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A Report on Intelligent Urbanization

Roadmap for India

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ii A Report on Intelligent Urbanization

The Report has been prepared by Booz & Company Inc for the Confederation of Indian Industry (CII)

© Confederation of Indian Industry (CII), 2010

Disclaimer and Confidentialities

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means electronic, mechanical, photocopying, recording or otherwise, without the prior written permission from Confederation of Indian Industry (CII).

While every care has been taken in data collection, analyses and compilation of this Report, CII doesn’t accept any claim for compensation if any entry is wrong, abbreviated, cancelled, omitted or inserted incorrectly either as to the wording, space or position in the Report. ‘A Report on Intelligent Urbanization: Roadmap for India’ is an attempt to create national and business awareness on some of the ways in which technology may to applied to addressing the challenges of rapid urbanization and the existing urban services deficit in India.

Published by Confederation of Indian Industry (CII)The Mantosh Sondhi Centre; 23, Institutional Area, Lodi Road, New Delhi-110003 (INDIA)Tel: +91-11-24629994-7, Fax: +91-11-24626149Email: [email protected]; Web: http://www.cii.in


A Report on Intelligent Urbanization iii

FOREWORD Urbanization comes with proven benefits of economic growth and development. Cities are centres of innovation in terms of ideas, knowledge, and their commer-cialization. Consequently, cities serve as magnets for talent and human capital seeking basic economic sustenance and fulfilment of dreams.

However, urbanization also comes with its social and environmental challenges. Cities are characterized by strained infrastructure which manifests itself in terms of power cuts and water shortages, high cost of living, and unaffordable real estate resulting in urban sprawl and slums, high volume of traffic resulting in pollution and delays.

India is at the cusp of a wave of urbanization. The sheer pace and scale of urban-ization expected in the foreseeable future is unprecedented and will bring India to the tipping point where majority of its population will reside in urban areas. This presents both a challenge and an opportunity.

The challenge lies in our ability to cope. Our cities are already strained to meet the demands of their residents. Incremental demands on our existing cities are likely to degrade quality of life even further. Significant investments will be required to fulfil basic demands. Even if, for a moment we ignore financial constraints, the environmental impact of doing so is likely to be significant.

However, if done right, India can walk the path of intelligent urbanization that not only serves as a driver for growth but also is socially inclusive and environmen-tally sustainable. For this to happen, India needs to base its tomorrow on fresh thinking and original ideas provoked within a local context. The unprecedented and unmatched urban growth that we are experiencing today demands a radical and proactive response. This will necessitate a wide range of policies and practices to be conceptualized around new ‘socially inclusive’ and ‘environment-friendly’ paradigms.

Technology has a role to play and the global community is waking up to it. CII in collaboration with Cisco and Booz & Company as knowledge partners presents a point of view on the integral role of technology in meeting India’s urbanization goals. The report extensively covers issues pertaining to urbanization and sug-gests a way forward with specific recommendations on the use of technology for inclusive and sustainable communities. I thank Wim Elfrink, Chief Globalisation Officer, CISCO Inc for leading CII in this important area of work and sincerely believe that this report would help and guide all stakeholders in making urbaniza-tion more inclusive and sustainable.

Chandrajit Banerjee

Director General

Confederation of Indian Industry (CII)


A Report on Intelligent Urbanization v

PREFACE The year 2010 marks a defining moment in human history when, for the first time ever, more of mankind is urban than rural. In India, the urbanization process is marching at an unprecedented pace creating a unique set of opportunities and challenges that calls for a concerted societal response. Today alone, approximately

thousand Indians will migrate from India’s villages to its cities. As is true of most of India’s opportunities and challenges it is not just the pace but the sheer scale at which urbanization is manifesting itself that is staggering. It is encourag-ing to note that there is an increasing acceptance and understanding of the many ramifications of urbanization in India and the urgency of solutions entailed.

India is probably the only country which needs to not only revitalize some of the densest urban agglomerations in the world but also ensure the delivery of basic services to the lesser privileged in an efficient manner during this urban transfor-mation. The opportunities and challenges are unique to India and therefore the solutions must be transformational, not incremental.

Our solutions must embrace and address the imperatives of social equity and in-clusive growth in a sustainable fashion. Our response needs to be well balanced. The country requires a massive investment of over a trillion dollars from the gov-ernment and corporate sector. There is great potential for technology to be the en-gine that ensures the optimal use of these investments and there is an urgent need for smart government regulations and strategic public–private partnerships.

Most importantly, our approach should be based on sustainability— social, economic and environmental. We call this approach, Intelligent Urbanization—enhancing the quality of life of citizens and ensuring social inclusion, boosting economic growth and decreasing environmental impact.

During the course of developing this report, our colleagues at Booz & Company have not only attempted to capture the unique features of Indian urbanization, but also worked on a recommendation of specific solutions in the Indian context while highlighting some of the success stories.

We have already made a beginning at trying to embrace these opportunities and challenges. This is our chance to get this right by making our solutions scalable, replicable, and sustainable. On behalf of the CII Steering Committee on Intelligent Urbanization, it is our hope that this report will serve to encourage you to better understand not just the benefits of Intelligent Urbanization in India, but also its applicability and execution requirements so that we can together make this hap-pen.

Wim Elfrink

Chairman, CII Steering Committee on Intelligent Urbanization

Chief Globalisation Officer, Cisco and EVP, Cisco Services



A Report on Intelligent Urbanization vii

EXECUTIVE SUMMARY

India’s Urbanization ChallengeThis is the urban century— more peo-ple are living in urban areas than rural for the first time in recorded history in 2010. Urban areas are the engines of economic growth and centres of culture, entertainment, innovation, education, knowledge, and political happenings.

Along with the world, India has also been experiencing rapid urbaniza-tion marked largely by a bottom-up, self-driven approach. This bottom-up urbanization model in India has some unique characteristics (Exhibit E.1):

• Unprecedented scale: India is a country of daunting numbers; it is estimated that nearly 140 million people will move to our cities by 2020 and 700 million by 2050. Not only that, each state has urbanized in its own way, resulting in the co-existence of multiple urbanization models. West Bengal has a single large urban core similar to South Korea or Thailand, whereas Kerala and Gujarat have small dispersed multiple urban growth areas similar to that of Germany.

• High density: Most of our cities are extremely crowded—5 of the 20 most densely populated cities glob-ally are Indian.

• Predominantly brownfield: The growth of our cities is largely or-ganic in the sense that existing urban centres are expanding and exploding economically, geographi-cally and demographically rather than new planned cities emerging from scratch.

While urbanization has fueled eco-nomic growth in our cities, it has also resulted in a huge strain on existing physical infrastructure. Overcrowding, rampant growth of slums, disparities in living conditions and inequity in access to services are endemic in India. In most cities the critical infrastructure is now woefully inadequate, technologically outdated, increasingly fragile, and inca-pable of meeting even the current needs of all its residents. If India is to improve the quality of urban life, we have to significantly improve and enhance our existing cities, and the systems which govern and administer them.

Exhibit E.1Challenges of Indian Urbanization

Limited transparency

Fragmented accountability

Incongruent city divisions (e.g.

Bangalore has 88 wards for

policing, 39 for electricity etc.)

‘Leakage’of resources

~ 60% of urban growth through

natural population increase

Unplanned growth

~ 5-10 planned Greenfield

projects

Mumbai and Kolkata are the

world’s most densely populated

cities (~10X New York)

5 of the 20 most densely

populated cities in the world

are Indian

Largest urban movement in the

world, matched only by China

>700M new urban residents by

2050

Multiple models of urbanization

Municipal expenditure only 0.5%

of India’s GDP

Narrow revenue base

Inadequate capabilities

Source: Booz & Company


viii A Report on Intelligent Urbanization

Exhibit E.2SuBAH Framework for Sustainable Urbanization


Tackling the ChallengeGetting urbanization right requires that we address some core execution chal-lenges. There is severe shortfall in gov-ernance capability and resources at our third tier of government— the very same Urban Local Bodies (ULBs), which need to lead this transformation. Further, the process of revitalizing our existing thickly-populated cities must be carried through without interrupting ongoing services or disrupting lives of their many residents. Finally, cumbersome over-heads in governance arise from multiple city departments with unclear decision rights and accountability. Paucity of funds is a major obstacle, since current revenue sources are not sufficient.

Encouragingly, several initiatives have been taken by the government to fur-ther the cause of urban India. The 74th Constitutional Amendment Act (CAA) was one such landmark initiative intro-duced in 1992. More recently, under the JNNURM, an investment of INR 100,000 crore has been envisaged in urban infrastructure.

The demand for urban services in the oncoming decades will continue to grow exponentially. Our cities need to make substantial investments in physi-cal infrastructure first and foremost to meet the basic needs of the citizenry. This infrastructure deficit is appar-ent across all aspects of urban services —be it housing, power, water, security,

health, education etc. We estimate that meeting these basic requirements will require in excess of USD 1 trillion of public investment over the next decade. In contrast, JNNURM—laudable for being independent India’s flagship ur-ban renewal programme—represents a corpus of USD 25 billion.

SuBAH Framework for Sustainable UrbanizationHowever, merely investing in enhanc-ing infrastructure is not sufficient. Projects that focus primarily on ex-panding capacity are not necessarily most effective in serving community needs, and neither are they sustainable in the long run. For instance, building new roads to accommodate increasing traffic is neither a socially equitable nor an environmentally sustainable solution. More roads have in the past simply resulted in an increase in the volume of traffic, increasing the mag-nitude of the same problem and wors-ening pollution levels. A more long term solution may be to implement an intelligent multi-modal transportation network, with participation from pub-lic as well as private entities, to arrive at a solution which meets the param-eters of social equity, economic viabil-ity and environmental sustainability. Therefore, for urbanization to be truly sustainable, India needs to adopt the Framework for Sustainable Urbaniza-tion (Exhibit E.2).

Furthermore, it is evident that the sheer magnitude of the challenge requires so-lutions that are more efficient, cheaper, and holistic. Technology has proven to be the key—and arguably the only—enabler of sustainable outcomes (Ex-hibit E.3 on page ix).

Both in India and abroad, there are many examples—along the multiple dimensions of demand—of technol-ogy being applied to provide socially equitable, economically viable and environmentally sustainable solutions. Governments are utilizing technology to enhance the competitiveness of exist-ing cities, and investing in the creation of new ‘Connected Cities’. South Korea is building a new city leveraging tech-nology to improve the quality of life of its residents. Masdar in the UAE has been planned as the world’s first zero-waste settlement. New York has lever-aged technology to tackle its security scenario, while Seoul and Singapore have implemented smart transporta-tion solutions which discourage use of personal transport and offer good pub-lic options.

Green shoots are also visible in India:

• Leveraging a smart teacher alloca-tion and monitoring system in Del-hi’s schools has contributed to the increase in student pass percentage to 84 per cent in 2008, from 48 per cent in 2004.


A Report on Intelligent Urbanization ix

Exhibit E.3Technology Solutions

‘Smart metering’ systems

– Real-time usage metering, saving

~10-15% energy

‘Smart distribution’ systems

– Intelligent networked transmission/distribution

– Real-time network condition monitoring

Systems for interactive two-way content delivery

to students and teachers

– Monitoring systems

– Remote access

– Access to quality content

Intelligent transport systems

– Direct traffic flow based on real-time information

Automatic systems for reducing congestion

– Dynamic demand handling

– Systems like car sharing, multi-modal transport

scheduling etc.

Intelligent systems

– City-wide monitoring, sensor tracking, alerting,

controls

Dynamic resource management systems

– Quick emergency response

Intelligent real-estate solutions that manage

building energy efficiency, security, utility

supply, etc.

– Reduce total cost of ownership over building

life-cycle

– Provide environmentally sustainable properties

Remote systems for diagnostics and treatment

– Enhance patient experience and penetration

of direct care

– Improve emergency responses


• Delhi has announced the introduc-tion of smart grid solutions to im-prove the quality and reliability of service while reducing transmission and commercial power losses.

• The Ministry of Health, Centre for Disease Control (CDC) and UNI-CEF launched a pilot programme where they used GIS mapping to support expansion of Patna’s vacci-nation programme. ‘Aarogya Jaal’, a tele-healthcare facility, was launched in Rui, a taluka hospital in Baramati, Pune District, Maharashtra in 2006.

• Ahmedabad Municipal Corporation and Gujarat Urban Development Corporation have developed a Bus Rapid Transport System (BRTS) to provide reliable and secure public transport with the primary objective of reducing travel time.

Going forward, the challenge is to scale up such solutions, and make our over-all urbanization process intelligent. Intelligent urbanization is an Indian imperative.

Given the unique characteristics of Indian urbanization, a top-down ap-proach will not work. Each urban area will have to pick the technologies and solutions that best suit their needs, and have the ability to implement them. Successful ‘Intelligent Urbanization’ thus requires many fathers.

To make it happen…In order to make Intelligent Urban-ization a nation-wide phenomenon in India, there is an urgent need to strengthen our urban basics i.e., gover-nance and financing, while enhancing capabilities, and embedding technology (Exhibit E.4).

Exhibit E.4Recommendations for Change



x A Report on Intelligent Urbanization

Strengthening Basics• Governance: Through constitutional

amendments and increased power to ULBs

• Financing : Measures to ensure fi-nancial independence and viability of ULBs

Enhancing Execution Capabilities• Building personnel capabilities: In-

stitute state level municipal cadre; appoint city CIO and institute sys-tems for capability building and skill up-gradation

• Broadening resources: Explore av-enues to minimize strain on existing municipal resources

• Encouraging PPPs: Introduce initia-tives to promote PPPs in develop-ment of urban infrastructure

Embedding Technology• SuBAH Framework: Aim for manda-

tory adoption of SuBAH framework while visualizing and executing new

initiatives in order to ensure sustain-ability

• Mandating SLAs: Leverage technol-ogy to meet Government Citizen SLAs and introduce performance scorecards

• Broadband and Connectivity: En-courage networking amongst local governments and building of data management capabilities

In conclusionGiven the current scenario and huge opportunities in the near future, it is critical for India to act immediately. To attain the ideal of inclusive growth, it is important that urbanization be socially equitable, economically viable and en-vironmentally sustainable. Different examples from across the world have proved that technology is a key enabler to help achieve these goals at the lowest cost and in the most efficient manner. It is now for India to make this happen, and this report attempts to lay out a roadmap to do so.


A Report on Intelligent Urbanization xi

TABLE OF CONTENTS

1. The Urban Century 1

2. The State of Indian Cities 3

3. Policy Initiatives and Impact 5

4. Urbanization Challenges in India 7

4.1. Structural challenges to urbanization in India 7

4.2. Execution challenges to urbanization in India 10

5. Dimensions of Urban Demand 12

6. Framework for Sustainable Urbanization 15

7. Building the Future through Intelligent Urbanization: Better, Cheaper, and Faster 16

7.1. Energy/ Utilities/ Water 18

7.2. Healthcare 19

7.3. Transport 20

7.4. Education 23

7.5. Housing 23

7.6. Security 25

8. The Roadmap 26

8.1. Strengthening the Basics 26

8.2. Enhancing Execution Capabilities 28

8.3. Embedding Technology 32

Endnotes 34



A Report on Intelligent Urbanization 1

1THE URBAN CENTURY

Ban Ki-moon, the Secretary General of the United Nations, recently remarked that we are living in the ‘urban centu-ry’. For the first time in recorded his-tory, more people are living in urban areas than in rural. The urbanization trend has accelerated in the last cen-tury—whereas in 1950 only about 30 per cent of the world population lived in cities, today the figure stands at just over 50 per cent. By 2030, UN forecasts estimate that more than 70 per cent of the world population will be urbanized (Exhibit 1.1).1

Urbanization, defined as a spatial con-centration of people and economic activity, represents one of the most

transformative processes of human civilization in terms of social and eco-nomic parameters and reference points. Cities have changed the development paradigms of entire nations and have laid the foundation for modern econ-omies. They are the engines of eco-nomic growth and centres of culture, entertainment, innovation, education, knowledge, and political power. There cannot be high economic growth with-out a high degree of urbanization. There is a clear positive correlation between the GDP of a country and its degree of urbanization. While not all urbanized economies are developed, there is not one developed country that is not ur-banized. Statistical evidence unambigu-tatistical evidence unambigu-

Exhibit 1.1Urbanization and Economic Growth

Source: World Bank; UN-Habitat Report on ëState of the worldís cities; UNFPA; Ni Pengfei, Chinese Academy of Social Sciences

DISCUSSION

Urbanization is strongly correlated to prosperity

All high-income countries are 70-80% urbanized

Tokyo/ NY are as big as India in GDP terms; cities are able to create and sustain above-trend economic growth

Indian policy has been largely geared to dispersal, and ‘de-congestion’ of the major economic centres


2 A Report on Intelligent Urbanization

ously underscores the importance of cities—GDPs of mega cities such as To-GDPs of mega cities such as To-kyo and New York are similar to that of India as a whole!

Not only do cities catalyse growth, they also nurture creativity and talent as they offer space for interaction and engage-ment for gifted individuals with drive and aspiration. It has been argued that the spatial proximity allows intellectual spill-overs and free exchange of innova-tive ideas, eventually honing skills and increasing productivity of the city and its people2. The urban environment can also reveal and facilitate unexpected synergies between seemingly unrelated ideas that may provide important for-ward leaps in knowledge.

Growth triggers and centres of an ur-ban economy have been redefined and reinvented by each generation. In the

cities irrespective of the countries they are geographically situated in. Thus the concept of urban competitiveness is rapidly gaining credence where cities, rather than countries, compete for re-sources and investments (Exhibit 1.2).

Within a country, the competitiveness of individual cities is determined by fac-tors such as quality of its infrastructure, ability to attract talent, medical facili-ties and quality and cost of housing—these are becoming increasingly critical to global investment decisions. In India, the competition between Hyderabad and Bangalore for incremental IT in-vestment and Gujarat’s plan to develop GIFTa to challenge the dominance of Mumbai in financial services indicate this trend. Cities in the future will vie with each other for attracting talent and investment, within the country as well as across national boundaries.

Exhibit 1.2Global Urban Competitiveness

Source: World Bank; UN-Habitat Report on State of the World’s Cities, UNFPA; Ni Pengfei—Chinese Academy of Social Sciences

DISCUSSION

Cities are emerging as centres of eco-nomic traction, at times transcending the national framework

Cities compete with each other for at-tracting talent & investment

No Indian city appears in the Global Top 100 - Mumbai ranks a poor 114, and Delhi ranks 213

Top 10 cities with the fastest economic growth are mainly from China; no In-dian city makes the list

past, when growth was led by indus-trial enterprises and the manufacturing sector, there was limited flexibility in the choice of physical locations of these enterprises. Today, in the context of the modern service-based industry in a fully networked world, globalization is changing the very benchmarks of per-formance, growth and competitiveness in urban areas. Ease of integration with the world economy is a key determi-nant of sustainable economic activity.

Globalization has released the power of markets, standardized products, proce-dures, quality parameters and regula-tions. This, in conjunction with the growth in service industries, has inten-sified competition across cities for at-tracting economic activity. Investment location decisions are now strongly rooted in the assessment of compara-tive advantages offered by different

a Gujarat International Finance Tec-City



Exhibit 2.1Impact of Urbanization on Growth

Source: Ministry of Urban Development (MOUD)

2THE STATE OF INDIAN CITIES

India has witnessed unbridled urban-ization in the recent past. During the last fifty years, while the population of India as a whole has grown two and half times, that of urban India has grown nearly five times over. The urban population rose from 210 million in 1992 (25 per cent of total population) to approximately 400 million in 2008 (30 per cent of the total population).3

This rapid urbanization has been the marker of India’s economic progress, where its major urban centres make substantial contributions to its GDP (Exhibit 2.1). Although less than 1/3 of India’s people live in cities and towns, these areas generate over 2/3 of the country’s GDP and account for 90 per cent of government revenue.4 The ser-vices sector accounts for more than half of India’s output, and growth of em-ployment (main workers) in urban In-dia during 1981–91 was recorded at 38 per cent as against 16 per cent in rural areas and 26.1 per cent in the country as a whole.5

This explosive growth of Indian cities in the last decades of the 20th century has created a huge strain on the physi-cal infrastructure of cities. Power short-ages, mismanagement of monsoon del-uges, collapse of law and order, traffic systems, pollution and congestion are a few of the innumerable instances that expose the fundamental issues in the delivery of services in urban India. Overcrowding is endemic while the ur-ban poor driven by unemployment and low productivity suffer the outcomes of inadequate housing and poor basic ser-vices provisioning. Paucity of afford-able housing in cities has made India home to the largest urban slum popula-tion in Asia. India has over 170 million slum dwellers—this number surpasses the populations of all but five countries in the world6. In fact, each major city faces its own set of challenges with re-gards to electricity, transportation, wa-ter systems, housing, solid waste man-agement, infrastructure bottlenecks and poor service delivery. Although city-specific circumstances vary, over-all, critical infrastructure is technologi-



cally outdated, woefully inadequate, increasingly fragile, and incapable of meeting even the current needs of all its residents. In many cases the issue is not simply one of poverty or the ability of citizens to pay—it is as much a ques-tion of urban agencies, institutions and governments being unable to facilitate access to these basic services for their citizenry.

A comparison of quality of life indica-

tors of Indian cities with global coun-

terparts (Exhibit 2.2), highlights the

poor ‘liveability’ of urban India. This

is a critical need for the Indian econ-

omy for growing at a rate of over 10

per cent in the next quinquennium, and

for improving the quality of lives of its

citizens.

Exhibit 2.2Indian Cities do not Stack Up

Source: World Bank, UN Habitat, Booz & Company



3POLICY INITIATIVES AND IMPACT

Exhibit 3.1Timeline of Government Initiatives in Urbanization

Source: Government of India websites, Booz & Company

In the decade immediately following India’s independence, economic policy focused more on rural areas. It was widely held that development of ru-ral India was critical to the country’s progress. Urban areas were treated as sectors of residual investment (Exhibit 3.1).

However, over the last decade, urban development concerns have taken cen-tre stage as India’s rise as a major glob-al economic force has revealed the true potential of its cities. The need for ur-ban reforms and policy level interven-tions in order to sustain India’s impres-sive economic growth rate has been felt more acutely. As a consequence, several initiatives have been taken by the Gov-ernment of India.

While many policy interventions have been able to provide impetus for urban development, the two major initiatives that have had the most impact are:

The 74th Constitutional Amend-ment Act (CAA): The 74th CAA of 1992 recognized Urban Local Bodies (ULBs) as the third tier of the gov-ernment, and instituted a framework to significantly enhance their vi-ability as well as functional capacity. Amongst other things, the 74th CAA proposed the devolution of greater functional responsibilities and finan-cial powers to the local governments, adequate representation of weaker sections and women in ULBs, and regular and fair elections. This was an important development since in many states local bodies had be-come ineffective due to failure to hold regular elections, prolonged supersessions as well as inadequate devolution of powers and functions. Consequently, the ability of ULBs to function as vibrant democratic units of self government had been severely hampered. Several state governments have now amended their Municipal Acts/Laws/Legislations to conform to



the Constitutional Provisions. How-ever, the economic viability of ULBs remains an issue and has significantly restricted the ability of the ULBs to fully discharge their responsibilities.

Jawaharlal Nehru National Ur-Jawaharlal Nehru National Ur-ban Renewal Mission (JNNURM): JNNURM is an INR 100,000 crore (USD 26 billion) Government of In-dia initiative launched in De cember 2005. Administered by the Ministry of Urban Development and Ministry of Poverty Alleviation, the Mission is designed to support state and lo-cal investment in urban develop-ment. The central government spend amounts to INR 50,000 crore (USD 11 billion) with matching contribu-tion from cities/ states.7

The overall objective of the Mission is to ‘create economically produc-tive, efficient, equitable and respon-sive cities’. The aim is to encourage reform and fast track planned devel-opment of identified cities. The focus of JNNURM is on efficiency and in-clusiveness in development of urban infrastructure and service delivery mechanisms, community participa-tion and accountability of ULBs to-wards citizens. The duration of the mission is for 7 years and covers 63 cities across the nation. To qualify

for JNNURM funding, city admin-istrations must submit a three tiered application with the following infor-mation:

1. City Development Plan (CDP) de-fining the vision for the city over the next 20-25 years;

2. Detailed project report, enumer-ating the financial requirements;

3. Timeline for implementation of the proposed initiatives.

As of date, nearly 500 projects have been approved and over INR 20,000 crore has been committed by the Government8.

JNNURM is a landmark in India’s urbanization policy and has infused a sense of urgency amongst various stakeholders to ensure timely results. As a consequence of the JNNURM, the government has drafted various policies to address specific areas of urban development such as National Urban Transport Policy (2006) and the National Urban Sanitation Poli-cy (2008).

Though the steps taken by the govern-ment are commendable, there are many challenges that still remain.



Unprecedented scaleThe scale of urbanization in India is un-precedented—it is estimated that nearly 140 million people will move to cities by 2020 and 700 million by 2050 (Ex-hibit 4.2). This is roughly 2.5 times the current total population of USA.

This scale of urbanization is expected to transform existing urban agglomera-tions into mega-cities. Mumbai, Delhi and Calcutta are slated to emerge as the three largest cities in the world. In this proliferation will lie, the origin of nu-merous urban communities. There were 12 cities with population greater than 1 million in India in 1981. By 2001, that number had grown to 35. According to some projections, there may be 68 such cities by 2020.9

Exhibit 4.1Challenges of Indian Urbanization

Limited transparency

Fragmented accountability

Incongruent city divisions (e.g.

Bangalore has 88 wards for

policing, 39 for electricity etc.)

‘Leakage’of resources

~ 60% of urban growth through

natural population increase

Unplanned growth

~ 5-10 planned Greenfield

projects

Mumbai and Kolkata are the

world’s most densely populated

cities (~10X New York)

5 of the 20 most densely

populated cities in the world

are Indian

Largest urban movement in the

world, matched only by China

>700M new urban residents by

2050

Multiple models of urbanization

Municipal expenditure only 0.5%

of India’s GDP

Narrow revenue base

Inadequate capabilities

Source: Census Bureau; Goldman Sachs Research; United Nations Department of Economic and Social Affairs; City Mayors; UNFPA State of the World Population Report 2007; Indian Statistical Institute; Aijaz, Rumi (2007) ‘Challenges for urban local governments in India’. Working Paper, 19. Asia Research Centre, London School of Economics and Political Science, London, UK; Booz & Company

4URBANIZATION CHALLENGES IN INDIA

Urbanization challenges in India can be classified in two categories (Exhibit 4.1):

Structural challenges, driven by the nature of urbanization in India

Execution challenges, faced in imple-menting initiatives to improve urban infrastructure

4.1 Structural challenges to urbaniza-tion in India

Urbanization issues that India faces today have their genesis in three struc-tural challenges:

Unprecedented scale

High density cities

Brownfield urbanization



Exhibit 4.2Unprecedented Scale

Source: Census Bureau; Goldman Sachs Research; United Nations Department of Economic and Social Affairs

Exhibit 4.3Multiple Models of Urbanization

17

25

36

3

108129

142

2051

244

291

330

2031 2041

165158

85

2021

198

120

68

10

2011

94

50

9

2001

115

74

35

6

1991

82

55

234

1981

56

41

12

153

No. of cities>0.5M

No. of cities >1M

No. of cities >5M

(2001)

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

60%

65%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Haryana

Gujarat

Bihar

Andhra Pradesh

West Bengal

Uttar Pradesh

Tamil Nadu

Rajasthan

Punjab

Maharashtra

Madhya Pradesh

Kerala

Karnataka

Jharkhand

Centralized

(as in South Korea)

Model

Decentralized Model

(as in Germany)

Delhi is 93% urban

due to the state’s

unique composition

Source: Census Bureau; Goldman Sachs Research; Booz & Company



The challenge is compounded by the fact that multiple models of urbaniza-tion (with respect to urban centraliza-tion) have evolved simultaneously in India and co-exist within its geogra-phy. Some states such as West Bengal are centred on a single large tier-1 city. Others such as Gujarat or Kerala have a relatively large number of compara-tively small cities. This makes a ‘one size fits all’ solution infeasible (Exhibit 4.3).

Exhibit 4.4Population Density of Indian Cities - among the highest in the world

Source: citymayors.com, 2007

High density citiesNot only will Indian cities be amongst the largest by 2050, they will also be among the most densely populated worldwide. The current population density of Mumbai is already 10 times that of New York (Exhibit 4.4). This is likely to go up significantly as the population of Mumbai rises to over 20 million by 2020. This situation is further exacerbated by low per capita incomes.

The higher density of population results in greater pressure on infrastructure. On the other hand, limited flexibility in land use, and lack of resources will continue to hinder infrastructure devel-opment and land use for community facilities. This will impact the creation of sustainable living environments. Policies formulated and solutions con-structed must acknowledge this high density–low per capita income scenario in all its manifestations.

Predominantly brown-field urbaniza-tionIn India, the most significant challenge will be to revitalize our existing urban centres, while strengthening capacity to support the future growth.

Contrary to conventional belief, ur-banization in India is driven by natural population growth as opposed to mi-gration. Consequently, India will con-tinue to grow its existing towns and smaller cities in the future—cities with histories, cultures, populations, proper-ty rights, and deeply embedded politi-cal interrelationships, all of which de-mand cognizance and respect in policy administration. A city cannot be wiped clean and planned anew. The process of revitalizing our existing cities must be carried through without interrupt-ing ongoing services or disrupting lives of millions of people. This poses sig-nificant implementation challenges on ground and makes upfront consensus, robust design and speedy execution very important.

Our cities were not built for the in-creases in populations that they are experiencing or will experience in the future; nor were they designed for this rate of expansion.



4.2 Execution challenges to urbaniza-tion in India

Efficiency in governanceGovernance suffers from policy limita-tions and administrative problems (Ex-hibit 4.5).

Policy Limitations: Most initiatives are focused on building new infra-structure—adding to scale, rather than sweating existing assets or more ef-ficiently using available funds for sus-tainable urban development. Regula-tions are thus not ‘smart’, and do not incentivize use of technology/ IT for increasing efficiency.

Municipal governance is assumed to be a State Function by the Indian Consti-tution; Entry 5 of the State List in the Seventh Schedule of the Constitution of India gives legislative power to the State with regard to municipal laws, establishments, constitution, and pow-ers of local government. Except for recognizing local self-government as an essential part of the system of govern-ment, the Constitution does not confer independent status or powers to local government bodies.

The 74th Constitutional Amendment Act (CAA) of 1992 seeks to provide more power and authority to ULBs. It is the first serious attempt to ensure stabilization of democratic municipal government through constitutional provisions. It introduced the Twelfth Schedule which lists the functions of ULBs, covering planning, regulation and developmental aspects.

Exhibit 4.5Governance Challenges

Limited number

of ‘smart regulations’

Limited policy alignment

for increasing private sector

participation

Lack of oversight with

respect to ULB portfolios in

the case of policies/planning

at national/state levels

Overburdened municipalities

with poor execution capabilitiesPoor accountability

Existence of multiple

agencies with minimum

coordination

Source: Aijaz, Rumi (2007) ‘Challenges for urban local governments in India’. Working Paper, 19. Asia Research Centre, London School of Economics and Political Science, London, UK; Booz & Company

However, the list is merely advisory in nature. Whether or not states devolve powers, and to what extent they do so, is entirely a matter of state choice. What-ever powers or functions are devolved, will be subject to provisions in existing enactments. As a result, the powers of local bodies on all matters are subsidi-ary to those of the states. Consequently, ULBs are not empowered to function as independent arms of governance.

Administrative Problems: Municipali-ties are overburdened, resulting in poor levels of service delivery.

The existence of a large number of de-partments, agencies and officers under-taking similar, related or over-lapping functions, leads to conflict in opera-tion. These agencies operate in overlap-ping jurisdictions and are often not in a position to fully understand backward

and forward linkages associated with their functions.

Additionally, multiple structures of service delivery exist with criss-cross-ing administrative jurisdictions. For instance, a Janaagraha study10 high-lighted that Bangalore’s service delivery structure is as follows:

Public works are carried out under 12 engineering divisions

Garbage collection divides the city into 278 health wards

Property taxes are collected through 30 Assistant Range Offices

Electricity services are structured along 39 sub-divisions reporting to 10 divisions

Water supply is managed through 5



divisions, 17 sub-divisions and 74 service stations

Bus service is monitored through 24 depots

Law and order is dispensed via 88 police stations, and traffic through 29 of these stations

Slum Development is coordinated through 4 sub-divisions

Not one of these criss-crossing admin-istrative jurisdictions is aligned to a political unit. A political unit has an inherent accountability associated with it. As a result, there is limited account-ability in service delivery.

Resources EnhancementCities have narrow financial resource bases leading to monetary constraints.

Share of transfers from state govern-ments in the revenues of municipali-ties was 31.7 per cent on an average (2001/02). Municipalities in several states are almost entirely transfer-de-pendent for running local services. The dependence was as high as 84 per cent in case of Jammu & Kashmir, 83 per cent in case of Rajasthan and 74 per cent in case of Uttar Pradesh. There-

Exhibit 4.6Property Tax Collection Efficiency

Collection Efficiency (2005–06, Select Indian Cities)

Source: ICRA

Exhibit 4.7National Municipal Government Expenditure: Global Comparison

Source: Goldman Sachs Research

fore, the financial viability of municipal corporations is dependent on the trans-fers from the State Governments.

A city’s own revenues are mostly de-pendent on octroi and property taxes. Most urban districts have abolished octroi; property tax collections suffer from evasion and low levels of collec-tion efficiency (Exhibit 4.6).

Consequently, Indian cities are unable to commit requisite financial resources for development (Exhibit 4.7).

Resource constraints are not only finan-cial but also capability driven. Planning capabilities often do not match up to requirements. Consequently, city devel-opment has mostly been short sighted and not holistic. Capacity to execute has also traditionally been poor due to shortage of skilled personnel. Our in-terviews with Municipal Commission-ers and Mayors clearly highlighted that the biggest limitation to project execu-tion is unavailability of skilled person-nel. This is further exacerbated by the use of archaic tools and processes.



5DIMENSIONS OF URBAN DEMAND

Exhibit 5.1Key Dimensions of Urban Demand

Source: Goldman Sachs Research; World Bank reports; GoI data sources; Booz & Company

As India continues to urbanize, demand for basic urban services will explode even as population density makes it dif-ficult to build and maintain the robust infrastructure needed to satisfy that demand. If these demands are not met, cities can lose their competitiveness in an increasingly global environment.

The ability of a city to cater to its ever increasing citizenry assumes impor-tance not only in the context of satis-fying the needs of existing residents, but also to attract a talented workforce and consequently, private investments. Therefore, abundant and reliable pow-er, water, and transportation are criti-cal enablers of the higher quality of life to make these cities attractive (Exhibit 5.1).

However, given India’s current state of urban infrastructure, catering to this

increasing demand for basic services will be a daunting task. Significant in-vestments will be required in each area of basic service provisioning:

Urban housing shortage will reach 30 million units by 2020. As more people live and work in cities, de-mand for housing will rise signifi-cantly. Presently, over 35 per cent of India’s urban population resides in slums and over 50 per cent of urban housing is considered kacha or tem-porary. Even by conservative esti-mates based on trends in population growth and household size, a total investment of USD 1 trillion will be required to meet future housing de-mand which require a bridge invest-ment of at least USD 300 billion by the government with the rest (70 per cent) being provided by the private sector.



India accounted for 10 per cent of world terror casualties in 2007. Each Indian city has become vulnerable to terrorist attacks. Our estimates, based on US and Australian bench-marks on capital expenditure for homeland security, suggest that India would be required to invest approxi-mately USD160 billion over the next 10 years to make its cities safer.

Over 3 million teachers will have to be recruited and trained by 2020. To meet future demand in urban India and just to achieve the teacher-stu-dent ratio of China, nearly 3 mil-lion teachers will be needed. This requires tremendous commitment from the government, as India will need to allocate at least 6 per cent of GDP per annum (compared to cur-rent 3 per cent) on improving edu-cational facilities across the country. Based on the ideal per capita spend and benchmarks on annual capital expenditure component from previ-ous GoI programmes, we estimate the government investment require-ment in urban education to be ap-proximately USD 150 billion over the next 10 years.

Approximately 1 million new hos-Approximately 1 million new hos-pital beds would be required by 2020. There are only 4 doctors and

10 hospital beds for every 10,000 people in India. Even to meet the healthcare standards of China, India will have to increase its healthcare infrastructure facilities by over 200 per cent over the coming years. Con-sequently, government expenditure on healthcare will have to increase fourfold, and this would demand allocating 3–4 per cent of the GDP specifically to improve healthcare in-frastructure. Based on the ideal per capita spend and benchmarks on an-nual capital expenditure component, we estimate required government in-vestment in urban healthcare to be approximately USD 120 billion over the next 10 years. Private sector is expected to pump in another USD 500 billion over the same period.

Number of vehicles on road will grow approximately 5 times by 2020. The strain of urbanization will be most visible in the transpor-tation network, as the number of vehicles in cities will increase with economic growth. However, merely building more roads is not a solu-tion. Concerns of environmental sustainability and inclusiveness also have to be considered. Therefore, In-dia must focus on developing Mass Rapid Transport Systems (MRTS) and multi-modal transport networks

within cities in order to create public transport systems that are well net-worked, comfortable, attractive, sus-tainable and yet affordable. Based on analyst estimates, over USD 100 billion will need to be invested over the next 10 years in capacity addi-tions and maintenance of transport infrastructure.

Over 200 GW of power to be add-Over 200 GW of power to be add-ed in 10 years. For continued GDP growth, India will need to more than double its current generation capac-ity. To meet the demand from urban India alone, approximately 160 GW of generation capacity would need to be added. Further, India’s peak power deficit already stands at 12 per cent of demand. The 10th and 11th plans have missed their capacity addition targets by a wide margin, leading to a sustained and widen-ing demand–supply gap. Part of the problem is that the transmission and distribution (T&D) system is in a state of disarray—AT&C (aggregate technical and commercial) losses are as high as 35 per cent. Based on de-mand projections and the nature of urban versus rural demand for elec-tricity, we estimate an investment requirement of USD120 billion over the next 10 years (approximately USD 90 billion from the government



ban households have access to piped water. Given that the existing water supply infrastructure in India is old, worn out and fraught with leakage problems, the challenge of providing these many extra connections will not be straightforward. Apart from investing an estimated USD 30 bil-lion in capacity enhancement, the governance, business models and distribution systems will need to be completely overhauled.

By our estimates, a total of nearly a tril-lion US dollars will have to be invested (capital expenditure) by the govern-ment alone in improving urban services by 2020 to simply cater to basic de-mandb (Exhibit 5.2). These investments are large by any standards and would require tremendous financial commit-ment from the government over the next decade.

Exhibit 5.2Investment Estimates from Government (2011 to 2020, USD billion)

Source: Goldman Sachs Research; World Bank reports; GoI websites; Booz & Company

at current investment proportions). The task at hand is daunting consid-ering that India has managed to add only 30 GW over the last 7 years.

Approximately 250 million more people need to be provided access to sanitation facilities. Lack of sew-erage and sanitation facilities lies at the root of several diseases prevalent in Indian cities. Therefore, poor san-itation is not only an infrastructure issue, but a marker of unhygienic living conditions. To ensure that each person gets access to improved sanitation facilities, Goldman Sachs estimates investments of the order of USD 40 billion over the next 10 years.

Approximately 200 million extra water connections will be required in the next 10 years so that all ur-

b Note that investments in several of these areas are amenable to PPP. We have assumed that 100 per cent investment in water supply, sanitation, security and transport needs to come from the government. Private sector investments as a percentage of totals in education, healthcare and electricity have been assumed to continue at current levels. In housing, we have assumed that 30 per cent of the investment needs to come from government.



6FRAMEWORK FOR SUSTAINABLE URBANIZATION

Exhibit 6.1SuBAH Framework for Sustainable Urbanization


It is evident that significant investment is needed for the capacity additions re-quired to meet the expected explosion in urban demand. However, merely investing in enhancing infrastructure is not the solution. While urbanization has resulted in economic growth, it has also posed socio-economic and envi-ronment challenges. Therefore projects that focus primarily on expanding ca-pacity are not necessarily most effective in serving community needs—they are not sustainable over long periods of time and could create inefficiencies in-stead of mitigating them.

As an example, to help cope with in-creasing commuter traffic, building new roads is neither a socially equitable nor an environmentally sustainable solu-tion. More roads have traditionally re-sulted in an increase in number of cars, increasing the pollution levels, without mitigating congestion in cities. A more long term solution would be to imple-ment an intelligent multi-modal trans-portation network, with participation from public as well as private entities, thus leveraging technology to arrive at a sustainable solution.

Similarly, in education, building schools and recruiting more teachers can cer-tainly ensure that the current deficit in availability of classrooms and teachers is reduced. However, the absence of a viable business model and oversight would challenge the economic feasi-bility and effectiveness of such invest-

ments. Such projects would constantly require funds and assistance from the government and external agencies, and still not ensure quality in education.

Therefore, we propose the following Framework for Sustainable Urbaniza-tion (Exhibit 6.1).

For urbanization to be successful there are three goals that need to be achieved: the benefits have to be socially equita-ble, economically viable and environ-mentally sustainable.

Social equity is based on the principle of inclusion where there should be no discrimination in access to benefits. Economically viable solutions are those that are financially self-sustaining, while environmental sustainability en-sures the preservation of the environ-ment for future generations. To achieve these outcomes three mandates are required—governance, business model, and infrastructure. With the scale of in-vestments entailed, effective governance is top priority. Appropriate policies should provide an enabling environ-ment for urbanization initiatives and must be based on principles of account-ability, enforceability and transparency. Effective government policies need to be supplemented by a viable business model to ensure implementation effi-ciency. Finally, effort should be made to adopt appropriate infrastructure/technical solution, to address urbaniza-tion challenges.



7BUILDING THE FUTURE THROUGH INTELLIGENT URBANIZATION: BETTER, CHEAPER, AND FASTER

Social, economic, and environmental well-being of a city needs to be ensured for urbanization to be sustainable. It is also evident that the current efforts are consistently falling short of these goals, inspite of the large amounts of money being allocated to address urbanization challenges. Clearly, the shortage of re-sources and governance challenges are major issues.

The sheer magnitude of the challenge requires alternate solutions that address the demands in a manner that is bet-ter, cheaper, and quicker. Technology can act as a key enabler to help achieve these goals. Technology not only pro-vides a solution to address the systemic inefficiencies that are inherent in In-dia’s urban service delivery machinery, but also provides solutions that ensure environmental sustainability and social inclusiveness (Exhibit 7.1). Technology-enabled solutions already exist across different development models (Brown-

field, Revitalization and Greenfield)c, and also along the multiple dimensions of urban demand.

In an attempt to enhance attractiveness of cities as destinations for internation-al business, many governments have leveraged technology to make urban-ization initiatives sustainable. As part of its current 5-year Plan, China has announced an aggressive framework for Smart Grid deployment to address power transmission issues. By 2012, it plans to have Wide Area Monitor-ing System (WAMS) with sensors at all generators and substations to monitor transmission on a real time basis. San Francisco has introduced ‘Connected Bus’, the advantages of which include reduced emissions, enriched services to the riders and increased effective-ness of the transit operator. Amsterdam has developed ‘Smart Work Centres’ which are residential complexes de-veloped close to work places to reduce

Exhibit 7.1Technology Solutions

‘Smart metering’ systems

– Real-time usage metering, saving

~10-15% energy

‘Smart distribution’ systems

– Intelligent networked transmission/distribution

– Real-time network condition monitoring

Systems for interactive two-way content delivery

to students and teachers

– Monitoring systems

– Remote access

– Access to quality content

Intelligent transport systems

– Direct traffic flow based on real-time information

Automatic systems for reducing congestion

– Dynamic demand handling

– Systems like car sharing, multi-modal transport

scheduling etc.

Intelligent systems

– City-wide monitoring, sensor tracking, alerting,

controls

Dynamic resource management systems

– Quick emergency response

Intelligent real-estate solutions that manage

building energy efficiency, security, utility

supply, etc.

– Reduce total cost of ownership over building

life-cycle

– Provide environmentally sustainable properties

Remote systems for diagnostics and treatment

– Enhance patient experience and penetration

of direct care

– Improve emergency responses


c Brownfield development refers to development of ‘living’ cities, in which governments plan infrastructure changes as and when required to improve citizen quality of life. Revitalization refers to integrated expansion or redevelopment of abandoned of underused urban land. Greenfield development refers to planned, coordinated construction of entire cities.



Songdo International City in Incheon, South Korea, is one of the world’s newest cities. Built on 1500 acres of land reclaimed from the Yellow Sea off Incheon, it was created to establish a new standard of smart urban development that is en-vironmentally sustainable, blessed with parks and open spaces and networked in the latest communication technology.

Recognizing that the future of the world lies in cities and their interconnected-ness, authorities in South Korea embarked on an experiment in cutting-edge city building.

Government authorities have partnered with property developer, Gale and Cisco to develop an interconnected communications network system and a suite of solutions that will change the shape of cities to come.

Songdo City plans to deploy video networking technology and energy manage-ment software tools city-wide and join municipal systems, education, health care, transportation and hospitality into a common network.

Songdo IBD will encourage and foster sustainable design practices by incor-porating the latest design standards and technologies that reduce energy consumption, increase energy efficiency, utilize recycled and natural materials and generate clean or renewable electricity. Songdo buildings are incorporating advanced energy management solutions. Greywater and rain will be collected for irrigation and use in cooling towers. A network of underground pneumatic pipes will move solid waste, reducing the need for garbage trucks.

Songdo is also a petri-dish for green transportation schemes. The city’s main car depot has been buried in a sunken courtyard to keep heat and emissions down. A sleek new public transport system including underground trains linked to Seoul and a network of electric water taxis in the city’s salt-water canals will help make this one of the cleanest urban areas on the planet.

Songdo will also serve as a landmark in urban planning with 40 percent of the city designated to be open space with parks accessible from all corners of the district. The flagship 100-acre ‘central park’ in the district’s centre hides the multi-level parking underneath the greenery. An artificial lake also provides ferry services from one end to the other.

The future of cities is evident now in Songdo, a city that seems to have found a harmonious connection between nature and technology, innovation and innova-tive urban design and superior quality of life.

travel time, reduce fuel emissions and enable a more efficient use of time and resources (Exhibit 7.2, page 18). South Korea is building a new city with state-of-the-art schools, hospitals, apart-ments, office buildings and high-end cultural amenities (see Sidebar: New Songdo City). Masdar City, the world’s first carbon-neutral zero waste city, is an initiative by the Government of Abu Dhabi to position the country as a leader in renewal energy and sustain-able technology.

New Songdo City: South Korea’s High Tech Utopia



‘Green Shoots’ are already visible in In-

dia— technology is being used for tack-

ling multiple dimensions of urban de-

mand across various parts of India with

a high degree of success. Here we illus-

trate the impact that select technology

solutions have already created in vari-

ous urban centres, and highlight avail-

able technology solutions that would

enable India to urbanize in a sustain-

able, inclusive, and viable fashion.

Exhibit 7.2Global Examples

Advantages include reduced

emissions, enriched services to

transit rider and increased

effectiveness of transit operator.

Aims to reduce traffic and

parking congestion, introduce

variable charging schemes

and encourage use of public

transportation.

These benefit employees by

reducing travel time, reduce

fuel emissions and enable

more efficient use of time

and resources.

The main goal was to cut down

energy consumption (water, gas,

electricity) in the city, while creating

awareness of citizens’ actions on

climate change.

Aimed to maximize ‘user-related

energy efficiency, attain energy self-

sufficiency and reduce carbon footprint.

’

Data Management Centre to keep

track of crime data and deploy

forces effectively. This has reduced

crime rates by 27% since 2001.

The idea is to use cloud

computing to provide

education to children

with poor access to schools

by connecting them virtually

with leading city schools.


7.1 Energy/ Utilities/ WaterThe power sector in India is plagued by high AT&C losses due to outdated distribution systems and lack of auto-mation. The realization is much lower than cost of supply resulting in large losses (Exhibit 7.3).

The situation is similar for water, where non-revenue water (water lost on way from production to consumption) is as high as 50 per cent in Indian cities

Exhibit 7.3Challenges in the Power Sector

Source: Urbanisation & Sustainability In India: An Interdependent Agenda, The Alternative Urban Futures Report, WWF and Mirabilis Advisory; http://www.mirabilisadvisory.com/wwfreport/pdfs/Sec1.pdf, Booz & Company



In India, smart grid solutions are also

being introduced. In September 2009,

North Delhi Power Limited (NDPL),

a joint venture of Tata Power (51 per

cent) and Delhi Government (49 per

cent) announced the introduction of

smart grid solutions to improve the

quality and reliability of service, while

reducing transmission and commercial

power losses. It has been estimated that

to meet future power demand with cur-

rent AT&C loss levels, India would

need an additional 200 GW of power

requiring an investment of USD120 bil-

lion. However by using smart meters

and upgrading systems, AT&C losses

can be gradually reduced to approxi-

mately 17 per cent by 2020 leading to

reduction in capacity addition require-

ment by 70 GW, resulting in savings of

approximately USD 40 billion.

Exhibit 7.4Potential Water Situations in 2050

Total supply

of water

remains

the same

BUSINESS AS

USUAL (BAU)

50% of waste water

treatment opportunity is

captured

50% of water harvesting

opportunity is captured

50% of water leakage


OPTIMIZED

Entire water waste

treatment opportunity

is captured

Entire water harvesting


All of water leakage


Supply of

water

REVOLUTIONARYASSUMPTIONS

Water Scenario in Delhi 2050

Net

Shortage

Water

Harvesting

Waste

Water

Treatment

Reduce

Leakage

to 10%

Shortfall

(BAU)

–1,000

–800

–600

–400

–200

0

200

2001 2050

(Revolutionary)

2050

(Optimised)

2050

(BAU)

Sh

ort

fall

inw

ate

ravaila

bili

ty

(Dem

an

d–S

up

ply

ofw

ate

r)

Sources: Urbanisation & Sustainability In India: An Interdependent Agenda, The Alternative Urban Futures Report, WWF and Mirabilis Advisory; http://www.mirabilisadvisory.com/wwfreport/pdfs/Sec1.pdf; Booz & Company

In the case of water, in the absence of any improvement, the deficiency in 2050 in Delhi estimated by WWF is approximately 800 MCM. Using smart meters to reduce water leakage by 50 percent in conjunction with wastewa-ter treatment and water harvesting can help reduce this shortfall to 50 MCM (Exhibit 7.4).

7.2 HealthcareThe healthcare infrastructure in In-dia is currently inadequate to cater to the needs of its population. There are only 0.7 hospital beds and 0.6 doctors per 1000 people.11 Most of the hospitals and clinics are under-staffed by 15 to 20 per cent. Gov-ernment expenditure on healthcare is merely 5 per cent of GDP (as com-pared to 15 per cent in the US). The

like Delhi and Indore, as compared to 17 per cent in Shanghai and 3 per cent in Singapore. In 2001, in Delhi, the leakage in water was estimated at 470 MCM resulting in a shortage of ap-proximately 17 MCM.

The use of smart grids/ meters for wa-ter and power transmission provides a technology-enabled solution to reduce leakage and wastage, and increase transparency and reliability. Smart grids deliver electricity from suppliers to consumers using two-way digital technology and have the capability of integrating alternate sources of elec-tricity such as solar and wind energy. A study by the Department of Energy in USA calculated that internal mod-ernization of US grids with smart grid capabilities would save between USD 46 and USD117 billion over the next 20 years.



Exhibit 7.5Government Expenditure on Healthcare

Source: World Health Organisation, Booz & Company

per capita government expenditure on healthcare is approximately USD 109 (vis a vis USD 342 in China) (Exhibit 7.5). Consequently there is high dependence on the private sector and a general perception of poor quality of public service pro-visioning. There are no healthcare schemes specifically targeted at the urban poor resulting in high direct, indirect and opportunity costs of accessing healthcare services for them.

This is despite the fact that through-out India, technology has been used to increase the reach and efficiency of healthcare services.

The Ministry of Health, Centre for Disease Control (CDC) and UNICEF launched a pilot programme where they used GIS mapping to support expansion of Patna’s vaccination programme. CDC equipped planners with GPS units, affordably priced at

USD 125 a piece, that captured the geographic coordinates of sites, from which maps were created for plan-ning the most efficient routes to get vaccines and medical staff to the cen-tres. Each vaccination site was linked to a hub hospital, which in turn func-tioned as the nucleus for personnel, logistics and financial management. Preliminary results showed that im-munization cover increased two-fold, and there was an increase in vaccina-tion sites from 10 in centrally located hospitals to 650 non-hospital loca-tions.

Tele-health services have been widely used to provide healthcare primarily in cardiology and oph-thalmology to remote regions in the country, especially in rural areas. ‘Aarogya Jaal’ was launched in Rui hospital, a taluka hospital, in Ba-ramati, Pune district in 2006. The ECG of a patient in Baramati was transmitted to the cardio-care room

of a hospital in Bangalore where a cardiologist examined the test re-sults and reported the abnormalities in less than 10 minutes. The operat-ing cost was as low as Rs 10 and this service was provided free of charge by the hospital. Given the success of the project, 13 more hospitals in the Pune district are to be added to the programme.

Hospital Information Systems (HIS) de-veloped by companies like Wipro and C-DAC are in use in hospitals across the country, which allow relevant in-formation to be accessed from all de-partments of the hospital. An electronic patient folder with details of each visit enables doctors to have ready access to past episodes and information about the patient, thus ensuring efficient pa-tient care.

7.3 TransportRoads in India today are congested and



Exhibit 7.6Pollution in Indian Cities

Source: Urbanisation & Sustainability In India: An Interdependent Agenda, The Alternative Urban Futures Report, WWF and Mirabilis Advisory; http://www.mirabilisadvisory.com/wwfreport/pdfs/Sec1.pdf, Booz & Company

of poor quality. Most national high-ways are 2 lanes or less, while a quarter of all roads and highways is congest-ed, reducing truck/car speed by 30–40 kmph. There has also been a dramatic increase in car ownership which has displayed a 15 per cent growth rate over the last decade. Urban centres are congested and rush hour speeds have been decelerated by 5–10 kmph. Trans-port safety remains a key issue. Accord-ing to WHO, more people die in road accidents in India than anywhere else in the world.12

Indian cities are also highly polluted when compared to their international counterparts. The level of suspended particulate matter in Delhi and Kolkata is 150 μg/m3 and 128 μg/m3 respectively as compared to 73 μg/m3 in Shanghai, 40 μg/m3 in Sao Paulo and 20 μg/m3 in London (Exhibit 7.6).

To cope with the increasing number of commuters and to help ease the pres-sure off roads, Ahmedabad and Delhi have developed advanced transporta-tion solutions.

In Ahmedabad, the Gujarat Infrastruc-ture Development Board, Ahmedabad Municipal Corporation and Gujarat Urban Development Corporation have developed a Bus Rapid Transport Sys-tem (BRTS) to provide reliable and se-cure public transport with the primary objective of reducing travel time. Key design elements of BRTS include: GPS enabled buses, an integrated control centre for traffic management, and use of driver assist & automation technol-ogy with vehicle prioritization and pas-senger information systems for opera-tional efficiency. BRTS Ahmedabad was



Case Study : AHMEDABAD

City Background and Statistics

City population 45 lakh as per 2001 census, now esti-mated at approximately 55–58 lakh

Ahmedabad Municipal Corporation (AMC) budget estimated at INR 3200 cr in 2009–10

JNNURM support of INR 2800 cr for 2009–12 period

City Plan and Vision ‘Vibrant City’ vision presented under CDP Single point responsibility; AMC responsible for – city planning and development – water and sewage – transport – local transport – sanitation – schools – public health

Initiatives Underway BRTS under PPP, part funded by JNNURM Sewage treatment Sabarmati Riverfront Development Program Water supply and treatment (not under JNNURM)

some elements (pump maintenance) under PPP Solid waste collection and management under PPP Public spaces (parks and playground) Some traffic island maintenance under PPP

Challenges and Limitations

Lack of previous revenue buoyancy as octroi, a major source of revenue has been abolished; AMC depends on state government octroi equalization scheme to make up for some of the revenue shortfall

Application of IU and Benefits

BRTS planning and implementation under Compre-hensive Traffic Management System; traffic manage-ment monitored via GPS-enabled central control room to ensure adherence to published time tables

Integrated traffic management perspective already in force, aligned to overall CDP; average travel of 5.5 km per capita per day, intent is to keep within existing indices

e-Gov infrastructure well developed; 26 Service Kiosks spread across city with online payment, applications and delivery (building permits, tenders, birth/ death certificates, etc); kiosks targeted to increase to 55 over 2010 to ensure 100 per cent ward coverage; has won E-Gov award two years in a row

Property tax record computerized; collection and recovery > 72 per cent

Dedicated de facto CIO function—all e-gov and IT infrastructure is responsibility of a specific Deputy Municipal Commissioner

Digitization of land records, overlay with property records, electoral register, and tax records planned; intention is to increase recovery of property tax (main source of ULG revenue) to above 80 per cent

Potential for computerization of local health infrastruc-ture and patient records, to enable seamless intra-city transfer.

recently awarded the 2010 Sustainable Transport Award, beating four of the world’s prominent cities. (see Sidebar: Ahmedabad)

The Delhi Metro Rail Corporation Ltd. (DMRC), a joint partnership between the Government of India and Govern-ment of National Capital Territory of Delhi, has developed Delhi’s first rail network. This project was awarded the UN certificate for preventing over 90,000 tonnes of CO2 from being emit-ted into the atmosphere between 2004 and 2007. DMRC has also successfully reduced the energy requirement by 30 per cent due to the use of three-phase traction motors attached to the brakes, that act as generators to produce ener-gy which flows back into the overhead electricity lines.



7.4 Education35 per cent of the population in India is illiterate, and only 15 per cent students reach high school. There is shortage of teachers, and teacher absenteeism is an acute problem in publicly owned and managed schools. A study carried out in 2004, found that in Delhi, govern-ment school teachers were not teaching or were absent for 62 per cent of teach-ing time versus 31 per cent in private recognized schools (Exhibit 7.7).

Operations and record keeping in gov-ernment schools are manual rather than electronic—it takes 60 days to allocate municipal teachers across 926 schools in Delhi at the beginning of each aca-demic session. Additionally, no central records are maintained on physical in-frastructure, financials etc.

To meet these challenges and streamline processes, technology is being leveraged for various projects in India. Govern-ment schools in Delhi have introduced standard software for different pro-cesses such as attendance, performance evaluations, transfers, student prog-ress, and financials. These measures have reduced teacher absenteeism and improved pass percentage from 48 per cent in 2005 to 84 per cent in 2008.

Rajiv Gandhi Project for EduSat Supported Elementary Education (RGPEEE), an initiative of IGNOU-ISRO-MHRDd, and several state gov-ernments, supports satellite communi-cation enabled education, through 750 Receive Only Terminals (ROTS) in re-gions selected in Madhya Pradesh, Ut-tar Pradesh, Chattisgarh and Bihar. The RGPEEE works as a DTH (direct to home) network using the digital tech-nology in Ku-band with national cover-age, and has been transmitting regular lessons four hours a day since Decem-ber 2005. The project also includes recurrent teacher-training and skill upgradation in new and emerging tech-nologies and e-content support to state governments for transmission on their regional network. In India, IGNOU is planning to impart student courses on public health, art, music, and various other subjects through mobile phones, given their growing popularity.

Separately, a pilot project in Kenya conceived by Eduvision deserves men-tion here as it uses customized Pocket PCs, referred to as ‘e-slates’. These slates contain all sorts of information that was formerly available in text books. They are Wi-Fi enabled and run on licence-free open source software to keep costs down.

Cisco, Intel and Microsoft, in collabo-ration with the Govt. of Kenya, have also created ‘one-to-one e-learning’ classrooms as a best-in-class model to provide access to high quality educa-tional content.

7.5 HousingThe projected shortage of housing units in urban areas has been estimated to be approximately 30 million units by 2020. Regulatory barriers such as lim-its on urban density, land ceilings, poor planning, rigid master plans and restric-tive zoning statutes have crippled land markets and exacerbated the situation. Poor control and lack of appropriate regulations have led to the prolifera-tion of slums. Shortage of funds at the disposal of urban local bodies and ser-vice providers has left them incapable of expanding trunk infrastructure that housing developers need to develop new sites. There is also limited focus on ‘green initiatives’ or environmental considerations when constructing new housing. There is a strong bias towards adding physical infrastructure rather than providing environmentally sus-tainable solutions.

Exhibit 7.7Activities of Teachers Teaching Class V (Delhi, 2004)

Source: Kremer et al: Teachers’ Absence in India (2004), secondary research, Booz & Company

d Indira Gandhi National Open University, Indian Space Research Organization, Ministry of Human Resource Development



GIS mapping has been extensively used in urban planning. As part of National Urban Information Scheme, INR 68.28 crore has been dedicated for develop-ment of digital maps and GIS data for 137 cities. GIS functions could be used in planning for utilities like water sup-ply, sewerage, storm water drainage and waste management. It would en-able sharing of databases among differ-ent service providers which would be economical, enable better coordination and disaster mitigation.

In April 2010, the Karnataka govern-ment announced an Urban Property Ownership Record (UPOR) project under PPP to give a ‘unique identity’ to each urban property. The project in-volves the creation of a comprehensive database (spatial and non-spatial) of all properties, and collection and mainte-nance of dynamic records of all property

details related to land, building, right to the property, and its history of transac-tions. This would be followed by issue of a UPOR certificate— henceforth to be treated as the only valid ownership certificate. The objective is to increase property tax collection, prevent fraudu-lent transactions, regulate building plan permissions and protect government properties from encroachment.

Though the allocation of low-income housing in India is corruption-prone, with least attention being paid to the poorest among the poor, a case in point is the National Slum Dwellers’ Federa-tion (NSDF) which works actively with Mumbai authorities to develop and im-plement resettlement plans and ensure that the most vulnerable are not missed. NSDF is mapping each member to his/her household electronically and is-sues individual identity cards to ensure

transparency in rehabilitation efforts.

Buildings are responsible for up to 40 per cent of the total energy consumed in urban areas. Given the exploding ur-ban population, a sharp rise in energy demand by the urban building sector is imminent. To ensure that new housing projects are environmentally sustain-able, there is a pressing need to give priority to enforcing ‘green’ building codes. A study conducted by WWF, af-ter discussions with leading architects, has determined that the greening of single-family homes would yield energy savings of approximately 15 per cent with current or foreseeable green tech-nologies and densification would result in greater savings. The study estimated potential energy consumption for Del-hi, Ahmedabad and Kolkata in three different scenarios (Exhibit 7.8).

Exhibit 7.8Energy Consumption by Buildings

Source: Urbanisation & Sustainability In India: An Interdependent Agenda, The Alternative Urban Futures Report, WWF and Mirabilis Advisory; http://www.mirabilisadvisory.com/wwfreport/pdfs/Sec1.pdf; Booz & Company



7.6 SecurityIn India, currently there is little com-munication across different security authorities—this inhibits coordinated, integrated response to emergencies and crises, as witnessed during the Mumbai terror attacks. Unlike world class cities, there is little application of technol-ogy through city sensor tracking (use of alarms, CCTVs, etc.), real time dis-patch and tracking of police personnel etc. for securing public places.

Police strength is also low—Mumbai has 40,000 personnel which translates to approximately 3 policemen per 1000 persons. The ratio in cities such as New York and London is approximately 4.5 policemen per 1000 persons.

Real time crime centres and integrat-ed emergency response solutions are technology-enabled solutions that have been successfully used worldwide to increase efficiency and reduce response time.

The New York Police Department launched a Real Time Crime Centre (RTCC) in July 2005. The RTCC has 3 key elements: a data warehouse, data analysis and a data wall. The system can comb through 120 million New York City criminal complaints, ar-rests, and 911 call records dating back a decade. The RTCC has successfully reduced the crime rate by 27 per cent since police are using analytics and vi-sualization tools to see crime patterns

Exhibit 7.9Declines in New York Crime Rates (in 2005, over 2001)

Note: GLA: Grand Larceny Auto implying auto theft Source: New York Police Dept, Booz & Company

as they are forming. Also, approxi-mately three-quarters of the homicides in New York City were solved in 2005 using the database. Declines in differ-ent crime rates have been documented in the Exhibit 7.9.

After the terror-attacks in June 2004, Madrid developed an Integrated Secu-rity and Emergency Centre. The Centre coordinates resources and efforts of the police, fire service, highway, hotline, and ambulance units, among others. It can also recognize if alerts from sev-eral different sources relate to single or multiple incidents. It assigns resources based on requirements coming from the ground.



8THE ROADMAP

To successfully serve as engines of eco-nomic growth, Indian cities must be in a position to provide high quality in-frastructure to their citizens. The chal-lenge is understandably immense.

At a fundamental level, there is a vital need to let go of obsolete approaches to financing, governance, and manage-ment — outdated approaches that no longer work in our politically and ad-ministratively complex society. Addi-tionally, there is a need to put in place, tools and support systems that can enhance the ability of ULBs to execute and deliver results. We will also need to recognize and acknowledge the role of technology in meeting the objectives of sustainable urbanization.

While, coverage of the holistic recom-mendations is not new, we have iden-tified selected recommendations that require urgent consideration, and have outlined them in Exhibit 8.1.

8.1 Strengthening the BasicsIn many states, local bodies have become weak and ineffective on ac-count of prolonged supersessions by state governments, lack of financial independence, inadequate capabilities,

and inadequate devolution of powers and functions. As a result, ULBs are not able to perform effectively as vibrant democratic units of self-government.

Governance Currently, institutions at the urban or rural district levels, intermediate or village level do not have independent powers for self governance. They exer-cise only such powers as are delegated to them for the ‘preparation of plans’ and the ‘implementation of schemes’. With respect to the former, there is no legal guarantee that the plans so made will be accepted and implemented. With respect to the latter, the schemes are designed by state or central authori-ties. In either case, there is no real deci-sion-making by local bodies.

In view of the above, we recommend amending the 7th Schedule to carve out a separate ‘legislative list’ in the Consti-tution—the fourth list beyond Central, State & Concurrent Lists which may be called the ‘local list’ reserving the sub-jects under 11th and 12th Schedules for local bodies exclusively. This would in-stitutionalize local bodies as the ‘third arm of governance’.

Exhibit 8.1Recommendations for Change

Source: Primary Interviews with Government and Industry stakeholders; CII; UN Urban Habitat; Booz & Company



The Ministry of Finance undertook a study in 2009 on the implementation of 74th CAA in various states. The study revealed a great deal of variability in per-formances across states. An important observation was that while there had been full compliance in respect of pro-visions such as the constitution of three types of ULBs, reservation of seats, and the constitution of state finance com-missions (SFCs), the same could not be said for other provisions, namely con-stitution of wards committees, district planning committees and metropolitan planning committees. Many states have not transferred functions, funds, and functionaries. Revenue powers of ULBs are often not in consonance. There is also no consistency in term, powers and methods of electing Mayors. The study concluded that implementation of 74th CAA needs strengthening.

To strengthen the local bodies, it is thus essential that the discretion of states in constituting and granting of executive powers be removed—73rd and 74th CAAs need to be suitably amended and made mandatory. Additionally, the transfer of functions under the 12th Schedule should be made mandatory, and the functions should be handed over to the ULBs to be implemented speedily.

Currently, administrative bodies within a municipality are not structured for single point of accountability. Admin-istrative jurisdictions of multiple agen-cies are overlapping and criss-crossing leading to confusion, duplication of effort, lack of accountability, and inac-tion. The large number of departments, institutions, local authorities, agencies, and officers undertaking similar, relat-ed or over-lapping functions or func-

tions that are not clearly defined leads to conflicts in operation.

Service delivery structures where ad-ministrative jurisdictions of agencies are not congruent with politically de-fined units are bereft of the inherent ac-countability that characterizes political units of an empowered electorate. This contributes to lack of accountability in service delivery.

For efficient citizen service delivery, it is essential to establish appropriate legitimate political and accountabil-ity ‘spaces’. This could be achieved by standardizing ward classification with-in the city and ensuring congruence of service delivery structures with ward boundaries.

Inter-institutional externalities, which occur abundantly in metropolitan economies, account for problems of metropolitan management; they call for effective coordination and mitiga-tion mechanisms. Article 243ZE of the Constitution defines a Committee for Metropolitan Planning to prepare a development plan for the Metro-politan area as a whole. For instance, the Hyderabad Urban Development Authority oversees coordinated plan-ning for Hyderabad area covering all the metro municipal authorities and 125 rural local bodies. While plan-ning is thus achieved in a coordinated manner, the real problem is in the plan implementation. The processes by which these institutions carry out their work—inter-institutional coordination issues—are as important as the ideas on planning.

In addition to ensuring congruence of service delivery structures with ward

boundaries, it is essential to put in place a formal structure for ensuring inter-agency coordination.

The exercise should begin with a study of all government bodies operating in the municipality and identification of their functional overlaps. This should be followed by defining coordination requirements at four levels—Policy Decision-Making, Program Design and Planning; Operations; and Service Delivery. We also recommend creation of enabling conditions and tools for coordination at the four levels e.g. at the Program Design & Planning level, specific departments can collaborate through coordinating committees. In-centives for coordination at different levels should be clearly defined.

To access the funds under JNNURM, city administrations are required to pre-pare City Development Plans (CDPs). 63 cities covered under JNNURM have prepared CDPs prior to fund access.

It is recommended that this ‘net’ be ex-tended to all cities. Long term planning should be encouraged in all cities. All cities should mandatorily make CDPs based on steady state population. Task forces should be set up for planning and coordination during the develop-ment of CDPs.

FinancingWhile Article 280 of the Indian Con-stitution constituted the Finance Com-mission of India to allocate resources between Union and state governments, the transfer of funds to local bodies has been left to the discretion of states.



74th CAA inserted a sub-clause (c) to Ar-ticle 280 clause (3) and made it obliga-tory on the Commission to recommend ‘measures necessary to augment the Consolidated Fund of a State to sup-plement the resources of panchayats/ municipalities in the State on the basis of the recommendations made by the Finance Commission of the state’.

Thus, 74th CAA has not changed the structure of fiscal federalism in India. The legislature of a state continues to enjoy absolute powers to endow the municipalities with such fiscal author-ity as it considers necessary. ADB in its study13 found minimal impact of State Finance Commission recommendations on the finances of local bodies—trans-fers made by all states to ULBs as per SFC reports on an average amounted to 4.47 per cent only of State’s Own Rev-enues during 1997–98 to 2000–01.

The study further highlighted that the average per capita expenditures (daily) by urban local governments range be-tween INR 0.20 and INR 2.25, explain-ing the extremely poor levels of services and consequently, the deplorable con-ditions in Indian cities and towns.

Accordingly, we recommend the amendment of Article 280 such that the Finance Commission may specify allocation of resources across the Cen-tre, states and local bodies. Further, in allocating funds to municipalities, it should ensure a direct link to consump-tion expenditure so as to trigger a vir-tuous cycle between good governance and rewards, for instance, by allocating

a share of GST collected in the jurisdic-tion to the ULB.

Although corporations are typically empowered to introduce new taxes and increase tariffs, in reality they need the concurrence of the state government for the same.

Additionally, ULBs need the state gov-ernment’s approval for almost every aspect of their borrowing programme regulated by the Local Authorities Loans Act, 1914. This Act regulates the purpose and amount of debt, tenure and interest rate as well as the man-ner of raising loans, collateral usable, and repayment procedures. Subject to the limits imposed by this Act, state governments are empowered to deter-mine the framework within which local governments, including the parastatals, can borrow from the market.

Ensuring sustainable financial indepen-dence for ULBs will be critical to true empowerment for decision-making and execution. Hence, it is recommended that ULBs be empowered to raise financing independently—say, through assessment and collection of property tax which could be the exclusive mandate of ULBs. Furthermore, the Local Authorities Loan Act, 1914 should be scrapped so that state governmental approval is no longer required for a borrowing programme.

A key development in the sphere of in-frastructure financing in India has been the emergence of a municipal bond market. The bond market in India has grown significantly in recent years, in

terms of issuers and investors, instru-ments, trading volume and market awareness. The credit rating agencies, ICRA, CARE and CRISIL, have high-lighted key factors that limit or con-strain the development of the market. These include poor credit quality of municipal bodies, nature of projects being funded (long gestation period, erratic revenue flows etc.), and lack of liquidity in the secondary debt market.

To improve the fundamental credit quality of the ULBs, certain steps need to be taken in addition to ensuring op-erational and financial freedom. This includes mandating fundamental fi-nancial reforms such as shifting to ac-crual accounting, scientific budgeting processes, internal control and assess-ment systems, and maintaining asset registers. It should be mandatory for all ULBs to maintain balance-sheets and revenue and expenditure accounts.

Debt access for project financing vis-à-vis general ULB financing should be encouraged. This would facilitate effi-cient execution of municipal projects, ensuring revenue sufficiency and cost coverage of stand-alone public service projects. Project financing structures should be insulated from political in-terference. Division of responsibilities between administrative and political wings should be clearly defined vis-à-vis policy making and execution with respect to the project financed.

Exhibit 8.2Recommendations for Building Personnel Capabilities

Source: Primary interviews with government and industry stakeholders; Booz & Company



cesses for hiring staff for the cadre will ensure basic minimum qualification and quality of personnel. The detailed steps for creation of such a cadre have been outlined as optional reform under JNNURM (Exhibit 8.3).

It is recommended that processes for building capacity among municipal officers be facilitated by making tied grants for training. Training needs to be delivered on PPP, financial manage-ment, frameworks for usage of com-mons, etc..

The impact of technology on driving sustainable urbanization has been out-lined in the previous sections. Many cit-ies in US, Australia, and Europe, depute Chief Information Officers (CIOs) with the sole mandate of implementing tech-nology to raise efficiency in delivery of government services. Pune has become the first city in India to have officially created such an appointment. In Pune, the CIO is driving the use of technology for several purposes such as Citizen GIS, wireless information systems for traffic monitoring, fleet management, water delivery and management, lighting man-agement, solid-waste management, sew-age management, and disaster alerts.

8.2 Enhancing Execution CapabilitiesDevolution of operational and financial power to local bodies must be accom-panied by a well managed process of building capabilities (Exhibit 8.2, page 28). ULBs need support to build requi-site financial and governance capacity to sustain the new momentum for cre-ating inclusive and liveable cities.

Building Personnel CapabilitiesOur primary interviews with stake-holders in the government and NGOs indicated the need for each state to mandatorily create a state-level cadre of municipal staff. This would enable superior sourcing of specialist capabili-ties in areas such as urban planning, financial management, food and sani-tation inspection, environment, and education. This should lead to ULBs engaging full time staff with special-ized skills, within the hierarchy of the municipal setup. Experiences and com-petencies can be shared across cities through lateral movement. This should mandatorily be undertaken by each state government, through its MoUD or equivalent body.

Centralized and unified selection pro-

Exhibit 8.3JNNURM Recommendations for Creation of Cadre of Municipal Staff

Creation of cadre of municipal staff for different disciplines

Creation of cadre of municipal staff for both administrative and technical functions.

B1.1 Identify skill gaps, skill areas, and number of professionals required.B1.2 Notify position vacancies, grade and scale for that position (linked to ULB size, role, etc.).B1.3 Define qualifications, experience and competencies required. Finalize pay scale, grade (equivalence) with existing cadres, etc. B1.4 Institute a standardized selection process, operated in a transparent manner. (e.g. Govt. of Karnataka’s approach for posting municipal cadre officers through counselling).B1.5 Define performance management process for the cadre.B1.6 Ensure that the cadre is able to attract young qualified professionals, with the ability and aptitude to work in public institutions.

Cadre management systems – all systems, processes, rules and norms for managing the cadre

B2.1 Define career growth path for cadre officers. Growth should offer higher responsibilities, learning opportunities, apart from higher emoluments.B2.2 Define process and norms for absorbing existing personnel with related qualifications and experience into the cadre at ap-propriate levels.B2.3 Define a process that provides balance of authority in cadre management between State level and city level leadership. For all positions, process may be adopted of providing the ULB leadership a panel of at least 3 to 5 short-listed names, and final selection should be left to the discretion of the ULB. Similar balance should be created with respect to transfers, disciplinary action, etc.B2.4 Institute processes for offering intensive training to personnel hired into the cadre, and periodic retraining and learning op-portunities.B2.5 Institutionalize processes for managing the cadre w.r.t all personnel management functions.

Source: JNNURM Primer



In today’s information era, shared ser-vices and shared information are not just possible but necessary. In keeping with the needs of the day, it is only appropriate to create platforms to strengthen each authority’s ability to serve the purposes for which it exists and ensure the continued growth of the urban centre.

In keeping with this, we recommend that each city appoint a ‘City CIO’. The CIO’s primary role should be three-fold:

To accelerate implementation of technology and develop plans for deployment of technology in all rel-evant applications;

To enable reforms that improve quality of service extended to the citizenry;

To create platforms for establishing networks and collaborations, mak-ing the business processes of authori-ties simpler and easier.

Broadening ResourcesMunicipal resources in India are seri-ously stretched, thanks to a combi-nation of high density of service pro-visioning and shortfall in execution capability. It would be of considerable value then, to minimize the strain on municipal resources by making avail-able a broader resource base for citizen service delivery.

The first priority would be to separate functions, most importantly service

provision and regulation. While the lat-ter has to remain within the exclusive purview of the government, the former is amenable to private partnerships/ contracts.

Given the limited technical and institu-tional capacity of municipalities, direct provision of services by municipalities may be avoided. Municipalities should be encouraged to evaluate the feasi-bility of outsourcing specific activities through service contracts with private players for specific activities. This can increase efficiency and consequently, standards of service. ULBs should also be encouraged to enlist support from industry associations, corporate, civil societies and NGOs for developing norms and performance benchmark-ing.

Encourage PPPsPublic Private Partnerships (PPPs) have been recognized as a viable alternative to overcome systemic problems that be-set India’s ULBs. They infuse efficiency into the operation and maintenance of infrastructure, while bringing in capital to supplement public funds.

The Government of India has taken sev-eral landmark initiatives to encourage PPPs in infrastructure. These include: (i) establishment of a PPP cell in the Depart-ment of Economic Affairs in the Ministry of Finance to administer various propos-als and coordinate activities to promote PPPs (ii) setting up the India Infrastruc-ture Finance Company Limited to pro-vide long-term finance to infrastructure

Exhibit 8.4Recommendations for Encouraging PPPs

Create ‘Enabling Environment’

at State Level

Build and enhance ULBs’

capacity to executeCreate and propagate replicable

templates and toolkits

Source: Primary interviews with government and industry stakeholders; Booz & Company

projects (iii) viability gap funding for projects which are not deemed commer-cially viable in the immediate future (iv) preparing PPP toolkits and model con-cession agreements, etc..

To encourage PPPs at the municipal level, we recommend some additional initiatives which will strengthen and accelerate the ongoing initiatives.

An ADB study in 200914 indicates a number of reasons for reluctance on the part of the private sector to assume commercial risks in majority of the ur-ban subsectors. Most of the urban sec-tor investments involve the third tier of government, which increases the perceived revenue risks for private sec-tor investors. Most municipalities, bar-ring a few, present precarious financial health indicators. Thus the urban sec-tor is seen as a high-risk sector, leading to anaemic inflows of private capital. Devolution of operational and financial power to municipalities would thus go a long way in increasing private sector confidence (see Sidebar: Ajmer).

Additionally, states need to take the lead role in creating an enabling en-vironment with an aim to educate, facilitate and guide ULBs in attract-ing private sector investments to infra-structure. For this purpose, each state should mandatorily set up a PPP Cell as a dedicated institution for urban sec-tor projects. The administrative status of the cell needs to be defined with a strong advisory role, authority for ap-proval of PPP projects and other man-dated functions.



Case Study: AJMER

City Background and Statistics

City population 4.85 lakh as per 2001 census, now estimated at approximately 5.4 lakh.

Total budget estimated at INR 2337 lakh in 2004-05, with a YoY decline of 5.7 per cent.

City Plan and Vision To promote the city as an international destination of religious and heritage tourism and a centre for learning by leveraging existing religious and educational institutions.

Making city efficient and improving the quality of life for all.

Initiatives Underway Water transmission: main pipeline from Bisalpur to Ajmer is being set-up (INR 188 cr).

Provision for Supervisory Control and Data Acquisition (SCADA) is part of the tender

Water distribution network across the city is being revamped (INR 180 cr)

Urban renewal of the Dargah (INR 38 cr) ‘Vishram’ facility for pilgrims (INR 15 cr) Basic services for urban poor

Challenges and Limitations

Governance Multiple agencies with limited co-ordination e.g. agen-

cies involved in water transmission and distribution projects e.g. Urban Improvement Trust (UIT), Public Health Engineering Department (PHED), Rajasthan Urban Infrastructure Development (RUIDP), Rajasthan Housing Board (RHB), Nagar Nigam, etc.

Water pipeline efforts (total project costs of over INR 400 crore) have stalled due to delays involved in forest department approvals.

Tight budgetary conditions resulting from a weak local economy – district unable to raise INR 60-70 cr which is 10 per cent of estimated project cost under JN-NURM.

Crumbling city infrastructure. Water shortages: water is supplied once every 4 days. Lack of skilled personnel and local oversight capabilities. Technology implementations have found limited suc-

cess due to software glitches and insufficient training.

Recommendations Single agency oversight: Potentially JNNURM Officer on Special Duty (OSD) the nodal point for coordination and inter agency implementation.

Implementation of a Sustainable Urban Development Board with the objective of pursuing sustainable, in-novative urban development.

Explore alternatives to close funding gap. PPPs in water transmission network, road projects, etc. Improve district revenue position by increasing col-

lections and improving administrative efficiency. Alternate funding (e.g. Government bonds). Technology as an enabler. Quick wins: interconnected policy network, public

services accessible via mobile / Interactive voice response (IVR) (e.g. FIR status check).

Medium term: Geospatial city planning, intelligent traf-fic management systems.

Long term: Water T&D monitoring and metering to prevent losses and theft, connected health solutions.

The states must reduce the level of am-biguity surrounding PPP project cov-enants to increase investor confidence. With this view, the states should formu-late clear and stable PPP policies, guide-lines and governance framework and clearly outline oversight requirements and dispute resolution procedures for the benefit of the municipalities. Given the complexity of unbundling urban service delivery, the state should disag-gregate the requirement of urbaniza-tion and systematically identify PPP products.

States should also be encouraged to create an Urban Infrastructure Fund, with an integrated approach to capac-ity building, project development (tech-nical studies and bid process manage-ment) and financing. Examples from Tamil Nadu and Maharashtra may serve as models for reference in the cre-ation and management of such state-level funds.



A critical issue is capacity building of ULBs and urban development agencies for PPP. Most often the absence of ca-pacity is the single largest impediment to PPP15. Capacity building at the level of ULBs needs to focus on improving the awareness of selected city officials and political executives in commercial and operational issues impacting PPP development. The intent should be to develop PPP specialists in select cities and states who will also be trained in different PPP modalities and in evalu-ating, implementing and monitoring PPP contracts. The All-India Institute of Local Self Government (AII-LSG) may be given the responsibility to de-velop and run courses in PPP for ULBs. Industry associations can also be lever-aged to provide such training in liaison with AII-LSG and private sector part-ners. They should be encouraged to or-ganize sector-specific workshops (say in sewerage and solid waste management) to showcase successful projects to rel-evant agencies in the municipalities.

At a central level, sector-specific tem-plates for PPPs in urban infrastructure should be developed for all sectors amenable for PPP. Such templates have already been developed for water sup-ply and sewerage by the MoUD. These templates can act as guidelines to the most achievable PPP modalities, in view of a host of considered criteria. MoUD should also develop a Model PPP Policy for Urban sector and Model Concession Agreement for PPP Projects in the urban sector. Studies have shown that standardization accelerates the PPP process, making processes repli-cable and streamlined.

8.3 Embedding TechnologyTechnology will act as a key enabler in ensuring sustainable living environ-ments in urban centres.

Adopting the Sustainable Urbaniza-tion Framework (SuBAH)As discussed earlier, to ensure that ur-banization is sustainable, it should be based on the principles of inclusive growth. This implies that the benefits need to be socially equitable, eco-nomically viable and environmentally sustainable. Therefore at the time of planning, each project should adopt the framework for sustainable develop-ment. At the onset every project should have clear articulation of all the con-ditions necessary for its success. There should be no ambiguity around the viability, equity, and sustainability of each project slated for execution. There should be a clearly defined action plan stating the objective and mandates. To ensure that the projects meet condi-tions necessary for sustainability there are three criteria they must include:

1. Each project should have a business model that outlines its operational viability. This should clearly state all the activities needed to be undertak-en to ensure the success and continu-ity of the project.

2. Each project should have clear pro-jections of improvements expected on implementation on a set of qual-ity-of-life indicators. Improving the quality of life is a crucial expected outcome of all projects; therefore tracking progress against some pre-defined targets is extremely perti-nent.

3. Environmental sustainability is an is-sue of critical importance and there-fore each project should provide an overview of its ‘green’ measures and demonstrate environmental sustain-ability.

The government, currently, has a host of initiatives targeted towards urban planning and development. These in-clude the National Mission on Sustain-able Habitat, National Urban Trans-port Policy, and the National Urban Sanitation Policy. To ensure that exist-ing initiatives are sustainable, the gov-ernment should evaluate the feasibility of integrating these with the SuBAH framework (Exhibit 6.1). Adoption of this framework should be made man-datory for all future projects under the different urbanization initiatives. This will help ensure that all urbanization efforts yield results that are socially eq-uitable, economically viable, and envi-ronmentally sustainable.

Broadband and ConnectivityThe value of ensuring basic broadband network, extending basic and value-added services to citizens and industry through the internet, and using technol-ogy for collaborative service provision-ing and delivery has been established.

Ministry of Information Technology (MIT) has started several initiatives to use IT to drive citizen centricity, service orientation and transparency. National e-Governance Plan (NeGP) is a land-mark initiative to establish a massive countrywide infrastructure with the ultimate objective of bringing public services closer to citizens.



Here we highlight certain specific areas into which the NeGP should expand its scope through National Mission Mode projects.

A departmental approach and the ab-sence of a national framework for common standards have resulted in the adoption of varied technical stand-ards and architectures. This has had significant implications for designing effective integrated applications as also long-term costs with sub-optimal re-sults. Thus there is a need to mandate/ generate consensus on common stand-ards nationwide.

The Common Service Centre (CSC) is a cornerstone of the NeGP mandated to offer web-enabled e-governance services in rural areas, including ap-plication forms, certificates, and utility payments such as electricity, telephone and water bills. Master Service Agree-ments (MSAs) have been signed in 25 states covering 109,348 CSCs across rural India. We recommend extension of the scope of CSC programmes to include urban service centres. CSCs in all cities should be mandated through the PPP mode in line with initiatives in Maharashtra and Karnataka. To ac-celerate adoption, the MIT should al-locate INR 1600 crore under NeGP for this scheme.

MIT should also initiate schemes for use of IT applications at all levels of government interaction—central, state and local body.

Basic urban services (utilities, trans-port etc.) need to leverage technol-ogy to ensure social, economic and environmental benefits. Thus there

is a need to ensure connectivity of all services via seamless network as a basic infrastructure. The scope of the SWAN (state-wide area network under NeGP) should be expanded or a city-wide con-verged backbone network in all urban centres separately established to make delivery of all urban services intelligent in municipalities.

Data sharing and data management will be critical to managing urban areas efficiently. All municipal departments should be mandated to participate in the central data repository created un-der NeGP (via State Data Centres), and provide citizens access to data.

In addition, there is an ongoing initia-tive to roll out a fibre optic infrastruc-ture across the nation. We recommend that an evaluation be done to extend this to urban areas, say, through FTTK equivalent architecture.

Information technology must be lever-aged to capture data on urbanization; for instance, integrated GIS linked data to census to records for dynamic city planning. Geo-spatial planning should be a mandatory part of CDP— all lo-cal building and refurbishment approv-als should come via geo-spatial mode. Preliminary steps in this direction have been taken by Government of Karna-taka for its ULBs. Standard templates for data management should be en-couraged.

Mandating SLAsThere is an urgent need to increase government accountability and trans-parency when providing services to citizens. This can be achieved by imple-

menting the concept of government–citizen service level agreements (SLAs). This will involve the conversion of ex-isting citizen charters, which are largely statements of intent, into SLAs that make it binding on the authorities to help provide services in a certain time bound manner. Prime Minister Man-mohan Singh intends to implement these SLAs starting with Delhi in April 2010, followed by the Union Territo-ries. In order to give SLAs teeth, it has been suggested that the failure to meet deadline’s would result in a penalty / fine that would be deducted from the official’s salary.

Technology solutions, such as e-govern-ance or web-based platforms, should be used in monitoring and implementing SLAs. Online databases and real time records could be used to monitor time to service applications and ensure dead-lines are met. These platforms would also increase accountability by enabling prompt identification of the officials in charge. Automation of the processes would enable coordination across dif-ferent departments and creation of a central database to help improve effi-ciency. The quality of service provided can be measured through technology as also enhanced transparency for equita-ble access. Adoption of government–citizen SLAs by itself is not sufficient to ensure improved services. This should be accompanied by performance score cards. Standard service levels should be defined and existing levels should be evaluated against these benchmarks. These performance score cards would help monitor progress and also high-light shortfalls, thus enhancing trans-parency and service quality.



Endnotes1. UN Habitat, Global Report on Human

Settlements 2009, http://www.unhabi-tat.org/downloads/docs/GRHS2009/GRHS.2009.pdf

2. Richard Florida (2005), The Flight of the Creative Class, Harper Business, New York.

3. Census Bureau; Goldman Sachs Research

4. Urbanisation & Sustainability In India: An Interdependent Agenda, The Al-ternative Urban Futures Report, WWF and Mirabilis Advisory; http://www.mirabilisadvisory.com/wwfreport/pdfs/Sec1.pdf

5. National Institute of Disaster Manage-ment, Ministry of Home Affairs, Govt. of India

6. Nandan Nilekani (2008), Imagining India: Ideas for the New Century, Penguin, India.

7. JNNURM website www/jnnurm.nic.in; IL&FS

8. JNNURM website www/jnnurm.nic.in

9. ‘India’s Urbanization: Emerging Opportunities’: Goldman Sachs, July 2007

10. ‘Bangalore Master Plan 2005 – Beyond Planning: The Governance Process’, Janaagraha

11. World Health Organisation12. WHO Global Status Report on Road

Safety, 200013. Ravikant Joshi (2005), Decentralisa-

tion and Local Finance Issues – The Workings of State Finance Commis-sions in India, Prepared under ADB’s Technical Assistance Project, Policy Research Networking to Strengthen Policy Reforms, Thematic Cluster: State Government Budget Constraints and Delivery of Social Services, April.

14. ‘Review Meeting of ADB TA on Main-streaming PPPs’, Ministry of Urban Development, 2009

15. ‘Review Meeting of ADB TA on Main-streaming PPPs’, Ministry of Urban Development, 2009




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