If there is money and technology, then opting for a metro project works. But if it's only for a status symbol, then it's not a well-deserved investment. Other investments should be explored before jumping on the metro bandwagon.
Our Experts
- Arun Chandran, Managing Director, SynergiZ Global Services Pvt Ltd & Project Director – (Parsons Brinckerhoff) – L&T Hyderabad Metro Rail
- GR Madan, Principal Advisor – Projects, Louis Berger, and former General Manager, Indian Railways
- Dr Manoj Singh, Adviser – Transport, Planning Commission
- Sanjiv Rai, Managing Director & CEO, IL&FS Rail Ltd
What were the issues faced by you while getting the metro project implemented in your city?
Chandran
Obtaining Right of Way (RoW) continues to be the major challenge on a linear work project like the metro project. It is more difficult in a metropolitan region due to the existing unplanned development and population. Designing the foundations and the piers in a complex construction environment and getting them executed on the ground is also a huge challenge. Procurement challenges that were common a couple of decades ago have been overcome to a large extent these days because of the availability of qualified vendors who meet the required criteria.
Rai
One of the key issues in implementing the project is always the availability of land and funding. We being an infrastructure finance institution, were able to raise the financing in a short period.
However, acquiring land did pose some trouble. Land acquisition is the biggest challenge for any project. Unless land is available on a clear cut basis from day one, it will be difficult to start the project in time.
What factors make metro rail a viable mode of transportation for your city?
Chandran
An integrated traffic and transport plan is the starting point for any city to determine the viability of any public transport system. Unfortunately in India we are building “a specific transport system at a given time” in the absence of a comprehensive executable transport plan taking into account the other existing or planned modes of transport. Nevertheless, a growing city where population and traffic are on the rise will certainly benefit from and adapt slowly to the public transport system of metro rail. Ideally, every city with over 4 million people should have a metro rail in place.
Singh
For cities like Delhi, Mumbai and Kolkata, metro projects are required and the success of the Delhi model has shown us that it works. But smaller states, cities and capitals, it is debatable whether they should go for metro straightaway without exploring other mass transit methods including the BRT or including the buses. If you improve your bus service in a one million or sub-one million city, I think it will give you more dividend than going for a metro project or a monorail. We are of the view that these options should be exercised first. Also, in most of the towns there are hardly any active bus services. So money should go in improving the bus service of these states than going for these prestigious projects and going for a metro just for the sake of it. Every city must have an efficient and functioning bus system and state governments should focus on them. If there is money and technology, then opting for a metro projects works. If it's a well-thought of project serving an SEZ or an IT city, then we should have it. But if it's only for a status symbol, then I don't think it's a well-deserved investment. Other investments should be explored before jumping on the metro bandwagon.
Rai
Availability of passengers is one of the factors that make a project viable. Metro can earn revenue either by its passengers or through advertising, branding, which is not very great initially. As time goes by, advertisers see the value and they come and advertise. But initially the revenue is dependent on passengers. We realised quite upfront that the ridership in Gurgaon metro was going to grow slower than what we had anticipated 3.5 years back when we had taken the concession. This was based on the fact that many companies were quite hesitant to shift their staff from private taxis into the rapid metro because they wanted to see the performance and the reliability. So we went out to a lot of companies, did a lot of innovation in marketing, branded the stations and trains and we were able to generate a fair amount of revenue from the non-fare sources, which we are doing till date.
What is the kind of burden does this rapid expansion adds on to the state's treasury?
Chandran
Any capital intensive project will require huge capital investments and as India is already lagging behind in implementing the metro rail system in its major cities, the burden is two-fold. The cost escalation and the additional costs to carry out the difficult task of structuring the implementation of a new project in an existing city that has been developed over the years will both impact the state treasury.
Madan
Providing proper mobility to people is the responsibility of the government, not a burden on the government. Cities have to grow and if they are growing, they should continue to grow. This needs continuous mobility and it is the duty of the government to do the needful. Basically, urban transportation continues to be state government's responsibility. Central government is involved in assisting these major projects because state governments by themselves cannot handle such projects. So they have come forward with special schemes to partly finance these projects.
How can smaller states (that do not fit the population criterion) sustain this rapid growth and affiliation towards metro rail?
Chandran
Smaller states would need to plan the development with sound public-private partnership (PPP) models, central funding and under the Metro Act. The projects should be planned in smaller phases and connectivity should be increased with time. States have to make sure that major issues preventing the development of such projects like RoW issues, property acquisition, road widening, etc, are taken care of ahead of time. Sound planning would ensure that construction is faster.
Madan
Smaller states also have big cities. Assam is a small state, but Guwahati is a growing city which is now planning for metro rail. We are not worried about the size of the states, but the size of the cities. The policy now is that any city having population of 20 lakh and above should have a well-planned public transport system. So size of the city, its population and its projected growth are important.
What way of financing a metro project would you prefer and why?
Chandran
PPP would still be the ideal route at this time since the capital investments are huge but the PPP model currently being used in Mumbai or Hyderabad needs to be refined. The Delhi Airport Metro Express is one model that had all the right ingredients for success. In this PPP model, the civil structures were built by the government (represented by DMRC) and the systems were installed and operated by a private partner (the concessionaire). The cost of the project was borne by both the parties but more importantly the government took the responsibility of resolving the initial issues that typically come up during the construction of a linear project. The revenue sharing model ideally compensates both the parties.
Rai
Today all metro projects are being financed with commercial financing. Almost 30 per cent of it is being put in as equity by the sponsors. IL&FS is putting 30 per cent equity and 70 per cent is being financed from several banks for which we are paying higher rates of interest. And rates of interest are not fixed. And as plan rates go up, the base rate goes up and our interest rates have also grown up by almost 2.5-3 per cent in the last 3-4 years. So that is honestly not the preferred mode of financing. Most of the European and North American countries have long-term bonds because you realise that all these infrastructure projects are long-term projects. A metro project is built to last for over 100 years. Of course there will be upgrades and retrofits etc, but the structure is built for a very long time. Also, our concession is for 99 years, so there is no reason why we should be forced to pay loans in such a short period of time. We have 17 years and 9 months to repay the loan, which is a very short period of time considering we have a 99 year concession. So if India has to build a lot of privately financed infrastructure, they will have to issue long-term bonds for these projects.
Madan
Metro projects need a lot of money. We in Mumbai tried the PPP model. In the country only four lines were tested for PPP. Delhi Airport Metro, Mumbai Metro I & II and Hyderabad. Rest all projects are funded by government, or partly funded by government and public fund. The experts committee view is that we should go for public funded projects. My personal view is that instead of throwing the model out, refine the model. If you had a bad experience, analyse the cause and find out the reason and structure the project in such a way that PPP becomes workable. The Ministry of Urban Development (MoUD) has decided to take only 20-25 per cent projects in PPP mode, rest go with government or public funding. The experts committee also says that unless a project gets a heavy revenue base, one should not go for PPP.
Any existing local/global metro project/model you would like to mould your project upon or take learning from?
Chandran
Most of the cities in India are quasi developed and the density of the population in the areas where these projects are planned is high. Hence the model needs to account for the ground work to be completed prior to roping in the private party in the PPP model. A slight variant of the Delhi Airport Metro Express model could also be used where all RoW issues are addressed by the government and the private party is provided with an encumbrance free site to start the work.
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