Sunday, September 15, 2013

Blueprint to build 24 cities: Will India's biggest infra project, DMICDC, worth $100 bn deliver?

Blueprint to build 24 cities: Will India's biggest infra project, DMICDC, worth $100 bn deliver?

Seated in his Delhi office Amitabh Kant says with a tinge of sarcasm: "I am not here to build a mall." The chief executive of the $100-billion Delhi-Mumbai Industrial Corridor Development Corporation (DMICDC), India's biggest-ever infrastructure project, is piqued about "some people" saying that the project is "not on the fast track".


Several government officials ET Magazinespoke to say DMICDC — which in its first phase will set up six cities each of 40-50 sq km and one of 153 sq km — has to be "expedited" so that it spurs manufacturing growth in the country and helps the country ride out the bad times. Once completed, the mega project is expected to generate 2.15 lakh direct jobs and 6.18 lakh indirect jobs in the country.
The first phase of a $100-bn blueprint to build 24 cities by 2040 entails erecting seven of them by 2019.The first phase of a $100-bn blueprint to build 24 cities by 2040 entails erecting seven of them by 2019.
The deadline for the first phase is 2019. While Kant finds such statements laughable empty talk, Vinayak Chatterjee, founder and chairman of Feedback Infra, which advises infrastructure companies, makes a point: "Well, it [DMICDC] can't go as fast as his political bosses expect it to because it is a complex project and it is a conceptually sound one. It has to proceed at an appropriate pace."

In its first phase, DMICDC, which falls under the industry ministry and envisages creating 24 new cities in the country by 2040, will build cities around the high-speed 1,483-km-long dedicated freight corridor (DFC), a fast-progressing railway network funded by the Japanese government. DFC doesn't face issues with buying land because it will mostly use the land owned by Indian Railways.

Blueprint to build 24 cities: Will India's biggest infra project, DMICDC, worth $100 bn deliver?

The genesis of the idea called DMICDC lies in the need to develop industries around DFC and that makes a lot of sense, points out Chatterjee. On Tuesday, nine projects of the first phase were approved by the DMIC Trust, a body that gives the go-ahead for individual DMICDC projects once it secures all other regulatory nods. It is headed by the Department of Economic Affairs secretary Arvind Mayaram.

"People who criticise the so-called slowness of the work in progress don't understand how intricate and highly complex this is. In fact, I don't want to do what Kalmadi did," thunders Kant, referring to the sloppy construction work undertaken for the 2010 Commonwealth Games. Suresh Kalmadi, a former Congress leader and Union minister, was later arrested for causing major losses during the event.
Challenges too Many

Of course, Kant, unlike tainted Kalmadi, is an accomplished IAS officer and wouldn't want to put his reputation as a doer on the line (see Man of Action). "My team and I have to go into the details of each project and make sure that we meet all international standards in setting up new cities. I will say that, in scale, this is the biggest city-building exercise ever in the world," he argues. And yes, there are problem areas, he concedes.

Clearly, the biggest problem for DMICDC — like any major infrastructure project in India — is acquisition of land which, in this case, has to be done by the states that are covered in the programme: Haryana, Gujarat, Madhya Pradesh, Rajasthan, Maharashtra and Uttar Pradesh.

"Many states didn't have the relevant laws to meet the demands of a project as intricate and complex as this one," maintains Kant, emphasising that "though it is generally seen as a project, in reality it is a vast programme, driven by individual special purpose vehicles [SPVs]". SPVs have been created to ward off legal hurdles that may arise at a later stage due to political expediencies in a region. SPVs will have the power to charge a user fee on the infrastructure built in a new city (see Seven Integrated Cities).


Blueprint to build 24 cities: Will India's biggest infra project, DMICDC, worth $100 bn deliver?

To tide over difficulties in acquiring land, Madhya Pradesh came out with a legislation that allows for making land buys less cumbersome, says PK Dash, principal secretary at the state's commerce and industry department.

"We have found difficulties in procuring land in the Indore region because it is already industrialised and land is very scarce. Which is why we had to find state land for DMICDC. In other places though we have found success. Overall, the scenario in the state is positive [for the project]," he adds.

Gujarat has been extremely prompt with acquiring land, says Kant. The Narendra Modi government, which also brought in a new law to facilitate land buys for the purpose, has allocated a huge chunk of land for the new city in Dholera, a port town in the Gulf of Khambhat. The final phase will see Dholera becoming a new 550-sq-km city.

According to a DMICDC official, land acquisition efforts were toughest in Uttar Pradesh. Madhya Pradesh, Maharashtra and Rajasthan were much more proactive in procuring land, he said requesting anonymity. ET Magazine couldn't independently verify this statement.

Gujarat Always First?

Jagdish Salgaonkar, programme director and regional managing director of Aecom Technology Corp, a Los Angeles-based technical and management services provider, has previously been closely associated with the London Olympics and the Thames Tunnel project. He says he is excited to work in the first city that DMICDC is expected to complete — Dholera in Gujarat. "Projects like these are unique," says Salgaonkar, explaining why he chose to return to India after working on global projects for nearly 30 years.

He also dwells at length on why slowness isn't actually slowness at all. "People think programme management is just another layer of costs. It's not," he declares. A finance ministry official who asked not to be named contends that cities can no longer be built in a hurry. "One needs to build the baseinfrastructure before you invite private participation," she says.

That's clearly what DMICDC has done. Once states acquire the land for a city project, DMICDC creates an SPV to set up base infrastructure or trunk infrastructure — such as water, power connections, drainage system, broadband network, roads and so on. Only then will industry be invited to invest in projects, says Kant.

Well, there is more to it than meets the eye. Explains Salgaonkar: "In Dholera we also focus on interface management." He adds that this is not a waste of time, but about cutting costs. In Dholera, there was a plan to build two water treatment plans — one for industrial water and another for domestic water. By way of innovation, Salgaonkar and team eliminated the need for one of them which, according to him, saved hundreds of crores of rupees.

How Planning Helps

"Had it not been for programme management, you would have never known you had overspent. What we do is to maximise the link between one discipline and another," Salgaonkar says referring to how, typically, companies that secure individual bids for a project end up spending more for want of an interface between them.


Blueprint to build 24 cities: Will India's biggest infra project, DMICDC, worth $100 bn deliver?


"All this is time consuming. We try to make sure that white spaces don't occur between various projects," he notes. He goes on to compare the first phase of Dholera with existing Indian cities. "Mumbai is just a 26-sq km city and Greater Mumbai a 150-sq km. Which means in Dholera we are adding one big Mumbai. This is no mean feat," he says.

Once the trunk infrastructure — which is an eight-layered one — is built, the new cities will invite industry to invest for building vertical infrastructure. In fact, building trunk infrastructure is not a commercially viable option for any industry which is why builders first go for vertical expansion and do shoddy work at base infrastructure — roads, water treatment, power supply, etc, says the finance ministry official.

"In the cities that we build, no one will have to dig up to place optical fibre. All such infrastructure will already be in place," says Kant. "These new cities won't just be new, they will also be smart."

Birth of Smart Cities

Edward Glaesar, author of Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier, and Happier, who is also working on a paper comparing urban patterns in the US and India, says that the future of India depends on its cities. Our cities have to be smart, and that is what we are planning in Dholera, says Salgaonkar.

The city becomes smart when its roads, sewers, power supply, water, ICT, flood control systems and so on are constantly monitored from a command and control centre. In these cities, sensors will alert the control room if there is anything amiss about each system, he adds. Sensors will also send messages when a car parks on the highway for a longer time, as part of efforts to make cities safe.

In Dholera, for phase I, DMICDC will have to build 550 km of roads, 1,500 km of sewers, and flood control pipes, amongst other infrastructure. "We will start doing it soon and in a very methodical manner," says Kant adding that the plan includes housing for workers so as to eliminate growth of slums and global standard roads — S2H — that ensure that dust doesn't end up accumulating on roads, resulting in major pollution. He hopes to start buildinginfrastructure in Dholera by mid-2014.

For his part, Aamer Azeemi, managing director at Cisco Consulting Services (Asia-Pacific region), which has won the global bid to create the digital master plan of four cities in the first phase of the DMICDC programme, says they have to closely study services that people require in new cities. He and his team have categorised services required across segments: industries, residents and people who maintain the city. Their plan also includes an estimate of the skills people will require in these cities. Besides Cisco, IBM is another company doing the digital master plan for DMICDC's new cities.


Blueprint to build 24 cities: Will India's biggest infra project, DMICDC, worth $100 bn deliver?Man of Action

Amitabh Kant, the Uttar Pradesh-born, 1980 batch Kerala cadre IAS officer with a taste for art and culture, is highly rated among his peers. This St Stephen's alumnus is the chief architect of the successful "Incredible India" advertising campaign meant to attract high-end tourists to India. But he knows that DMICDC, a different ball game, is his toughest assignment yet. 

In militant trade union-infested Kerala of the 1990s Kant structured the first Indian airport on private-public partnership — in Kozhikode — where he had been a district collector. In that northern Kerala city-district where Portuguese explorer Vasco da Gama first landed in India, he also embarked on a drive to clean up and get rid of illegal encroachments. "They used to say if Gama were to return to Kozhikode in the early 1990s, some 500 years after his original visit, the city would have looked the same to him. It was a feat considered impossible and Kant proved that impossible was possible," says noted filmmaker PT Kunhimohammed. Later, as managing director of the Kerala State Development Corporation, he was instrumental in building a second bridge connecting the Cochin mainland and the Willingdon Island, the first build-operate-transfer bridge in the state. The feather in his cap, of course, was giving Kerala — as well as India — a makeover from a beach-and-Taj Mahal-focused, budget-tourist destination to the high-end traveller's dream, showcasing the country's culture, heritage and specific attractions. Says V Sunil, global partner of advertising hot shop Wieden+Kennedy, who has done several Incredible India ad campaigns for the government: "Kant has got the taste, cosmopolitanism and speed. There are very few people like him and E Sreedharan [who headed the Delhi Metro] who can make such miracles happen in India. I am glad that the government picked him up for the post. He has tremendous energy. He is a great leader and he is also ambitious. He works like a top-notch private-sector executive."
"Planning is crucial in these projects. What you see as waste of time isn't really waste," the finance ministry official agrees. Kant says he doesn't want to set the DMICDC project to the lower standards of typical Indian projects — most of which are done by the central and state public works department which have often come under attack for not ensuring longevity of projects.

L1 & Old Mindset

For building cities such as the one conceived by DMICDC, a great amount of detailed engineering is needed, which in turn entails working with the best engineering companies, insists Kant. That clearly means one can't often settle for the lowest bidder.

"In India everyone wants to get work done at the lowest cost. Nobody wants to look at the lifecycle cost of a project. You pay peanuts you will get monkeys. To bring in quality players is a big challenge," says he, adding that it is very important that we "ring-fence the city SPV through very strong shareholder agreements and state support agreements".

"The shareholder agreement", according to him, "must envisage that the planning, development and the power to levy user fees are vested with that SPV". It should also offer legal protections against tampering of plans. "What is created [trunk infrastructure] must generate revenues for the city."

Officers at DMICDC contend that even drafting of the request for proposal (initial bidding) so as to get the best agencies from across the world has been a Herculean task. "All those who are working for us have been selected through a global bidding exercise," observes Kant.

Hurdles Remain; Hopes, too

Kant, 56, sees the new land acquisition law creating a lot of problems for the states. This, he fears, may raise the cost of projects, too. "Land is a complex issue. It is very difficult to get land of this size and scale. States are finding it hard to get land and the financial resources to buy land," he says. He recommends a central funding to help states get the finances to buy land for such infrastructure projects.

He says it is extremely tough to get DMICDC's plans notified in every state. "This is because state urban planners have all become regulators and they are used to merely sanctioning plans; the concept of compact, dense vertical cities based on transit oriented development is alien to the Indian urban planner. And for the urban and the town planners in states we need to carry out a big education campaign and expose them to best practices around the world," declares the DMICDC chief executive.

A Gujarat government official agrees. "DMICDC, according to our government, is all set to be a game changer for our state and the rest of the country. We need to adapt fast and learn international urban planning standards to speed up its execution," he says asking not to be named because he is not authorised to speak to the media.

Ireena Vittal can't agree more. She, as a partner with McKinsey, had co-authored a seminal report called "India's Urban Awakening: Building Inclusive Cities, Sustaining Economic Growth". She calls DMICDC a "critical catalyst project".

According to her, the project symbolises the reinvention of an investment method practiced by Englishmen around railway networks. "This is an amazing opportunity to revive industrial activities, especially manufacturing," she says adding that unlike India's horizontal cities, these new ones are meant to make smart use of resources such as water, land and energy. Besides, we need cities that are home to multiple industrial sectors, unlike Detroit, which depended merely on one industry, points out Vittal. "DMICDC, as far as I know, has taken into account all this," she adds. And we don't need urban sprawls like Chandigarh, but new, vertical cities, she elaborates.

Meanwhile, there have also been calls to tweak environmental clearance guidelines. According to Kant and the Gujarat government official, environmental clearances have to take into cognizance the industrial needs of the country.

Says Kant: "The process of environment clearance requirements for new industrial townships needs to be clearly spelt out in the Indian context. These committees lack a multi-diciplinary perspective; after all we are not just in the business of creation of infrastructure, but also in the operation, maintenance and running of new cities."

The odds are immense and Kant knows that DMICDC is his biggest challenge yet. "But this can result in a paradigm shift in the quality of infrastructure that is created. So it is very important that we do this to perfection."

Then he beams and counsels: "After all we don't make cities every day. Have patience. 2019 is still a few years away."

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