How Smart Cities Mission can help municipalities to improve governance
The Smart Cities Mission (SCM) promises to bring India into the 21st century of governance. This is no mean feat given the negative perception of municipalities as unresponsive and ineffective. The SCM requires each smart city to create a parallel institution called a ‘Special Purpose Vehicle’ (SPV), which is then delegated the ‘rights and obligations’ of a local municipality. The two are interrelated. However, the exact terms of their relationship and hierarchy are unclear, thus making them liable to conflict. This ambiguity will be detrimental to collaborative efforts between SPVs and municipalities and to democratic processes. Thus, it is imperative to ask: How can the SCM create efficiencies in local governance while strengthening democracy?
A study by the Centre for Policy Research (CPR), New Delhi, demonstrated that SPVs and municipalities differed in terms of composition, but overlap greatly in terms of functionality. The SPV is registered as a limited company under the Companies Act, 2013, and comprises a small board, normally under 20 people. The board consists of state and central government bureaucrats with a smattering of municipal-level bureaucrats and elected representatives. All SPVs are allowed up to 40% private investment. Municipalities consist of both elected officials and appointed bureaucrats, whose numbers could run into the hundreds. According to the Mission guidelines a SPV is formed to, “…plan, appraise, approve, release funds, implement, manage, operate, monitor and evaluate the Smart City development projects...” and should have ‘operational independence’ and the right to collect taxes and charge fees towards achieving this aim.
The SPV structure was created to circumvent the problems associated with municipalities and ensure greater efficiency in planning and implementing urban development projects in the smart cities. Unfortunately, the ambiguity surrounding the relationship between the two organisations has made SPVs vulnerable to failure.
First, the strongest asset the SPV offers urban governance is stable leadership. Indian cities are primarily governed by municipal commissioners who are frequently transferred. The lack of institutional memory in municipalities further prevents projects from being implemented in a timely manner, even if the leadership changes. The SPV, however, will hire a CEO to implement the mission and could have more stable leadership and ensure that the plan is implemented professionally. However, the CEO essentially could govern a geography and budget similar to the municipality (currently at Rs 1,91,2015 crore for 90 cities and growing) without clear accountability to citizens.
The second advantage of the SPV is its liberty to develop new processes between people and departments that could streamline decision-making and ensure better coordination between departments. Municipalities are often restricted from achieving similar forms of efficiency as they are encumbered by their size and propensity to work in departmental silos. While SPVs could implement projects rapidly, their accountability is unclear and without a strong body of elected representatives, this structure could become opaque.
Third, most municipalities do not have strong finances in India, and one hopes the SPVs will have higher credit ratings and allow cities to have greater access to funding, through fees and the debt market.
While the CPR study found that no SPV has currently opted for private investment, it does not preclude them for utilising this source of finance at a later date. This could bring about financial and ethical dilemmas as private bodies will seek returns on investments and this could result in rising costs of services. This could render the projects under SCM unaffordable for low-income citizens. It is essential that the financial security-public service balance be made clear and techniques like cross-subsidisation be planned in advance, rather than applied haphazardly later.
Thus, the SCM could visualise the SPV as a means of bridging departments, providing finance and stable leadership in the short term for municipalities to understand the importance of goal-oriented urban development.
This will, hopefully, push municipalities to work towards inter-departmental convergences and for a decentralisation of executive powers to elected leaders from the city, like a Mayor, who could ensure more sustained city management.
In order for the Mission to affect urban development in the long term, it must revolutionise urban governance while ensuring that safety nets of accountability and transparency are bolstered.
Persis Taraporevala is a research associate, Centre for Policy Research, New Delhi
The views expressed are personal