Although smart cities have been provided with some seed money from the Centre and the state, with some to be generated from their own budget, the financial requirement still remains huge as smart city plan has to benefit the entire city and not just limited to the area identified for development.
The SPV needs to identify bankable projects to attract private investment. The challenge is to mitigate funding as well as keep it self-sufficient to generate revenue from various available sources for sustainability. Currently, SPVs are in a comfortable position. The reason, assured funds from both the State and Centre for launching projects. However, as soon as the first few billion spent on envisaged projects, SPV becomes paranoid where the rest of the money will come from. In such cases, other revenue sources for urban centres such as user charges for specific services, taxes and non-tax revenues, grants, loans and other receipts can play an important role. According to the report titled ‘Municipal Finance: Funding Urban Development in India’ by JLL India, it is estimated that as much as Rs 250 million can be raised annually through advertising fees by municipal bodies of metropolitan cities of India.
Advertising fees are trending as a key instrument for revenue augmentation in the urban centres of India. The advertising fee or revenue collected through the leasing of advertisement rights on assets owned by various government agencies have the potential to be a game changer in the near future. It is to be noted that many Indian cities are now focusing on developing, planning and expanding this opportunity to assets that present an advertisement fee opportunity including public convenience facilities, lamp posts, public parks an open spaces, and government buildings.
The report notes that metropolitan cities (population of 1 million and over) have a potential to attract average revenues of over Rs 250 million per year through out-of-home advertising. Cities that have a population of up to 1 million, revenue from out-of-home advertising is estimated in the range of Rs 7.5 million to Rs 10 million per annum.
For smaller municipalities and town panchayats, the estimated revenue generation potential through advertising is estimated in the range of Rs 1 million to Rs 2.5 million per annum. Megacities have an even higher potential of generating revenue through advertisements revenue and tax and can be in the range of Rs 750 to Rs 1 billion depending on the availability of space in their assets, the report says.