How Corporations Are Taking Control Of Governance Through Smart City Project

Water and sanitation are among the key areas that are being commoditised under India’s much-celebrated Smart City Mission
Many private companies, foreign and domestic, are seeing India’s smart cities as gateways to take control of key governance areas (Credit: Pixabay)

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March 7, 2023: India’s so-called Smart City project has become a channel for weakening the role of elected civic bodies and increasing corporatisation of the cities with rising dependence on foreign investment, say experts and ground-level activists.

According to British financial and legal services firm Deloitte, India’s ‘Smart Cities Mission’ or SCM, encompassing 100 cities across the country, would require $150 billion in investments over the years, of which $120 billion – which is 80% of the total capital outlay – would have to come from the private sector.

Launched on June 25, 2015, the SCM is nearing completion. According to an Indian government official, while in 22 of the 100 cities the entire work would be completed by this month, the remaining smart cities would be ready in May-June. Incidentally, New Delhi will host prominent world leaders and foreign delegates at the G20 Summit later this year, and India’s Smart City project is likely to feature in sundry discussions.


In the official booklet “Smart City Mission (SCM) Statement and Guidelines”, the Indian government had proposed financial support to the extent of ₹48,000 crore (23.4% of the Smart City Proposal value) over five years, that is, an average of ₹500 crore per city. An equal amount, on a matching basis, is provided by the state or urban local body.

This apart, there were ambitious expectations of roping in around ₹42,028 crore (21%) from convergence with other projects, ₹41,022 crore (20%) from public-private partnerships (PPP), ₹9,843 crore (4.8%) from loans, ₹2,644 crore (1.3%) from own resources, including user charges, and the rest (6.1%) from other sources.

Thus, in the capital outlay itself, the private sector’s involvement, including the backing of foreign governments, bilateral and multilateral institutions, as well as domestic organisations, was needed for the funding of over ₹60,000 crore through PPP models, loans, and other sources.

With the projects requiring heavy doses of revenues through the years for being properly functional and sustainable, there is the scope of a much greater role to be played by the non-government and private sectors.

“The selected cities are, thus, raising funds through a variety of PPP models with large companies, including several big multinational players, likely to be the greatest beneficiaries. Since dependence on the private sector for the success of the mission is high, it is apparent that the private sector is also likely to be the greatest beneficiary of the SCM,” the NGO and monitor Housing and Land Rights Network (HLRN) said in its study report on the SCM.


Sitaram Shelar, one of the founders of Pani Haq Samiti and founder-director of  Centre for Promoting Democracy, Mumbai, complained of the commoditisation of water and sanitation in the Smart City projects.

“Smart cities are pushing the privatisation of water and sanitation,” he said, pointing out that many of them can’t afford the long-term hefty cost of projects such as sewage and water treatment plants.

At a time when two of India’s neighbours, Sri Lanka and Pakistan, have experienced economic meltdown due to rising debt and depletion in foreign reserves, the SCM’s high dependence on foreign investment further raises critical questions.

In fact, the SCM guidelines themselves openly call on the earmarked cities to seek foreign funding. Under the subsection ‘Handholding Agencies’, the SCM claimed that a number of foreign governments have offered to provide technical assistance (TA) support.

“Additionally, other external organisations, including bilateral and multilateral institutions, as well as domestic organisations, have suggested to the ministry of urban development that they can give technical assistance support. These include World Bank, ADB (Asian Development Bank), JICA (Japan International Cooperation Agency), USTDA (United States Trade and Development Agency), AFD (Agence Française de Développement), KfW Bank (Germany), DFID (Department for International Development, UK), UN Habitat, UNIDO (United Nations Industrial Development Organisation), etc… The ministry will assist in tying up the arrangements,” the SCM spelt out.

The SCM also urged the cities to “leverage borrowings from financial institutions, including bilateral and multilateral institutions, both domestic and external sources”.


Decrying the projection of the smart city mission as a strong investment opportunity for foreign governments, MNCs, and the Indian corporate sector, the HLRN report said, the “slow rate of investment and inability of cities to mobilise the required funds reveal the limits of overly relying on the private sector”.

Moreover, with the SCM assigning the urban local bodies – many of them financially distressed – to provide a large share of the project funds, private investors may eventually have a field day.

“This might create pressure on the government to create avenues for private companies to earn assured return on investments…. There is a high risk that these schemes will be influenced by corporate giants, who will make their own strategic selections, undermining the real needs of the millions who build and inhabit these cities,” warned Shaguna Kanwar, project coordinator for national programmes at YUVA (Youth for Unity and Voluntary Action).


The SCM’s statement and guidelines say each smart city would be required to form an SPV (special purpose vehicle) – a limited company incorporated under the Companies Act 2013 – in which the state government and the urban local body have 50:50 equity shareholding. The SPV will plan, appraise, approve, release funds, implement, manage, operate, monitor, and evaluate the smart city development projects.

The sweeping powers given to the SPVs have been criticised as a violation of the Constitution (Seventy-fourth Amendment) Act 1992, which divests power in local governments and urban local bodies, the Delhi-based HLRN pointed out.

“The competing governance mechanism created by the SPV, while resulting in overlapping powers, could substantively dilute local democracy… Moreover, the undemocratic powers conferred on SPVs and the predominant role of the corporate sector bring to light dangerous trends of privatisation of governance and corporatisation of Indian cities,” stated the report.

Going against the spirit of its publicly proclaimed goals of ushering in inclusive development and ensuring better governance, the much-hyped SCM is welcoming dangerous trends of privatisation of governance and corporatisation of Indian cities.

Though the extent of overall foreign funding that the mission has received so far is not clear, the shameless way in which the project authorities have tried to nudge the cities to borrow from external sources, despite the tragic consequences in the country’s neighbourhood, raises questions about the real intentions of the powers-that-be.

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