Smart City Mission: The challenges ahead

The Smart Cities Mission of the Ministry of Urban Development is a flagship project of the government of India, an urban development initiative of massive proportion, set to attract billions of dollars of investment, and billed as one of the largest urban development projects in the world. Since its launch in June 2015, 60 cities have been selected, through a nationwide contest, to receive funds from the government and assistance from several agencies including the World Bank and the Asian Development Bank. However, implementation of the mission is replete with hurdles.

When the ministry launched the mission, government agencies (including municipalities) and private parties were given absolutely no clarity on the operation, management and financing of the special purpose vehicle (SPV), award of contracts, and bankability of a project. The mission guidelines simply provided for incorporation of a limited liability company (SPV) promoted jointly by the state government and urban local bodies to undertake the smart city projects. Besides this, no contractual framework governing the project development, operation and management, corporate governance aspects and state support was prescribed.

The lack of contractual framework will create ambiguity on obligations of parties and functioning of the SPVs, deter investments, and impede implementation of the projects.