New Delhi: Pigs, push-cart vendors and BMWs converge at an intersection in Kanpur, ignoring a stoplight that routinely malfunctions.

Mayor Jagat Vir Singh Drona wants to fix the light and hire more police to contain the traffic chaos. He also wants to clean up piles of roadside garbage, avoid daily power outages, build a modern sewage system and end illegal construction. Trouble is, he runs the biggest city in India’s most-populous state on a budget that wouldn’t last a day in Chicago.

“I can do nothing except maybe go out and direct traffic myself," Drona said at the guest house adjacent to city hall. “I am powerless—all I can do is write letters."

Those letters are addressed to the Uttar Pradesh state and municipal bureaucrats who control funds under a colonial-era system that restricts cities from raising and spending their own revenue. The corruption and inefficiency that leak money away before it gets to the streets are major roadblocks to Prime Minister Narendra Modi’s promise to develop 100 “smart cities" modelled after Singapore and Seoul.

The election pledge raised the prospect of investment in the strained urban infrastructure as Modi tries to turn India into a global economic power. An effective development policy for cities could lure $1 trillion in infrastructure spending, mostly in the corridor planned with the Japan External Trade Organization between Delhi and Mumbai, according to a report last month by Englewood, Colorado-based researcher IHS Inc.

‘Important step’

“If the Modi government can show investors something of substance out of the smart-cites programme, it could serve as a boost to India’s growth rate and international competitiveness," said Rajiv Biswas, IHS’s Asia-Pacific chief economist in Singapore. “This is an important step in India becoming a global leader."

Since Modi took office in May, little of substance has emerged. While he promised to build cities from scratch, the plan now is to harness technologies like intelligent power grids and tap the money and expertise of private companies to upgrade the largest municipalities, said Shankar Aggarwal, a secretary in the ministry of urban development. He has no idea how that will be done.

“We are groping in the dark—we still don’t know what a smart city is," Aggarwal said in an interview. “If you don’t even have the plans for the existing sewage network of the city on paper, how can we start this conversation of smart cities?"

Budget plan

In a budget speech in July, finance minister Arun Jaitley allocated ₹ 7,100 crore to begin developing the 100 smart cities “as satellite towns of larger cities and by modernizing the existing mid-sized cities." That’s ₹ 71 crore each—enough to buy a handful of apartments in Donald Trump’s new Trump Tower Mumbai. Nor is it clear which 100 municipalities will get the cash.

Most need it.

Within 15 years, Indian cities will hold more than twice the current population of the US, swollen by an influx of people from the countryside, according to McKinsey and Co. By then, 13 cities will house more than 4 million people each, the report says. The populations of Mumbai and Delhi, already more than 10 million each, may exceed 30 million.

The growth will be managed under 19th century rules introduced by the British. An attempt to modernize the system in a 1992 constitutional amendment required state leaders to appoint mayors and empower them to raise and control their own revenue. That has done little to reduce dependence on state bureaucrats.

Begging Lucknow

For Drona to get money to hire street sweepers in Kanpur, his city of about 4 million, he must file a request to the Uttar Pradesh government in Lucknow, 50 miles away.

The request will then go through multiple agencies until it has the approval of the department of public works, other related ministries or departments, and finally the finance minister.

The funds would be released to the municipal corporation, the city’s patronage-laden bureaucracy. Drona, a member of Modi’s BJP, would then lobby those officials to distribute the money for the intended purpose.

“Everyone is responsible and so no one is responsible, undermining the role that mayors can play in problem solving," according to Barjor Mehta, the World Bank’s lead urban-development specialist in India.

‘No accountability’

“There’s no accountability to the people, and so the cities suffer," Mehta said in an interview. “Indian cities need their own sources of revenue and empowered mayors to provide a credible vision and sustainable financing plan."

In most Indian cities, garbage litters the streets, the sewers overflow during monsoon rains and power outages are common during peak demand. Solving those issues will take more than ₹ 7,000 crore and a telecommunications backbone, said Mohan Guruswamy, chairman of the Centre for Policy Alternatives in New Delhi.

“They’re missing the point," said Guruswamy, a former adviser to India’s finance ministry. “Hooking up a couple cities with Wi-Fi doesn’t make them better governed. This won’t fix urbanization."

Progress will depend on implementing the 1992 reforms. In most cases that isn’t happening. Instead, the state government usually appoints a mayor who is powerless to levy new taxes, raise debt or even ask a junior official to deliver his letter on time, Drona said.

“The city’s only source of revenue—property taxes—is generally lost to graft or never collected, especially during an election year," Drona said. Of the ₹ 100 crore Kanpur hopes to raise in revenue this fiscal year, the city probably will see only about ₹ 60 crore, with much of that lost to corruption or inefficiency.

“The smart cities idea is a good idea," he said. “But if Modi wants it be successful, he’ll have to give the cities powers. Right now, I can’t even appoint a person to clean the roads." Bloomberg

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