Transforming India’s ambitious ‘Smart Cities’ dream into a reality would majorly depend on the availability of funding. Recently, there have been reports of the ‘Smart Cities’ mission facing roadblocks in long- term funding and private sector participation.
Already there are talks going on to create an incentive-based mechanism to lure the private sector and it seems to be the opportune time to bring in innovation in planning to fast track the development process. The much talked about concept of ‘Swiss Challenge Method’ can be a suitable solution in this scenario.
As we know, funding is critical for the successful completion of any infrastructure project within its targeted timeline. Large scale infrastructure project requires huge financial back up and often depends on Government Grants or financial aids. Therefore, ‘Swiss Challenge method’ can be considered as an effective and smart alternative to address the financing issues that often delay the completion.
Swiss Challenge: How it works
The Swiss Challenge method is a mix and match of open auction and closed tender invitation process which determine the asset’s optimal value and reiterates Government’s attempt to bring in transparency through e-Governance. It encourages innovation as the private entities have a chance to take the initiative as well as to usher in technological innovation leading to cost efficiencies and reduced project timelines. The method allows a mix of financing strategies where the government can finance, while also assistance can be sought in term of development loans from multilateral agencies through public private partnership (PPP) model.
Advantages of Swiss Challenge method
Broadly, following are the benefits of adopting this method:
a) It encourages private sector participation. For governments with limited technical and financial capacity, private sector can be looped in to fill the gap and promote innovation.
b) It is an opportunity for private developers to bring in innovation, technology and uniqueness to a project, while also fostering healthy competition.
c) It reduces the transaction cost considerably
d) If the project gets awarded to original bidder, the process is implemented faster.
e) Results may be assured as at least one private player (the original bidder) is engaged from the initial stage. Hence, better project structuring is possible as the original bidder Suo moto undertakes a detailed feasibility and financial analysis of a project.
The Indian context
The concept has already made an inroad in India and being implemented by the Government at various levels. There have been announcements of Government adopting this method for the redevelopment of four hundred Indian Railway stations. Andhra Pradesh Government has adopted Swiss Challenge approach for developing Eluru Smart City project with private partners like Shapoorji Palonji, Siemens and the other international players. The tender has already been received for counter challenge and is planned as a hybrid annuity model to be completed in 2 years’ time with investment of about INR 1000 crores. The Swiss challenge process had also been approved for Tirupati Smart Cities Project and initial proposals received from Essel Infra. Rajasthan PWD has released an RFP for the Upgrading and Rehabilitation of Roads in the Districts of Alwar, Bharatpur and Jaipur in the State of Rajasthan on Hybrid Annuity Mode, under Swiss Challenge Method of Procurement.
These projects, as they head towards successful completion, would stand as testimony encouraging wide acceptance by the Government organisations across sectors. To make 100 smart cities a reality in India, this method will play the role of a crucial catalyst.