Smart City: If A City Ranked Higher Than Others, Should Be Rewarded With More Funds

Full disclosure to start with, I am an unabashed supporter of the smart city initiative launched by the central government, and have read almost everything that I have been able to find on the scheme. I feel that this is a game-changer (sorry for using the cliché) in India’s urban development paradigm, and will be viewed as a seminal contribution to India, if not now, then definitely 10 years down the line (most game-changing actions are appreciated only in hindsight).

Having said that, there are aspects of the scheme which are jarring, and need to be addressed. This piece addresses some of these issues, and ends with a suggestion to add a missing element to the urban development paradigm, that is Greenfield cities.

Firstly, let’s start with some observations:

1. As expected, if one were to draw a vertical line at Kanpur, one would notice that the 16 “winner” cities are to the west of this line, and only four to the east. However, this is not because of any inherent bias against the East of India, but just shows the relative poor governance in these states. Having said that, the clear winner in the ratings was a city from the east, Bhubaneswar (so not only is there hope – but the east suffers due to its own reticence rather than any bias).
2. The parties that run the states in these selected cities also have an interesting pattern. 12 of the cities are from NDA-ruled states, just 4 from the Congress, and the rest from “others”. It also supports the common perception that the NDA is not just providing better governance, but also visibly trying to put in greater effort to improve the states it is ruling.

Lets also address some criticism that have been made, some genuine and some disingenuous.

1. No city has been selected from India’s largest states UP, Bihar and Bengal – while this is true, and assuming that the process of evaluation is fair, this reflects the poor planning and even poorer capabilities of these states, rather than any bias. UP has been unable to even nominate its 13th city (between Rae Bareilly and Meerut), and this itself shows the political naiveté. Similarly, J&K has not been able to decide between Jammu and Srinagar.
2. Cities that have lesser needs will be benefitted as opposed to those that have the greatest need – while this is ostensibly true, this criticism itself betrays the discomfort that India has with merit-based systems. All these 20 cities have made it on merit, and should be complimented, rather than asking for some state-wise or region-wise quota. I think that it is fantastic that Mumbai failed to make it (extremely crass politicking by the Shiv Sena), while cities like Jabalpur, Solapur, and Kakinada did. I agree that say a Muzaffarpur in Bihar has greater needs that New Delhi, but then it should compete for that funding, and maybe learn from Bhubaneswar and improve its plan for the next round, rather than cribbing that it did not get selected.

Now let’s come to the issues that need to be addressed.

Differentiated funding

The ratings these cities have received vary widely (as expected), from Bhubaneswar with an overall rating of 78.83% to Bhopal with a lowly 55.47%. The average rating of the 20 cities is 62.72%. I haven’t been able to find the ratings for all the 98 cities, but believe that Varanasi (which is the PM’s constituency) stood second from the bottom and got an extremely poor score (proof that the rating process was fair).

Intuitively, all cities receiving the same level of financial support from the centre (Rs 100 crores per year for 5 years) sounds just wrong. Some sort of differentiation is required between the cities that are putting their best foot forward, as compared to those that might be tempted to use it as just another central scheme to be milked. Why shouldn’t Bhubaneswar get more funding than Bhopal?

The suggestions I have are as follows:

1. Have a minimum cut-off rating for a city to qualify for funding (say 60%). This would mean that only 9 cities would qualify for immediate funding and the rest should be given an accelerated qualification period to revise their plans and revert, to get funded only if their revised rating is greater than the 60% cut-off. A core principle of qualification is that there should be a cut-off. Since all 100 cities are eventually going to get funded, should they get funded even if the plan doesn’t meet the basic minimum criterion?
2. We need to increase the allocation to those cities that prepare better plans. Let’s say we equate the funding for a 100% score to INR 200 Crs per year and a 60% score to INR 100 Crores, and then proportionately allocate the funding based on the rating received. This would imply that Bhubaneswar would now get funding of INR 147.1 Crs per year (for a 78.83% score) and Solapur would get only 102.1 Crs per year (for a 60.83% score). All the cities Davanagere downwards would need to rework their plan and qualify for the 60% cut-off to be entitled for funding.

Although this will increase the budget that has been allocated for the scheme overall, it is worthwhile so that states know that the ones with the best plans are going to get funded to the maximum. Additionally, now that all the plans are out in the open, it is possible for all the cities that did not qualify to learn from those that did, and redo their plans so that they not only qualify, but meet the cut-off. I strongly believe that cities that do not meet the minimum cut-off of 60%, should not get funded under this scheme, irrespective of how long it takes for them to get their plan right.

Greenfield Cities

One of the very valid criticisms of this scheme is that it does not encourage the creation of Greenfield cities as only those entities which are municipal corporations at present are able to qualify.

India needs to build at least 25 Greenfield cities going forward in order to meet its urbanization goals. I therefore propose a new scheme, in addition to the smart cities scheme that the Centre should come up with for building let’s say 10 such cities over the next ten years. The rough details could be as follows:

1. States should optionally prepare and submit plans for building Greenfield cities
2. Centre should select two cities every two years, and fund them to the tune of say INR 250 crores per year for five years (1,250 Crores per city), using the same format as the Smart City scheme.
3. While these are small amounts, the real benefit will come from the convergence of all other national and state developmental schemes towards building these cities.

While Amaravati and Dholera are already in the planning pipeline, others that have been talked about include Gairsain (Uttarakhand), and Shendre-Bidkin (Maharashtra). I am sure that there will be others to be added to this list.

I have read the plan of Bhubaneswar in detail and am very impressed with the effort that has been put in and the quality of the plan (here). They deserve a real shot at being able to achieve it.

There are many naysayers, who probably have genuine criticism to make on this scheme, and they have the right to do so. I believe that this is the biggest planned step towards urbanization that has ever been taken in the history of India. Even if 50% of these plans fructify, it will be a huge achievement and a giant step forward. Let’s hope for the best.