21 Sep Smart Cities Mission aims to Reform Systems, not just offer Grants

Till as late as the turn of this century, Central governments in India did not have cities and urban development on their priority. Urban Development was largely left to State Governments to deal with. State Governments pumped some money into urban infrastructure projects, but till about 1990s, cities still figured low on government spending. Neither the State nor the Central government could predict the consequences of Economic liberalization on cities. Investments in urban infrastructure remained low and urban issues remained low on priority even in the 1990s. And suddenly, the economic change propelled a massive shift in the equations between the urban and the rural or the Urban and the Agrarian societies in India.

The neglect of the governments in addressing urban infrastructure, since 1947 to 1990s, led to urban issues and the mess that we see in our cities today. Coupled with a lack of investment in urban infrastructure, we also severely lacked in building capacity of our urban local bodies. Urban management was, and leaving a few leading municipal bodies, still is, non existent. State Governments supported and allocated funds to cities and very rarely were cities made responsible in generating their own revenue and spending it wisely. Urban Local Bodies thus developed themselves the habit of ‘taking grants’ without ever having to be accountable for the money. As the gap between these grants and the need of urban infrastructure investment widened, our cities ended up in an even more complex mess.

Two events further shaped our cities post the 1990s. The first event was the 74th Constitutional Amendment which gave powers to the Urban Local Bodies that went beyond State and Central controls. And the second was the very popular and well known Central Government Scheme – Jawaharlal Nehru National Urban Renewal Mission (JNNURM). These two events once again changed the course of Urban development in India. The first event sought to make Urban Local Bodies more responsible, more accountable and more fiscally independent; while the second event was designed to pump in huge financial grants into cities by the Central Government. And the third event that has the potential to shape Indian cities, is the Smart Cities Mission.

At a recent lecture by  Dr Ravikant Joshi, at a forum organized by MASHAL, he spoke about these three events that will shape Indian cities. An urban finance and management expert, Dr Joshi, put out interesting  numbers in front of the audience. From a mere Rs.300 crore total grants by Central government for Urban development, the JNNURM moved to Rs.10000 crore by way of grants to cities. Further, the Smart City Mission has now an outlay of Rs.30000 crore to cities. Dr Joshi’s contention was that just prior to JNNURM, there was a serious effort by many urban local bodies, particularly leaders like Ahmedabad, Pune, Mumbai and Indore, to streamline their financial management to be able to cope with the increasing demand for urban infrastructure. However, with the availability of huge funds, the cities lost their incentive to make fiscal reforms.

There are two viewpoints in which this particular argument may be viewed. First, as Dr Joshi would like to believe, is that the cities, lacking the necessary funds to develop urban infrastructure, would have shifted to better fiscal management, possibly becoming accountable enough to generate their own funds. The counter argument to this view is that this attempt at fiscal management would not have given any evident & substantial results to cities and this movement may not have carried forward to second tier and third tier urban local bodies fast enough. So the crisis of cities would have anyways continued, as cities floundered either ways – for lack of investment and for lack of fiscal independence.

Prior to the JNNURM,  the municipal bodies had turned to fiscal consolidation, more out of necessity than political will. It is during this period that we find Pune, Ahmedabad, Indore and such other progressive urban local bodies had begun their reform process. However, these were only a handful of municipal bodies moving towards reforms. To state with a level confidence that this fiscal reform would have continued and would have been fast enough to bridge the tremendous gap of demand and supply of urban infrastructure, is foolishness. So Dr Joshi’s statement that if central government had not pumped in so much grant money, probably the municipal governments would have walked their way towards reform is a bit debatable. Also, the money numbers which were presented by Dr Joshi, showing a tremendous investment jump by central government in both JNNURM and Smart Cities Mission, is also questionable as they do not seem to be adjusted for inflation over a period of almost 30 years!

However, a valid argument thrown up by Dr Joshi is, did the pumping of JNNURM funds into cities really solve the problem of urban infrastructure? And he went to contend that without an evaluation of JNNURM, we have initiated the Smart City Mission, which is a similar scheme of urban infra funding. He mentions that the Smart City Mission will pump in even more money than the JNNURM, but are our urban local bodies capable to handle this money? The question that we should be really asking is, how do we ensure that reforms at ULBs continue at a rapid pace to be able to spend the proposed investments by the Central government? Why should making investments and reforms be mutually exclusive?

One immediate counter argument here is the fact that the JNNURM and the Smart City Mission are not similar at all. While, urban infrastructure investment is the objective of both, the two schemes are largely very different in their basic structure. JNNURM was a socialist, grant based funding scheme. While the Smart City Mission is a business based funding mechanism. The investment made under Smart City Mission is to be used like a seed capital or a Start Up fund to initiate cities into competing for generating revenues on their own later. So to call JNNURM pumping of funds and Smart City pumping of funds as similar is a big fallacy.

Secondly, the contention that Dr Joshi made is that reforms have vanished from the radars of municipal bodies also seems too far fetched. While there is an argument that municipal bodies are left aside while Smart City SPVs have taken over, it is important to understand that the action for cities is so urgent and immediate that India can no longer wait for systemic reforms to take place at a slow pace in its urban local bodies. If we wait for the ULBs to reform themselves before making urban infra investments, we will sink more and more into a chaos of urban mess.  Hence, a pragmatic and a politically astute decision of forming Smart City SPVs was made. The idea is to showcase that different models of urban development are possible and that SPVs with a very market oriented approach can possibly become instrumental in transforming our cities for the better.  SPVs will generate pilot projects and slowly, as Urban Local bodies reform themselves, entire cities will be able to replicate these pilot projects, in tandem with a SPV for the city. Smart City SPVs are  internalizing and reforming the urban infrastructure sector like never before. There are bound to be successes and failures, and not all projects may look as attractive, but reforms are definitely on their way.

One more argument that Dr Joshi made was the fact that taxes will rise.  His contention was that why taxes should rise for people who are not a part of the pilot Smart City Area? Well, considering that Dr Joshi was propagating fiscal reform in cities, It is a known fact that cities needs to raise their taxes to offer good urban infrastructure to citizens. All of our civic services are offered at subsidized rates today. Decentralized revenue generation and fiscal reforms will need cities to raise taxes and reform their tax base. So on one side, Dr Joshi argued against raising of taxes, while on the other advocating decentralized revenue reforms for the city.

Thirdly, in every forum that I attend, I find that the word Smart is taken in a very literal way. Experts seem to be more interested in the semantics of the word ‘Smart’, than the concept and its implications. For most, I find, it is more about technology and integration of ITC with civic systems. A continuous attempt to mock the ‘smartness’ of projects is a favourite pastime of the media, without realizing the underlying process and system changes that have happened for implementing the projects. In Pune, pilot public placemaking projects were completed in a record time of 2 months. This has never been heard of of public projects in cities ever. So some underlying reforms and systemic changes have made this possible, which remains backstage and hence never captured by the media. There are bound to be wrinkles which will need smoothening out, but blaming the entire Smart City Mission for such lapses is foolish.

I have written before too, that Smart Cities Mission is about developing alternative mechanisms expected to transform cities – not with a swish of a wand, but with out-of-the-box solutions that have never been attempted before. That, for me represents Smart and the Smart Cities Mission is right now target here.