Funding for smart cities delayed, to start in FY17

None of the 20 candidates selected for the first phase of the smart city project has got any funding from the Centre so far, it is learnt. Officials working on the project pointed out that the money is linked to formation of the Special Purpose Vehicle (SPV) by the city municipalities concerned. The Centre's funding of Rs 200 crore for each city in the first phase was now expected in 2016-17, they said. According to the plan, this should have come in 2015-16.

In addition to the 20 cities announced last month, another lot is likely to be selected for the first phase of funding, from 23 states/Union Territories, which have been given a chance to fast-track their proposals. These should come in by April 15. For a total of 43 cities, the annual fund requirement from the Centre for FY17 would be Rs 8,600 crore. However, the requirement would rise substantially if the government was to roll out the next list of cities too in FY17, making it a total of 60, as originally planned. Another 40 cities are scheduled to be announced in the third year of execution, FY18.

Union Budget 2016-17 would accordingly keep aside money for the project. In fact, finance minister Arun Jaitley had kept aside Rs 7,060 crore for smart cities in the July 2014 Budget. That remained unused as the selection process took off in 2015, Union Budget of 2015-16 was silent on smart cities.

The Cabinet had in April 2015 cleared a proposal for Rs 50,000-crore investment by the Centre into the 100 smart cities project. According to plan, Rs 500 crore per city would be spent by the Centre, and that would have to be equally matched by a consortia of state governments and city municipalities. While the Centre would fund Rs 200 crore per city in the first phase and subsequently pump in Rs 100 crore each for three years.

Arindam Guha, senior director, Deloitte in India, said not more than three selected cities would get the central funding for smart cities during FY16. That, too, is not certain, at least three other sources said. The urban development ministry had recently said the project should take off by June. However, the government has not set a deadline for completion. But, as Guha said, cities in their respective development plans have given a timeframe of five to 10 years for each smart city, depending on whether it's a new project or expansion of an existing project.

ALLOCATIONS SO FAR

• Union Budget 2014-15 had allocated Rs 7,060 cr for smart cities but the funds were not used
• In 2015-16, smart cities did not get any budgetary fund
• In April 2015, the Union Cabinet cleared Rs 50,000-cr investment by the Centre for smart cities
• According to the plan, Rs 200 cr each for the 20 selected cities was to be given in FY16
• This was to be followed by Rs 100 cr each in 3 subsequent years, as part of the plan to spend Rs 50,000 cr on 100 smart cities in a phased manner
• The 20 selected cities have come from 11 states, with BJP-ruled Madhya Pradesh getting the highest share of three (Bhopal, Indore and Jabalpur) in the first list
• 23 states/UTs have been given a chance to fast-track their plans by April 2015

According to Pratap Padode, founder and director at Smart Cities Council India, this time, budgetary allocation should be more realistic as the smart city project is actually taking off now. He said every city is eager to receive funds as the biggest challenge is financing of smart cities. Funding by the Centre is limited and without the participation of the private sector, smart cities cannot get into the real zone. While the funding by the Centre and the state/city municipality would be Rs 1,000 crore per city, cost is estimated to be much higher at Rs 4,000-5,000 crore.

While announcing Bhubaneswar (Odisha) as the top name in the smart city list, urban development minister Venkaiah Naidu said the winner was a surprise candidate. The 20 selected cities have come from 11 states, with Bharatiya Janata Party (BJP)-ruled Madhya Pradesh getting the highest share of three (Bhopal, Indore and Jabalpur) in the first list. Those with two cities each include Gujarat, Rajasthan, Maharashtra (all BJP-ruled states) and Andhra Pradesh (led by BJP ally Telugu Desam Party).

All India Anna Dravida Munnetra Kazhagam-ruled Tamil Nadu and Congress-ruled Karnataka have also made it to the list with two cities each. Punjab, Assam, Kerala and New Delhi Municipal Council area of Delhi are the other winners.

While West Bengal, Uttar Pradesh (going to polls in 2016 and 2017, respectively) and Bihar have not found any representation in the smart city list, 23 states/Union territories have been given a chance to fast-track their plans by April 15.