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Are smart cities passé?

Evidence of late suggests that the tech industry is waking up to the reality that it needs to rethink what and how it is trying to sell smart cities to the state governments. And the pandemic seems to have taken out the remaining air out of the smart-cities bubble.

Smart cities surfaced as a concept more than 20 years ago, and served as an umbrella term to describe a large and varied set of emerging technologies that seemed destined to help metros operate more efficiently. The Internet of Things (IoT) included everything from simple sensors that allow transportation engineers to track cycle-lane usage to full-blown smart-city operations centers.

By the middle of the past decade, all over the world, it was common to see vast sums of grant funding made available to local governments that were keen to join the innovation bandwagon. Smart-city challenges spurred metros of all sizes to adopt new technologies, sometimes to the good but also, it now seems clear, for the sake of becoming a member of the growing global club of cutting-edge communities. Dozens, if not hundreds, of conferences, marketplaces, and expos emerged to showcase the latest gee-whiz gadgets that cities could buy to transform themselves. To pursue a smart-city strategy was to be seen as relevant and forward-thinking, whether or not the problems a local government was aiming to solve would necessarily be best served by an expensive new monitoring system or software package.

Criticism of the culture of the smart city predates the coronavirus pandemic. Concerns around privacy, of who should own or control public data, and to what extent technology is always the answer could be heard loud and clear at least a couple of years before Covid-19 changed the world.

The pandemic took much of the remaining air out of the smart-cities bubble. More and more smart-city project deployments began to be delayed or scrapped in the face of budget and revenue uncertainty, and city governments in various parts of the world were in the midst of shifting their priorities toward economic recovery and digital equity.

Since then, one of the industry’s biggest players, Cisco, announced it would pull the plug on its flagship smart-city software. Google’s parent, Alphabet abandoned plans to develop a smart city in a Toronto neighborhood, a controversial project that once embodied the tech giant’s futuristic ambitions. The Toronto project, under Alphabet arm Sidewalk Labs, was a favorite of Google co-founder Larry Page, who held the CEO role until December 2019. Alphabet Chief Financial Officer Ruth Porat was pushing to curb the initiative even before coronavirus hit. Sidewalk Labs cited economic uncertainty and pressure on the local real-estate market in the wake of the coronavirus pandemic. Cost was another major factor. Alphabet had poured hundreds of millions of dollars into Sidewalk, with most of that earmarked for the Toronto project, and yet had little to show for it.

Due to a combination of new government funding and a shift in perspective about how to approach these projects, they moved from flashy to functional, from tech-first to resident-first – and some are optimistic about the prospects in 2022. Earlier projects of Sidewalk Toronto or Sidewalk Labs’ spin-off company Replica’s work in Portland, Oregon, were hyper-focused on flashy technologies – like creating autonomous delivery carts or city-wide transportation prediction models – and paid less attention to the needs of city residents.

One example of an early project shifting from flashy to functional is Columbus, Ohio’s smart-city initiative. The project was funded by USD 50 million in grants from the DOT and Vulcan, Inc., which the company won as part of a 2016 smart-city competition. Since then, it has strayed from its original smart-city vision, which included plans for an autonomous shuttle service, and has instead shifted focus on projects like a food-bank delivery service.

There is also no guarantee that city residents will view technology and smart-city projects as particularly high on their list of priorities. In a recent survey of residents across 118 major cities worldwide, respondents’ top priorities were affordable housing, employment, and health services – things that could be helped by tech, but also by non-tech solutions.

Technology is still an important part of it. It is one of the ways to improve, but it is not the sole thing, and has to be used sustainably. It is not a one-size-fits-all kind of solution for everyone.

Shanghai has been ranked as the world’s number one smart city for 2022 by Juniper Research. The ranking of 50 world cities is based on an evaluation of many different aspects of smart cities, covering transportation and infrastructure, energy and lighting, city management and technology, and urban connectivity. The other top smart cities are Seoul, Barcelona, Beijing, and New York.

In addition to these rankings, the research found that smart-city initiatives will generate almost USD 70 billion in spend annually by 2026; up from USD 35 billion in 2021. Much of this will focus on smart-grid initiatives, which will save over 1000 TWh of electricity in 2026 – equivalent to more than 5 years of energy consumption by Greater London at present levels.Many areas of smart-city development are still in their early stages, particularly outside the leading cities, so initial roll-outs still make up much of the market. Juniper Research notes that this means savings made through smart city technologies will remain high. We expect energy savings alone to reach USD 96 billion in 2026, making their deployment highly cost-effective in most instances.

In India, 100 cities were selected to be developed as smart cities through a two-stage national competition. A centrally sponsored scheme, Smart Cities Mission, was launched on June 25, 2015, to promote cities that provide core infrastructure, clean and sustainable environment, and give a decent quality of life to their citizens through the application of smart solutions. The Mission aims to drive economic growth and improve the quality of life through comprehensive work on social, economic, physical, and institutional pillars of the city.

The central government announced it will provide financial support to the extent of `48,000 crore over five years, i.e., on an average `100 crore per city per year, and an equal amount on matching basis is to be provided by the state/urban local bodies (ULBs).

Thus, government funds will meet less than one-half of the estimated project cost. The balance has to be mobilized from internal and external sources, including financial intermediaries, state/local government internal sources, other central government schemes, innovative mechanisms (such as municipal bonds, pooled finance), borrowings from bilateral and multilateral institutions, and the private sector.

Emphasis has been given on the participation of private sector through public-private partnerships (PPPs). Aggregating at national level, these proposals contained more than 5000 projects worth over `200,000 crore. The Mission laid out a two-pronged strategy consisting of pan-city and area-based development projects. Implementation at the city level is being done by a special purpose vehicle (SPV) created for the purpose. There is no template or universally accepted definition of the smart city. Therefore, conceptualization of smart city depends on the level of development, willingness to change and reform resources, and aspirations of the city residents.

The Mission has launched several initiatives that will not only ensure integrated development across various aspects of urban development but also help lay long-term foundation for good-quality urbanization in the country.

Stocktaking. Initially aimed to be completed by 2019-20, the Centre has recently extended the timeline for the implementation of the Smart Cities Mission to June 2023.

The overall progress of the Mission as on November 12, 2021, showed over 6452 projects worth `184,998 crore tendered. Of this, work orders have been issued for close to 5809 projects worth `156,571 crore, of which 3131 projects worth around `53,175 crore have been completed.

Since the launch of the Mission, a total of `27,234 crore have been released by the Government of India to 100 cities under the Mission. The progress of the Mission in these cities is done on a regular basis by a state-level high-powered steering committee.

Key challenges. The slow progress in implementing the Smart Cities Mission is a matter of concern. Overall, less than 50 percent of the projects had been completed at the end of the Mission’s six-year period.

Management. The SPVs are not functioning well. In Panaji, for example, which was among the cities selected during the fast-track round in May 2016, the SPV functioned without a Board for over a year. Four Board positions still remain vacant. There have been several audit violations, including failure to file statutory returns during 2016-17 and 2017-18.

Inadequate understanding of data, and how to analyze it to provide effective solutions has also created difficulties. But MoHUA, in collaboration with Tata trusts, has begun conducting training programs for city data officers.

A Ludhiana Smart City Company Ltd. (LSCL) director has publicly expressed dissatisfaction over execution of projects, maintaining problems have arisen due to lack of coordination among multiple government departments.

Finance. An analysis of the financial data reveals that the Center, as well as most state and local governments, are finding it difficult to mobilize funds, transfer them to SPVs, and use them efficiently.

For Srinagar, for instance, the Center sanctioned `127 crore. However, the state/local government has released only `20 crore.

A former Faridabad Smart City Ltd. (FSCL) CEO admitted that arranging funds and monetizing land have been major hindrances, noting too that the financial condition of the Faridabad Municipal Corporation was not strong. Of the total 23 projects tendered in Faridabad, only six have been completed.

Panaji Smart City Development Ltd. (IPSCDL) has also been affected by delays in release of funds by the Goa government. The Center released `196 crore for Panaji’s development, but the state government has transferred only `118 crore to the IPSCDL. There have also been irregularities in the transfer of the state’s matching grant to IPSCDL.

City level. The highest number of project tenders has been issued in Indore (277), followed by Belagavi (219) and Raipur (217). Itanagar and Imphal have issued less than 10 tenders.

In New Delhi, Chennai, and Indore, over 80 percent of the projects have been completed. In Amaravati, Bhagalpur, Muzaffarpur, and Shillong, not a single project has been finished. Cities in Dadra and Nagar Haveli, Puducherry, Bihar, and Meghalaya are trailing. In 61 cities, project completion is below 40 percent.

The proportion of central government funds released to total tendered amount is over 87 percent for Dharamshala, followed by Itanagar, Pasighat, Namchi, and Panaji. In the remaining cities, this proportion is less than 50 percent. In Bareilly, Biharsharif, Thane, and Bilaspur, it is below 5 percent. This share urgently needs to be increased.

In 64 cities, all funds released by the Center have been transferred to the SPVs. In the remaining 36 cities, this share is between 40 and 99 percent. Release of central government funds has been the least (below 50 percent) in Aizawl, Amritsar, and Jalandhar.

The state governments for all 100 cities are lagging in raising their counterpart funds for the projects – the rate is less than 45 percent so far for all cities. Faridabad and Chennai have received the highest share from their state governments – between 40 and 45 percent. Cities with the lowest share are Srinagar, Kavaratti, and Gangtok. For Karimnagar and Warangal, available data shows that the Telangana government has not released any amount at all. The state government’s share too needs to quickly increase if the SCM is to succeed.

The cities of Rajkot, Indore, Ujjain and Bhopal are at the forefront of utilizing the funds they received. Besides these four, there are seven more cities where utilization has been over 90 percent. In 23 cities, it has been less than 50 percent, the lowest (below 10 percent) in Bhagalpur and Diu.

The progress of the Mission has been best in the states of Tamil Nadu, Madhya Pradesh, and Gujarat. Chennai and Coimbatore in Tamil Nadu, Indore, Bhopal and Ujjain in Madhya Pradesh, and Surat and Rajkot in Gujarat, figure repeatedly among the best performers on different criteria (see Table 2). Other states/UTs that have done well are Delhi, Haryana, Chhattisgarh, Dadra and Nagar Haveli, and West Bengal.

States/UTs where significant improvements are required include Bihar, Punjab, Telangana, Puducherry, Meghalaya, Goa, Mizoram, Jammu and Kashmir, Sikkim, Assam, Lakshadweep, Dadra and Nagar Haveli, Daman and Diu (see Table 3). Bhagalpur, Muzaffarpur, and Biharsharif in Bihar, Amritsar and Jalandhar in Punjab, and Karimnagar and Warangal in Telangana figure prominently among the bottom five cities on different criteria.

Technology. Smart cities rely on sensors and network-connected devices and systems that generate large volumes of data, which are vulnerable to hacking by cyber criminals, who can steal confidential data, shut down access to essential resources, and gain illegal access to security cameras. The data needs to be adequately protected.

While this has not happened in India yet, in Oldsmar, Florida, in February 2021, such hacking had serious consequences. The intruder boosted the level of sodium hydroxide (used to control acid levels and remove metals from drinking water) in the water supply to 100 times higher than normal. Consuming excessive sodium hydroxide can cause serious health problems, including bleeding, vomiting, pain, and burns. However, in Florida’s case, efficient monitoring helped to restore the system to normal.

A virtual roadshow to showcase PPP opportunities under the Smart Cities Mission was organized end-January this year by the Ministry of Housing and Urban Affairs (MoHUA) and Invest India, the National Investment Promotion and Facilitation agency.

It provided a platform to various smart city CEOs from respective cities to directly showcase PPP opportunities to private investors and start-ups.

During the roadshow, MoHUA stressed upon the importance of private sector participation in the progress of the Smart Cities Mission. It was highlighted that the Mission had successfully completed 228 PPP projects worth `22,000 crore across 60 plus cities. And more than 160 PPP early-stage projects worth `15,000 crore could benefit from private sector participation, both in terms of investment and development.

PPP opportunities were showcased by CEOs from 10 smart cities (Ranchi, Nashik, Nagpur, Srinagar, Pune, Gwalior, Imphal, Bilaspur, Shivamogga, and Warangal) in four sectoral sessions, viz., urban transport, commercial infrastructure and hospitality, education, and energy. The projects cover areas, such as market redevelopment, multi-level smart parking, urban mobility, solar power generation, development of multi-modal transport hubs, as well as the establishment of the educational hub.

The advent of 4G LTE and the arrival of 5G has opened up immense possibilities for enterprises across many industries to consider the use of private networks in conjunction with IoT devices.

5G will serve as the backbone of smart cities in 2022. Smart cities will take information from people, crunching data from sensors on roads, vehicles, and buildings to improve the quality of life for all. It can offer the ability to connect up far more devices than ever before; as a result, it will serve as the backbone for the hugely interconnected wireless infrastructure needed in a smart city.

With the increased capacity, we can expect to see more in-depth sensor usage that could be vital for gathering data from smart city initiatives, such as air-quality monitoring or traffic congestion. Small cell networks broadcast across a certain localized area, allowing for in-depth sensor usage that could be vital for gathering data from smart city initiatives, such as air quality monitoring or traffic congestion.

As 5G rolls out across the world and more IoT devices get connected, the potential it offers to smart cities of the future is truly endless.

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