Different lines of thoughts over metro funding model

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Metro: Whose line is it anyway?

With an investment to the tune of $13.5 billion required for the future metro projects in the country, the issue of funding model for projects needs a closer look, especially in the context of non-allocation of funds for such projects by the government and the recent criticism of private-public partnership (PPP) model used in the Hyderabad metro by DMRC chief E Sreedharan.

“The 11th Five Year Plan does not have any allocation for the metro projects. Projects need to be taken up on PPP model to fund infrastructure growth in the country,” said Gajendra Haldia, principal advisor (Infrastructure), Planning Commission.

In this context, the three projects currently underway in the country display distinct models on which the upcoming metro projects could be funded in Ahmedabad, Chandigarh and Pune.

The Delhi Metro, which has shown extraordinary feats in project management and efficiency, has been funded solely by the government in cooperation with Japan Bank for International Corporation.

The Rs 12,000 crore Hyderabad metro has just been awarded to a consortium led by Maytas Infrastructure on PPP basis. Similar is the case with Mumbai Metro, the first phase of which is being developed by Mumbai Metro One, a joint venture company between Reliance Infrastructure, Mumbai Metropolitan Region Development Authority (MMRDA) and France-based Veolia Transport at an investment of Rs 2,300 crore.

Explaining the model of the Hyderabad metro, N V S Reddy, managing director, Hyderabad Metro Rail Ltd, said, “The project based on build operate and transfer basis will be developed by Maytas Infrastructure for a concession period of 30 years. We have got Rs 30,000 crore from the concessionaire in lieu of the 269 acres of land leased to the concessionaire to develop properties around 33 railway stations and three depos. The investment in real estate is beyond the project cost and will be funded solely by the developer.”

“In case of the Hyderabad metro project, the concessionaire will have to pay all the taxes, interest and dividend unlike the Delhi Metro. The operational losses will also have to be met by the concessionaire. The Delhi Metro pays an interest of 1.5% on the total loan worth Rs 10,000 crore for a period of thirty years. Also, it is not liable to pay Customs as well as Excise duty,” said Haldia.