Project cost for Mumbai Trans Harbour Link doubles, toll for passenger cars won’t change

By: | Published: September 27, 2016 6:32 AM

The project cost for the Mumbai Trans Harbour Link (MTHL) has doubled over the past four years, but the toll for passenger cars (one-way) is expected to remain at the same level proposed in 2012 — R175-220.

The project cost for the Mumbai Trans Harbour Link (MTHL) has doubled over the past four years, but the toll for passenger cars (one-way) is expected to remain at the same level proposed in 2012 — R175-220.

In 2012, the project cost was estimated at over R9,360 crore; today that number has been reworked to R17,500 crore, an official spokesperson for Mumbai Metropolitan Region Development Authority (MMRDA) said. The toll proposed for commercial vehicles in 2012 was R800 — one-way.

The six-lane Mumbai Trans-Harbour Link (MTHL), which was first conceived in 2004, has seen the project cost escalate from about R4,500 crore in 2005 to R9,360 crore in 2013.

Earlier the project was to be built under the build, operate, transfer (BOT) model which meant the developer of the project would provide the finance, procured at high interest rates. Currently, even with a soft loan (an interest rate of roughly 1-1.4%), MMRDA still needs to repay JICA, and according to a senior MMRDA official, it plans to levy a toll on commuters for using the bridge.

However, the official said the rates would not be higher than what was first proposed in 2012.

“The reason that the cost escalation isn’t a big problem is that since the entire project model has changed, the loan is now offered to us at an interest rate of just about 1%, in line with the general interest rate that Japan International Cooperation Agency (JICA) has indicated for all projects in India. Therefore, we do not need to charge higher toll rates compared to what was first proposed under the BOT model,” the official said.

However, Alok Deora of IIFL Research believes the additional rise in costs will have to be recovered from commuters. “The toll period which has been proposed at 30 years — and is one of the longest toll recovery periods we have seen till now — could be increased further to recover part of the additional construction costs,” he said. However, with toll charges also being a political issue in Maharashtra, Deora said he does not expect toll rates to be higher than what has already been proposed.

The escalation to the current level is in large part due to the changes proposed in the design by the financier, to include two rescue lanes on either side, to be used only in times for emergency for evacuation. Also, a section of the project is now envisaged to be built using steel instead of concrete, as was proposed earlier.

In 2012, five bidders were shortlisted based on pre-qualification criteria,but none of them bid for the project. The tender had to be scrapped. Feasibility of the project was then cited as one of the concerns since the estimate of 62,000 cars a day was built on the premise and promise of the Navi Mumbai Airport which itself was a question mark.

The shortlisted developers were concerned that 15-20% of the traffic would be impacted if the Navi Mumbai airport was delayed. The MMRDA, therefore, added a provision for a shortfall loan from the central government if the traffic would be 20% below estimates. The project still failed to take off and had to be converted into a cash contract or engineering, procurement and construction (EPC) mode.

It has now witnessed massive interest by developers with 26 bidders having submitted their requests for qualification. The large quantum of loan by JICA (85% of the project cost) has further added to their comfort.

All eyes are now on further developments. The bids for the project are likely to be evaluated by November and construction work — which has been divided into three packages — is expected to begin by December.

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