industry

A tale of new cities: The main challenge before govt's aim to develop eight new cities


One hundred years ago, Mahatma Gandhi wrote that “India lives in her villages”. Since then, while the country’s population has started to move on (the urban population has doubled from 17% in 1951 to 35% now), the number of cities has not. Barring a few notable exceptions such as Chandigarh, Bhubaneswar, Gandhinagar, Gurgaon and Naya Raipur, India’s rapid urban growth post-Independence has turned out to be unplanned and somewhat chaotic.

Given that the 35% is projected to increase, one of the most pertinent questions in the nation’s political discourse should be: why are we not building dozens of new cities?

The failure to develop new urban centres has led to the mushrooming of “census towns” — agglomerations that have urban characteristics, population above 5,000, but which are not notified as towns and don’t have an urban local body to administer them.

The number of such towns, the ones that are primarily scripting India’s urban tragedy, rose from 1,362 in 2001 to 3,894 in 2011 and is believed to be far higher now. The total number of statutory towns in India (as per the 2011 Census) is only marginally higher at 4,041.

Against this backdrop, a Rs 8,000 crore grant from 15th Finance Commission to incubate eight new cities, a proposal which the GoI has accepted in toto, offers a glimmer of hope for some planned urbanisation in the near future. The award proposal has a condition that a state can only apply for one city, so the aim is to spread these eight new cities across the country. But the question that has not been answered is whether these — and other new cities — should be satellites of existing urban centres or greenfield projects, perhaps sited in barren areas of India’s countryside.

“We have kept both the options open for states while applying for the fund,” says NK Singh, chairman of the 15th Finance Commission in an interview with ET. Rs 8,000 crore fund is like a seed capital for building new cities. That means, one city will receive Rs 1,000 crore each. It is not that small. The fund can be the basis for raising much greater market resources,” he says.

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Every five years, the Finance Commission evaluates the fiscal condition of the Union and the states before laying down the principles of distributing taxes among them. The 15th commission has recommended that formula for 2021-26.

While doing so, it added a first-of-its-kind proposal, earmarking “Rs 8,000 crore as a performancebased grant for incubation of new cities.

According to the proposed timeline, the Ministry of Housing and Urban Affairs (MoHUA) will first set up an expert committee. By January 31, 2022, it has to specify the minimum eligibility conditions for competing for the award. The names of eight states are likely to be announced by the end of 2022. And the fund is scheduled to be allocated between 2023 and 2026 in four separate tranches. Details of the judging panel composition have not been made public but the “brownfield versus greenfield” debate has already kicked off among experts and policymakers. The report of the commission has listed a number of daunting challenges such as laying of roads, water and sewer lines and selecting sites for schools and colleges in existing cities. It warns that the building of greenfield cities often runs into problems when it comes to land acquisition and rehabilitation. Without taking sides, the report comes to a conclusion: “The country needs both rejuvenation of old cities as well as the setting up of new cities.”

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Lack of funds is not the sole reason why India has not embarked on building new cities in mission mode. The focus so far — be it the big-ticket Jawaharlal Nehru National Urban Renewal Mission during the UPA rule or the Smart City project in the Modi regime — has been on pumping resources to rejuvenate existing urban centres.

Former Union urban development secretary, M Ramachandran, says the basic idea of creating a new city should be such that it addresses the problems arising out of the periphery of an existing city. “If haphazard growth is allowed to crop up in the outskirts, a healthy city will ultimately inherit those problems,” he says.

As far as building of ongoing industrial townships is concerned, India has preferred greenfield projects mostly located in the neighbourhood of established cities. For the National Industrial Corridor Development Programme, a joint venture between the Centre and states, the Centre has provided up to Rs 3,000 crore for developing one node each. Four such mini towns, which are nearing completion, fall in Gujarat’s Dholera (22.5 sq km), Maharashtra’s Shendra-Bidkin (18.5 sq km), Uttar Pradesh’s Greater Noida (748 acres) and Madhya Pradesh’s Ujjain (1,100 acres). As the small size of each project indicates, none of these townships is developed on a standalone basis. They are industrial townships located either in a city or in close proximity to an urban conglomeration.

The financing model adopted in creating such townships is that the government will spend the initial resources to develop the area before private industries, including multinationals, buy plots on lease and set up factories and offices. The arrangement between the Centre and the states is such that the state concerned will provide the requisite land whereas the Centre will spend money to develop its basic infrastructure.

Company secretary of National Industrial Corridor Development Corporation (NICDC), Abhishek Chaudhary, says the construction of two more industrial townships — in Krishnapatnam (Andhra Pradesh) and Tumakuru (Karnataka) — will start soon. He adds that Visakhapatnam, Chittoor and Kadappa nodes have been prioritised by the Andhra Pradesh government.

Amaravati, a greenfield city being built by the river Krishna, was originally identified as the new capital of Andhra Pradesh, but a change of leadership after the 2019 assembly elections has stalled the progress of the dream city of former CM N Chandrababu Naidu. His successor YS Jagan Mohan Reddy evolved a three-capital formula under which he retained Amaravati as the state’s legislative capital while naming the coastal city of Visakhapatnam as the executive capital and Kurnool — the gateway to Rayalaseema region — as the judicial capital.

No doubt, if India decides to build more cities, the first question that will arise is where they should be located. OP Agarwal, CEO of WRI India and former transport adviser to the World Bank, says: “Satellite cities offer a unique advantage of enabling better manageability and help leverage the high cost infrastructure of the parent city.” He lists the examples of Gurgaon, Faridabad, Ghaziabad, Noida, Rohtak and other cities around Delhi which benefit from the airport, the railway stations, good universities and medical facilities of Delhi.

Another urban expert and MD of Hyderabad Metro Rail, NVS Reddy, says greenfield cities are the better bet, though the land should be acquired via a “pooling method” so that landowners are made stakeholders. In that case villagers give up land with an agreement with a local authority that it will return a part of the land to the owner once the city is developed. So the landowner benefits as realty prices rise.

Reddy says that any attempt to purchase land to build a new city is not desirable. “After all, any allocation — be it Rs 10,000 crore or Rs 50,000 crore — won’t be sufficient for building a new city. So, a new city must adopt a self-financing method,” he says, adding that greenfield cities should be built along existing national highways, railway lines or in the neighbourhood of a port to derive economic benefits in future.

nk-singh---agenciesAgencies

NK Singh, chairman of 15th Finance Commission

Rs 8,000 cr fund is like seed capital: NK Singh, chairman of 15th Finance Commission


Edited excerpts from an interview with NK Singh, chairman of 15th Finance Commission:


What is the rationale behind the decision to earmark Rs 8,000 crore to incubate eight new cities?


I wanted to actively promote new urban conglomerations. If you look at the 2011 census data, it says 31% of India’s population live in urban areas. Today it is much more. So we decided to somewhat tilt the balance in favour of the urban sector when we divided resources for urban and rural sectors. Also, urbanisation is an important driver of growth. We have noticed that states with larger urban populations have moved faster.


Isn’t Rs 1,000 crore per city too small an amount?


(It) is like seed capital for building new cities. It is not that small. The fund can be the basis for raising much greater market resources. It will also put some pressure on improving the urban local bodies’ finances by taking measures such as better collection of property taxes etc. It is more like a viability gap funding for which states will compete and try to be winners.


What’s the next step? How will the government execute the plan?


The government has accepted our recommendations in toto. The Ministry of Housing and Urban Affairs will set up an expert committee comprising, among others, some independent domain experts to figure out minimum eligibility criteria for selecting proposals from states. The first tranche of grants should be released by March 31, 2023, and the award will continue till 2026.


Should new cities be greenfields or satellites of existing cities?


We have kept both the options open for states to apply for the fund.



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