Smart Cities Can Only Succeed With Smart Governance

Like its predecessor flagship urban programmes, the NDA’s Smart City initiative falls short of ensuring institutional adequacy for its success.

The Modi government notified its first set of 20 citiesunder its flagship Smart City initiative, hailed equally by media, corporate circles and citizens to be a potential game changer in overhauling the quality of urban life.

However, it remains to be seen whether this initiative, unlike its predecessors, such as the Jawaharlal Nehru National Urban Renewal Mission (JNNURM), can be made politically liable as are other performance indicators such as economic growth or ensuring good governance.

The last few months have been symptomatic of the muddle Indian metropolises are engulfed in, and the Smart City intervention should be assessed in the larger context of such developments. Notable among these are concerns over air quality deterioration across cities, urban flood havoc (Mumbai in 2005, and Chennai in 2015), and health epidemics due to the lack of basic civic services.

Lastly, given the asymmetrical distribution of resources in cities, the poorer sections of society have become more vulnerable. The simplest course corrections, therefore, would ask for administrative and infrastructural improvements going together, rather than piecemeal. The Smart City initiative, coined by the present government, may thus be a half-hearted effort at urban rejuvenation considering its dependence on the existing institutional set-up.

Discontinuous Urban Policy Cycles

Of considerable interest is the fact that post-independence, successive governments have launched new urban flagship programmes. But new programmes and new funding are being implemented with the same old institutions and policy managers.

If the Modi government was out of office in 2019, one can surmise that the Smart City initiative will have a fate similar to the JNNURM. Such irregular and discontinuous policy cycles over the years have yielded low productivity from municipal establishments and urban systems have become more unpredictable than ever. With more than three-fourths of GDP accounted for by cities and urban areas alone, a lackadaisical policy architecture therefore could have grave consequences for the India growth story and imperil the rollout of Smart City initiative.

Smart City and Institutional Incongruities

Local governments and urban local bodies (ULB’s) are the main stakeholders in the Smart City initiative. In fact, they are supposed to exercise jurisdictional control of the envisaged projects within their territorial limits and, at the same time, hold financial equity, according to the “Smart City mission statement and guidelines” drafted by the Ministry of Urban Development (MoUD).

In reality, however, the status of this third tier of governance, both politically and fiscally, is confused, barring a few. Although the 73^rd and 74^th constitutional amendments ensure a statutory status and provide state legislatures flexibility to organise them, the power has been severely misused and abused.

A near discretion is exercised by state legislatures in decentralising urban functions to local governments or to notify/upgrade the eligible areas to the status of a local body. But  they are no too autonomous fiscally. The inter-governmental fiscal transfer model which was thought of as a capacity building instrument is now a lifeline for revenue-starved local governments.

The debt-laden balance-sheets of urban local bodies threatens the success of the Smart City initiative as they would need guarantees from state finance departments to raise project equity from the financial market, forfeiting their already minimal autonomous status. To place some facts, municipal expenditure in India today accounts for a mere 1.1 percent of the country’s GDP ascompared to 6.9 percent in South Africa and 9.7 percent in Switzerland. 

The plausible explanation for all this: state governments are reluctance to let go of the politico-economic influence associated with urban resources, particularly land and infrastructure works.

Further, the Smart City initiative has been penned in an effort not to disturb the existing institutional status-quo but has envisaged the creation of a parallel, semi-bureaucratic structure for its implementation.

This has grave consequences for city administrations in the long term, which could also impact the Smart City initiative.

Case 1

Usual Scenario: Multiple and functionally overlapping bureaucracies proliferate in urban centres as compulsions in political-economic choices. For example, key urban functions, such as land management, water supply, waste disposal, etc.,  are packaged either as neo-liberal entities (e.g. limited liability companies or special purpose vehicles)  or vested in bureaucratically-controlled parastatals (water boards, land development authorities, etc.).

The best illustrative case, but functionally worst, is the case of the national capital Delhi; MCD (Solid Waste, Storm Water Drainage), Delhi Jal Board (Water Supply and Sewerage), and enclaves managed by the Cantonment Board and NDMC.

Smart City Case: Surprisingly the special purpose vehicle architecture embodies the Smart City initiative, where accountability is split three ways between centre, ULB and private player(s). This is hardly different from the existing institutional setup, in matters of political accountability or institutional oversight. Both of them remains to be suitably dissected.

Case 2

Usual Scenario:  What has been observed over the years is near abandonment of local government structures as credible political institutions in Indian cities. The city administrations, or mayoral offices, have become politically rudderless on account of meagre fiscal resources. The inadequacy has led to citizen disillusionment with local governments.

Smart City Case: While the mayoral office (as in New York or London) should act as a single point of accountability within its jurisdiction, its role again remains near undefined in case of Smart City initiative. Far from being outlined, the word “Mayor” has just three cursory mentions (as member of various oversight committees) in the 43-page Smart City document.

Smart City – A Zero-Sum Attempt

The SPV architecture for undertaking Smart City initiatives is old wine in a new bottle, in other words remodelled bureaucracies, micro-managed at Nirman Bhawan (Miniatry of Urban Development, or MoUD). Further, in the absence of defined political accountability in Smart City SPVs, the “opportunity set”, or incentive for local governments to support such programmes, remains minimal. Political reprimands by ballot are critical in ensuring institutional delivery, but this is overlooked in the Smart City initiative.

It is hard to figure out, if residents in Jaipur, Chennai or Itanagar have political tools to register their whims or fancies in the Smart City initiative, other than cursory provisions about stakeholder consultations. A comprehensive analysis on the other nitty-gritties of the Smart City initiative is beyond the scope of this article, but just one more instance is illustrative of the top-down nature of this programme – the stipulations about how SPV members are to be selected.

i. The Chairperson of the SPV will be the Divisional Commissioner/Collector/Municipal Commissioner/Chief Executive of the Urban Development Authority as decided by the State Government”.

ii. The CEO of the SPV will be appointed with the approval of the MoUD. The CEO will be appointed for a fixed term of three years and will be removed only with the prior approval of MoUD.

These are clear instance of micro-management at state and central secretariats.   

The Smart City scheme per se is again an attempt to “fix” some parts of the city infrastructure rather than push for a robust institutional overhaul or creating complementary synergies within them. Further, the programme is no different from the previous infrastructure schemes, as it is again anchored through “Apex Committees”, insulated from the ballot.

Way Forward

From the larger policy perspective, the government’s managers again have to ponder over the fact that the creation of efficient and functional urban systems, which are key to economic growth, cannot be reduced to infrastructure schemes or programmes. The key is to create the right set of incentives for city managers to perform and deliver. The JNNURM lessons are far from being learned. A few suggestions therefore:

1. Political and fiscal autonomy as well as reinforcing administrative capacity at the local level is the only way forward, as been tried and tested in western cities, to ensure success of Smart City initiative.

2. Micro-management of urban programmes, like Smart City initiative, from Nirman Bhawan (MoUD) should be eschewed. Power should be divested to local government structures in order to set political accountability that can be ballot-tested by its patrons. MoUD should limit its role to creating institutional incentives, sharing best practices or create evaluation frameworks that can set competition amongst cities, much like ease of doing business.   

3. A key incentive that can easily be sought is to enlarge the scope of the Central Finance Commissions’  “Terms of Reference (ToR)”.

The 14^th Finance Commission stipulates “measures needed to augment the Consolidated Fund of a State to supplement the resources of the Panchayats and Municipalities in the State, on the basis of the recommendations made by the Finance Commission of the State.”

The devolution, despite being of considerable size, “Rs 2,87,436 crore ($43 billion) for the period 2015-20”, is not tied to creating substantive administrative capacity or undertaking pending institutional reforms.

Not only fiscal devolution, but benchmarking it to institutional capacity, could yield incentives for fiscally starved state legislatures to initiate local governance improvements. This is what could make the Smart City initiative a real game-changer.