Financing smart cities

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The High Power Expert Committee (HPEC) on Investment Estimates in urban infrastructure has assessed a Per Capita Investment Cost (PCIC) of Rs 43,386 for a 20 year period. Their estimates cover water supply, sewerage, sanitation and transportation related infrastructure. Using an average figure of 1 million people in each of the 100 smart cities, the total estimate of investment requirements for the services covered by HPEC comes to Rs7 lakh crore over 20 years (with an annual escalation of 10% from 2009-20 to 2014-15).

This translates into an annual requirement of Rs 35,000 crores. However, it is expected that most of the infrastructure will be taken up either as complete private investment or through PPPs. The contributions from the Govt. of India and States/ULBs/parastatal will be largely by way of Viability Gap Support (VGF).

Of the funds allocated to each Smart Cities by the Central Government, roughly 60% will be earmarked for investment in infrastructure and 10% for e-governance initiatives. The remaining funds will be in the form of equity contribution of the government in two integrated township projects (in partnership with a private developer), as well as one greenfield project and one redevelopment project.

Looking at all the investment and expenses needed to develop the smart cities in the country, it is expected that the living should also be likable and affordable.