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PPP framework and policies need to be revamped

PPP framework and policies need to be revamped

Highlighting the role of the mass rapid transit system in the Indian urban transportation, Abhay Kumar Mishra, CEO, Mumbai Metro One Pvt Ltd, lauds the successful completion of the first year of the Mumbai Metro, and seeks more benefits from the government.

With lesser carbon emissions, metro rail has become a significant mode of transportation globally. What, in your opinion, is the role of metro rails in the Indian urban transportation system today?
As cities grow in size, the number of vehicles and vehicular trips on road system go up. This necessitates a policy shift to discourage private modes of transport and encourage public transport. The ideal transportation system provided should be such that it would take into account the passenger carrying capacity, energy consumption, environmental impact, travel time, safety, reliability, convenience to commuters, and space constraints for building the infrastructure.

There has been a growing interest among policymakers about the relevance of rail-based systems in India to address the mobility needs of the expanding population in the cities. While evaluating different mass transit options for Indian cities, metro systems are often given preference due to the fact that road-based bus systems cannot cater to capacity requirements as much as metro systems. In addition to this, metro rails are perceived to have higher levels of comfort, safety, speed, and efficiency than bus systems, making them more attractive to both policymakers and potential users of the system.

How is Mumbai Metro One faring? How is the work on the other phases of Mumbai Metro progressing? Are they likely to meet their respective targets of commencement?
Mumbai Metro One completed its first full year of operation in June 2015. The operational performance of Mumbai Metro has been outstanding in the first year of operation itself. It has surpassed all performance targets as stipulated in the Concession Agreement and is one of the very few metros in the world to have stabilised its operation in the very first month of commercial operations. In a short span of one year of operations, Mumbai Metro has served over 95 million commuters, making it the densest metro in the country and the eighth densest metro in the world. The safety and punctuality record of the metro has been impeccable till date, and we will always strive to provide such safe and quality services to the citizens of Mumbai. The team at Mumbai Metro One is committed to provide reliable and comfortable travelling experience to the Mumbaikars.

Regarding other metro projects in Mumbai, the Maharashtra government is keen to start them at the earliest. After the huge success of Mumbai Metro Line 1, expectations of Mumbaikars have increased for additional metro lines. Although there are many challenges, I hope the government will be able to commence the proposed metro lines at the earliest.

What are the pros & cons of the PPP and EPC models of funding the metro rail projects? Which is the preferred alternative and why? Has PPP model been rewarding for Reliance?
In an increasingly competitive global environment, governments around the world are focussing on new ways to finance projects, build infrastructure, and deliver services. Public-private partnerships (PPPs) are becoming a common tool to bring together the strengths of both sectors. In addition to maximising efficiencies and innovations of the private enterprise, PPPs can provide the much needed capital to finance government programmes and projects, thereby, freeing public funds for core economic and social programmes.

A PPP model brings in the efficiency of the private player and ensures that a quality product is delivered as the private player understands that it would also have to operate the same, and would ensure minimal life cycle costs. Further, a PPP player would ensure that the assets are created at a minimal cost.

An EPC player would be aiming to complete the construction at the minimal cost to maximise its profit. An EPC player works with the short-term vision of constructing the project, but under a PPP framework, the developer is required to serve for a long-term period, say 25 to 40 years.

In India PPP framework in metro sector is yet to mature; however, in the existing PPP framework, there is a need for innovation to make it successful in the current scenario. From our experience in electricity distribution and transmission sector, PPP has proved to be rewarding for us. This clearly establishes that PPP is bound to work if the right framework and regulatory mechanism are put in place by the government.

How far has the government´s target of attracting investments of Rs 56 lakh crore into the infrastructure sector during the 12th Five-Year Plan (2012-13 to 2016-17) benefited the progression of the metro rail projects?
Private sector investments look for assurances in terms of regulatory stability, political willingness to develop infrastructure on commercial principles, and fair policies to protect the investors money through guaranteed returns. The PPP framework and the associated policies need to be revamped in view of the above so that the business becomes sustainable through a combination of prudent commercial principles.

What is the current debt- to-equity ratio for the projects? How far has the proposed 20:80 ratio progressed? What is your perception of the 20:80 ratio?
The current debt-equity ratio for the Mumbai Metro Line 1 project is around 50:50. Funding at 20:80 ratio of debt and equity can be only made feasible if the government makes available cheaper loans.

What is your take on the funding from international agencies like JICA as well as the World Bank´s keenness to fund two mega projects in Mumbai?
The success of the large infrastructure projects would largely depend upon the availability of cheaper sources of funds and therefore, funding from international agencies like JICA and World Bank is extremely important. Metro projects are highly capital-intensive in nature, with a long gestation period. Interest cost constitutes the largest chunk of the total cost for any metro project, and most of the large projects are able to meet only the operating cost during its initial years of operation. In order to reduce the financial stress on the infrastructure projects, it is important that the interest burden be reduced, so that there is no compromise made by the company on the other operational and safety requirements and standards.

Are all the metro rail corridors utilised to the optimum level? What is the significance of first mile and last mile connectivity for proper utilisation of capacity?
Generally, all the infrastructure projects are developed for catering to the traffic demand for a horizon of 30-40 years. In that scenario, the optimum level of utilisation cannot be achieved during the initial years of implementation. Having said that, there are certain metro rail corridors where the traffic level has reached to a substantially high level, whereas there are other corridors where the traffic build up has not been as per the expectations.

The first and last mile connectivity is very important as a seamless connectivity can significantly increase the traffic for any infrastructure facility. There is a need for the urban transportation planners to give more focus to this aspect, and ensure that planning for first and last mile connectivity shall be undertaken along with the planning for the infrastructure facility itself. With inadequate first and last mile connectivity, the infrastructure facility shall remain unutilised.

Is the government´s announcement of 100 smart cities likely to escalate the implementation of the metro rail projects?
Yes, definitely. Metros are the most technologically advanced urban transport solution. It is the fastest and the most reliable transport system, and has the capacity to ferry large number of commuters. In our view, smart cities would be incomplete without an MRTS project like the metro.

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