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The two strategies under SCM are

Area-based Development:
Retrofitting: Enhancing existing areas for efficiency.
Redevelopment: Creating new layouts with improved infrastructure.
Greenfield Development: Introducing smart solutions in vacant areas.

Pan-city Development:
Applying smart solutions city-wide, utilizing technology, information, and data for better infrastructure and services.

The selection of cities for SCM projects was initiated during January 2016, and continued up to June 2018 in 5 rounds.

City Selection Process for SCM was conducted in two stages named 'city challenge'.

Stage 1: Intra-state competition based on pre-conditions.
-- Selected cities approved by State Mission Director and HPSC.

Stage 2: Cities submit Smart City Proposals fitting retrofitting, redevelopment, greenfield development, or pan-city models.
-- Themes include solar, water supply, waste management, etc.
-- MoUD analyzes proposals and gives approval for implementation.
-- Selection process ran from January 2016 to June 2018 in 5 rounds

While area-based development receives a fifth of the funds, total population in the Area Based Development (ABD) area is only 9.4% of the city's population for 90 cities. (source)

As of December 2023, a total of 7,959 projects worth Rs. 171,223.62 cr were being implemented by 100 cities. Of these, 79% of the projects have been completed, with a total project worth of Rs. 116,269 crore. (source)

There has been a significant increase in the number of projects completed in recent years as well as costs incurred.

Between June 2018 and June 2020, the number of completed projects, as well as cost incurred increased by five times. FY 2021-22 and FY 2022-23 saw a significant acceleration in completion of projects.

Between June 2021 and December 2022, the number of completed projects increased by 85%, while total costs incurred had more than doubled.

Read the analysis of this scheme by Accountability India.

The MoHUA noted that as per comprehensive ranking mechanism which takes into consideration not only the physical progress but also the financial progress, compliances etc., the bottom 10 cities are: Greater Warangal, Aizawl, Guwahati, Amaravati, Diu, Imphal, Port Blair, Shillong, Puducherry, and Kavaratti. (source)

There are significant differences between project completion within a round.

Financing for SCM can come from multiple sources. Of the total project costs, 22.5% is to come from the GoI. States and Urban Local Bodies (ULBs) are to provide another 22.5% of the funding.

In addition, more than a fifth (21%) of funding is to come from convergence with other missions such as AMRUT, Swachh Bharat Mission (SBM), National Heritage City Development and Augmentation Yojana (HRIDAY), Digital India, Skill Development, Housing for All, etc.

Special Purpose Vehicles have been created in every city in a PPP model to implement the Smart Cities Mission. Operating as limited companies under the Companies Act, 2013, these bodies were meant to corporatise the process of setting up a smart city and cut through the political clutter.

But several institutional and structural issues plague these bodies.

"Municipal Corporation-owned public assets are being transferred to the SPVs and then the SPVs are selling that property at market rates. There are also profit margins involved and that might be creating distortion in the market; this appears to be taking prices to a substantially higher level"

Read more about this: IndiaSpend story

"The budget allocated from the central and state government for each city for five years is around Rs 1,000 crore (approximately Rs 196 crore annually). On the other hand, proposals have been planned and designed by the city-level municipal corporation (MC). For example, a second-tier city with a government grant of around Rs 1,000 crore has sent a proposal of Rs 2,500-3,000 crore. The Rs 1,000 crore is like seed funding given by the government, and then based on this seed funding, the SPV and MC have to raise more funds to implement the smart city projects. These funds can come from various sources -- raising taxes on entertainment, water and sanitation/solid waste management, increasing parking charges and advertising fees, and from loans from banks or international institutions like the World Bank."

Read more: IndiaSpend story

Dharamshala has proposed a total smart city cost of Rs 1,407 Crores. In February 2021, it was reported that DMC had an income of just about Rs. 5 crores and a budget of Rs 149 Crores. The SCP cost is 281 times that of its income. This suggests that the proposal cost is huge compared to the financial feasibility of the cities.

Smart Cities have to finance more than a quarter of the capital expenditure through means other than state funding.

A SCP which is equal to the annual average income of a smart city would still be a high expenditure for the city, given its expenditure on providing services to its city inhabitants.

Read more: CFA's Analysis

In August 2023, Indore was awarded the National Smart City Award in the fourth edition of the India Smart Cities Award Contest (ISAC) 2022.

Smart City Indore is also subject of a legal challenge, the Centre for Environment Protection Research & Development filed a petition against the Union of India over legality of SCM against the Union of India over what they believe to be unconstitutional nature of Smart City Indore. The petitioner presents potential issues in the planning of Smart City Indore. The small percentage of land allocated for ABD, the state’s current debt, and ongoing budget cuts all present issues for Smart City Indore.

Read more about the Smart Cities Mission in Indore in this case study by Centre for Financial Accountability.

When the Tumakuru Smart City Proposal was rejected in Round 1 for low population and area coverage, among other things, newer areas which had higher concentration of marginalized communities were added, but eventually they received very low project investments. For example, Ward 19 which contributed 20% to the population coverage, with 30% Dalit population, received only 0.31% of project expenditure under area-based development component.

"Some people have benefited from the Smart Cities Mission while others have not. Those who own property have benefited from the increase in the value of property. Those who don’t have property would find it difficult to buy land at such high prices. The owners of rented property have hiked the rents saying that the property tax, the water tax and other municipal taxes have increased."

Read more about the Smart Cities Mission in Tumakuru in this case study by Centre for Financial Accountability.