Creative solutions required for infrastructure financing

By Hemant Sahai and Nilesh Chandra, HSA Advocates

Asmart city can be only as “smart” as its infrastructure permits. A smart city must offer efficient and effective services and infrastructure to encourage and allow economic activity that can compete with the rest of the world. Creating world-class infrastructure within smart cities will require creative financing and execution solutions.

Hemant Sahai
Hemant Sahai

India’s ambitious 100 smart cities development plan presents an unprecedented investment and economic growth opportunity and will require focused effort. While significant institutional financial support is available, the figures pale in comparison with the aggregate capital investment required.

The Indian government in its 2014-15 budget allocated US$1.2 billion in investment towards the smart cities initiative, to be followed by ₹1 trillion (US$15 billion) over five years. In addition, an average of ₹1 billion per smart city per year will be contributed by a centrally sponsored scheme, state governments and urban local bodies (ULBs), largely by way of viability gap funding support. The government has also prepared a blueprint for financing the smart cities by pooled finances from national and state-level agencies and ULBs and schemes to attract investment in the form of bonds, etc. International partners too have committed financial support. However, as an estimated US$1 trillion in financing is needed for these smart cities, it is now accepted that most of the infrastructure will have to be built on the public-private partnership (PPP) model.

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