Strategic Approaches for Implementing Smart Cities in India

When the Smart Cities Mission was launched in June 2015, it set out to do something Indian urban policy had rarely attempted before: let cities compete for funding rather than simply distributing money from the top down. Behind the headlines about sensors and command centres sits a more interesting story about strategy-how cities were picked, what kinds of physical transformation they were allowed to attempt, and how central and state governments structured the money and laws to make it all work. Understanding these strategic choices explains both why some cities moved quickly and why the mission took a decade rather than five years to wind down.

How the smart cities were chosen 🔗

The selection of cities was built on the idea of competitive and cooperative federalism. For the first time in the country’s urban history, cities were not handed funds based on size or political weight-they had to win a contest. A two-stage process was followed: the Ministry first distributed a target number of slots across states and union territories using an equitable formula based on urban population and number of statutory towns. Each state then held an intra-state competition to shortlist its strongest contenders, who went on to face nationwide rivals.

Each shortlisted city had to prepare a Smart City Proposal (SCP) setting out its vision, the development model it would follow, and the smart solutions it planned to deploy. These proposals were scored on the quality of the plan, the level of citizen consultation, financial feasibility, and the city’s ability to actually execute. The competitive design meant that cities had to invest serious planning effort upfront, which was a sharp departure from the older approach of building detailed project reports only after funds were assured.

The City Challenge and its rounds 🔗

The contest, known as the City Challenge, played out across several rounds between 2016 and 2018. According to the mission’s official record, 20 cities were selected in the first round in January 2016, followed by 13 in a fast-track round in May 2016, 27 in the second round in September 2016, 30 in the third round in June 2017, and the remaining cities in the fourth round during 2018. Taken together, around 100 cities were brought into the mission, though the working number settled near 99 after Kolkata withdrew and the list was finalised.

This staggered structure had a clear logic. Cities that did not make the cut in one round could improve their proposals and try again, which pushed municipal teams to learn from feedback and raise the quality of their plans. The competition genuinely sharpened local capacity, since officials had to grapple with vision-setting, financing models, and citizen engagement in ways many had never done before.

Why competition was chosen as the route 🔗

Competitive federalism encourages states and cities to rival each other to improve governance and attract investment, while cooperative federalism stresses partnership between the Centre and states. The mission deliberately blended both. The rivalry pushed cities to perform, while the shared funding structure kept the Centre and states working together. Critics have noted that the competitive model also created an imbalance-cities with stronger administrative capacity and better consultants tended to write better proposals, which meant some well-resourced cities pulled ahead while others struggled to even prepare a competitive bid.

The four implementation models 🔗

Once a city was selected, it could not simply spend money everywhere. The mission channelled physical transformation through two broad strategies-area-based development and the pan-city initiative-which together gave four distinct models. The first three reshape a chosen part of the city, and the fourth spreads a smart solution across the whole city.

Retrofitting 🔗

Retrofitting means improving an existing built-up area rather than tearing it down. As described in the mission strategy, a city identifies an area of more than 500 acres, in consultation with residents, and upgrades its infrastructure and services to make it more efficient and liveable. Because the existing structures largely stay in place, retrofitting focuses on intensive service improvements-better water supply, sanitation, mobility, and digital infrastructure-within a relatively short timeframe. The Local Area Development zone in Ahmedabad is a frequently cited example of this approach.

Redevelopment 🔗

Redevelopment goes further. Here, an existing area of more than 50 acres is cleared and rebuilt with a new layout, enhanced infrastructure, and higher density to make better use of land. This model suits congested, older neighbourhoods where incremental improvement is not enough. The Bhendi Bazaar project in Mumbai and the East Kidwai Nagar redevelopment in New Delhi are well-known illustrations of how the model replaces ageing fabric with planned, mixed-use development.

Greenfield development 🔗

Greenfield development builds an entirely new area on previously vacant land of more than 250 acres, using planning tools such as land pooling and land reconstitution. This model is designed to absorb the pressure of rapidly growing urban populations and to provide affordable housing, especially for the poor. Unlike retrofitting and redevelopment, a greenfield project can sit either within the urban local body’s limits or within those of a development authority. The GIFT City in Gujarat is the best-known example of greenfield planning in this context.

Pan-city initiatives 🔗

The fourth component, the pan-city initiative, works differently. Instead of concentrating on one area, it applies at least one smart solution across the entire city. The idea is to use technology, data, and information to improve services that everyone uses. A common example is an intelligent traffic management system that reduces commute times, or smart metering and wastewater recycling that improve water management. Every selected city had to include a pan-city dimension in its proposal, ensuring that benefits were not limited to a single privileged zone. These city-wide solutions are tied together through Integrated Command and Control Centres, which monitor utilities, traffic, and public services in real time.

Most cities did not pick just one model. Proposals typically combined area-based development-often a mix of retrofitting and redevelopment-with a pan-city smart solution, giving each city a tailored blend that matched its local context, resources, and level of ambition.

Government support and the policy framework 🔗

None of these models could be executed without a clear financial and legal framework. The mission was structured as a Centrally Sponsored Scheme, with deliberate mechanisms to pool money, protect funds, and keep projects moving even when municipal capacity was thin.

How the money flows 🔗

The central government committed financial support of about Rs 48,000 crore over five years, averaging roughly Rs 100 crore per city per year. States and urban local bodies were required to contribute a matching amount, so close to Rs 1 lakh crore of government funds was meant to be available for smart city development. Crucially, central and state grants were only ever expected to cover part of the cost. The remainder had to be mobilised through other routes-user charges, land monetisation, public-private partnerships, municipal bonds, pooled finance, and borrowing from domestic and multilateral institutions, alongside resources made available through the Fourteenth Finance Commission.

By the time the mission’s deadline was extended to March 2025, official figures showed that the Centre had released the large majority of its allocated budget and that most projects had been completed, according to a government press release. That said, independent reviews have pointed out that many urban local bodies struggled to raise money through PPPs and loans, leaving a heavier financial burden on states than originally envisaged.

Special Purpose Vehicles and project execution 🔗

The central instrument for execution was the Special Purpose Vehicle (SPV). Each city created an SPV-a company set up under the Companies Act, 2013, with 50:50 equity shared between the state or union territory and the urban local body. As laid out in the implementation guidelines, the SPV plans, appraises, approves, releases funds for, implements, manages, and monitors smart city projects. Each SPV is headed by a full-time CEO and has nominees of the central, state, and local governments on its board.

This corporate structure was a conscious choice. Many municipalities lacked the technical and financial capacity to handle complex infrastructure projects, so the SPV gave the mission a professional, ring-fenced body with operational flexibility. A think-tank analysis from TERI noted that the SPV was placed at the centre of the entire exercise precisely because it could plan, appraise, and administer projects more nimbly than a traditional municipal department. The trade-off, often debated, is that placing decision-making in an SPV can sit awkwardly with the democratically elected municipal council.

Convergence with other schemes and legal support 🔗

The policy framework also relied heavily on convergence. Rather than building everything from scratch, smart cities were encouraged to align their plans with other central and state programmes. The guidelines highlight a strong complementarity between the Atal Mission for Rejuvenation and Urban Transformation (AMRUT), which follows a project-based approach, and the Smart Cities Mission, which follows an area-based one. At the planning stage, cities were asked to seek convergence with AMRUT, the Swachh Bharat Mission, HRIDAY for heritage cities, Digital India, Skill Development, and Housing for All. This let a single rupee work harder by stacking resources from multiple schemes toward shared goals.

On the governance side, an Apex Committee headed by the Secretary of the Ministry of Housing and Urban Affairs approved proposals, monitored progress, and released funds, while High-Powered Steering Committees performed a parallel role at the state level. Procurement followed transparent state and municipal financial rules, and model frameworks developed by the Ministry gave cities a legal and administrative template to work from. Together, the funding structure, the SPV mechanism, convergence, and this layered oversight formed the scaffolding that turned proposals on paper into projects on the ground.

What do you think? Did the competitive selection model genuinely raise the quality of urban planning, or did it widen the gap between well-resourced cities and those that struggled to compete? And was the Special Purpose Vehicle the right way to get projects executed, given that it sits somewhat apart from the elected municipal council?

References

1. https://www.clearias.com/smart-cities-mission/
2. https://smartcities.gov.in/selection-process
3. https://smartcity.ndmc.gov.in/content/about/smart-city-mission/strategy
4. https://ebooks.inflibnet.ac.in/esp12/chapter/concept-of-smart-cities-in-india/
5. https://smartcities.gov.in/financing
6. https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=2030491
7. https://smartcities.gov.in/implementation
8. https://www.teriin.org/opinion/financing-indias-smart-cities-mission-special-purpose-vehicle
9. https://www.ibef.org/government-schemes/smart-cities-mission