In his opening speech to the presentation of the NDA Government’s maiden budget in July, Finance Minister Arun Jaitley noted that the NDA Government was a result of the people’s desire for change, and with that in mind the Budget was to serve as an ‘policy indicator of the direction in which (they) desire to take the country’.  Smart cities have found themselves to be the focus for the Government ‘as the pace of migration from the rural areas to the cities is increasing. A neo middle class is emerging which has the aspiration of better living standards. Unless, new cities are developed to accommodate the burgeoning number of people, the existing cities would soon become unlivable.

To provide an impetus to the development of these new smart cities, the Budget has proposed to set aside INR 7060 Crore for the development of 100 smart cities (i) as satellite towns of larger cities,(ii) by modernizing the existing mid-sized cities, and (iii) along the industrial corridors.

WHAT ARE SMART CITIES?

Smart Cities are planned cities which focus heavily on development of infrastructure and timely delivery of services- its main focus is on the role of information, communication and technology (ICT) infrastructure. This involves innovation in fields including in delivery systems, local government, physical planning, infrastructure development, environmental protection, etc. 

A city can be considered ‘smart’, when investments in human and social capital, and in communication infrastructure, encourage economic development which is sustainable and a quality of life higher than previously enjoyed, with sagacious management of limited resources through government participation and involvement.

EXISTING SMART CITIES

Internationally

Internationally, Toronto, Barcelona, New York, London, Tokyo, Copenhagen are all existing cities that have been converted into smart cities due to investments and innovation in public utilities, public transport, reliance on green technology. China, on the other hand, is focusing on building new cities on the smart city model.

In India

The focus appears to be on creation of affordable housing for the new middle class through these smart cities, much like the one currently being developed by the Gujarat Government between Ahemdabad and Gandhinagar i.e. Gujarat Infrastructure Tech- City (GIFT).

GIFT has been conceptualized as a global financial and IT services hub, a first of its kind in India, designed to be at or above par with globally benchmarked financial centres. The main purpose is to provide high quality physical infrastructure (electricity, water, gas, district cooling, roads, telecoms and broadband), so that finance and tech firms can relocate their operations from Mumbai, Bangalore, Gurgaon etc. where infrastructure is either inadequate or expensive. On completion, GIFT hopes to be designed as a hub for the global financial services sector with state-of-the-art connectivity, infrastructure and transportation access being integrated into the design of the city.

To develop and implement the GIFT project, Government of Gujarat (GoG), through its undertaking Gujarat Urban Development Company Limited (GUDC) and Infrastructure Leasing & Financial Services, have established a Joint Venture Company, ‘Gujarat International Finance Tec-City Company Limited’ (GIFTCL). The GIFT project contemplates the development of road network, district cooling systems, automated solid waste management systems, utility tunnels, smart ICT, master balancing reservoir, waste and sewerage treatment plant and power distribution. The project will be spread over 886 acres, including a 261-acre SEZ on the outskirts of Gandhinagar. When GIFT city's cooling towers become operational, buildings will not rely on air-conditioning but district cooling technology, considered to be more energy-efficient process that circulates chilled water through buildings to cool them. Solid waste will be sucked out from homes and offices at 90 km per hour using pipelines leading directly to a waste processing plant. Emphasis will be on using solar energy to meet the power demands of the GIFT City.

 From the look of it, the GIFT city project is intended to be a prototype for the development of other smart cities in the country.

REGULATORY FRAMEWORK

Although plans have been announced for the development of smart cities in India, there are lacunae in the regulatory framework relating to the development of smart cities. As a first step, what a smart city actually entails needs to be defined. Although there exists a broad general concept of a smart city, the actual objective features which would qualify a city as a smart city have not been crystallized. Any regulatory framework to govern their development would be possible once its subject matter is known and understood. 

For their effective and efficient development, smart cities may require both, Central and State legislation, and possibly the inclusion of local regulation and codes as well.

GIFT city was conceptualized by the Gujarat Government and the development thereof has been in accordance with local law. The primary mode of development is on a PPP basis under the aegis of State made laws. However, since the development is highly driven by communication technology and availability of power through non traditional means, which fall within the purview of the Central Government’s powers to varying extent, there may need to be a recognized regulatory framework for smart cities at various levels of governance.

Another interesting feature of the development of the GIFT city is that it is developed as joint venture between various state entities with private participation wherein either the GoG/GUDC will facilitate to obtain necessary permission or registration from the concerned departments of the State or Central Government and would also help to avail incentives under the various schemes announced by State or Central Government including through a State Support Agreement. It is also interesting to note that one of the promoter entities is IL&FS, which is a private entity.

For the integrated development of smart cities, special legislation dealing specifically with smart cities together with changes to existing laws may be required. As an example, the laws relating to SEZs are set out in Central and State laws. Further, the existing laws, including those relating to taxation, land acquisition and local land development laws, have been amended to provide for the rights and benefits attached to establishments of SEZs.

INTERNATIONAL REGULATORY FRAMEWORK

The steps taken by some foreign governments to implement development of cities as smart cities is briefly discussed below:

  1. Barcelona: Initially smart city movement grew so rapidly in Barcelona that no formal strategy was created early on; the projects came first. Currently, there are over 100 project components considered part of the smart city network in Barcelona. From 2011 the Urban Habitat, a centralized government body, acted as the umbrella to facilitate departments relating to urban development that used to work in isolation to come together. Underneath this Urban Habitat structure sits water, energy, human services and environment.  Housing and urban planning are also grouped together. The city has created the Smart City PMO (Personal Management Office) in which different projects belong, and this PMO is responsible for coordinating the projects in the city under the smart city tag. Barcelona is also a forerunner in use of alternate energy. Barcelona Energy together with the City Council has implemented a sustainable energy initiative, making Barcelona the first city to require to the use of solar water heaters in 2006. Barcelona, one of the pioneers of the smart city movement, recently held the Smart City Expo, which attracted more than 6,000 participants from 51 cities around the globe. 
  2. As early as 1998, the city of Hong Kong identified that ICT investment had the potential to have a positive impact on the economy. However, they were also aware that driving change in this area would bring about new challenges, and in response they developed the Digital 21 Strategy as the blueprint for Hong Kong’s ICT development. The Office of the Government Chief Information Officer (OGCIO) was established in 2004. The idea behind the OGCIO was to streamline government structure and leadership for delivering the ICT functions within the Government and to enable the Government to take a proactive, leading role in championing ICT. The Digital 21 Strategy bought together a pan-governmental ICT strategy for the first time. It contains five key action areas (i) Facilitating a digital economy; (ii) Promoting advanced technology and innovation; (iii) Developing Hong Kong as a hub for technological cooperation and trade; (iv) Enabling the next generation of public services; and (v) Building an inclusive, knowledge-based society. Today the OGCIO’s role has expanded to include running the city’s main webpage, conversion of the city of Hong Kong into a predominantly wireless city providing free wireless internet to all its citizens.

From the above it is clear that there are different models for development of smart cities – some that bring together a centralization of different functions and some that emphasize on the focused development of certain key infrastructure. 

In India, for the successful implementation of the smart city structure, an integrated approach may be essential, given the plethora of laws that would affect the actual development of a city.

SOME ISSUES UNDER THE EXISTING REGULATORY FRAMEWORK

A key issue with the development of smart cities appears to be financing. The Government proposes development of these smart cities through the PPP model, as was in the case of the GIFT City. It appears that heavy reliance will be placed on private participation in the development of these new smart cities which may include financing the development to a large extent. There are proposals for substantial allocations in the Budget, but the ability of the private sector to fund such large scale development is a concern. It is pertinent to note that there is no Central legislation governing PPPs, although some States have legislated therefor.

A concern that also arises is that relating land acquisition. The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (‘Land Act’) has increased the amount of compensation payable to displaced persons as well as created obligations relating resettlement and rehabilitation that may have a substantial impact on costs as well as development schedules.

CONCLUSION

Through the Budget, the NDA Government has proposed a reduction in built up area and capital conditions for foreign direct investment from 50,000 square meters to 20,000 square meters and from USD 10 million to USD 5 million respectively with a three year post completion lock in. Further, projects which commit at least 30 per cent of the total project cost for low cost affordable housing will be exempted from minimum built up area and capitalisation requirements, with the condition of three year lock-in. These measures could be seen as an incentive considering the difficulties that could be faced due to the Land Act.

India has received offers from France, Japan and Singapore to assist with the realisation of the smart city dream. The Government of Singapore has offered to provide assistance in the development of these smart cities by providing expertise in improving IT in management of cities, use of new technology for sewerage treatment, including solid waste management, energy use of urban planning norms. Japan, which already has a presence in India via the Delhi Mumbai Industrial Corridor (DMIC) project, may be enlisted to develop bullet trains. This involvement of Japan could be due to the fact that a number of these smart cities are proposed to be developed along the DMIC. France too, has offered to assist with urban planning for these smart cities.

According to IBM - Every minute during the next 20 years, 30 Indians will leave rural India for urban areas. At this rate, India will need some 500 new cities in the next two decades[1].

With a burgeoning urban population, there is an immediate need for creation of infrastructure facilities to satisfy the increasing urbane aspirations of our populace and smart cities seem to the solution. While the focus seems to have shifted towards smart cities and urbanisation, care must be taken so as to ensure the large percentage of population that relies on unskilled jobs and agriculture are not left behind.

 

 

Disclaimer: This article was first published in the August 2014 issue of the Infrastructure Today magazine. It has been authored by Aakanksha Joshi, who is an Associate Partner and Tarini Menezes, who is an Associate at Economic Laws Practice (ELP), Advocates & Solicitors. They can be reached at aakankshajoshi@elp-in.com or tarinimenezes@elp-in.com for any comment or query. The information provided in the article is intended for informational purposes only and does not constitute legal opinion or advice. The contents of this article/update are intended for informational purposes only and do not constitute legal opinion or advice. Readers are requested to seek formal legal advice prior to acting upon any of the information provided herein.