Special Purpose Vehicle Project

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03 Nov 2021
7 min read

Post Highlight

The Ministry of Housing and Urban Affairs has a smart city mission, and the goal will be implemented at the city level by an SPV founded specifically for this purpose. The SPV's mission is to design, appraise, approve, and disburse money for Smart City development projects, as well as to implement, manage, operate, monitor, and evaluate them. The government has determined that each city would have its own SPV, which will be led by a full-time CEO and will include candidates from the federal, state, and local governments on its board of directors. #ThinkWithNiche

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Special Purpose Vehicles (SPVs) have been implemented into all 100 cities chosen to become "smart cities" under India's Smart Cities Mission. Meenakshi Sinha argues in this note that the SPV-driven paradigm of city government is rife with power imbalances that are likely to enhance elite control over city resources and governance spaces, hence exacerbating class disparities among cities.

A wish list of infrastructure and services in Smart City describes his or her level of aspiration. To meet people's hopes and demands, urban planners should strive to build the complete urban eco-system, which is represented by the four pillars of comprehensive development: institutional, physical, social, and economic infrastructure.
The government has a smart cities mission, with the major goal of providing strong infrastructure, high quality of life, and a clean and sustainable environment.

A Special Purpose Vehicle (SPU), sometimes known as a Special Purpose Entity (SPE), is a legal entity created by the parent firm. Because it has its own assets and obligations, as well as its own legal standing, the SPV is distinct from the parent company.
To isolate the financial risk, an SPV is built for a specific object. It protects the parent firm if it goes bankrupt. SPVs are typically set up so that the parent firm can take on high-risk initiatives.
Being a separate body corporate (typically under the Companies Act, 2013), it can undertake processes, works, and mechanisms that the municipal body may not be able to undertake in terms of law or its processes, such as raising large amounts of debt, entering into joint venture arrangements, leasing, purchasing, or selling assets – the majority of which, for municipalities, require separate sanction from the senate.

The SPV will have complete control over the implementation and management of smart cities. SPV can hire Project Management Consultants (PMC) to help with the design, development, management, and implementation of area-based projects.
The list of these firms is established by the MoUD and other hand-holding authorities, and assistance can be obtained from an impaneled consulting firm. The state/ULB financial method to be followed for the procurement of goods and services. Smart City projects can also benefit from the model frameworks produced by MoUD.
That the State/ULBs will verify that the SPV is receiving enough revenue to be self-sustaining, creditworthy and that it will then be able to acquire more funds from the market.

The government's contribution to smart cities will be in the form of infrastructure with public benefits. Despite the skewed political logic that underpins the formation of SPVs to steer governance in our cities, SPVs have been promoted in the name of efficiency, the ability to raise funds for infrastructure projects, and the capacity to better coordinate and effectively channel efforts for speeding up the urban development process. Municipalities are frequently perceived as lacking in any of the aforementioned characteristics, necessitating the creation of new institutional configurations such as SPVs.

Conclusion

The overarching objective is to demonstrate a high-performing urban system that the municipality can use as a model for expanding its jurisdiction into other areas. SPVs can also communicate with citizens in ways that municipal entities cannot, particularly through social media.

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