Government today announced the formation of Special Purpose Vehicles (SPVs) for the development of the ambitious project of smart cities. Minister of Urban Development, M Venkaiah Naidu revealed that each of the proposed smart city will be included under the SPVs.
The new government in its first budget last year has announced the development of 100 smart cities across the country to modernize urban infrastructure. In that budget, 7060 crore rupees were allocated for the project. But the new budget presented last month (February 2015), has not given a follow up financial package for smart cities, creating doubts about the dedication about the government effort.
The latest decision about the pattern of financing of the project doesn’t provide any details about the manner of obtaining funds for SPVs. But given the trend, it is expected that funds will be accumulated through tax credit given bond programmes. Similarly, overseas institutional funds can also be sought.
Formation of SPVs gives a clear indication that government’s contribution will be limited in the future. As in the case of many other infrastructure projects, government’s effort here is to put the start up money and leaving the funding option to private and foreign investors.