The corridors are still in the nascent stages of development

While highlighting the potential of the metro rail sector, Arun Chandran, Programme Director, L & T Hyderabad Metro Rail and Managing Director, Synergiz Global Services Pvt Ltd, reveals the stumbling blocks in project execution.

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 benefited metro rail projects?
This has not been largely used in the metro rail sector as yet, and this sector is still developing. It is to be noted that these projects take a long time to construct and the initial challenges of right of way need to be overcome.

What kind of VGF subsidy has been extended by the government?
The Government of India has notified a scheme for viability gap funding to infrastructure projects that are to be under¡taken through public private partnerships. The amount of VGF will be equivalent to the lowest bid for capital subsidy, but subject to a maximum of 20 per cent of the total project cost.

What is the current equity-to-debt ratio for the projects? What is your take on the 20:80 ratio?
The prevailing ratio is 30:70 and the government has proposed an equity-to-debt ratio of 20:80 with some riders, where the metro rail project has to be developed as a pure transport project. Metro projects are highly capital-intensive and an equity-to-debt ratio of 30:70 requires a high investment by the concessionaire. The 20:80 structure will definitely be better, but other overall conditions of RoI should improve to generate interest in PPP models for the metro rail.

In terms of ROI, how many metro rail projects in India have been successful? Currently, none of the projects can be called successful. Large upfront capex requirements, opex requirements (supported by the existing revenue inflows), and constant upgrades on the existing network with time consume large chunks of capital.

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?
India does need sustained funding for large capital-intensive infrastructure projects and the funding from agencies like JICA and World Bank will be a big boost in the development of the infrastructure in the country. This is generally a win-win as this helps keep the project costs lower by 15 to 20 per cent, and also boosts indigenous manufacture and supply on such capital-intensive projects. The new Foreign Trade Policy that was introduced for 2015-20 has been applauded by the industry and any concerns regarding agencies like JICA need to be addressed.

Is the launch of smart cities likely to escalate the implementation of the metro rail projects?
Our cities in the future need to be both inter and multi-modal. Information should flow seamless from one transit system to another, giving options for travellers to choose from the various transport options. Smart cities will definitely be a step towards integrating technology in everyday life and the implementation of metro rail as an attractive public transport system will play a significant role in the city´s development. Commuter convenience has to be the top priority in planning any metro.

Do all the cities that are proposing to set up this rapid transit system have the requisite infrastructure for the purpose?
At present, the infrastructure is inadequate in the cities where the government is proposing to set up the rapid transit system. There has to be a rapid development and improvement in the basic infrastructure in these cities. Apart from that the basic norms of ridership have to be met as the rapid transit system will be expensive to construct. The best way would be to identify the routes and the alignment early with acquisitions completed prior to bringing a PPP developer or an EPC player on board. Sound planning will help in not only getting a cost effective rapid transit system, but also develop a city which has excellent last mile connectivity and the right infrastructure that can be expanded with the growing population.

Are all the metro rail corridors utilised to the optimum level? How significant are first mile and last mile connectivity for proper utilisation of capacity?
Currently, the corridors are still in the nascent stages of development as metro rail corridors are developed over a long period of time. Based on the city´s expansion and development, the connectivity has to accommodate pedestrians, office goers, transit riders, and other types of commuters at the opportune time. The development has to take place forecasting a certain corridor´s growth in future along with serving the current densely located areas, hence using the corridors to optimum levels. First and last mile connectivity are very important, but they are challenging to implement as the time for these projects is half a decade or longer, and most of this can only be done in a staggered manner.

What are some of the government´s policies and initiatives that have helped to push overall growth?
On one hand, we are seeing some movement in the road sector, with a few projects getting the nod in a couple of states. On the other hand, banks are carrying bad loans and company profits are dwindling. Some front loaded spending will be required, but this has to be measured and funnelled into areas and sectors where the requirement is high. Though, the government recognises the need to create jobs and achieve the growth goals, it has to keep into account the macro economic scenario that is developing. The next six months will be very challenging.

What reforms do you expect to help the progress of the sector?
The reforms will focus more on the rail sector to start with. The development of this sector and corridors will improve the infrastructure, connectivity and stations in some of the tier II cities, and then the development within the city can be looked at.