The 38-km, R12,500-crore Lucknow Metro Rail project may not see the light of the day. Hailed as one of the most ambitious projects undertaken for the rapidly expanding city, the mass rapid transport system is projected as the need of the hour. But even after a string of high-level meetings between senior state government officials and officials of Delhi Metro Rail Corporation (DMRC) and Larsen and Tubro (L&T), regarding which financial model to finally settle on, the state government is still not convinced whether it should go ahead with the project or not.

According to a senior official, the reason why the state government seems to be grappling with the issue is that the project does not seem to be viable on paper. Giving a lowdown he explains, ?All financial models, viz, the DMRC model and the PPP model, as in Hyderabad metro which is under construction, have been taken into account. But the consensus that has emerged so far is that the Lucknow Metro project is an idea whose time has not yet come. It is slightly premature to plan for a metro at this stage, especially as it does not seem to be a viable preposition.?

The DMRC model envisages the Lucknow Metro project to cost R12,671 crore. This includes R9,519 crore for construction and R3,052 crore as escalation and central taxes. While both the Centre and the UP government would give a combined 40% viability gap funding, the balance funding would come from a JICA loan. The state government would provide the land for the project. ?The advantage of giving the project to DMRC is that it is the only one to be running a metro in the country and has a track record of completing the project on time. Also, they are in the business and all tender documents are already in place, and so time would be saved if we go in for this project,? said the official.

The other option is to go through the Hyderabad Metro model, which is the standard PPP model, in which 20% VGF would be borne by the GOI and 20% by GoUP. The land would be that of the state government and the private company will run it.

?If we take the DMRC model,? said the official, ?the 20% VGF of the R12,500-crore project plus the land cost works out to be approximately R3,500 crores, which has to be borne by the state government. Add to this the state guarantee for the JICA loan plus the operational losses, if any. Based on the project report and the traffic figures, the rate of return is working out to be around 1.03%. which means that the project, per se, is not viable.?

In case the PPP model is adopted, the biggest worry is that anyone who bids will have to assemble the expertise as no private company is running a metro in India as of today. ?If the rate of return is 1.03%, the state government has to throw in a lot of land for development. If 250 hectare of land is given, the rate of return can be brought down to 14%. Anything less than that would be termed financially unviable,?? said another senior government functionary closely associated with the project. However, that land assembling is in itself would be a big challenge,? the official said, adding that the fundamental question is with traffic density not being viable, what should the state government do?

Speaking to FE, another senior official of the state government conceded that a consensus is fast emerging among all stakeholders that the Lucknow Metro project is slightly premature in time and one has to wait for the traffic density in the city to pick up before the demand for the project can become financially viable. ?One can argue that almost all metro rail projects in the world are operating either on losses or on wafer thin margins, but one still has to understand whether there is actually a need for it in Lucknow, which does not even have a proper city bus service as of now,? he said, adding that a final decision on the issue would be taken after a few more clarifications come in. ?We have asked for the cost difference if the metro is elevated on different stretches of its 38-km run. Once we get the clarifications, it would be easier for us to take a conscious decision,? said the official.

According to experts, the construction and operational cost of an underground metro rail is almost three to four times the cost of over head one.