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Time to smarten up for the Smart City project

By Dipanjon Konwar
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For the citizens of Guwahati, to hear the Minister of Guwahati Development Department informing the Assembly that �the Smart City project is tougher than we thought�, was a bit of a dampener. The Minister stated that the Central assistance for the Guwahati Smart City project will be Rs 488 crore.

In January 2016, Guwahati, with the rank of 17, made it to the first list of 20 cities of India selected by the Ministry of Urban Development, using the �City Challenge� or the competition method to select cities to be developed as �Smart Cities�. The Guwahati Municipal Corporation (GMC) submitted a proposal for Rs 2,256 crore investment in area-based development (ABD) and pan-city solutions spread over a period of five years. For ABD, each city has to identify an existing area to develop within the city or a new area on its outskirts. The pan-city initiative should improve the delivery of services and/or infrastructure for the majority of people across the city, using information and communication technologies. For this purpose, the equity contribution of the Assam government will be Rs 500 crore.

The very first requirement for implementation of the Smart Mission at the city level is to create a Special Purpose Vehicle (SPV). The SPV will plan, appraise, approve, release funds, implement, manage, operate, monitor and evaluate the Smart City development projects. The SPV will be headed by a full-time CEO and have nominees of the Central and State governments and urban local bodies (ULBs) on its board.

As the first step, �Guwahati Smart City Development Agency Limited (GSCDAL)� was incorporated on May 11, 2016, under the Companies Act, 2013, with the Registrar of Companies, Shillong. This company limited by shares with an authorised capital of Rs 200 crore has the following registered office address � The Commissioner, GMC, Panbazar, Guwahati. Eight IAS and ACS officers of the State were appointed as the Directors with the Chief Secretary of the State being the Chairman of the Board of Directors.

It is clearly documented in the guidelines for implementation of the Smart City project that the States/urban local bodies shall ensure that (a) A dedicated and substantial revenue stream is made available to the Special Purpose Vehicle so as to make it self-sustainable and could evolve its own credit worthiness for raising additional resources from the market; and (b) Government contribution for the Smart City is used only to create infrastructure that has public benefit outcomes.

The execution of projects may be done through joint ventures, subsidiaries, public-private partnership (PPP), turnkey contracts, etc, suitably dovetailed with revenue streams.

The State and the ULBs (for Guwahati they are GMC and GMDA) will be the promoters of the SPV having 50:50 equity shareholdings. The private sector or financial institutions could be considered for taking equity stake in the SPV, provided the shareholding pattern of 50:50 of the State and the ULB is maintained and the State and the ULB together have the majority shareholding and control of the SPV.

The funds provided by the Government of India in the Smart Cities Mission to the SPV will be in the form of tied grant and kept in a separate Grant Fund. These funds will be utilised only for the purposes for which the grants have been given and subject to the conditions laid down by the Ministry of Urban Development.

It is required that the State Government and the ULB will determine the paid up capital requirements of the SPV commensurate with the size of the project, commercial financing required and the financing modalities. It is hoped necessary thought have been given by our administrators while finalising the Authorised Capital of Rs 200 crore of the Guwahati Smart City Development Agency Limited.

The Central funds and the matching contribution by the State/ULB will meet only a part of the project cost. The balance funds are expected to be mobilised from:

i) The State/ULBs� own resources from collection of user fees, beneficiary charges and impact fees, land monetisation, debt, loans, etc.;

ii) Additional resources transferred due to acceptance of the recommendations of the Fourteenth Finance Commission (FFC);

iii) Innovative finance mechanisms such as Municipal Bonds with credit rating of ULBs, Pooled Finance Mechanism, Tax Increment Financing (TIF);

iv) Other Central Government schemes like Swachh Bharat Mission, AMRUT, National Heritage City Development and Augmentation Yojana (HRIDAY);

v) Leverage borrowings from financial institutions, including bilateral and multilateral institutions, both domestic and external sources;

vi) States may also access the National Investment and Infrastructure Fund (NIIF), which was announced by the Finance Minister in his 2015 Budget Speech;

vii) Private sector through Public-Private Partnership (PPP).

Now, let us study how Bhubaneswar, the topper in the Smart City Challenge, is executing its Smart City project. Bhubaneswar was the first city to constitute an SPV � Bhubaneswar Smart City Limited (BSCL). The BSCL has a 16- member Board of Directors with representatives from various departments, one from the Central Government and five independent directors. The BSCL has an authorised capital of Rs 500 crore. Of this, the State Government and the Bhubaneswar Municipal Corporation will have a share of Rs 112.50 crore each and the Bhubaneswar Development Authority will contribute a share capital of Rs 250 crore.

The Bhubaneswar Smart City proposal pegs the total project cost at Rs 4,537 crore, including Rs 4,095 crore for 56 projects under ABD and Rs 442 crore for one project under the pan-city proposal for the Intelligent City Operation and Management Centre.

The Bhubaneswar project fund will be sourced from Smart City Mission Fund (Rs 950 crore), convergence plan with State and Central schemes (Rs 525 crore), PPP (Rs 2,563 crore), city infrastructure funds (Rs 184 crore), public-private community partnership (Rs 30 crore), commercial borrowings (Rs 30 crore), and loan programme from the Asian Development Bank (Rs 210 crore).

It is hoped that with the new Assam government, which has been in the seat of power for more than three months now, will smarten up and have a detailed study of the Guwahati Smart City proposal. The Guwahati Smart City executives need to study and adopt the best practices and borrow innovative funding methods from the other Smart Cities who have taken off first from the start blocks. The citizens of Guwahati have high hopes that the Smart City mission will improve the urban infrastructure, remove the ills like flash floods, improve the quality of life with 24x7 electricity and water, and create a safe, clean and sustainable environment conserving the heritage and culture.

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Time to smarten up for the Smart City project

For the citizens of Guwahati, to hear the Minister of Guwahati Development Department informing the Assembly that �the Smart City project is tougher than we thought�, was a bit of a dampener. The Minister stated that the Central assistance for the Guwahati Smart City project will be Rs 488 crore.

In January 2016, Guwahati, with the rank of 17, made it to the first list of 20 cities of India selected by the Ministry of Urban Development, using the �City Challenge� or the competition method to select cities to be developed as �Smart Cities�. The Guwahati Municipal Corporation (GMC) submitted a proposal for Rs 2,256 crore investment in area-based development (ABD) and pan-city solutions spread over a period of five years. For ABD, each city has to identify an existing area to develop within the city or a new area on its outskirts. The pan-city initiative should improve the delivery of services and/or infrastructure for the majority of people across the city, using information and communication technologies. For this purpose, the equity contribution of the Assam government will be Rs 500 crore.

The very first requirement for implementation of the Smart Mission at the city level is to create a Special Purpose Vehicle (SPV). The SPV will plan, appraise, approve, release funds, implement, manage, operate, monitor and evaluate the Smart City development projects. The SPV will be headed by a full-time CEO and have nominees of the Central and State governments and urban local bodies (ULBs) on its board.

As the first step, �Guwahati Smart City Development Agency Limited (GSCDAL)� was incorporated on May 11, 2016, under the Companies Act, 2013, with the Registrar of Companies, Shillong. This company limited by shares with an authorised capital of Rs 200 crore has the following registered office address � The Commissioner, GMC, Panbazar, Guwahati. Eight IAS and ACS officers of the State were appointed as the Directors with the Chief Secretary of the State being the Chairman of the Board of Directors.

It is clearly documented in the guidelines for implementation of the Smart City project that the States/urban local bodies shall ensure that (a) A dedicated and substantial revenue stream is made available to the Special Purpose Vehicle so as to make it self-sustainable and could evolve its own credit worthiness for raising additional resources from the market; and (b) Government contribution for the Smart City is used only to create infrastructure that has public benefit outcomes.

The execution of projects may be done through joint ventures, subsidiaries, public-private partnership (PPP), turnkey contracts, etc, suitably dovetailed with revenue streams.

The State and the ULBs (for Guwahati they are GMC and GMDA) will be the promoters of the SPV having 50:50 equity shareholdings. The private sector or financial institutions could be considered for taking equity stake in the SPV, provided the shareholding pattern of 50:50 of the State and the ULB is maintained and the State and the ULB together have the majority shareholding and control of the SPV.

The funds provided by the Government of India in the Smart Cities Mission to the SPV will be in the form of tied grant and kept in a separate Grant Fund. These funds will be utilised only for the purposes for which the grants have been given and subject to the conditions laid down by the Ministry of Urban Development.

It is required that the State Government and the ULB will determine the paid up capital requirements of the SPV commensurate with the size of the project, commercial financing required and the financing modalities. It is hoped necessary thought have been given by our administrators while finalising the Authorised Capital of Rs 200 crore of the Guwahati Smart City Development Agency Limited.

The Central funds and the matching contribution by the State/ULB will meet only a part of the project cost. The balance funds are expected to be mobilised from:

i) The State/ULBs� own resources from collection of user fees, beneficiary charges and impact fees, land monetisation, debt, loans, etc.;

ii) Additional resources transferred due to acceptance of the recommendations of the Fourteenth Finance Commission (FFC);

iii) Innovative finance mechanisms such as Municipal Bonds with credit rating of ULBs, Pooled Finance Mechanism, Tax Increment Financing (TIF);

iv) Other Central Government schemes like Swachh Bharat Mission, AMRUT, National Heritage City Development and Augmentation Yojana (HRIDAY);

v) Leverage borrowings from financial institutions, including bilateral and multilateral institutions, both domestic and external sources;

vi) States may also access the National Investment and Infrastructure Fund (NIIF), which was announced by the Finance Minister in his 2015 Budget Speech;

vii) Private sector through Public-Private Partnership (PPP).

Now, let us study how Bhubaneswar, the topper in the Smart City Challenge, is executing its Smart City project. Bhubaneswar was the first city to constitute an SPV � Bhubaneswar Smart City Limited (BSCL). The BSCL has a 16- member Board of Directors with representatives from various departments, one from the Central Government and five independent directors. The BSCL has an authorised capital of Rs 500 crore. Of this, the State Government and the Bhubaneswar Municipal Corporation will have a share of Rs 112.50 crore each and the Bhubaneswar Development Authority will contribute a share capital of Rs 250 crore.

The Bhubaneswar Smart City proposal pegs the total project cost at Rs 4,537 crore, including Rs 4,095 crore for 56 projects under ABD and Rs 442 crore for one project under the pan-city proposal for the Intelligent City Operation and Management Centre.

The Bhubaneswar project fund will be sourced from Smart City Mission Fund (Rs 950 crore), convergence plan with State and Central schemes (Rs 525 crore), PPP (Rs 2,563 crore), city infrastructure funds (Rs 184 crore), public-private community partnership (Rs 30 crore), commercial borrowings (Rs 30 crore), and loan programme from the Asian Development Bank (Rs 210 crore).

It is hoped that with the new Assam government, which has been in the seat of power for more than three months now, will smarten up and have a detailed study of the Guwahati Smart City proposal. The Guwahati Smart City executives need to study and adopt the best practices and borrow innovative funding methods from the other Smart Cities who have taken off first from the start blocks. The citizens of Guwahati have high hopes that the Smart City mission will improve the urban infrastructure, remove the ills like flash floods, improve the quality of life with 24x7 electricity and water, and create a safe, clean and sustainable environment conserving the heritage and culture.

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