening worldwide. Everybody wants a smart city. Every MP wants a smart city, every state government wants it and every city wants to be a smart city. They are unable to understand its implications. We have to tell them that smart city programme will focus on four strategies: retrofitting, redevelopment, greenfield and pan-city infrastructure.

Q. Will the greenfield development be done within brownfield projects or are you talking about greenfield cities?

A. It can be both ways. For example, cities can go for a satellite town nearby. You cannot create a city overnight. You cannot create a city in isolation. See the example of China. There are some new cities built which are deserted now. You need to have better connectivity. You need to have education, entertainment, employment opportunities also. Unless you create that, city cannot survive by itself. People do not live in a city only for the sake of living. Life includes activities.

Q. Can a private developer, let's say with 8,000 acres of land, approach the Centre and ask if it qualifies to be a smart city?

A. If it is a business proposition, then he is on his own. The government will not fund it but will help him get permissions. The other day Lavasa made a small presentation. I am studying in-depth what is Lavasa, its background and why it was stopped. If somebody wants to create a city with good habitation, facilities and also takes care of the environment, why should the government stop it.

Q. So you will not enter into PPP model with them?

A. We won't fund the private projects. I am asking private players to join the government funding. Private people can partner with state and city and if that proposal comes to me, I will support them.

Q. GIFT in Gandhinagar is a state project. Will something like that qualify for a smart city?

A. I have told the states that I will give you guidelines for smart cities, the choice is yours. We are in a federal set-up. We want to operate on the principle of cooperative federalism. We want to work as team India. We don't want to dictate from Delhi [as to] which city should be made smart city in a particular state. The states will decide. If Gujarat wants to have Gandhinagar as a smart city, that is their choice. I will only come into the picture to tell them that these are the guidelines and criteria. I had consultations with all the states. I had a meeting with secretaries of the municipal administrations of every state at the national level. The US has shown interest to extend technical support.

The US trade agency USTDA has come forward. I suggested Vishakhapatnam, Ajmer and Allahabad. Their team has gone there. They have been asked to work with local municipal corporations. One preliminary meeting has taken place. One concept meeting had taken place in Delhi with me in the beginning. Similarly, Japan wants to develop Varanasi. They are studying it. Then, Singapore is studying the model for new capital city of Andhra Pradesh - Vijayawada-Guntur. [Countries like] Australia, Germany, Sweden and France are interested. We are engaging them. I am giving them patient hearing. I am seeing their presentations. I am trying to understand.

There was a two-day workshop on this. Many countries have come forward saying that they want to participate. There's a lot of interest across the globe to participate. How far it will translate into action, how far they will be able to walk the talk, we have to see. Companies like Infosys and Wipro want to have IT-based services to play an important role in smart cities.

Q. So will you say that Infosys' Mysore campus is a smart city?

A. I don't. Infosys will engage in one of the cities and offer them services. They have made a presentation. They have some technology wherein they can reduce the energy cost by 40 per cent. I will suggest different cities that these are the avenues and these are the opportunities. They have to take part in open bidding.

Cities will have to create a Special Purpose Vehicle (SPV) consisting of urban local body, state and central governments for planning, implementing, managing and operating the projects, for which the funds shall be released by the Centre. As far as PPP is concerned, they can go for joint interest in which private sponsors consisting of a consortium of private companies will contribute equity to the joint venture (JV).

The model memorandum of understanding for the JV will be provided as part of the guidelines only. Capacity building will be provided by states, and cities for establishment of SPVs and JVs. Digitisation will be funded by the Centre for any city.

Q. Will the Centre fund a part of the SPV?

A. We will be funding through viability gap fund.

Q. Eventually, will there be a certificate given by the ministry of urban development?

A. I don't use the word certificate. It will be handholding. I am engaging all the companies and countries who are interested and [will] show that these are the cities that have been qualified. We will be acting as a guardian.

Are you putting any ceiling on the number of cities per state? The idea is to have two-three [cities] per state, and at least one in northeastern states. Capacity is an important thing.

Q. Can our legal system take care of all redevelopment? Legislature has to be involved in creating new laws.

A. I don't think there's any need because municipal bodies have enough laws. This has to be worked out locally. Let me make it crystal clear. People are thinking that smart cities can be created like this. You cannot rebuild the entire city. It all depends upon the criteria, willingness and preparation of those urban local bodies. For example, if you are going for metro [project]. Metro is going to cost Rs 200 crore per km. Somebody has to study it otherwise companies will not come and invest here. Some feasibility study has to be made. Then, [it is] people's willingness. It will be put to general body discussion in corporation. There will be project monitoring units which will evaluate smart city proposals for extending VGF [viability gap funding].

Q. It seems it will require bringing together many government departments and making them fewer for better coordination.

A. That's an altogether different subject of minimum government and maximum governance. I am simultaneously working with six-seven ministries. Approvals have to be minimised. People are talking about single windows. It's not possible. We had one round of consultation with six ministries. They are working on how to ease [the process] of getting approvals and permissions.

Q. How will the synchronisation between six-seven ministries happen?

A. I have already set up a committee with our secretary to coordinate with those ministries. I myself had a meeting with the ministers. ~

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