The ambitious Smart City Mission was one of Prime Minister Narendra Modi’s key electoral promises in 2014. The scheme, launched on June 25, 2015, aimed to develop 100 cities across the country, making them citizen-friendly and sustainable.
The total proposed investment in the selected cities under the scheme is over Rs. 2.05 lakh crore. But according to government data, a mere 33 per cent of the total 5,151 Smart City Mission projects have been completed or are under implementation, utilising 25 per cent of the envisaged investment.
Under the Smart City Mission, it was decided to form a company for each smart city in which the State/UT and the Urban Local Bodies, will be the promoters having 50:50 equity shareholding. With so much Government money involved in these projects, it was expected from the Ministry of Housing & Urban Affairs that it will keep a close watch on the implementation of the Smart City projects, but unfortunately ministry has miserably failed in monitoring the smart city projects. It seems that Ministry of Housing & Urban Affairs is under the wrong impression that once the Company for implementation of the Smart City Project is formed, its responsibility for monitoring the operations of that company is over.
The question is who will be responsible if the company formed for the implementation of smart city project is not working as per the guidelines, advisories and instructions issued by the Ministry?Since all the smart city projects are Government funded and a huge amount of more than Rs.2 lakh crore is involved in its implementation, the Ministry rightly issued an advisory on 9/3/2016 for appointment of Independent Directors on the Boards of these Smart City Companies from the panel of independent directors maintained under section 150 of the Companies Act, 2013. The purpose of this instruction from the ministry was to ensure better corporate governance and transparency in the operations of the smart city projects.
However, most of the smart city companies have not appointed Independent Directors defying the instructions from the Ministry and are using all the Government money in the arbitrary manner as the transparency measure and corporate governance missing altogether from the system.
The most shocking and surprising fact is that the Ministry of Housing & Urban Affairs is indifferent and at all not concerned whether any smart city project is following their advisory for the appointment of Independent Directors. In an RTI Application, information was asked from the ministry as to the number of smart city companies, who have appointed Independent Directors on their Boards as per the Advisory Instructions issued by the Ministry. In response to an RTI Application, the Ministry of Housing has given the following reply: “The implementation of the Smart Cities Mission is to done by a city level Special Purpose Vehicle (SPV) incorporated under the Companies Act,2013 in which the State/UT and ULB are promoters having 50:50 equity shareholding.
The SPV will plan, appraise, approve, release funds, implement, manage, operate and monitor the smart city development project. As such the information regarding the appointment of Independent Directors may be had from the concerned city/SPV.” This reply clearly indicates that Ministry of Housing neither has the information about the appointment of independent directors by smart city companies, nor they are willing to know this crucial detail, which is the only mechanism available with the ministry to ensure the better corporate governance and transparency in the operations of the Smart City Projects. Since the ministry does not have these details, it means, the smart city projects are not being monitored by the Ministry and it has been left open to smart city management to utilize the huge fund of more than Rs.2 Lakh crores in the arbitrary manner, without following the prescribed procedure, guidelines, advisory and instructions.
The Ministry has issued an advisory instruction that each and every smart city company must appoint Independent Directors from the prescribed Panel of Independent Directors as per section 150 of the Companies Act, 2013. After issuing this advisory instruction, the ministry thinks that its responsibility is over and the smart cities themselves will do the monitoring work which the ministry is supposed to do. When the ministry has given certain instruction to the smart city company, then Ministry is duty bound to ensure whether the instruction given by it, is being strictly followed or not. But that is not happening and the huge amount of Government money is being spent by the smart city companies without any transparency or corporate governance mechanism in place.
For the reasons explained above, this ambitious project of PM Modi needs urgent intervention from PM himself, before this results in some scam after few years. If funds are left at the disposal of the local Government, without ensuring the transparency and corporate governance measures, scams are bound to happen.