European companies poised to invest billions into Indian government's plan to build 100 smart cities.
By Swaraj Singh Dhanjal, Makarand Gadgil and Madhura Karnik
Mint, New Delhi
(TNS) Feb. 09--MUMBAI -- European companies such as Schneider Electric SE, Alstom SA, ABB Ltd and ThyssenKrupp AG are reinforcing their Indian operations and creating separate business units to tap opportunities thrown up by the government's plan to build 100 smart cities.
At the India unit of Swiss engineering group ABB, the focus is on targeting segments such as power (network management, renewable integration), infrastructure (management of water and gas networks, waste management), building automation and mobility.
It is working on a high performance wireless broadband network to help integrate these multiple solutions on a real-time basis, according to a company spokesperson.
French energy and transportation firm Alstom is betting on smart grids. According to Laurent Schmitt, vice-president, automation and smart grid solutions, Alstom, the smart grid and smart cities opportunity in India is quite significant.
"Currently, the automation and IT (information technology) solutions part of the global smart grid market is worth approximately $30 billion, which is poised to increase to $60 billion by 2020 and India would be more than 15% of the worldwide market in these domains," he said. In the last Union Budget, finance minister Arun Jaitley allocated Rs.7,060 crore for developing 100 smart cities, which will provide reliable utility services, sanitation, solid waste management, storm-water drainage, energy efficiency, improved access to information and comfortable transport system.
"The draft concept note on smart cities is out. States would take the lead and the rollout would be state-wise. A programme management team will be created soon to create the smart city framework," said Jaijit Bhattacharya, partner, infrastructure and government services, at consulting firm KPMG.
According to Bhattacharya, at a conservative cost of $10 billion per city, the opportunity size will come to $1 trillion for 100 cities as and when they are developed. The estimated outlay for the 100 smart cities is pegged at Rs.7 trillion over 20 years by industry analysts and bodies, said the ABB spokesperson.
Experts say that there are plenty of low-hanging fruits for companies to exploit such as urban and inter-urban transportation (metros), energy-efficient public buildings and smart grids, water, sewage and information and communications technology (ICT).
Smart grids form a key element of smart cities as efficient energy management is one of the main pillars of a smart city.
In recent years, Alstom has been transforming itself to take advantage of these opportunities, said Schmitt.
"Alstom already has a critical size and presence in India along with significant R&D (research and development) investments. We have fully transferred our intellectual property to India and grown our team here. We want to capitalize our talent in India," he said.
Another French firm that is keenly eyeing the Indian market is Schneider Electric. The company has carved out a separate unit to focus on the smart cities opportunity. According to Charbel Aoun, president, smart cities at Schneider Electric, the company has devised solutions that can bring savings of up to 30% in energy consumption, a 20% increase in traffic speed, reduce water consumption by up to 20% and bring down building operation costs by as much as 50%.
The French firm has implemented a smart signalling project in Mumbai that has synchronized 300 traffic signals between Colaba in south Mumbai and Worli in central Mumbai, increasing average traffic speed by 20% in these parts, said Ravi Kant Malhan, the company's India head of the smart cities vertical.
The company has already built a strong base in India with 29 factories, Malhan said. "Out of three research and development facilities the company has across the globe, one is located in India, where more than 1,500 engineers work," he said.
German companies too are active in smart cities solutions.
"We believe that a significant portion of the overall infrastructure spend of around $1 trillion over next five years would be for smart cities," said Sunil Mathur, managing director and chief executive at Siemens Ltd.
The German company is increasing its focus on areas such as sustainable green buildings, e-governance, water treatment, urban and inter-urban transport, and power distribution. Siemens is already working with power distribution companies and metro projects in the country.
ThyssenKrupp India Pvt. Ltd, the local unit of Germany's industrial engineering conglomerate ThyssenKrupp AG, is also eyeing spin-offs from the smart cities programme.
"We believe that we are not just making smart cities, we are making the cities smarter. These are not just about getting fast trains from point A to point B. I believe in making few smart cities that have integrated transport and urban infrastructure with sustainable engineering solutions," said Michael Thiemann, chief executive at the Indian unit. ThyssenKrupp is keen to tie up with the Indian government in the smart cities project and can help execute projects in line with what the government wants in partnership with local companies, Thiemann said.
These firms have been in talks with various government agencies both at the centre and at the state level. "We have had interactions with state governments and we are particularly interested about Delhi-Mumbai corridor which I think will be part of the flagship project in India. We are very active in establishing relationships and explaining how we can help build these flagship projects," said Schmitt.
According to Neeraj Sharma, partner at auditing firm Walker Chandiok and Co. Llp, the smart cities opportunity is very attractive for technology-oriented foreign companies because technology will play a significant role in the smart cities concept. "A lot of multinationals such as Alstom, Cisco, IBM, etc., among others have come out with separate verticals which will be focusing on smart cities," he said.
He added that there will be a need to provide adequate incentives for these companies to take part in the smart cities initiative.
"Ultimately they will get into these projects only when they see a reasonable level of return," he said, adding that companies and investors will be keen if they are given a reasonable tax regime and reasonable ease of doing business.
To be sure, the Europeans are not the only ones queuing up for a piece of the smart cities pie.
On 25 January, the United States Trade and Development Agency (USTDA) signed three memorandums of understanding (MoUs) to support the development of Allahabad in Uttar Pradesh, Ajmer in Rajasthan and Visakhapatnam in Andhra Pradesh as smart cities.
Under the MoUs, the USTDA will contribute funding for feasibility studies and pilot programmes and will enable US industry organizations to mobilize private sector expertise and resources to address important aviation- and energy-related infrastructure connected to developing smart cities.
On 15 November, PTI reported that the Singapore government is keen to offer help to New Delhi on the planning side of smart cities. In August, an MoU was signed between India and Japan to develop Varanasi as a "smart heritage city".
In a high-level meeting held on 29 December, Prime Minister Narendra Modi called for identifying parameters that could be laid down for smart cities, Mint reported. Modi asked officials to identify the basics of infrastructure, quality of life and citizen-centric services that would lead to cities being identified as hubs of economic activity.
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