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That city state of mind PDF Print E-mail
Saturday, 09 October 2010 00:00
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To be growth engines our cities need mayor-CEOs

When was the last time you heart of a city in India monetizing its land value? When was the last time you heard of a city in India charging land taxes based on realistic valuations of the land? The reason is simple, the real value of the land is never monetized by the state

 

An urban Indian in even the smallest town, on average, earns 50 per cent more than her rural counterpart due to, among other things, a lot more job opportunities. Logically, when the proportion of Indians living in cities rises, so will India’s average income — NCAER-CMCR estimates that if this rises from the current 30 per cent to 40 per cent, this alone will make average household incomes across the country rise seven per cent. The 40 per cent figure is what the McKinsey Global Institute projects India’s urbanisation levels to be by 2030, by which time they will account for 70 per cent of India’s GDP.

The question then is where these people will stay if urban India isn’t to become one vast slum. Increased floor space index, or the proportion of construction that can be done per square yard of land, is an obvious solution especially given that urban Indian FSIs are around a fifth or less of those in other parts of the world, but given that it requires a completely different kind of sewerage/ water/ electricity/ transport paradigm, this may not be that easy to implement across huge swathes of land. But whether it is or not, it is clear India needs a lot more cities, and that’s just not happening. How many brand new cities have you heard of coming up in the recent past, of the type Ajit Gulabchand is developing at Lavasa, near Pune? Sure, Gurgaon, near Delhi, has really grown over the last few years, and there are other such examples (Gulab-chand has got some inquiries from a few other state governments), but I’m talking of really new cities and on a scale that makes you really sit up.

It is this that makes the DMICDC’s (Delhi Mumbai Industrial Corridor Development Corporation) industrial city project interesting. For one, the sheer size. Twenty-four cities with 5,000 sq km of land (Delhi is 700 sq km, Navi Mumbai is 163 sq km and Mukesh Ambani’s Navi Mumbai SEZ is 140 sq km) over the next 30 years; seven of these, with 2,000 sq km and likely to cost around Rs 325,000 crore, are to come up in the next eight years. Not all the 2,000 sq km will get developed by then, since cities take 20-30 years to really develop, but a reasonable start will have been made.

The DMICDC has some innovative plans, like building the trunk infrastructure of sewerage lines, power plants and a central Bus Rapid Transport line going through the city before the city is given out to private developers/ builders. Essentially the idea is to go the Gurgaon-Noida way with bulk of the work being done by private firms, but without the urban chaos you associate with a Gurgaon. The idea being that if homes are close to the workplace, if people can walk/ cycle to work, electricity consumption can fall by as much as 40 per cent — all your Leeds standards for energy efficient buildings, DMICDC CEO & MD Amitabh Kant says, are missing the woods for the trees. The cities are to have vibrant industrial areas, which is the way it should be since you can’t have industry far away from cities and yet expect it to thrive, so there will be a lot more work that will need to be done on tackling the environmental hazards associated with large industrial areas — it should be educational since so much of urban work in India is about shifting industrial areas out of cities instead of embracing them.

DMICDC is planning some experiments on greening existing cities, involving top Japanese firms, and we have to see whether we have the capability of turning around our cities into modern Asian cities — four Japanese consortia are working on feasibility reports and detailed plans for Manesar, Dahej, Sanand (of Tata Nano fame) and Shendra. This is not just critical for the DMICDC’s new cities, it is something we need in all cities, like Delhi for instance, if they are to survive — more important, if India is to urbanise without the carbon footprint becoming a killer. For all its grand plans, DMICDC is more about industrialisation than anything else — the plan is to increase industrial output in the region by around 1.6 times by 2040 — and will probably be home to 10-15 million people, a far cry from the need to accommodate 260-280 million in the next 20 years alone.

What is critical to whether DMICDC will work or not is the way it is to be financed. Under the current plan, each city will be developed by an SPV, equally owned by the state government and the Centre — the DMICDC will really function like a project consultant. While the Centre is being petitioned to give out around Rs 3,000 crore to each city’s SPV to start off work, the real money will come in as the SPV starts selling the land under its control. So, the SPV builds part of a road network and power plants and, when land values around it start rising, it sells off some land to make a killing. This is the financing model, the ability to fully monetise the value of land.

When was the last time you heard of a city in India monetising its land value? When was the last time you heard of a city in India charging land taxes based on realistic valuations of the land? The reason is simple, thanks to the politician-builder mafia, the real value of the land is never monetised by the state. The land is acquired at dirt cheap rates, the builder makes a killing once this is developed and sold and a part of this goes to the reigning politician. How, if ever, the DMICDC cracks this will be interesting, and critical, and will be a model for the rest of the country.

What’s also not clear is how cities are to develop if they are to be run at the whims and fancies of politicians like ours. Mumbai needs resources to survive, but the votes are in Maharashtra. Hyderabad needs resources, but the votes are in Telangana. CEOs, like for SEZ- or DMICDC-type cities, are one solution but you wonder what it does for democracy if a company is to run the way you live. Elected mayors with more powers are a good start. Whether it will resolve the politician-builder mafia is not certain. But what is, is that this is at the heart of making urbanisation happen, whether it is the McKinsey report or the Isher Ahluwalia one, expected in the next month or two.

 

 

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