Smart Cities Mission needs innovative financing models

By Ramya Hariharan, HSA Advocates
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Under the Smart Cities Mission, the government of India has earmarked approximately US$7.3 billion for funding of smart cities, with a total proposed investment of US$15.6 billion for 100 smart cities based on a matching contribution from states and urban local bodies. But estimates suggest that building smart cities and allied infrastructure is likely to require around US$1 trillion.

This means that the funding model for smart cities needs to shift from using public resources to contractual public-private partnerships (PPPs), to be able to attract private capital. PPPs will play a key role in developing the infrastructure for smart cities, especially due to limited availability of public resources.

Ramya Hariharan, HSA Advocates
Ramya Hariharan
Partner
HSA Advocates

The key to success of PPPs lies in framing a concession model that is balanced both for the government and the private party, taking into consideration the sector in respect of which a PPP is proposed. Since India is venturing into PPPs in urban infrastructure for the first time, a flexible model with greater risk allocation to the government is desirable.

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Ramya Hariharan is a partner at HSA Advocates. HSA is a full-service firm with offices in New Delhi, Mumbai, Bengaluru and Kolkata.

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