Sameer Jain, Director, Infrastructure, Government and Healthcare, KPMG

Migration from rural to urban areas is increasing across the globe. By 2050, about 70 per cent of the population will be living in cities and India, housing the second largest population in the world, will be no exception. The country needs about 500 new cities to accommodate the influx in urban population.

Historically, the rural-urban migration in India has been in the range of 5 per cent, which needs to improve significantly to increase the urban population, which currently stands at around 31 per cent. India ranks much behind other emerging econo­­­­­­­­­­­­­mi­­es in the rate of urbanisation with China at 45 per cent, Brazil at 87 per cent and Mexico at 78 per cent. India’s urban population contributes over 60 per cent of the GDP and this number is expected to inc­rease to 75 per cent over the next 15 years. It is for this reason that cities are called “engines of economic growth” and thus, th­e­ir efficient functioning is critical for ho­lis­­tic and sustainable economic development.

The Smart Cities Mission has been envisaged to provide the much needed thrust to the country’s “urban revolution”. The mission intends to drive In­dia’s economic growth and improve the quality of life by enabling local development and harnessing technology as a means to create smart outcomes for citizens. The mission aims to set examples that can be replicated both within and outside the smart city, catalysing the creation of similar smart cities in various regions and parts of the country.


Progress

In June 2017, the Ministry of Urban De­ve­lopment released a list of 30 more smart cities, taking the total tally to 89 under the mission to develop 100 smart cities across India. As of March 2017, a total of Rs 59.62 billion has been released to the cities under the Smart Cities Mission in 2015-16 and 2016-17. Out of the 60 smart cities, 55 have incorporated city-level special purpose vehicles for implementing the mission. For designing, developing, managing and implementing the smart city proposals, project management consultants have been appointed in more than 50 cities. A total of 642 projects amounting to Rs 259.35 billion have been identified across 20 cities. Of this, 23 projects (worth Rs 3.05 billion) have been completed, work has started on 65 projects (worth Rs 27.37 billion), re­­­­­­­­quests for proposal for 79 projects (worth Rs 63.52 billion) have been issued and the remaining 475 projects (worth Rs 165.42 billion) are at the pre-tendering stage or the feasibility study stage.

The mission provides an impetus to urban local bodies (ULBs) to distinguish between services that could be provided free and services that could be monetised. Therefore, services like parks, parking, 24-hour supply of services and toll roads are being targeted as revenue generating opportunities by ULBs. Given the limitation of funds, ULBs are expected to raise funds through alternative routes including financial markets, which require them to be more responsible and transparent in their functioning. In order to be eligible for cre­dit rating, several ULBs have already gone in for statutory financial audits of th­e­ir accounts in the past three years to meet Securities and Exchange Board of India’s stipulation for accessing these markets.

Moreover, the public-private partnership mode of providing services is on the rise in smart cities as it helps ensure efficiency as well as quality in many areas, while making the activity economically feasible. Such partnerships have been witnessed in the case of toll roads and attempts are being made for extending the same to other civic facilities like water supply or garbage collection.

Opportunities

Around 80 per cent of the total investment proposed by the government would be on area-based development, which includes infrastructure and information and communications technology (ICT). ICT provides the required infrastructure framework, in addition to data and information, which forms the bedrock for the integration needed to achieve this reform. A sm­art city is essentially a unification of a wide range of sources like authoritative data sources, embedded sensors, public servi­ces, citizen reports, and utility companies, which help generate actionable inputs for decision-making.

The data consumption market in India has grown six times in the past six months and the country is getting connected to the digital world in no time. It took 20 years since the introduction of the internet to reach 100 million users. The second 100 million was reached within three years, and the third 100 million in less than a year, and this is expected to double by 2021. Therefore, ICT is poised to be amongst the greatest beneficiaries of the Smart Cities Mission. As smart cities grow in number and a larger percentage of population moves to urban regions, government agencies will need to rapidly invest in IT innovations.

There are a number of ICT applications, the evolution and deployment of which are contributing to the growth of smart cities. Some of these are:

  • Focus on point solutions: While many major cities are aware of, and to some extent pursuing, smart city strategies, it is clear that most smart city deployments are currently focused on specific infrastructure needs, for example, reducing water loss through ageing pipe infrastructure, or improving transportation effi­ci­en­­cy through monitoring. Compa­nies ne­ed to focus on these types of projects and look for incremental ways to connect in­dividual systems (silos) to provide ag­g­r­e­­gate efficiencies and support new services.
  • Instrumentation and actuation from internet of things (IoT): As sensors are being replaced in the system, an increasing percentage of city infrastructure is becoming IoT-connected. Cities that recognise this and put in place middleware and cloud systems to capture and use this data will see significant advantages over time.
  • Value from analytics: Today, few cities gather and analyse city data in a comprehensive way. Some lead examples do exist, but most cities are still developing these capabilities. Both the government and industry need to adopt big data strategies as part of their core framework, building solutions from a cloud-centric perspective that incorporate data analytics as core capabilities.
  • Different regions have different needs: It is clear that the needs of a smart city in India are different from those in Europe; different regions are grappling with different problems and thus need different solutions. However, the underlying technology trends do not differ. Companies that are able to adopt a flexible approach to delivering solution will reap benefits.
  • Collaboration is critical: Few, if any, companies can deliver a full smart city solution. Therefore, companies need to identify their role in the smart city solution ecosystem and work to develop partnerships that allow them to collectively offer solutions to cities. Major players will be able to use mergers and acquisitions to plug capability gaps.
  • Citizen engagement and activism are shaping the thinking of cities: Companies that can tap into this and can show how their approaches and solutions benefit from citizen engagement will accrue advantage through differentiation and collective wisdom of the community.
  • Emerging technologies: Behind the gr­ow­­­­­­ing smart city market is a number of broad ICT trends that are enabling key segments such as solid waste manageme­nt, transportation, energy, water, health and urban planning, to exploit new technologies to deliver smart solutions to ci­ties and citizens. Networking and communications, GIS, cybersecurity, big data and analytics, cloud and edge computing will power new-age technological solutions, which will be driving the smart city initiatives.

Challenges

As the cities progress from the conceptualisation and planning stages to real, on-the-ground implementation, several challenges are likely to emerge. Reforms need to be tailored to India’s unique urban needs both in terms of what separates it from its international peers and how the urban regions are on different developmental tracks within the country. It is important to note that the one-size-fits-all approach will not be successful. The varied economic performance of cities, differences in the local in­dustrial composition and infrastructure qua­­lity reveal the breadth and depth of In­dia’s urban investment need.

Financing smart cities will be another key challenge. The total investment appro­v­ed under the Smart Cities Mission so far for 89 cities has gone up to Rs 1.91 trillion. Till now, only banks have been financing su­ch projects, which is putting stress on th­eir already highly leveraged balance sheets. Re-capitalisation of banks is a good move to boost infrastructure-based lending by the banks but increased sponsorship fr­om alternative sources of funding is required.

In order for India to make real pro­gress, basic infrastructure issues need to add­ressed. The country is lacking in nece­­ssities such as healthcare, food, electricity and education. Unless these elementary re­quirements are met, the ground for deve­lopment will never be strong. With effective capacity building and governance beyond the realms of political differences, the Smart Cities Mission can be a game changer in building a “new India”.