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Are smart cities destined to fail like the SEZ initiative, which started with a bang and ended in a whimper?

Are smart cities destined to fail like the SEZ initiative, which started with a bang and ended in a whimper?

real estate Updated: Sep 14, 2015 14:58 IST
Vandana Ramnani
Vandana Ramnani
special economic zones (SEZs),100 smart cities,National Institute of Urban Affairs
A great smart city proposal will not make states eligible for the annual R100 crore funding

With only 40% of the approved 436 special economic zones (SEZs) operational in India even after 10 years of land acquisition, it remains to be seen if the government's plan of setting up 100 smart cities – both greenfield and brownfield – will also turn into what real estate experts term as another “land grabbing real estate venture.”

Unless there is actual work on the ground and improvement in infrastructure and service delivery in the cities that make it to the smart cities competition, this project too will meet the same fate as the SEZs, say experts.

But there is another school of thought that believes that the intent of the smart cities mission is not to acquire new land but to promote the ethos of doing more with less.

The smart cities mission is radically different from SEZ development as it takes into consideration the holistic needs of existing areas of cities, leveraging economic drivers that define the identity of cities and their citizens. The disbursement of funds to the special purpose vehicles, which will be set up to manage the transformation of the 100 cities, will be linked to the achievement of measurable outcomes and the implementation of reforms, says Jagan Shah, director, National Institute of Urban Affairs.

Amit Bhatt of Embarq India agrees. According to him there are substantive differences between the two. While the SEZs were aimed at reviving manufacturing, and were set up with the intent of promoting exports through service delivery and adding ancillary facilities, smart cities will be areas where people will live and work. There will be several approaches to setting up such cities – greenfield, retrofitting and redevelopment unlike SEZs that were mostly greenfield projects.

Smart cities will be implemented via an SPV and the majority stake will be owned by the state government. In case of SEZs, the government had limited stake. For smart cities, the majority stake will be owned by state government and the urban local bodies. Negligible at around 15% in SEZs, the residential component in smart cities will be at least around 50% to 60%.

Last but not least, the monitoring and evaluation mechanism for smart cities is very stringent. All cities will have to submit a utilisation certificate stating how they utilised the R100 crore. The annual grant will be given to them subject to the progress on the ground, says Bhatt.

SEZ versus smart cities

1) The SEZ initiative primarily focused on the need for integrated industrial-urban development with a focus on exports. The smart city programme, on the other hand, aims to improve urban service delivery through adoption of smart solutions / technology.

2) The SEZ policy required a minimum land size of approximately 5,000 acres and this in most cases led to the need for large parcels of land. The acquisition process often delayed implementation of projects. The smart city programme on the other hand focuses on existing cities and allows three modes of development: Retrofitting of existing areas through better water and sanitation coverage, other urban amenities etc (more than 500 acres); redevelopment (for example, redeveloping existing slums) which is applicable for part of an existing city with an area greater than 50 acres and greenfield development (more than 250 acres).

3) Unlike the SEZ policy which focused on creation of new export processing zones, the smart city programme aims to improve existing urban centres. Consequently, it is expected that the smart city programme will be relatively easier to implement since issues like land acquisition are not likely to act as impediments.

4) The level of planning (for example, specific services like water, sanitation, urban transport etc) and details (metrics specified for each area) seems to be more comprehensive than the SEZ policy where only broad guidelines were given in terms of proportion of processing area to non-processing area and permissible end uses (residential, commercial) in the non-processing area.

5) While the SEZ policy was open ended, the smart city programme is much more focused and is to be limited to only 100 cities (20 per year) over the first five years. This is expected to make it more manageable and ensure close supervision and hand holding from the ministry of urban development.
Source: Arindam Guha, senior director, Deloitte in India:

First Published: Jul 10, 2015 18:26 IST