Public-private partnerships make up only 6% of total financing, while other means of debt financing constitute 3.4%. The inability of the mission to raise money has led to an overreliance on convergence as a means of financing: at 30%, it constitutes the largest portion of overall funding (a 9% increase from the intended amount), amounting to Rs 50,000 crore.
As a consequence, water, sanitation and hygiene projects comprise the largest share of projects under the mission – 27%. This is because the Smart Cities Mission has relied heavily on convergence with existing programmes such as AMRUT, or the Atal Mission for Rejuvenation and Urban Transformation, and the Swachh Bharat Mission which focus on issues of water supply, sewerage and drainage management.
With over 1,200 projects out of 8,067, taken up through convergence, it makes it difficult to separate a new project or investment from an existing one. Despite this, the Standing Committee of Housing and Urban Affairshas repeatedly noted that projects implemented via convergence have seen implementation delays and monitoring difficulties because numerous agencies and stakeholders are involved.
As the mission draws to a close, the challenge of operating and maintaining projects must be considered. A five-year operation and maintenance cost has been covered under the project expenses. However, after this period, the smart cities are expected to make their own arrangements to fund these functions.
The government’s own data says that more than half the smart cities were unable to raise any funds through public private partnerships or loans. Through the duration of the mission, urban local bodies managed to mobilise a meagre Rs 2,000 crore. But the burden of financially sustaining smart cities now falls heavily on states and these urban local bodies.
Urban local bodies, which have been largely unable to generate resources from alternate sources. Additionally, since the special purpose vehicles – the entities established to oversee each smart city – are responsible for devising its own plan for financial sustainability, this will likely reinforce the existing trend: larger and richer states will be better positioned to bear these costs while smaller and resource constrained states fall behind.
After the Smart Cities Mission, the government has announced the urban challenge fund with a central allocation of Rs 15,000 crore that also places an additional burden on states to raise resources from their own revenues and through market borrowings.
Skewed Priorities
The expenditure pattern reveals clearly skewed priorities. The mission, intended to be completed by 2023, was further extended by another two years, with the ministry stating that many projects were re-assessed and reprioritised due the pandemic.
“The COVID pandemic led to reprioritization in most cities, forcing them to include components of health, education, active living, walking, cycling and placemaking to name a few areas in their plans,” the ministry told the Standing Committee.
Water and sanitation projects account for nearly Rs 47,000 crore of spending, the single largest head, while mobility projects relating to roads, transport, traffic flow and road safety absorbed more than Rs 41,000 crore.
Social infrastructure, by contrast, stands at just over Rs 12,000 crore, despite its direct link to quality of life. If the government’s claims were true, the category that is meant to expand access to essential services such as education and healthcare would have seen a larger increase.
The relatively modest allocation on social infrastructure signals that while cities invested heavily in physical assets and transport corridors, the dimensions of urban development – that shape human wellbeing and social cohesion – remained underfunded.
Despite the huge expenditure on the Smart Cities Mission, the problems such as poor roads, weak drainage and unreliable utilities keep recurring. The huge outlays with little transparency have left few lasting results.
Asmi Sharma and Nancy Pathak are associated with the Financial Accountability Network.
This article is the sixth and last part in a series on 10 years of the Smart Cities Mission, curated for Scroll by the Centre for Financial Accountability. Read all the pieces here.
This article was originally published in Scroll, and you can read here.
A car drives through a flooded road after heavy rainfall in Bengaluru in October 2024. | Reuters
The Smart Cities Mission, launched in June 2015 under the Ministry of Housing and Urban Affairs, promised to create citizen friendly and sustainable cities. Ten years later, crumbling infrastructure says otherwise.
The mission claimed it would deliver integrated planning, modern infrastructure and improved services, positioning itself as the flagship of India’s urban transformation. It was estimated to cost Rs 2 lakh crore.
Despite 10 years of funding and attention, much of the work has been limited to surface-level fixes on aging infrastructure. The mission has only delivered temporary solutions that lack a forward-thinking approach in strategies.
The design, funding and delays
One hundred cities were chosen for the mission through a competitive process completed by 2018. The programme envisaged that these cities would implement projects to enhance infrastructure related to water and sanitation, mobility and transport, energy efficiency, digital services and public spaces. It would be powered by the “Internet of Things” – a network of devices that share data.
Each city was projected to receive Rs 100 crore annually for five years from the Central government, amounting to an envisaged package of Rs 500 crore per city.
The Smart Cities Mission relied on a 50:50 cost-sharing model with states, with additional resources expected from municipal bonds, loans and public-private partnerships and “convergence” – financing from funds allocated to existing schemes.
By the time the programme formally closed in March after missing its original 2019-’20 deadline and receiving three extensions, cumulative spending had reached Rs. 1.64 lakh crore, said the State Bank of India in a report in April on the Smart Cities Mission.
Ninety two percent of the expenditure was concentrated in 21 major states: Uttar Pradesh, Tamil Nadu and Maharashtra alone accounted for nearly one-third of the total.
The successive extensions showed weak planning, eroded public trust and left the promise of smart cities mired in delay and uncertainty.
At the time of the publication of the latest information by the governmentin June, out of total 8,067 projects, 512 projects worth Rs 13,043 crore were still ongoing.
Financing Smart Cities Mission
The mission was designed as a programme to be funded through several sources. Under the initial estimated cost of Rs 2 lakh crore, the Central government committed Rs 49,000 crore. States and urban local bodies were expected to contribute a near matching share of Rs 42,000 crore (except for the northeastern states, where the sharing ratio was fixed at 90:10).
Together, these contributions were projected to cover approximately 45% of the total programme cost. The remaining 55% was expected to be raised via other means. “Convergence” or pooling resources from existing Central and state government programmes, and public private partnerships were hoped to each account for 21% of the estimated cost.
Another 4.76% was targeted to be raised via loans from multilateral development banks and international financial institutions such as World Bank, Asian Development Bank, as well as, international development institutions such as the French Development Agency, Germany’s KfW Development Bank. The remaining 7%-8% was to come from other sources such as loans and other government grants.
With the programme officially ending on March 31, though some projects are still underway, it failed to mobilise resources from its non-government sources. The Smart Cities Mission continues to be a programme that has been driven by Central and state government funding.
As of June, with 94% of the projects completed, the bulk of the funding has come from the Central government. It released Rs 47,225 crore, making up 27% of financing. States contributed approximately Rs 41,000 crore (close to their intended target) or 23% of the total.
Public-private partnerships make up only 6% of total financing, while other means of debt financing constitute 3.4%. The inability of the mission to raise money has led to an overreliance on convergence as a means of financing: at 30%, it constitutes the largest portion of overall funding (a 9% increase from the intended amount), amounting to Rs 50,000 crore.
As a consequence, water, sanitation and hygiene projects comprise the largest share of projects under the mission – 27%. This is because the Smart Cities Mission has relied heavily on convergence with existing programmes such as AMRUT, or the Atal Mission for Rejuvenation and Urban Transformation, and the Swachh Bharat Mission which focus on issues of water supply, sewerage and drainage management.
With over 1,200 projects out of 8,067, taken up through convergence, it makes it difficult to separate a new project or investment from an existing one. Despite this, the Standing Committee of Housing and Urban Affairshas repeatedly noted that projects implemented via convergence have seen implementation delays and monitoring difficulties because numerous agencies and stakeholders are involved.
As the mission draws to a close, the challenge of operating and maintaining projects must be considered. A five-year operation and maintenance cost has been covered under the project expenses. However, after this period, the smart cities are expected to make their own arrangements to fund these functions.
The government’s own data says that more than half the smart cities were unable to raise any funds through public private partnerships or loans. Through the duration of the mission, urban local bodies managed to mobilise a meagre Rs 2,000 crore. But the burden of financially sustaining smart cities now falls heavily on states and these urban local bodies.
Urban local bodies, which have been largely unable to generate resources from alternate sources. Additionally, since the special purpose vehicles – the entities established to oversee each smart city – are responsible for devising its own plan for financial sustainability, this will likely reinforce the existing trend: larger and richer states will be better positioned to bear these costs while smaller and resource constrained states fall behind.
After the Smart Cities Mission, the government has announced the urban challenge fund with a central allocation of Rs 15,000 crore that also places an additional burden on states to raise resources from their own revenues and through market borrowings.
Skewed Priorities
The expenditure pattern reveals clearly skewed priorities. The mission, intended to be completed by 2023, was further extended by another two years, with the ministry stating that many projects were re-assessed and reprioritised due the pandemic.
“The COVID pandemic led to reprioritization in most cities, forcing them to include components of health, education, active living, walking, cycling and placemaking to name a few areas in their plans,” the ministry told the Standing Committee.
Water and sanitation projects account for nearly Rs 47,000 crore of spending, the single largest head, while mobility projects relating to roads, transport, traffic flow and road safety absorbed more than Rs 41,000 crore.
Social infrastructure, by contrast, stands at just over Rs 12,000 crore, despite its direct link to quality of life. If the government’s claims were true, the category that is meant to expand access to essential services such as education and healthcare would have seen a larger increase.
The relatively modest allocation on social infrastructure signals that while cities invested heavily in physical assets and transport corridors, the dimensions of urban development – that shape human wellbeing and social cohesion – remained underfunded.
Despite the huge expenditure on the Smart Cities Mission, the problems such as poor roads, weak drainage and unreliable utilities keep recurring. The huge outlays with little transparency have left few lasting results.
Asmi Sharma and Nancy Pathak are associated with the Financial Accountability Network.
This article is the sixth and last part in a series on 10 years of the Smart Cities Mission, curated for Scroll by the Centre for Financial Accountability. Read all the pieces here.
This article was originally published in Scroll, and you can read here.