A smart city is an intellectually connected city that uses various emerging technologies such as artificial intelligence (AI) and data analytics to collect and analyse data, and subsequently uses the insights gained to manage assets, resources and services efficiently. Over the years, smart city technologies have become common in urban populations, as they enable innovative solutions that can make life more efficient, controllable, economical, productive, integrated and sustainable. Thus, smart cities are expanding mainly due to the rise of smart living. The growing number of government initiatives for urban management, the emergence of AI, and the growing need for resource management for sustainable development are the key factors driving the growth of the smart cities market. However, significant initial investment requirements and the Covid-19-induced global economic downturn are expected to pose serious challenges to the market’s growth.
The purpose of the Smart Cities Mission (SCM) is to drive economic growth and improve the quality of life of people by enabling local area development and harnessing technology – especially technology that leads to smart outcomes. According to the Ministry of Housing and Urban Affairs, the projected investments under the SCM are to the tune of Rs 1,314.6 billion for the period 2019-25. Considering a round-wise split, the maximum portion of this amount pertains to Round 3 (30 cities). Year-wise, the maximum amount is expected to be mobilised during 2021-22 and 2022-23. Meanwhile, the utilisation of funds by the end of 2019-20 is likely to have been impacted by the onset of the pandemic.
Contractors and developers are expected to have significant opportunities in upcoming projects. While the SCM highlights the huge potential for bigger players, what is more important is that it will bring forth a lot of opportunities for small and regional players. These players can leverage city-level opportunities in segments such as mobility, water and sanitation, and energy, as well as focus areas such as education, healthcare and bike sharing. The setting up of basic physical infrastructure can be another major participation option for these local players.
Technology solutions form the most critical part of the SCM. Tremendous opportunities have been created for solution providers and vendors to reduce municipal costs, tap new sources of revenue and improve the overall quality of urban life. Safety and security, and communication are the segments with the maximum opportunities for technology providers. Equipment providers will also have opportunities in projects such as water and energy meters, smart poles, and solar panels. As many projects are yet to secure funds, there are also opportunities for investors. Financial innovation has been incorporated into the design of the capital and investment plans under the SCM. After the pandemic, it will be rather more important for other sources of funds to step up their participation in the SCM, as the government’s capacity for financing has come under pressure. This has opened up different horizons of fundraising for cities in order to meet the huge corpus of funds required for the implementation of the SCM. Thus, there lie huge opportunities to tap several new and innovative financing resources in order to fund these projects.
As India ventures into smart cities, the communication network laid for smart electricity metering can be leveraged to provide data from water meters and gas meters to corresponding water distribution and gas distribution departments, thereby qualifying smart meters as anchor infrastructure for smart cities. The Ministry of Power has recently issued draft guidelines for a reforms-linked result-based distribution sector scheme with an outlay of over Rs 3 trillion, of which about Rs 1.5 trillion will be for smart metering. This will provide an impetus to large-scale smart metering roll-out, and could be a game changer for the distribution sector. Furthermore, with additional home and building automation tools, smart meters can provide the ability to manage and control appliances at homes and offices, thereby providing additional revenue streams.
Going forward, it would be ideal for the private sector to increase its participation in the SCM as the government’s budget is expected to remain under pressure for some time owing to the current pandemic, which is expected to have a negative impact on the country’s economic growth. Further, smart cities should continue to promote digitisation of data and surveillance systems. There is a need to bridge the gaps in income, opportunities and quality of life standards by providing citizens better access to infrastructure, facilities and information. Also, there is a need to conceptualise and evaluate urban development initiatives from a regional growth perspective.
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