Published in Business World magazine, December 2016
Rationale for greenfield smart
infrastructure – unparalleled potential to ‘do over’ cities
Economies
globally are increasingly aiming to become smarter, by way of transforming all
spheres of urban systems. Similarly, for
realising India’s urban vision, structured interventions to transform Indian
cities, such as the ‘Smart Cities Mission’ have been rolled out by the
Government of India. The smart infrastructure projects, should accommodate
scaling up of efficiencies and equip cities to effectively address evolving
complex social, economic and political issues. For this, optimally utilising IT
and digital technologies in improving the ‘Ease of Doing Business’ and the
‘Ease of Living’ in cities, will be central.
As part of the ‘Smart
City Mission’s’ implementation methodology[1],
while the envisioned area-based and pan-city developments aims to retrofit and
redevelop existing components, the greenfield developments aims at introducing
large-scale smart solutions. The very magnitude of possibilities and
transformative outcomes of greenfield smart projects has made the concept of
greenfield smart cities seem like potential panacea for Indian cities.
India’s greenfield smart cities
in progress – scale and prospects warrant attention
Consider the
Dholera Industrial City, which is envisioned to form the core of India’s
fastest progressing Special Investment Region (SIR). Over 72 kms of major and
minor roads, array of underground utilities such as stormwater drainage, water,
waste water, power, gas and ICT, are part of the innovative design and conceptualisation.
Aiming to be functional with infrastructure, manufacturing units and a
population of around 1 lakh by 2019, the city’s long-term vision further
envisions creating 8 lakh jobs by 2040.
Greenfield smart
cities in India are being envisioned as optimally efficient urban centres of
technology, job creation and living. The scale of investments and the areas
covered by the cities help to throw light upon the magnitude of the projects.
|
Name
of the Projects
|
Total
Area (Sq. kms)
|
Envisioned
Investments (INR crore)
|
|
Gujarat International Finance Tec-City (GIFT)
|
3.99
|
70,000 (cost of the total project)
|
|
Dholera Industrial City
|
22.5
|
3,000 (allocated by the government)
|
|
Naya Raipur
|
80
|
3,940 (proposed)
|
|
Lavasa
|
100
|
6,600 (incurred until now)
|
Sources: KPMG in
India’s analysis
Potential challenges
ahead for India’s greenfield cities – easier said than done
|
The
essential focus for greenfield cities of Masdar (UAE) & Songdo (South
Korea) is centred around innovative approaches related to solar energy,
public transport, waste management.
The design
of Masdar city takes into account the local climatic conditions. The
emphasis on high-rise constructions are intended to help ensure that
streets get only 30-45 minutes of direct sunlight a day in the desert
climate, contributing to natural cooling. Likewise, Songdo’s proposed waste
collection system eliminates the need for trash trucks.
|
Furthermore,
planners need to take into account the self-sustainability of greenfield cities
with regard to job creation and resource management. In greenfield projects,
renewable energy such as solar and wind energy can ensure uninterrupted power
supply for industries and other establishments in the city, which in turn can
boost manufacturing and economic growth.
Who invests in greenfield
cities?
Greenfield projects mandate large-scale requirements of land
and capital. Land acquisition (including acquiring agricultural land) should be
in line with the myriad of regulations, which currently is not only
time-consuming but also project-threatening. The show-cause notice to Lavasa’s
developers, farmer-resistance in Dholera, etc. have had significant time-costs
associated to them.
Given the nature of extensive funding requirements and
limited government capacity, identification of apposite funding mechanisms for
smart city infrastructure and technology investments is critical for greenfield
cities. Sale of land parcels for commercial and residential purposes is a
universal mechanism to recover initial capital investment by government and
investors. However, it has been observed that traditional sources of financing
are unable to address the requirements of innovative smart city infrastructure.
Therefore, decision makers are in the process of exploring alternative sources
of financing business models and partnerships, wherein, the cost recovery
mechanism of each infrastructure investment is defined at the onset.
In addition to traditional approaches such as PPP (Public
Private Partnership), funding for greenfield cities may also be addressed
through innovative measures such as TIF (Tax Increment Financing) and data
monetisation. Besides this, the recently established international financial
institutions such as Asian Infrastructure Investment Bank (AIIB) and the New
Development Bank (NDB) could be potential funding sources for greenfield smart
cities in India.
Conversely, the
discourse over the last year on Indian smart cities has revealed the general
lack of willingness of infrastructure funds or sovereign wealth funds to invest
in greenfield projects due to exposure of construction risk and concerns on
slow procurement processes. Therefore, there is a compelling need for
government to focus on developing adequate legal frameworks, institutional
strength and reliability to attract this capital for greenfield smart city
developments.
Inclusivity – the
raison d’être of Indian cities
In the context of
urban India, planners and decision makers should ensure that citizens engaged
within the informal sector are ensured place, space and opportunities within
proposed greenfield smart cities. Given the scale of the informal economy, future
models need to take into account existing social infrastructure and address the
specific needs of the vulnerable groups. Ensuring affordable smart
infrastructure such as piped water and electricity through innovative
mechanisms would go a long way in promoting the social objectives of greenfield
smart cities.
|
M-KOPA
Solar (www.m-kopa.com) is an innovative asset financing company that sells
small-scale solar home systems (SHSs) in Africa to off-grid households on
an affordable, 12-month mobile money payment plan via hire purchase.
The
battery-powered 8W home system has three lights, a phone-charging facility
and a chargeable radio. As of September 2015, M-KOPA actively provided
affordable solar power to over 2,50,000 households in East Africa – and is
adding a thousand more households per week.
A
combination of innovative technology, effective distribution system,
compelling value proposition, and a strong focus on customer care provided
the successful foundation for an inclusive business model to deliver clean
and affordable lighting for the masses.
Source: http://arcfinance.org/
|
[1] Source: Smart
Cities Mission Statement & Guidelines, Ministry of Urban Development,
Government of India, June 2015, http://smartcities.gov.in/writereaddata/SmartCityGuidelines.pdf
