building smart cities in india - national institute of ...€¦ · building smart cities in india...

Building Smart Cities in India

January 30, 2014 CONFIDENTIAL AND PROPRIETARY Any use of this material without specific permission of McKinsey & Company is strictly prohibited

Last Modified 30/01/2015 00:27 India Standard Tim

e Printed

McKinsey & Company | 1

Agenda

What great cities do?

Imperatives for Indian cities


e Printed


Every city can be a good city…

Public safety Healthcare

Education

Transportation

Jobs and businesses

Greens and recreational spaces

Air quality

Entertainment Housing


e Printed


…but what makes a city great?


e Printed


From our studies of great cities, we learned that…


e Printed


Achieve smart growth

Lead, inspire, perform Do more with less

Great cities…

Let’s explore how…

While there are many paths to greatness, great cities do three things well


e Printed


Our findings show that great cities excel in three ways which sets them apart from good cities

Grow smart Lead, inspire, perform Do more with less

Great cities …

SOURCE: McKinsey

▪ Develop an economic strategy: Focus efforts on strategic industries

▪ Promote opportunity and livability: Connect residents to jobs and create a safe and enjoyable city to live in

▪ Renew the environment: Reduce GHG emissions and improve air and water quality

▪ Build a personal vision: Design a legacy built on personal passion and priority issues impacting the city

▪ Build a winning team: Attract and retain the best talent

▪ Create an accountability culture: Execute pragmatically with an eye towards driving impact

▪ Forge stakeholder interest and trust: Stakeholder engagement through data transparency, and multi-sector partnerships

▪ Leverage all financing options: Maximize revenue collection and explore new financing models

▪ Introduce investment accountability: Prioritize, manage and govern capital investments

▪ Use technology to improve city services

▪ Actively assess and manage expenses: Improve cost transparency

▪ Stop wastages and leakages in all government services

1 2 3


e Printed


Bogota – Attracting foreign direct investment

SOURCE: World Bank; Invest in Bogota

Government-level intervention (2006) Impact Situation (2001)

▪ Bogota was recovering from two decades of civil war

▪ The private sector had lost confidence and stopped investing – FDI totalled only

$ 2.5 billion ▪ Unemployment rate

was 18.2 %

▪ Invest in Bogota was created as a public-private partnership between the Bogota Chamber of Commerce, the Bogota City Government and the Government of Cundinamarca, with support from the World Bank

National government intervention helped to reduce the unemploy-ment rate to 9.7%

▪ Invest in Bogota successfully increased economic activity and foreign investment in the city – FDI increased, reaching

$6.8 billion in 2010 – MNCs almost doubled – 3,600 new technical

jobs in the city created – Investment projects in

the city tripled

GROW SMART – DEVELOP AND ACTIVATE ECONOMIC STRATEGY


e Printed


Luxembourg City – Treating businesses as clients and adopting client service approach to attract businesses

SOURCE: Interview with Former Mayor Helminger; Doing Business Report; PWC report 2006; web-search; team analysis

Mayor – Intervention Impact Situation

▪ Mayor Helminger initiated a review of citizen and business services and introduced new customer interfaces in 2001:

▪ Impact on business environment – Number of days to

open a business has fallen from 26 days to 19 days, because now all forms can be completed in a one-stop-shop

– Cost to open a business has fallen by 90%

▪ When Mayor Helminger (1999-2011) took office in Luxembourg city, there were 50 key service processes for citizens, which were complex to access; little integration across city government agencies

– “Espaces Enterprises”, a one-stop-shop for startup businesses

– Bierger-Center where all services are centralized to simplify dealings with city

– eBerger-Center, which provides birth, death, marriage and residence certificates

GROW SMART – DEVELOP AND ACTIVATE ECONOMIC STRATEGY


e Printed


Singapore’s urban livability strategy has been recognized as one of the best among sister Asian cities

▪ Growing population with changing demographics: – Population is

expected to reach 6.5 million over the next 50 years

– By 2050, Singapore’s median age will be 54, making it one of the demographically oldest countries in the world

▪ Resource constraints:

– Singapore’s land area expected to increase by 25% vs population increase by 250%

Impact Situation Intervention ▪ Ranked the 3rd

most livable city worldwide, in the Global Livable Cities Index by the Centre for Livable Cities

▪ Education: – ~20% total budget spent on education – Literacy rate: 95%; average years of

schooling: 9 ▪ Safety:

– Strict laws regulating behavior – Strong surveillance, i.e., Neighborhood Police

Posts operate 24/7 in densely populated housing estates

▪ Affordable housing: – State owns 90% of land, government

provides cheaper financing and subsidies for lower income residents

– Diversity of home designs, mixed-use developments

▪ Green spaces: – 10% of city land set aside for green space – Developing 843-acre park, costing > $795 M

▪ Aging and wellness: – Public-private partnerships to expand

healthcare offerings

SOURCE: Centre for Liveable Cities (CLC) and the Urban Redevelopment Authority (URA)

GROW SMART – PROMOTE LIVABILITY AND OPPORTUNITY FOR ALL


e Printed


Barcelona’s SmartCity Centre of Excellence

SOURCE: barcelonacatalonia.cat; 22@barcelona innovation district and the internationlisation of business; Case study: 22@Barcelona Innovation District – Sustainable Cities Collective

Project overview

▪ 22@Barcelona launched in 2000 ▪ Located in historic (dilapidated) cotton

district of Sant Marti

Partnership involvement

▪ During the Smart City Expo in 2011, the Mayor announced the launch of a SmartCity campus to be the headquarters of all companies related to smart cities in Barcelona

▪ Partnerships: – 5 companies signed an

agreement with the Ajutament de Barcelona

– Partners to roll out services and infrastructure and to implement sustainable urban management projects

– Schneider Electric to create a SmartCity Centre of Excellence in the Campus

Financing

▪ Investment in infrastructure of the entire 22@Barcelona District: – A total of 200 million Euros

(2000 – 2010) – Mainly from private investors

(60%), with another 10% from municipality, and 30% from future public users

▪ New companies installed in the district between 2000 and 2009 – 1,502 (41.8% newly created)

▪ New jobs installed in the district between 2000 and 2009 – 44,600 (61.7 newly created)

▪ A 23% increase in residents since project inception

▪ Employment target of 100,000 new jobs with 20-25% of workforce coming from the international community

▪ 22@Barcelona is home to 5 knowledge/technology intensive clusters; ICT, media, bio-medical, energy, and urban design

▪ The project had 5 primary aims – Improve mobility (focus on EV) – Increase overall energy efficiency – Create comfortable, safe buildings – Obtain maximum efficiency in water

management – Improve connection between citizens

and local authorities

What is Smart City Campus-22@Barcelona? Smart city segments addressed

22@Barcelona actual results

22@Barcelona anticipated results


e Printed

McKinsey & Company | 11 SOURCE: City Council of Seattle: http://www.seattle.gov/council/issues/zerowaste.htm; press search

Mayor Intervention Impact Situation ▪ In the 1980s, Seattle

committed to recycle a minimum of 60% of its solid waste – By 2004, waste

diversion rates did not exceed 43%

▪ City council adopted a long-term zero-waste strategy – 60% waste diversion

rate by 2012 – 70% waste diversion

rate by 2025

▪ Key components of the strategy are: – Incentivizes for producers who

use reusable / recyclable materials

– Mandatory food waste collection

– Ban the use of Styrofoam and plastic bags

– Solid waste facility re-designs to emphasize better waste prevention, recycling and disposal systems in the future

▪ 10.9% of waste sent to landfills in 2009 (352,000 tons)

“Seattle is an environmental leader in the United States, and our commitment to waste reduction is unparalleled” Council member O’Brien, Jan. 2010

Seattle – Moving towards zero-waste through a variety of policy levers

GROW SMART – RENEW THE ENVIRONMENT

http://www.seattle.gov/council/issues/zerowaste.htm


e Printed


New York – Engaging citizens through technology

SOURCE: Press search; web search; team analysis

Mayor-level intervention Impact Situation

▪ New York City is a mega-city – $60 billion budget – 350,000 city employees – > 40 city departments – 8 million people

▪ Hard to measure city performance – Limited data available to

citizens – Limited data-sharing and

integration across departments

▪ Mayor Bloomberg came into office with a mission to create a more effective, more efficient and technologically-enabled government that is – Accessible – Transparent – Accountable

▪ Launched NYC 311, a non-emergency central number now receiving >1.2 million calls per month where citizens go to report street repairs and illegally parked vehicles, request tax information, and much more

▪ Launched Citywide Performance Reporting Online (leveraging 311 and other agency data)

▪ Created robust reporting mechanism to help make informed decisions

– Tracks 4,000 KPIs across 40 departments

– City government culture transformed to ensure greater accountability for performance

▪ Provides customers and advocacy groups with a fast, flexible tool to monitor city performance and service level – > 500 "critical"

outcome measures

– Digestible formats

▪ NYC BigApps competition inspires innovation of useful apps for all aspects of city life

▪ Complex interface between citizens and city – Over 40 help-lines:

▫ 14 for public safety ▫ 8 for infrastructure,

regulatory and community services

▫ 7 for business affairs and waste management

▫ 11 for health and human services

DO MORE WITH LESS


e Printed


Bogota – Antanas Mockus

SOURCE: Press search; web search

LEAD WELL – DEVELOP A PERSONAL VISION

Impact

▪ Famous initiatives included hiring 420 mimes to make fun of traffic violators, because he believed Colombians were more afraid of being ridiculed than fined. – Traffic fatalities dropped by over 50%,

▪ When he asked residents to pay a voluntary extra 10% in taxes, 63,000 people did so

▪ Bogotá saw improvements such as: water usage dropped 40%, 7000 community security groups were formed and the homicide rate fell 70%, drinking water was provided to all homes (up from 79% in 1993), and sewerage was provided to 95% of homes (up from 71%).

Personal vision

▪ Turn the city of Bogota safer and cleaner and inculcate a greater sense of civility and community

▪ He believed in the power of social incentives and norms and communicated his vision through creative and playful campaigns aimed to spark residents’ interest and increase the visibility and social costs of undesirable behavior.


e Printed


Agenda

What great cities do?

Imperatives for Indian cities


e Printed


Cities are likely to house 40 percent of India’s population by 2030

290220

377

+223

2030

600+

2011 2001 1991

SOURCE: India Urbanisation Econometric Model; McKinsey Global Institute analysis

1 Defined as the ratio of urban to total population based on the census definition of urban areas; population >5,000; density >400 persons per square kilometre; 75 percent of male workers in non-agricultural sectors; and statutory urban areas.

31 41 26 Urbanisation rate1

Percent

1210 1,470 856 Total population Million 1,040

28

Urban population Million


e Printed


10 states will be more than 50% urbanised by 2030

33

35

37

39

43

45

48

48

53

52

54

55

63

60

69

62

Andhra Pradesh

Haryana

Punjab

Karnataka

Gujarat

Maharashtra

Kerala

Tamil Nadu

Urbanisation rate Percent, total population

Urban population Million 2030

2011

34.9 52.7

15.9 25.3 50.8 79.9

25.7 45.4 23.6 39.2 10.4 19.0

8.8 16.5 28.4 51.2

Goa and Mizoram

are already 50%

urbanised

SOURCE: McKinsey Global Institute India Econometric Model; Census 2011


e Printed


Opportunity in the top Indian cities of tomorrow will be much bigger than countries today

Pune

66

74

83 Ahmedabad

Chennai 83

134 Bangalore

36 (GDP, Mumbai, 2010)

4x

66 2x

Surat

Hyderabad

Vadodara 42

36 (GDP, Mumbai, 2010)

Chandigarh 32

Vishakha- patnam 34

Kochi 35

Nagpur 36

1

2

3

4

5

6

7

8

11

12

13

14

Mumbai (MMR) 260

220 (Malaysia GDP, 2010)

Kolkata 200

Delhi 250

9

10

SOURCE: McKinsey’s “Granularity of Growth” work

Top 3 cities will be the size of countries today ... GDP 2030, US$ Billion, 2008 prices

... next 6 cities will become 2-4X the size of Mumbai today GDP 2030, US$ Billion, 2008 prices

... next 5 cities will be equal to Mumbai GDP 2030, US$ Billion, 2008 prices


e Printed

McKinsey & Company | 18 SOURCE: McKinsey Global Institute analysis

Only 105 lpcd supplied, need 140-150

Only 30% of sewage is treated

24% of urban population lives in slums

Public transport share has declined to ~30%

Water supply Sewage Affordable housing Public transportation

Private transportation Solid waste

Only 70% of solid waste is collected today

Peak morning travel time of 1.5-2 hours in large cities

Open space

Only 2.7 m2 open space per capita compared to 14 m2 in Beijing

Storm water drains

Storm water drain coverage of only 20%

The situation on the ground in our cities is grim


e Printed


Current trajectory will result in urban decay and gridlock

SOURCE: United Nations; Handbook of benchmarks, Ministry of Urban Development; W. Smith, Transportation Policies and Strategies in Urban India; National Council for Applied Economic Research; McKinsey Global Institute analysis

220150

105 65

85112170

610

00

25

Best-in-Class

Basic Current

38

2030 Business as usual

Current Future

Vehicular congestion Peak vehicles per lane kilometer

Water supply quantity Liters per capita per day

Slum population Million households


e Printed


India’s urban operating model should focus on three key elements

Elements of operating model

Funding Where will resources come from?

Reforms & Governance What needs to change to empower our cities and make them accountable?

City Development Planning and Policies How do cities plan and incentivize/enforce their planning choices? 1 2

3

SOURCE: McKinsey Global Institute analysis


e Printed





3





e Printed


In every international best practice city we studied, there were uniform “nuts and bolts” lessons

▪ All countries spent more than $300 in capita in capital expenditure on their large cities annually

▪ Cities in developing countries used land monetization to fund urban infrastructure

▪ All cities have systematic, formula based funding from central and state governments, and leverage debt well

Funding

Reforms & Governance

▪ All cities have strong, empowered, elected political leaders

▪ All large cities had metropolitan structures (and not just municipal) for governance

▪ Most cities have moved towards agency structure for service delivery, with chief executives and MOUs with cities

City Development Planning and Policies

▪ All have evolved urban planning systems with systematic attention to job creation, affordable housing and public transportation

▪ Best practice cities followed the principle “Economic master-planning before physical master-planning”


e Printed


Key principle of planning

SOURCE: Source

Economic master-planning before physical master-planning

Job creation engines with anchor tenants

Infrastructure tailored towards the job creation engines

Land monetisation and financing strategies


e Printed

1 Footnote

McKinsey & Company | 24 Source: MMR Regional Plan 1996-2011; The London Plan

Granular FAR planning norms in New York instead of one-value-for-all

Ward-wise specification of maximum FAR and minimum open space ratios

PLANNING


e Printed


London master plan includes detailed peak transport planning

SOURCE: The London Plan, Transport for London (TfL)

Population and employment forecasts by region

Peak AM traffic demand by region

Sequencing of key transportation projects

Financing strategies

PLANNING


e Printed


India should consider a cascaded urban planning system with integrated content


▪ 40-year forecasts, Economic development strategy, High-level land use, Major transit projects

Plan content

▪ 20-year forecasts, Economic development strategy, Broad ward-level land-use plan and FSI including, Key projects and policies in Metropolitan transportation and affordable housing

▪ 20-year detailed plot-level land-use plan, Key projects and policies in local transportation, water, sewage, solid waste, stormwater drains, urban design norms

Metropolitan Planning Committee

Metropolitan Authority

Technical Planning Board

Planning Department

Municipality Technical Planning Board

Planning Department

Concept plan

Master plan

Development plan

▪ Target population and employment for wards ▪ Ward-level broad land use and FAR, including

areas for intensification, regeneration, and greenfield development

▪ Major transportation projects and their effects on ward-level land use and densities

▪ Goals for specific sectors such as affordable housing, including zoning norms

Parameters that cascade down to municipalities

PLANNING


e Printed


Smart Components that can be integrated in city planning

1 Solutions included are described in greater detail in the following; solutions must exist in at least one city to have been included

Smart city solutions

City pain points addressed

Reliability Health Environ- ment Safety Time

E-governance and citizen services

Better transportation services

Better water management Smart meters & demand management

5

Leak identification and preventive maintenance

6

Water quality monitoring 7

Stormwater response 8

Better energy management Smart meters & demand management

1

Distribution & substation automation

2

Building energy management 3 Streetlight, building and structural health monitoring

4

Better air management Air-quality monitoring 9

Better waste management Smart solid waste management 10

Congestion zone & lanes 11

Smart parking meters & pricing 12

Adaptive traffic control (real time signal optimization)

13

Fleet monitoring, maintenance, and location services

14

Integrated intermodal fare payment

15

Citizen information and complaint management 16

Video crime monitoring 17

Citizen sourcing (empowering citizens to be the city’s eyes and ears)

18

PLANNING


e Printed






3




e Printed


India has massively underinvested in its cities in comparison with other urban centres around the world

391

127116

17

China Total Urban India

United Kingdom

South Africa

SOURCE: Press search; McKinsey Global Institute analysis

1 Urban services include water, sewage, city roads, storm-water drains, mass transit (including rail-based mass-transit), solid waste, and low-income housing

11458

Tier-3/4 Tier-2 Tier-1

India’s current USD per capita urban spending1 across tiers

Comparison of India’s USD per capita urban spending with other countries

FUNDING


e Printed


Indian cities need capital funding of USD 1.2 trillion over 20 years USD per capita per annum

Capital expenditure

17

Required

134

Current

231

392

395

96

Total capex

1,182

Afford-able housing1

Mass transit

City roads

Sewage and sanitation

68

Water

FUNDING

SOURCE: India urbanisation funding model; detailed project reports from the Jawaharlal Nehru National Urban Renewal Mission (JNNURM); McKinsey Global Institute analysis

1 Net of beneficiary contribution

Funding requirement for urban sectors, 2010-2030 USD billion, 2008 prices


e Printed

McKinsey & Company | 31 31

Cities across the world have used four key funding sources

1 DRK – Directional Route Kilometres

SOURCE: India Urbanization Transportation Model; McKinsey Global Institute analysis

Land Monetization

350139

Hong Kong Shanghai

$ per capita per annum

Property tax and user charges

Debt and PPP

541811

Shanghai London

120

659

Shanghai London

New York Shanghai

30% 32%

London

70%



Support from government

Per cent of local budget

FUNDING


e Printed


CapEx OpEx

India too needs to leverage these four to satisfy funding urban funding requirements $ per capita per annum, 2008 prices

26

43

134127

58

CapEx required

Total CapEx

Formula based government grant

Debt and PPP

Mon- etizing land

SOURCE: India Urbanization Funding Model; McKinsey Global Institute analysis

76

116112

36

Total OpEx

User chargrs

Property tax

OpEx required

Note: Numbers may not sum due to rounding


e Printed


Successful examples of such funding already exist in India

11

5

22

7

Debt and PPP

Land Monetization

Total Spend 2010-2015

Total Govt. Support

SOURCE: MMRDA; Press search; McKinsey Global Institute analysis

MMRDA capital spend program USD billion, 2010-2015

FUNDING


e Printed


Municipal Corporation of Greater Mumbai (MCGM) has only recently introduced policies to generate funds through land monetization

FUNDING

Background and highlights ▪ FAR of 1 is free of charge for every non-agricultural land parcel. Largely,

additional FSI is allotted on a discretionary basis rather than on the carrying capacity of the region determined by city’s master plan

▪ As per fungible FSI policy introduced by MCGM, developers have to pay a premium for additional FAR in areas under the jurisdiction of the corporation

– Residential construction: for an additional 35% of FAR, developers need to pay a premium of 60% of the per square foot ready reckoner price

– Commercial and industrial development: for an additional 20% of FAR, developers need to pay a premium of 80% to 100% of the per square foot ready reckoner price

Generate US$ 250 to 300 million annually, leveraged to create US$ 1billion of funds annually


e Printed







3



e Printed


India

London

Johannes-burg

Examples of success, including in India

▪ BEST in Mumbai – Well functioning – Fast decision making

▪ Transport for London – Increased share of public

transportation

▪ Johannesburg Water – Revenue collection has

increased from 56% to 105%

Create accountable corporatised agencies (instead of departments) in our largest cities

GOVERNANCE

Allows for fast decision making and

efficient service delivery


e Printed


Base reform agenda for small ULBs (population less than 5 lakhs as per census 2011)

REFORMS & GOVERNANCE

Proposed reforms ▪ Adoption of double entry system of accounting 1

▪ Introduction and enhancement of e-governance system with modules on property tax, accounting, water charge payment and birth & death should be implemented

2

▪ Collection of property tax, with overall efficiency of 65% in 5 years. ULBs may outsource the property listing, calculation of property tax and billing of the tax

3

▪ User charge collection – ULBs should collect user charges at least up to 80% of O&M cost in 5 years – ULBs in NE and Hilly states should collect user charges up to 50% of the O&M cost

in 5 years – States should approach the electricity tariff regulator to allow electricity to be charged

at domestic rates (instead of commercial rates) for supplying water

4

▪ Put in place transparent FAR policies and market value based FAR charges 5

▪ Earmarking at least 10-15% land or 20-25% dwelling units for housing projects for EWS/LIG category with a system of cross subsidization

6

▪ Internal earmarking within local body budgets for basic service to the urban poor 7


e Printed


Base reform agenda for large ULBs (population more than 5 lakhs as per census 2011)


Proposed reforms ▪ Adoption of accrual based double entry system of accounting 1 ▪ Introduce and enhance e-governance system with modules on property tax, accounting, water charge

payment, birth & death, citizen grievances, building plan approval, e-procurement and hawker’s licenses should be implemented

2

▪ Prepare a 20 year integrated spatial development plan extending ~10-15 km beyond the municipal limits 3 ▪ Collection of property tax, with overall efficiency of 75% in 5 years:

– GIS mapping should be used to increase coverage efficiency – ULBs may outsource the property listing, calculation of property tax & billing of the tax

4

▪ User charge collection – ULBs should collect user charges at least up to 100% of O&M cost in 5 years – ULBs in NE and Hilly states should collect user charges up to 50% of the O&M cost in 5 years – States should approach the electricity tariff regulator to allow electricity to be charged at domestic rates

(instead of commercial rates) for supplying drinking water

5

▪ Create a ring-fenced development fund, financed through sources such as all proceeds from land monetization, betterment charges, FAR charges (in line with the integrated spatial development plan), Land use conversion charges, Development charges etc

6

▪ Put in place transparent FAR policies and market value based FAR charges 7 ▪ Earmarking at least 10-15% land or 20-25% dwelling units for housing projects for EWS/LIG category with a

system of cross subsidization 8

▪ Internal earmarking within local body budgets for basic service to the urban poor 9


e Printed


Base reform agenda for metropolitan areas (UAs with population more than 1 million)


Proposed reforms ▪ All metropolitan areas (UAs) with population over 1 million should institute the

Metropolitan Planning Committee (MPC) with the development authority/ any other such agency as the secretariat. The MPC should prepare a 20 year metropolitan level Integrated Spatial Development Plan (ISDP). This plan should be legitimised through a statutory provision in the state town and country planning act and made binding on municipal plans. The plan should include: – Strategic densification – City mobility plan – Economic and commercial activity plan – Infrastructure plan – Disaster management plan – Inclusionary zoning with affordable housing plan, and – Environment conservation plan

1

▪ All metropolitan areas (UAs) with population above 4 million, should set up an UMTA to facilitate integration of multi-modal transport systems and ensure it works with the MPC and has the MDA as the secretariat

2


e Printed


Base reforms for all states REFORMS & GOVERNANCE

▪ Strengthen the State Finance Commissions and act on the existing recommendations of previous SFCs

▪ Create and establish the Municipal Cadre

▪ Set up a State Property Tax Board to frame assessment guidelines (based on either a capital value or annual rental system that is indexed every 3-5 years to factor in real estate appreciation) for property tax collection

▪ Prepare a State level urban blueprint to manage the urban population

▪ Revise town planning act, DCRs, municipal laws, and building bye-laws with a view to: – Allow mixed use of land to enable levy of FAR charges – Vest the authority Local Area development authorities to plan for local areas just outside

municipal boundaries (15 km for 5 lakh+ ULBs) – Put in place a time bound process for building plan approvals – To levy rationale basement controls, façade controls and maintenance

▪ Repeal of Urban land Ceiling and Regulation act

▪ Amendment of Rent Control Laws balancing the interest of landlords and tenants

▪ Rationalization of Stamp Duty to bring it down to 5% or lower

▪ Introduction of computerized process of registration of land and property

▪ Provide security of tenure at affordable prices to urban poor

1

2

3

4

6

5

7

8

9

10


e Printed







3



e Printed


END

building smart cities in india - national institute of ...€¦ · building smart cities in india...

Documents