Smart Cities Mission on till March 2025, but special purpose vehicles driving it face uncertain future
This was one of key projects implemented by Special Purpose Vehicles (SPV) or private companies, established in each smart city to implement SCM, which was launched in 2015 with an annual allocation of Rs 100 crore for sustainable and inclusive development of cities.
The SPVs are a joint venture between the city’s municipal corporation and the respective state government. They were registered as private companies under the Companies Act of 2013, and are one of the most crucial components of the mission. These were set up for swift execution of the projects. In most cities, SPVs are headed by district collectors with municipal commissioners serving as chief executive officers.
The mission, which was to end on June 30, has been extended till 31 March 2025, according to two senior officials in the housing and urban affairs ministry.
While the Centre has extended the mission for nine more months, uncertainty looms large over the future of SPVs as no further funding will be provided to them for their functioning, including operations of the ICCCs, according to senior officials of three state governments.
Currently, SPVs cannot undertake new projects from the mission funding, as SCM was originally concluded in June 2021. The mission period has since been extended thrice, most recently on 29 June, only to allow time for SPVs to complete the sanctioned projects, a senior official in the housing and urban affairs ministry said. However, SPVs can take up projects to earn revenue by utilising assets created under SCM.
Government officials in states like Gujarat, Maharashtra, Uttar Pradesh and Madhya Pradesh told ThePrint that they were awaiting directions from the Centre, before deciding whether to continue with SPVs or transfer the ICCCs, and other infrastructure created under SCM, to municipal corporations.
“If the Centre launches Smart Cities Mission 2.0 for the same eight cities in the state, continuing with SPVs in these cities won’t be an issue. However, if not, the state government will assess the necessity and will decide on whether to continue with SPVs or not,” said Shrikant Andge, deputy secretary, urban development department, Maharashtra government.
Maharashtra has eight smart cities — Pune, Solapur, Nagpur, Thane, Nashik, Aurangabad (now Chhatrapati Sambhajinagar), Pimpri Chinchwad and Kalyan-Dombivali.
The Ministry of Housing and Urban Affairs, senior officials said, is planning to issue guidelines for states, recommending continuation of SPVs after the mission is over.
Kunal Kumar, outgoing joint secretary and mission director, SCM, told ThePrint on 28 June, “The ministry will issue guidelines for states on the future of SPVs. The guidelines will suggest a few measures/projects, which can be taken by SPVs to become financially sustainable. They can be allowed to take up development projects and expand the services through ICCCs, which can be monetised.”
Kumar, who had been heading the mission since 2018, left the charge of SCM mission director on 30 June.
He added, “SPVs, which have a dedicated team of data, technology, engineering and other experts, have played a crucial role in the successful implementation of the projects under the mission. They will require hand-holding for some time to become financially sustainable.”
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Financial viability of SPVs
A majority of SPVs in cities, such as Pune, Bhopal, Chennai, Srinagar, Jhansi, Surat, Aligarh and Ujjain among others, have taken up remunerative projects to become financially sustainable.
Government officials in some of these smart cities and others told ThePrint that income from challans issued by traffic police is one of the main sources of revenue for SPVs, though the percentage of revenue shared varies from state to state. The Intelligent Traffic Management System (ITMS) at ICCC helps traffic police manage traffic and keep a check on traffic violations.
In Uttar Pradesh, which has 10 smart cities — Lucknow, Agra, Kanpur among others — the state government is exploring a similar initiative.
“In all smart cities, we have ITMS to ensure smooth traffic movement and check violations. We have requested the state government’s finance and home departments to share a portion of the amount collected from the online traffic challans in these cities, which are generated using our ICCCs. The SPVs are also exploring ways to generate their own revenue,” said D.P. Singh, Uttar Pradesh mission director.
Apart from this, some SPVs in cities have invested in real estate development projects to become financially independent. For instance, Aligarh and Saharanpur smart cities in Uttar Pradesh have developed habitat centres to ensure regular income from rentals.
In Srinagar, for instance, the SPV has taken up a project from the Union Territory’s Lake Conservation and Management Authority (LCMA) for surveillance using the ICCC, and is also planning to lease out the city’s 175-km optical fibre network in the city to telecom companies, said Bashir, the ICCC IT head.
“We are using the ICCC for traffic management, surveillance, monitoring e-buses etc., and plan to increase the number of activities which can help us earn revenue,” he added.
In cities like Bhopal, which were among the first ones to have the ICCCs set up in 2018, SPVs have managed to generate enough revenue to become financially viable.
K.L. Meena, CEO of Bhopal Smart City Development Corporation Limited, said that the SPV exhausted the mission funding over a year back.
“For the past one year, the salary of employees and operational costs have been borne by the SPV itself. We have developed a revenue model to make the SPV financially sustainable. We have created assets on a Public Private Partnership (PPP) basis that are rented out to ensure a steady source of income,” Meena told ThePrint.
He added that the SPV is using its sophisticated ICCC facility, which has become an integral part of the city’s governance, for carrying out projects for other agencies.
State government officials involved in the implementation of the mission admit that SPVs will require some financial assistance for a few years. Sanjay Kolte of Pune Smart City Development Corporation Limited (PSCDCL) said, “While we have undertaken remunerative projects, we will require some financial assistance for at least 1-2 years to make the SPV financially sustainable. We have requested the state government for additional funds.”
The other issue, officials in states like Gujarat, Uttar Pradesh, Maharashtra and Madhya Pradesh said, is the lack of clarity of the role of SPVs once the mission ends.
“The government is yet to decide on the future of SPVs. The city’s municipal corporation can take over the projects implemented by the SPVs, as having multiple agencies in a city will not help. The SPVs are just an extension of the corporations,” said a senior official of the Gujarat Urban Development Mission, requesting anonymity. “If we continue with SPVs, then special funding will have to be made available. A final decision will be taken based on the directions from the Centre.”
According to Saswat Bandyopadhyay, an urban development expert and professor of urban planning at CEPT University, Ahmedabad, discontinuation of SPVs is not a good idea, as the future Indian cities will continue to require high resolution spatial intelligence to respond to complex urban challenges, and to leverage the opportunities due to urban transformation across the country. It is easier for SPVs to implement crucial infrastructure projects due to lesser restrictions in procurements, he said.
“A large number of big projects, such as Sabarmati Riverfront development, were implemented through SPVs. The ICCCs would require constant upgradation in its technology, as it is changing so fast. It will be much easier to manage the ICCCs, which are working as the digital brain of the city, and expand their scope through SPV format,” he added.
What next for ICCCs?
The ICCC, urban development experts say, are among the tangible outcomes of the Centre’s SCM, and have become an integral part of governance in some cities.
The facility, developed under the mission by a city’s SPV, is being used for a variety of services, such as traffic management and keeping track of violations, solid waste management, monitoring of bus services, among others. The facility was used for surveillance and information dissemination purposes during the 2024 Lok Sabha elections.
But it was best put to use during the Covid pandemic. Several cities, such as Bhopal and Pune used it for surveillance purposes. Mission director Kumar said, “During Covid times, ICCCs became the war rooms for monitoring and management of the pandemic. They act as the brain and nerve centre of smart cities, and are useful in bringing about inter-departmental coordination, efficiency in city operations, real-time incident management and better complaint redressal mechanisms.”
There is a lack of clarity on who will manage the ICCCs once SCM ends. In some cities, the municipal corporations are planning to take over the management of these centres.
In all 100 smart cities, SPVs had engaged private concessionaires for the setting up of ICCCs, and their operations and maintenance for a period of five years. While, in most cities, this tenure will end in 2026-27, in some, it has either already ended or will end soon.
In Pune, for instance, the operation and maintenance contract ended in January this year. A senior official of Pune Municipal Corporation said, “It is being considered that the corporation should take over the ICCCs. We will hire a concessionaire to run it. A final decision will be taken soon.”
In Indore, however, the municipal corporation has already taken over the ICCC. Indore Mayor Pushyamitra Bhargav said, “The operation and maintenance of ICCC was outsourced to a private concessionaire, which will take care of the ICCC for the next 2-3 years as per the contract. Now, the Indore Municipal Corporation is taking care of the ICCC and is exploring ways to increase the number of services, which can be monitored through it.”
(Edited by Mannat Chugh)
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