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

SynopsisA grant by the 15th Finance Commission to incubate eight new cities is aimed atboosting planned urbanisation in India. The big question, though, is whether to buildnew green�eld cities or plan satellites of existing urban centres. A Rs 8,000 crore grantfrom 15th Finance Commission to incubate eight new cities, offers a glimmer of hope forsome planned urbanisation in the near future.

One hundred years ago, Mahatma

Gandhi wrote that “India lives in her

villages”. Since then, while the

country’s population has started to

move on (the urban population has

doubled from 17% in 1951 to 35% now),

the number of cities has not. Barring a

few notable exceptions such as

Chandigarh, Bhubaneswar,

Gandhinagar, Gurgaon and Naya

Raipur, India’s rapid urban growth

post-Independence has turned out to

be unplanned and somewhat chaotic.

Given that the 35% is projected to increase, one of the most pertinent

questions in the nation’s political discourse should be: why are we not

building dozens of new cities?

The failure to develop new urban centres has led to the mushrooming of

“census towns” — agglomerations that have urban characteristics, population

above 5,000, but which are not noti�ed as towns and don’t have an urban local

body to administer them.

The number of such towns, the ones that are primarily scripting India’s urban

tragedy, rose from 1,362 in 2001 to 3,894 in 2011 and is believed to be far higher

now. The total number of statutory towns in India (as per the 2011 Census) is

only marginally higher at 4,041.

Against this backdrop, a Rs 8,000 crore grant from 15th Finance Commission

to incubate eight new cities, a proposal which the GoI has accepted in toto,

o�ers a glimmer of hope for some planned urbanisation in the near future. The

award proposal has a condition that a state can only apply for one city, so the

aim is to spread these eight new cities across the country. But the question

that has not been answered is whether these — and other new cities —

should be satellites of e�isting urban centres or green�eld projects, perhaps

sited in barren areas of India’s countryside.

“We have kept both the options open for states while applying for the fund,”

The failure to develop new urban centres has ledto the mushrooming of “census towns” —agglomerations that have urban characteristics,population above 5,000, but which are notnoti�ed as towns and don’t have an urban localbody to administer them.

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Industry | 21 September, 2021, 03:18 PM IST | E-PaperEnglish Edition

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says NK Singh, chairman of the 15th Finance Commission in an interview

with ET. Rs 8,000 crore fund is like a seed capital for building new cities. That

means, one city will receive Rs 1,000 crore each. It is not that small. The fund

can be the basis for raising much greater market resources,” he says.

Every �ve years, the Finance Commission evaluates the �scal condition of the

Union and the states before laying down the principles of distributing taxes

among them. The 15th commission has recommended that formula for 2021-

26.

While doing so, it added a �rst-of-its-kind proposal, earmarking “Rs 8,000

crore as a performancebased grant for incubation of new cities.

According to the proposed timeline, the Ministry of Housing and Urban

A�airs (MoHUA) will �rst set up an expert committee. By January 31, 2022, it

has to specify the minimum eligibility conditions for competing for the award.

The names of eight states are likely to be announced by the end of 2022. And

the fund is scheduled to be allocated between 2023 and 2026 in four separate

tranches. Details of the judging panel composition have not been made public

but the “brown�eld versus green�eld” debate has already kicked o� among

experts and policymakers. The report of the commission has listed a number

of daunting challenges such as laying of roads, water and sewer lines and

selecting sites for schools and colleges in existing cities. It warns that the

building of green�eld cities often runs into problems when it comes to land

acquisition and rehabilitation. Without taking sides, the report comes to a

conclusion: “The country needs both rejuvenation of old cities as well as the

setting up of new cities.”

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Lack of funds is not the sole reason why India has not embarked on building

new cities in mission mode. The focus so far — be it the big-ticket Jawaharlal

Nehru National Urban Renewal Mission during the UPA rule or the Smart

City project in the Modi regime — has been on pumping resources to

rejuvenate existing urban centres.

Former Union urban development secretary, M Ramachandran, says the basic

idea of creating a new city should be such that it addresses the problems

arising out of the periphery of an existing city. “If haphazard growth is allowed

to crop up in the outskirts, a healthy city will ultimately inherit those

problems,” he says.

As far as building of ongoing industrial townships is concerned, India has

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preferred green�eld projects mostly located in the neighbourhood of

established cities. For the National Industrial Corridor Development

Programme, a joint venture between the Centre and states, the Centre has

provided up to Rs 3,000 crore for developing one node each. Four such mini

towns, which are nearing completion, fall in Gujarat’s Dholera (22.5 sq km),

Maharashtra’s Shendra-Bidkin (18.5 sq km), Uttar Pradesh’s Greater Noida (748

acres) and Madhya Pradesh’s Ujjain (1,100 acres). As the small size of each

project indicates, none of these townships is developed on a standalone basis.

They are industrial townships located either in a city or in close proximity to

an urban conglomeration.

The �nancing model adopted in creating such townships is that the

government will spend the initial resources to develop the area before private

industries, including multinationals, buy plots on lease and set up factories

and o�ices. The arrangement between the Centre and the states is such that

the state concerned will provide the requisite land whereas the Centre will

spend money to develop its basic infrastructure.

Company secretary of National Industrial Corridor Development Corporation

(NICDC), Abhishek Chaudhary, says the construction of two more industrial

townships — in Krishnapatnam (Andhra Pradesh) and Tumakuru (Karnataka)

— will start soon. He adds that Visakhapatnam, Chittoor and Kadappa nodes

have been prioritised by the Andhra Pradesh government.

Amaravati, a green�eld city being built by the river Krishna, was originally

identi�ed as the new capital of Andhra Pradesh, but a change of leadership

after the 2019 assembly elections has stalled the progress of the dream city of

former CM N Chandrababu Naidu. His successor YS Jagan Mohan Reddy

evolved a three-capital formula under which he retained Amaravati as the

state’s legislative capital while naming the coastal city of Visakhapatnam as

the executive capital and Kurnool — the gateway to Rayalaseema region — as

the judicial capital.

No doubt, if India decides to build more cities, the �rst question that will arise

is where they should be located. OP Agarwal, CEO of WRI India and former

transport adviser to the World Bank, says: “Satellite cities o�er a unique

advantage of enabling better manageability and help leverage the high cost

infrastructure of the parent city.” He lists the examples of Gurgaon, Faridabad,

Ghaziabad, Noida, Rohtak and other cities around Delhi which bene�t from

the airport, the railway stations, good universities and medical facilities of

Delhi.

Another urban expert and MD of Hyderabad Metro Rail, NVS Reddy, says

green�eld cities are the better bet, though the land should be acquired via a

“pooling method” so that landowners are made stakeholders. In that case

villagers give up land with an agreement with a local authority that it will

return a part of the land to the owner once the city is developed. So the

landowner bene�ts as realty prices rise.

Reddy says that any attempt to purchase land to build a new city is not

desirable. “After all, any allocation — be it Rs 10,000 crore or Rs 50,000 crore

— won’t be su�icient for building a new city. So, a new city must adopt a self-

9/21/21, 3:19 PM urbanisation plan: A tale of new cities: The main challenge before govt's aim to develop eight new cities - The Economic Times

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NK Singh, chairman of 15th Finance Commission

�nancing method,” he says, adding that green�eld cities should be built along

existing national highways, railway lines or in the neighbourhood of a port to

derive economic bene�ts in future.

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

Commission

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

Commission:

�hat is the rationale behind the decision to earmark Rs 8,000 crore to

incubate eight new cities?

I wanted to actively promote new urban conglomerations. If you look at the

2011 census data, it says 31% of India’s population live in urban areas. Today it

is much more. So we decided to somewhat tilt the balance in favour of the

urban sector when we divided resources for urban and rural sectors. Also,

urbanisation is an important driver of growth. We have noticed that states

with larger urban populations have moved faster.

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

(It) is like seed capital for building new cities. It is not that small. The fund can

be the basis for raising much greater market resources. It will also put some

pressure on improving the urban local bodies’ �nances by taking measures

such as better collection of property taxes etc. It is more like a viability gap

funding for which states will compete and try to be winners.

�hat’s the ne�t step? How will the government e�ecute the plan?

The government has accepted our recommendations in toto. The Ministry of

Housing and Urban A�airs will set up an expert committee comprising,

among others, some independent domain experts to �gure out minimum

eligibility criteria for selecting proposals from states. The �rst tranche of

grants should be released by March 31, 2023, and the award will continue till

Agencies

9/21/21, 3:19 PM urbanisation plan: A tale of new cities: The main challenge before govt's aim to develop eight new cities - The Economic Times

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2026.

Should new cities be green�elds or satellites of e�isting cities?

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

( Originally published on Sep 18, 2021 )

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