JNNURM, RIP: Why we need to invest in new cities and let old ones fend for themselves

Venkaiah Naidu, the new Urban Development Minister, is making a bold departure from past thinking on how to make India more urban. In newspaper interviews yesterday (28 May), he said that the UPA’s flagship scheme, the Jawaharlal Nehru National Urban Renewal Mission (JNNURM), will be scrapped. Instead, the new approach will be to build new smart cities. JNNURM will be refashioned with a new name and new orientation.

Way to go. India is already 32 percent urban, and in future decades the urban population is likely to grow in leaps and bounds - possibly from over 325 million right now to over 600 million by 2031. No amount of investment in existing cities is going to accommodate a doubling of the urban population. India simply needs many new cities, and not just patchwork investment in old ones.

Consider the current stats: we have 50 cities with one-million-plus population, including eight super metros with five-million-plus population. In the next 20 years, we will have 100 metros, including eight more super metros. That’s either 50 new cities or 50 old towns becoming metros by haphazard internal growth.

If we had a choice, we should opt for new cities with better infrastructure.

The reason for choosing new cities for investment over old ones is simple: it costs more to build infrastructure in old cities with costly land and sub-optimal public spaces than to focus on brand new cities, with no legacy issues and lots of land.

As the high-level committee on urban infrastructure headed by Isher Judge Ahluwalia noted some time back, “India’s economic growth momentum cannot be sustained if urbanisation is not actively facilitated. Cities will have to become the engines of national development.”

There are other reasons to invest in new cities that go beyond merely cost. According to the Ahluwalia report, 59 percent of the growth in urban population is already coming from natural increases - that is existing urban people having kids. Only 21 percent of the growth comes from rural migration and the balance from the expansion of existing urban centres to absorb nearby rural areas.

The implications of these numbers are huge: existing cities will bloat from their own internal population growth, leaving little space for the flood of rural migration that will become inevitable when agriculture becomes more mechanised and jobs in the sector shrink due to the rise in rural wages. The big wave of rural migration, currently stemmed by launching make-work schemes like NREGA, will start once the rural areas exhaust their natural capacity to absorb new entrants to the labour force, not to speak of those rendered surplus by rising agricultural productivity.

This trend, which will be visible shortly, will call for the creation of new cities and new infrastructure, so that both growth and jobs are created in new cities.

As I have noted before, “if we want moderately livable cities, we need new cities, not old ones with crumbling infrastructure and sprawling slums where land costs are simply unviable (Mumbai, for example, is simply unaffordable even to the upper middle-classes). The additional 300 million people who will head for cities over the next 20 years can either cram the Mumbais and Delhis and Bhopals of the world, or be diverted to new, planned cities with better amenities - like Lavasa in Maharashtra, which got into a controversy over legal issues, or Dholera in Gujarat.

“Assuming one million to be a good size for viable new cities, we need 300 new cities over 20 years. This means we need 15 new Lavasas with one million capacity every year.”

So Venkaiah Naidu is on the right track when he said that the accent will be on creating ‘smart’ new cities. “These will offer a smart, safe and better environment, better facilities, better connectivity and better living conditions. We are finalising the concept. This is what PM Modi has also visualised,” Naidu is quoted as saying in Hindustan Times.

With Modi planning a Look East economic policy where Japan, China and south-east Asia are going to become our more important trading partners, it is logical to expect big-ticket infrastructure projects like the Delhi-Mumbai Industrial Corridor (DMIC), which will be funded by the Japanese, and Chinese involvement in building new cities.

The old cities need investment, but given their locational and other advantages, they should be asked to fund their revival with higher user fees and property taxes, among other things. The new investment must go disproportionately to new cities, build with ideal infrastructure from scratch.

The scrapping of the JNNURM, started early in UPA-1, is a vital part of thinking of cities. In its current form, JNNURM seeks some changes in state-level urban policy and injects funds in sub-optimal projects. Despite being in existence for years, our cities don’t look any better after JNNURM. It is simply too small and too pointless to make a difference. As at the end of 2012, the centre had allocated Rs 66,000 crore, but less than half of that money had been disbursed. Since then, thanks to the funds crunch, disbursements have not been much better.

Now consider the sale of urban investments needed in the next 20 years: Ahluwalia estimates that $620 billion needs to be invested in areas like urban water supply, sewerage, urban roads, storm water drains, transport, and street lighting, among others. In the last five years, the actual investment under JNNURM would not be more than $10 billion.

Considering the scale of investments needed as against the actual money going to urban areas, clearly JNNURM is sub-optimal and a waste of effort. It’s scrapping makes sense. It’s good that Naidu is initiating new thinking.