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Smart Cities Cover Story

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‘Innovations in technology and skilled human capital are critical factors for creating, engaging and sustaining the future cities’. –Global real estate consultancy Cushman & Wakefield.

A smart city is a high tech intensive and advanced city that connects people, information and city elements using new technologies in order to create sustainable greener city, competitive and innovative commerce and an increase in quality of life with straightforward administration and maintenance system of city. A smart city is one which leverages traditional (for example: water supply) and modern (Internet and communications technology) enablers to fuel sustainable economic development, ensuring high quality of life and better management of natural resources.

The smart city concept can be looked as a framework for implementing a

Vision of advanced and modern urbanization. This vision envisages achievement of three goals –social equitability, economic viability, and environmental sustainability. Social equitability is based on the Principle of inclusion; there is no discrimination in access to benefits across population segments. Economically viable solutions are those that are financially self-sustaining. Environmental Sustainability ensures the preservation of the environment for future generations.

India is going through major shifts. Megatrends such as Rapid Urbanisation, Resource scarcity, etc are demanding innovative strategies across the economy

for Government to provide smart governance to its citizens, by addressing local challenges affecting the citizens’ in their daily lives. In line with PwC’s purpose

of ‘building trust in society and solving complex problems ’PwC India has developed a comprehensive smart city solution called ‘Smart Local Governance Platform’, a modular and comprehensive solution, creates meaningful structured data from the vast siloed data available with local governments and across the social media, and assists urban planners in enforcing solution parameters though appropriate governance models, thereby, achieving a truly smart and sustainable city.

In late August, the Indian Government announced a list of ~100 cities which would become smart cities over next five years. Since taking charge last year, the Smart City Mission is one of the key projects of Modi Government and it has been highlighted as an initiative which could lead to a significant improvement in the quality of life for citizens of cities which would be identified as smart cities.

The Govt believes that the purpose of the Smart Cities Mission‟ is to drive economic growth and improve quality of life of people by enabling local area development and harnessing technology that leads to Smart outcomes. Area based development will transform existing areas (retrofit and redevelop); including slums, into better planned ones, thereby improving liveability of the whole City. New areas (Greenfield) will be developed around cities in order to accommodate the expanding population in urban areas.

Government’s Mission

Smart Cities Mission of the government is a bold, new initiative. It is meant to set examples that can be replicated both with and outside the smart city. The core infrastructure elements in the city would include- sufficient water supply, sufficient electricity supply, sanitation, including solid waste management, efficient urban mobility and public transport, affordable housing, robust IT connectivity and digitization, e-governance and citizen participation, sustainable environment etc. The smart cities mission is to drive economic growth and improve quality of life by enabling local area development and harnessing technology that leads to smart solutions. Applications of smart solutions will enable cities to use technology, information and data to improve infrastructure and services.

Coverage and Duration of Smart Cities Project

The mission will cover 100 cities and its duration will be 5 years (FY2015-16 to FY2019-20). The total number of smart cities has been distributed among states and UT’s on basis of equitable criteria. The formula gives equal weightage to urban population of the state/UT and the number of statutory towns in the state/UT. Based on this formula, each state /UT will have a certain number of smart cities with each state/UT having at least one.

Basic criteria for selection of a city/municipal area

  1. Implementation of e-governance and online grievance redressed mechanism
  2. Publication of e-newsletter
  3. Putting all government expenditure online for public
  4. Swachh Bharat: at least 5% increase in coverage of latrines since 2011 census
  5. Track record of paying salaries to employees
  6. Track record of urban reforms and citizen participation being introduced

The number of smart cities will be capped at a certain indicated number. The distribution of smart cities will be reviewed after two years of the implementation of the mission.

Essential Features of Smart City Proposal

The proposals are expected to include a large number of infrastructure services and smart solutions. The elements provided would assure electricity supply with at least 10% of the smart energy‟s requirement coming from solar, adequate water supply including waste water recycling and storm water reuse, sanitation including solid waste management, rain water harvesting, smart metering,, pedestrian friendly pathways, encouragement to non-motorised transport, non-vehicle streets/zones, smart parking, energy efficient street lighting, innovative use of open spaces etc. In case of redevelopment and Greenfield models of smart cities, in addition to the essential features mentioned above, at least 80% buildings should be energy sufficient and green buildings. Additionally, of the total housing provided in Greenfield development. There can be expected to have at least 15% in affordable housing category.

Retrofitting: This will introduce planning in an existing built up area to achieve smart city objectives to make existing area more efficient. An area more than 500 acres will be identified by the city in consultation with citizens. Since existing structures are largely to remain intact, it is slated that more intensive infrastructure service levels and a large number of smart applications will be packed into retrofitted smart city. This strategy is expected to be completed in a short time.

Redevelopment: This will replace the existing built up environment and enable co creation of a new layout with enhanced infrastructure using mixed land use and increased density. Redevelopment envisages an area of more than 50 acres identified by urban local bodies in consultation with citizens. Two examples of redevelopment model are the SaifeeBurhaniUpliftment project in Mumbai and the redevelopment of East Kidwai Nagar in New Delhi being undertaken by National Building Construction Corporation.

Greenfield: This development will introduce most of the smart solutions in a previously vacant area of more than 250 acres using innovative planning, plan financing and loan implementation tools with provision for affordable housing. Green field developments are required around cities in order to address the needs of the expanding population. One well known example is GIFT city. Greenfield developments could be located within the limits of urban local bodies or within the limits of local urban development authority.

Pan City: Development envisages application of selected smart city solutions to the existing city wide infrastructure. Application of smart solutions will involve the use of technology, information and data to make infrastructure and services better. For instance, applying smart solutions in transport sector. Another example can be waste water recycling and smart metering for better water management in the city.

As smart city is expected to take a compact are approach, it is necessary that all the city residents feel there is something in it for them also. For North Eastern and Himalayan states, the area proposed to be developed will be one-half of what is prescribed for any of the alternate models – retrofitting, redevelopment or Greenfield development.

Financing Opportunities for Smart Cities

The smart city mission will be operated as a centrally sponsored scheme and it proposes to give financial support to the mission to the tune of Rs 48000 crores over 5 years i.e. an average of Rs 100 crore per city per year. An equal amount on matching basis will be contributed by the state. A total of close to 1 lakh crore will be made available for smart cities development. Government grants from the center and state will be leveraged to attract funding from internal and external sources. The project expenses are slated to vary depending upon the level of ambition, model, capacity to execute and repay.

The success of this endeavor will depend upon the robustness of SPV‟S revenue model and comfort provided to lenders and investors. A number of state governments have successfully set up financial intermediaries in Tami Nadu, Gujarat, Orissa, Punjab, Maharashtra, Karnataka, Madhya Pradesh and Bihar that can be tapped and other states may also consider a similar model in their respective states. It is expected that number of schemes in the smart city will be taken up on PPP basis.

The GOI funds and the matching contribution by the states are anticipated to meet only a part of the project cost. Balance funds are expected to be realized through innovative financing schemes- pooled financing scheme, tax increment financing, Tax increment financing, additional resources transferred due to acceptance of recommendations from fourteenth finance commission, other central government schemes like Swachh Bharat Mission, AMRUT, National Heritage City Development and Augmentation Yojana, Private sector through PPP‟s, States may also access the national investment and infrastructure fund announced by the Finance Minister in his 2015 Budget Speech which is to be setup this year and rest from state‟s own resources through collection of user fees, beneficiary charges, impact fees, land monetization, debt, loans and etc.

The distribution of funds under the scheme would be – 93% project related funds, 5% administrative and office expenses funds for state (towards preparation of pilot studies connected to area based developments and deployment and generation of smart solutions, capacity building as approved in the challenge and online services), 2% administrative and office expenses for MoUD ( Mission directorate and connected activities and structures, research, pilot studies, capacity building and concurrent revolution)

Developmental Challenges for Smart Cities

This is the first time, a MoUD programme is using the challenge or competition method to select cities for funding and using a strategy of area based development. States and Urban local bodies will play a vital role in development of smart city. Smart leadership and vision at this level will be important factors determining its development. Understand concepts like retrofitting, redevelopment and greenfield development by policymakers, implementers and other stake holders is expected to require capacity assistance. There are two ways of obtaining technical assistance- by hiring consulting firms and engaging with hand holding agencies.

Consulting Firms: The ministry of urban development is expected to technical qualify a panel of consulting firms and the states are at liberty to draw up on the panel. As considered necessary, the states/union territories may request financial proposals from these firms. The states have an option of appointing a consulting firm outside the panel by following transparent and fair procedures as per state financial rules.

The consulting firm is expected to prepare a smart city proposal and participate in a challenge according to the smart city mission statement and guidelines. The proposal would contain retrofitting or redevelopment or Greenfield projects and at least one Pan-city initiative. The focus will be given to transformative projects with the highest possible impact 1)economic growth in the city 2) improving the quality of life for all i.e. reduction commuting time, improvement in air and water quality, increased coverage of water, solid waste management, street lighting, enhanced green public spaces and improved safety and security

Handholding Agencies: During the preparation of smart cities mission, there has been a significant interest from foreign governments. Additionally, other external organizations have suggested to the Ministry of Urban Development that they can give technical assistance. These include World BANK, ADB, JICA, USTDA, DFID etc. Ministry can help in forging tie ups between multilateral institutions and states/UT‟s acting as handholding agencies for development of respective smart city projects.

Major investments in time and resources will have to be made during the planning phase prior to participation in challenge.

The smart cities mission would require smart people who can actively participate in governance and reforms. Citizen involvement is important in the entire governance process. Decisions on deploying smart solutions, implementing reforms, oversight during implementation, designing post project structures in order to make smart city projects sustainable will be enhanced with participation of experienced professionals in the industry. Their participation will be enabled by the SPV through increasing use of internet communication technology and mobile based applications.

Potential Solutions –To aid development of Smart Cities

For improving the institutional capacity, develop a tripartite framework as part of which local government is provided access to defined financial and technical support in lieu of undertaking specific governance reforms and setting up institutional structures like central control station with representation from all the departments, having a common database for sharing of data and so forth.

For technical capacity constraints, leverage private partnerships and outsourcing arrangements for implementation, operation and maintenance. Opt for cloud based model for architecture for implementation of internet and communication technology as it results in the operations and maintain responsibility being taken over by private players.

Financial constraints, initial investment cost for internet and communication technology concerned applications, which are anyway significantly lower than associated network level infrastructure, can be reduced and recovered in phased manner by adopting a cloud based scalable model.

Ensure municipalities, in their effort to develop a smart city vision, build on unique advantages of Indian cities and the great work that community groups and SME‟s are already doing. Support the potential of social entrepreneurs and other grass roots smart city initiatives by working with intermediaries that already work with these groups.

Smart Facts

Smart Buildings

India is expected to emerge as the world‟s 3rd largest construction market by 2020, by adding 11.5 million homes every year. The intelligent building systems market is around USD 621 million and is expected to reach USD 1891 million by 2016, a CAGR of 24.93% from 2011 to 2016. Smart buildings would save upto 30% of water usage, 40% of energy usage and reduction of building maintenance costs by 10 to 30%.

Smart Transportation

Government has approved a USD 4.13 billion plan to spur electric and hybrid vehicle production by setting an ambitious target of 6 million vehicles by 2020. Electric vehicle charging stations in all urban areas and all along all national state and national highways by 2027.

Ministry of Urban Development plans to invest more than USD 20 billion on the metro rail projects in coming years. The proposed 534km Mumbai-Ahmedabad high speed rail project will have an investment of around USD10.5 billion. India‟s first monorail project at Mumbai will cost around USD 500 million of which USD 183 million has been spent on phase 1.

Information and Communications Technology

Broad band connections expected to touch 175 million users by 2017. Cloud computing market is expected to reach over a USD 3 billion market by 2016-an almost five fold increase from 2012.

Security and Surveillance

Under the flagship safe city project union ministry has proposed USD 333 million to make seven big cities (Delhi, Mumbai, Kolkata, Chennai, Ahmedabad, Bangalore, and Hyderabad) to focus on technological advancement instead of manpower.

Disaster Management

Government of India and the World Bank have signed a USD 236 million agreement for reducing disaster risks in coastal villages of Tamil Nadu and Puducherry.

Smart Meters

India to install 130 million smart meters by 2021.

Sectoral Impact

Building Materials

The Government has launched the „Smart City Mission‟ covering 100 cities in five years (FY16 to FY20) to accelerate urbanization, improve the quality of life and attract investment. This will require a comprehensive development of physical, institutional, social and economic infrastructure. The Government‟s progressive policies like 100 Smart Cities Mission, Housing for All by 2022, Swachh Bharat Abhiyaan (Sanitization for All by 2019), Atal Mission for Rejuvenation and Urban Transformation (AMRUT) should facilitate investment, accelerate construction activities and give a fillip to the economy.

These schemes aim to meet the needs of around 40% of India‟s population and hold significant promise for the real estate sector. While we believe these government initiatives to increase demand for building material products like tiles, sanitary ware & faucets, though we see limited benefit directly for organized players in the near term given supply in Govt. projects would be mainly catered by the unorganized players who supply products like Indian style pan and plastic taps mainly used under affordable housing at ~30% lower prices than organized players.

Infrastructure spend is yet to improve, however expectations are built on the government announcements around the Delhi Mumbai Industrial Corridor, Smart City Initiatives, Digital Connectivity and Make in India etc., indicate increased expenditure in infrastructure projects over the near and medium term. With growth in infrastructure activities, the building material industry is expected to benefit and companies like Finolex cables, Havells India will be among the key beneficiaries for higher demand for cables; switches; lightings; etc.

The middle income segment has become one of the principal drivers for real estate boom. This segment has grown from 11mn households in 2001-02 to 31mn households in 2010-11 and is further expected to grow to 114mn households by 2025-26. Our interaction with the management of Kajaria, Cera and HSIL.

highlights the same, though they are of the view that these steps will result into indirect benefits for the organized players as; 1) Increased awareness about branded products to propel higher spending; and 2) Shift from unorganized to organized products demand with increase in per capital income & implementation of GST. We expect these initiatives stores significant upside for Kajaria Ceramics, Cera Sanitaryware& HSIL from our building material coverage given their strong brand equity & distribution network, changing consumer preferences towards premium & lifestyle products along with diverse product basket.

Pipe Sector

Creation of smart cities will provide a significant opening for players operating in the pipe industry. Companies like Astral and Supreme industries are expected to benefit from the business opportunity dedicated for providing efficient water supply systems and sanitation to various nominated cities under the smart city mission.

Smart Partners so far

Smart city council lead partner Cisco is stepping up to build its own Cisco smart city in Bangalore. Cisco‟s showcase shows spans some 2.6 million square feet to show off its internet of things offerings, including smart work places, buildings, parking’s and transport offerings. Cisco smart city would include- smart parking, smart buildings, Cisco energy management solution, remote expert solution, connected learning, smart work spaces, Cisco Service grid etc.

IBM another council lead partner is also investing heavily in India. IBM has a huge presence in India, with offices in 14 cities and employees more people than it does in US.

The smart cities would need power and work is underway to supply that. Council associate partner ABB will work with power Grid Company of Bangladesh to help build four turnkey substations and expand six others reaching nearly half a million households.

Schneider Electric India has signed a pact with ESSEL Infra projects to develop smart projects in India. Schneider Electric has great experience in having executed more than 250 projects. The company has completed smart city projects in Hong Kong, Carson City, Barcelona and Lyon.

Hitachi India and Siemens signed a MoU with CII. The consortium would create pilots and reproduce them for setting up of smart cities across India.

Tech Mahindra recently launched software defined networking (SDN) and network functions virtualization (NFV) based smart city solutions. SDN-NFV are going to play a critical role in the next generation of telecommunications, data centers and enterprise networking. Tech Mahindra has also joined forces with the Open University and Milton Keynes council in leading the charge in the UK‟s smart cities revolution. We expect the enriching experience to add value to India‟s smart city ambitions.

Lord Francis Maude of Horsham, minister of state for trade and investment UK has recently agreed to offer assistance in areas of mass transport, water, waste management, built environment, ICT data, software analytics, smart metering , commercial services, regulatory services and social community led services like healthcare and e-governance.

Japan is also helping India to develop smart cities by investing USD4.5 billion in the first phase of DMIC project through lending from Japan International Corporation Agency. JICA has also taken up master planning for 3 smart cities –Ponneri in Tamil Nadu, Krishnapatnam in Andhra Pradesh and Tumkur in Gujarat- in the Chennai-Bangalore industrial corridor

UK is collaborating for developing the Bangalore-Mumbai economic corridor project with help from private companies from Britain.

India also has signed an agreement with Singapore to use its expertise in smart cities and urban planning.

IBM prepared the integrated communication technology master plan for dighi port industrial area in the DMIC.

CISCO also has prepared the internet and communication technology master plan for 4 smart cities under DMIC- Dholera in Gujarat, Shendra in Maharashtra, Manesar in Haryana and kurukshetra in Rajasthan.

Even the US government is slated to lend its support to build three smart cities and improve clean water and sewage services in others. A number of other countries around the world are also planning to help India in its ambitious agenda.

A snapshot of projects which have played as motivating role in order to boost the idea that Smart Cities initiative can take of….

Gujarat International Finance Tech City (GIFT CITY)

Brainchild of Narendra Modi, GIFT is promoted by Gujarat Urban Development (GUDC) and Infrastructure Leasing & Financial Services (IL&FS). A first of its kind smart city development spawning 62 mnsqft of office, residential and commercial space. Targeted at Financial Services and IT/ITES offering global firms a world class infrastructure and facilities. Aims to attract the top talent by providing the finest quality of life all with integrated townships, IFSC and multi-specialty special economic zone (SEZ) to 0.5 million people. Strategic Location: 12 KM from the Ahmedabad International Airport and 8 KM from Gandhinagar.

Bus Rapid Transport System (BRTS) in Ahmedabad

BRTS in Ahmedabad, operated by Ahmedabad Janmarg Limited, initiated its operations in 2009. Investments in phase 1 intended to cover a third of Ahmedabad‟s population of around 3 million people, was around INR 500 crores. Currently, BRTS with 12 operating bus routes covering 126 bus stops, has an integrated transportation management system, including number of smart solutions like advanced vehicle tracking system, fleet management system, automatic fare collection system, passenger information system and vehicle scheduling and dispatching mechanism.

Supervisory Control and Data Acquisition (SCADA) for water management in Pimpri, Chinchwad

It was implemented in 2011 with an investment of INR 13 crores. Enabled real time water auditing, monitoring and control for the entire city spread over with water supply of around 450 ML per day. The system provides city engineers data pertaining to the electrical efficiency, flow, pressure, level, valve operation filter operations on real time basis at various points of the water supply value chain and enable controlling the same.

SCADA based reporting system allows urban local bodies insight into possible issues on a day to day basis. It is possible to implement a cloud based Internet and communications technology based solution capable of integrating data from various sources and generating smart responses to build upon the existing SCADA based water distribution system at a fraction of time and cost which would have been taken to build such a system from scratch.

This would help to integrate the data collected from SCADA system through back end internet and communication technology based solution with customer feedback collected through sources like social media, service delivery call centres, websites etc. This would improve savings in hardware and application costs. To overcome technical capacity constraints at urban local bodies.

Standardize business processes and operating practices. Open data standards and central repository for all data across states. Opportunity to host ICT application developed by private developers with associated revenue models.

Solid Waste Management System in Greater Hyderabad Municipal Corporation

Implemented multiple smart solutions with regards to solid waste management for monitoring of more than 1000 dustbins utilizing mobile technology, monitoring of more than 2000 solid waste management workers utilizing mobile technology, development of integrated waste management facilitates on public private partnership basis with private sector partners.

The success of India’s ambitious plan to develop 100 smart cities hinges on five crucial elements – power, infrastructure, funds, technology and social capital.

Smart cities required clean and continuous supply of power and therefore there was need to develop alternative sources of energy in order to make the cities financially and ecologically viable.

The other necessary elements for developing smart cities, it noted, were physical and social infrastructure development, up-gradation and maintenance of existing infrastructure, development of innovative and viable mechanisms for securing funds, strategies for engaging multiple stakeholders and technology advancements that supported the overall objective of the initiative. Innovations in technology and skilled human capital were critical for creating, engaging and sustaining the future cities.

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