Industrial corridor projects offer clues to revive mission

By Soumya De Mallik, HSA Advocates

June marked the third anniversary of the Smart Cities Mission, a marquee project of the government, which had attracted international interest and appreciation. The involvement of international financial institutions and agencies had raised hopes for development of the 100 cities chosen through a competitive process. However, despite efforts of the Urban Development Ministry and the initial enthusiasm, the overall progress of projects in the selected cities has been disappointing.

Soumya De MallikPartnerHSA Advocates
Soumya De Mallik
HSA Advocates

Several cities are yet to incorporate the special purpose vehicles (SPVs) to undertake smart city projects, and many SPVs are yet to receive the grant funds. Although blueprints of area-based and pan-city elements of projects are in place, not much has happened on the ground in most of the cities. Key to success of the mission is to prioritize projects, identify and achieve development milestones within a specified timeframe, monitor the projects until completion, and operate and maintain the assets for public use during their lifetime. From a legal perspective, a comprehensive contractual arrangement and a dedicated institutional framework are crucial.

A master developer agreement between the SPV and its shareholders, i.e. the state government and the relevant municipal body, could provide the contractual framework required to segregate the scope of work, specify the role and responsibility of each party, ensure transparency and accountability, and set project milestones and timelines. Such a framework should ensure requisite support from the shareholders and adequate autonomy to the SPV to carry out the activities.

The agreement should also provide for entry of new shareholders to accommodate domestic and foreign investments in the SPV, delegation of powers to the SPV, future funding for projects, service delivery framework, governance and management of the SPV. A comprehensive and robust agreement, including details of state support to be provided and timelines for completion of activities and obligations of the parties, would go a long way towards the effective and timely completion of projects and implementation of the smart and sustainable development initiatives as contemplated under the mission.

The need for a dedicated institutional framework at the state and national level is evident from the slow progress of project works in all cities, release of only a fraction of the total funds allocated for the projects and limited use of the funds. Over 300 projects with costs over ₹1 billion (US$14.5 million) each are proposed. A dedicated institutional structure would provide the much-required supervision and oversight and support the project development activities.

A case in point is the Apex Monitoring Authority that reviews the industrial corridor projects. The National Industrial Corridor Development and Implementation Trust was set up in 2017 – replacing and expanding the mandate of the Delhi Mumbai Industrial Corridor (DMIC) Project Implementation Trust – for coordinated and unified development of the DMIC, the Chennai-Bengaluru Industrial Corridor (CBIC), and three other industrial corridors.

The development of state-level industrial nodes and clusters, with several core infrastructure and urban development elements, is envisaged for the industrial corridors, similar to what is envisaged for smart cities under the mission. The success of the DMIC and CBIC can be partly attributed to support from the dedicated institutional structure, as well as coordination with various national and state agencies. The state of Andhra Pradesh is setting up the AP Industrial Corridor Development Authority to promote industrial corridors and nodes in the state, and to plan, develop, operate, maintain, manage and regulate industrial corridors.

As in the case of industrial corridors, a dedicated institutional framework for smart city projects could ensure that necessary consents, approvals and assistance from national and state agencies are available for timely completion of the projects. The institutional framework would also encourage grants and loans from international financial institutions, as it would provide comfort in relation to monitoring of the projects and compliance with policies of the financial institutions.

To conclude, the Smart Cities Mission is critical to accommodate the rural-urban migration and the unprecedented urban transformation which is being experienced by most states in India. A robust contractual arrangement and a dedicated institutional framework for the smart cities would go a long way in providing accountability, clarity on project milestones and timelines and a mechanism for monitoring the progress, which would all contribute to the success of the mission.

Soumya De Mallik is a partner at HSA Advocates. HSA is a full-service firm with offices in New Delhi, Mumbai, Bengaluru and Kolkata.

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