The Cabinet on Wednesday approved a new metro rail policy, making private participation a must for states to get central assistance for new metro rail projects in the country. The policy will focus on innovative models of implementation and financing, as well as standardisation and indigenisation of hardware and software, to create jobs locally, finance minister Arun Jaitley said. “There will be a system-based approach (for sanctions of new projects). Economic internal rate of return (EIRR) should be 14% for approving new metro projects,” Jaitley said. Taking note of substantial social, economic and environmental gains of metro projects, the policy stipulates a shift from the present financial internal rate of return of 8% to EIRR, in line with global practices.
The policy empowers states to make rules and regulations and set up a permanent fare fixation authority for timely revision of fares. States can take up metro projects exercising any of the three options for availing central assistance: Public-private partnership (PPP) with central assistance under the viability gap funding scheme, grant by central government under which 10% of the project cost will be given as lump-sum central assistance and 50:50 equity sharing model between central and state governments. “Under the policy, states need to adopt innovative mechanisms like value capture financing tools to mobilise resources for financing metro projects by capturing a share of increase in the asset values through ‘Betterment Levy’,” the government said in a statement. States would also be required to enable low-cost debt capital through issuance of corporate bonds for metro projects, it added.
Metro rail projects are gaining popularity across the country with a total length of 370 km already operational in eight cities — Delhi (217 km), Bengaluru (42.3 km), Kolkata (27.39 km), Chennai (27.36 km), Mumbai (21 km), Kochi (13.3 km), Jaipur (9 km) and Gurugram (1.6 km).
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Metro projects with a total length of 537 km are in progress in 13 cities including the eight mentioned above. Metro projects with a total length of 595 km in 13 cities including 10 new cities are at various stages of planning and appraisal. Separately, 381 km of rapid rail is being planned for the national capital region.
The new policy also mandates transit-oriented development (TOD) to promote compact and dense urban development along metro corridors since TOD reduces travel distances besides enabling efficient land use in urban areas. Setting up of an Urban Metropolitan Transport Authority (UMTA) has been made mandatory; the UMTA is to prepare comprehensive mobility plans for cities.
Seeking to ensure financial viability of metro projects, the new policy requires states to clearly indicate in the project report the measures to be taken for commercial/property development at stations and on other urban land and for other means of maximum non-fare revenue generation through advertisements, lease of space, etc, backed by statutory support. States are also required to commit to accord all required permissions and approvals.