Smart cities: govt looking at user charges to raise resources

The Centre is looking at multiple revenue mobilisation measures to meet the huge resources required to make the smart cities scheme a success. This is in addition to the Union Cabinet approving an outlay of ₹48,000 crore for the smart city scheme over the next five years.

“The resources of urban local bodies from collection of user charges, beneficiary charges, impact fees, land monetisation, loans etc can be tapped. Innovative financing mechanisms such as municipal bonds to further the credit rating of urban local bodies, pooled financing mechanism, and tax increment financing (TIF), are also being considered,” a senior official in the Ministry of Urban Development told BusinessLine .

Different models Under TIF, if a particular area or zone of a municipal body is developed through a loan, once the project benefiting that area is completed, the residents of that area can be made to bear the cost of the project by increasing property tax for a certain period.

“Globally, financing models based on user charges have been successful, especially in Bogota (the capital of Colombia) and some South-East Asian countries,” said Pratap Padode, Founder & Director, Smart Cities Council India, a consortium of smart city practitioners and experts.

“The sustainability of the service is possible only if citizens are ready to pay a value for it,” he added.

Apart from the public-private-partnership model, the scheme may look at leveraging borrowings from bilateral and multilateral institutions, the official said.

ADB funding On June 16, the Asian Development Bank had announced doubling the funding to support India’s urban development from $2.6 billion per annum at present to up to $5 billion per annum.

It will also support smart cities and the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) in seven States: Andhra Pradesh, Madhya Pradesh, Karnataka, Rajasthan, Gujarat, Tamil Nadu and Maharashtra.

June 25 launch The smart cities mission will be launched by Prime Minister Narendra Modi on June 25 along with two other schemes, AMRUT and Pradhan Mantri Awas Yojana.

Modi will also announce the operational guidelines, apart from unveiling the logos for the schemes.

Each smart city, selected through a ‘City Challenge Competition’, will get Central government assistance of ₹100 crore per year for five years, the Ministry had said in April.