sion proposal, the project will be operated as
a Centrally Sponsored Scheme (CSS) and the
Central Government proposes to give finan-
cial support to the extent of Rs. 48,000 crore
for developing 100 smart cities over the over
the next five years. It roughly translates into
an average Rs. 100 crore per city per year. An
equal amount, on a matching basis, will have
to be contributed by the State and the ULBs
for smart cities development.
However, to fund the massive infrastruc-
ture requirement is challenging. According
to the government’s own estimate, to main-
tain and build the city infrastructure, the cit-
ies will require infrastructure spending to the tune of
Rs. 7 lakh crore over the next 20 years, which roughly
amounts to spending Rs. 35,000 Cr. each year. This
is huge fund corpus and it is not possible for the cen-
tre or the state alone to fund the massive infrastruc-
ture investment require for these cities.
“The amount of allocation I have made is not suf-
ficient, even a matching grant from the state is not
sufficient. That’s why I have come up with the PPP
model. PPP is the way forward for urbanisation in
India. People have to be willing to pay for the services
they want,” Naidu has said in a recent interview.
Given the funding gap, the government has incor-
porated various financial tools to aid the financing
requirement of the cities in its smart city mission.
Public- Private Partnership is one of the important
tools to finance the various infrastructure projects
under the Smart Cities Mission. According to De-
loitte, roughly 80 percent finances of the Smart City
projects are expected to come from the private play-
ers. In order to smoothly implement the project un-
der the PPP model the SCM guidelines have created
the provision of Special Purpose Vehicles. All smart
city projects will be implemented through special
purpose vehicles, or SPVs, created by those munici-
palities. The SPVs are permitted to enter into joint
ventures with other entities to raise capital. These
will be autonomous bodies accountable to the city,
with majority ownership held by government agen-
cies. The private sector and financial institutions
could hold minority equity stakes.
Another major aspect of the mission was the emer-FINAN CING
INDIAN
CITIES
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