Brookfield Asset Management, I Squared Capital, Japan’s Sojitz Corporation, Ambit Capital and Morgan Stanley are among financial institutions (FIs) who have expressed interest in funding the Delhi Metro Rail Corporation (DMRC) for a new public-private-partnership (PPP) initiative to lease coaches rather than purchase them.
Even as two new metro lines are scheduled to open shortly, the DMRC is currently short of 916 coaches on the six lines that are already operational. To avoid huge capital investment of approximately Rs 13,000 crore for purchasing 916 coaches, the DMRC has decided to invite bids from financial institutions and rolling stock manufacturers in a PPP model whereby it will submit its requirement for trains and pay the FI concerned on an hourly basis for trains and coaches provided. However, since this is the first time that such a model is being explored in India for metro operations, the DMRC has decided to initially invite bids for 25 trains, comprising six coaches each, or a total of 150 coaches.
HS Anand, director, rolling stock, DMRC, told FF that Delhi Metro has received enthusiastic responses from both FIs and global rolling stock manufacturers in the two pre-bid meetings that have been held so far. “The bidders will have to submit their hourly availability rate and based on the other criteria mentioned in the tender, the net present value (NPV) will be calculated. Whoever is able to give the best NPV will be the preferred provider and will be selected,” Anand said.
The bidder will be held responsible for procurement and maintenance of the rolling stock. Hence, in order to submit a bid, financial institutions will also have to tie up with manufacturers such as Bombardier, Alstom, BEML, Mitsubishi Electric and CRRC Sifang who have expressed interest in providing coaches to the DMRC on a lease basis. With an increase in passengers, the DMRC plans to lease 100 more trains in the second phase, if this experiment goes well.
The ridership for the DMRC crossed the 100-crore mark in a single financial year in FY17 and was averaging almost 30 lakh on a daily basis, as per data available till March this year on the DMRC’s website.
The advantage of the PPP, or the lease model is that the DMRC is not required to make an upfront capital investment or incur any maintenance costs over the entire life cycle of the rolling stock, which is usually about 35 years. Anand said as a thumb rule, while maintenance costs are about 2-4% of the capital expenditure incurred in the purchase of the rolling stock, costs tend to shoot up after the 10th year and grow till the end of their life span.