Why do we need our cities to be smart?
“Why do you think we need smart cities in India, when we can’t fix basics like security, traffic, water, power, pollution and cleanliness?” asked my friend. Responding with a smile, I said, “We need our cities to be smart so that we can fix the basics!”
So, how can smart cities help? Smart cities involve deploying ICT-enabled solutions that can provide accurate, real-time information that can drive actions. Information has the power to change societies and cultures. By making information available to citizens we can drive greater accountability, efficiency and empowerment in government service delivery.
Emerging business models
India needs a huge amount of investment for basic physical infrastructure and for making what already exists smart. The government cannot fund all projects and active private sector participation is essential. Smart city projects with the right risk-return profile will be attractive to the private sector. According to Frost & Sullivan’s analysis, public private partnership (PPP) is the optimum model. For PPP projects to be successful, the right kind of deal structuring is crucial. Creative leveraging of government assets including land use rights, physical assets and concessions can be offered as collateral to financial institutions to make PPPs work.
Below are four possible business models that are being used globally. The selection of the optimum business model should be determined at the project sub-component level, depending on its risk and return profile.
There are four ways to slice a pie -
- BUILD OWN OPERATE (BOO): The smart city planner independently builds the city infrastructure and delivers smart city services. The operation and maintenance of the services is fully under the planner’s control.
- BUILD OPERATE TRANSFER (BOT): The smart city planner appoints a trusted partner to build the city infrastructure and provide smart city services for a particular area within a time period. The operation is handed over to the smart city planner after completion
- BUILD OPERATE MANAGER (BOM): The smart city planner appoints a trusted partner to develop the city infrastructure and services. The partner operates and manages the smart city services. The city planner has no further role. Most of the public private partnerships are built on this model.
- OPEN BUSINESS MODEL (OBM): The city planner allows any qualified company or business organisation to build city infrastructure and provide city services. The city planner, however, will impose some regulatory obligations.
The Build Own Operate (BOO) model is generally used by city planners with sufficient funds. For example, at the Yanbu Smart City, Saudi Arabia, the overall development and operation of the project is funded by the Royal Commission for Yanbu. The Build Operate Transfer (BOT) model is usually preferred in cities that have funding constraints. For example, GE has deployed a smart grid as a service project in Norcross, Atlanta, USA, where it charges the city a monthly fee. The Open Business Model (OBM) is a popular one in Europe. The Amsterdam Smart City Consortium (ASC) openly invites members to bid/ participate in projects. It has over 70 members on the ASC platform. The Build Operate Manage (BOM) model is normally used when private companies are involved in building, operating and managing smart infrastructure. IBM’s city operations centre project in Rio, Brazil is an example of BOM. Frost & Sullivan expects that smart cities in India will see the emergence of all of the above business models. However, BOT and BOM will be the most preferred.
Making Smart Cities in India a Reality
One of the most pressing issues is institutional capacity. Urban local bodies (ULBs) have limited bandwidth and technical know-how to implement smart city projects. States need to support ULBs with technical and project management expertise. The second is funding, which most ULBs lack, to implement smart city projects. Arriving at the right financial structure and risk-return profile will be a key attraction for private investments. The third is political will. Internal resistance to greater public transparency and accountability necessitates significant political will to overcome pockets of resistance. Citizen Disagreement is the fourth. Due to issues related to land acquisition, environmental concerns or, at times, vested interests, the government’s resolve in doing the right thing is often tested. Proactive citizen engagement and communication is necessary to address genuine citizen concerns. The fifth is litigation. Most infrastructure projects attract litigation at some stage or the other. A comprehensive legal framework is necessary to minimise this.
Greenfield projects have the advantage of avoiding many of the above challenges. Their key constraint is attracting citizens to relocate, necessitating significant economic activity. For example, in Naya Raipur, Chhattisgarh the government has moved its own offices to the new city and initiated catalyst projects to provide employment opportunities.
Citizen Engagement and Participation
Smart cities are citizen-centric, sustainable cities for citizens, by the citizens and of the citizens. The concept note by the Ministry of Urban Development, Government of India, also recommends the development of a Citizen Reference Framework (CRF) via extensive surveys and citizen feedback. Every city has its own priorities based on urban issues, demographics and social and economic challenges. ULBs should begin their smart city plans through a rigorous evaluation of CRF. Projects that solve top issues affecting citizens should be prioritised. Active citizen participation in the planning process is an important element to make the community accept any development plans.
Making our Indian cities ‘smart’ is a journey that will unfold over the next few decades. Frost & Sullivan expects that Brownfield cities in India will become smart bit by bit, project by project, rather than through a big bang. Greenfield projects will take off first. Such projects will provide a great testing bed to demonstrate the technology and problem-solving efficacy of smart cities. Smart cities have the potential to enable economic development balanced with healthy, environmentally-conscious and happy citizens. However, all stakeholders will have to collaborate to make this a reality.
