The government is pursuing loans from international agencies to finance its smart cities mission. This is in addition to an outlay of ₹48,000 crore approved by the Union Cabinet for the mission.

The Urban Development Ministry has informed States that the government is pursuing a loan of $1 billion from the Asian Development Bank and another $500 million from the World Bank to provide funds to the Special Purpose Vehicles to be created for each smart city.

“The modalities in this regard are being worked out and the loan should be available in 2016 for use by the first batch of smart city candidates to be chosen in the second stage of the City Challenge competition among the 100 cities included in the mission,” a source said.

The Ministry recently unveiled the roadmap for financing smart cities at a northern region workshop organised here for 40 cities.

Operation, maintenance

In the workshop, the Ministry stressed that States should structure user charges so that operation and maintenance costs are met. User charges should be partially indexed to inflation and improved quality of services, States were told.

The Ministry’s roadmap also proposes automatic partial indexation (linking) of user charges to inflation in urban areas and to quality of services to increase cost recovery, the source said.

In this regard, the Ministry is developing a ‘model concession agreement in urban water supply’, based on tariff indexation to inflation to mitigate risks.

“This model document also covers risk allocation between public and private sectors, performance standards and coverage targets besides providing for flexibility to urban local bodies,” the source added.

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