In a big relief to Reliance Infrastructure (R-Infra), the Anil Ambani-led company that operates Mumbai’s first metro line, the Bombay High Court has cleared the decks for fares on the Ghatkopar-Versova metro route to be raised.
On Thursday, the court dismissed an appeal, which the Mumbai Metropolitan Region Development Authority (MMRDA) had filed in June, challenging the R-Infra-led consortium Mumbai Metro One’s decision to hike metro fares.
R-Infra had argued that it had the right to decide the fares for the 11.4-km metro network, being the administrator of the project under the new Metro Act, and pending the formation of a fare fixation committee. It also reasoned that a fare hike was necessitated due to cost escalations during commissioning of the project, which was delayed by two years.
The final project cost of the first phase of the metro rail to come up in Mumbai stood at R4,000 crore, up 70% from the originally envisaged cost, according to R-Infra.
The court’s decision will allow Mumbai Metro One to raise metro fares up to R40 for the full journey between Ghatkopar in the eastern suburbs to Versova in the west (with slabs of R10, R20 and R30 in between).
At present, the company is running promotional fares, with the maximum fare being R20. These discounted fares were applicable till Thursday.
R-Infra did not comment on Thursday’s court order.
R-Infra and another private firm Veolia Transport hold a 74% stake in Mumbai Metro One, while MMRDA holds the rest. As the news about the court order broke around
noon, R-Infra’s share price shot up to the day’s high of R494.95 per share at 12.20pm, on the BSE. R-Infra’s stock price closed at R488.25 per share on the BSE, 2.13% higher than its previous close.
The court also noted that the central government is expected to form the fare fixation committee by January 31 and directed that metro fares should be fixed within three months of the formation of the committee. The court refused MMRDA’s plea for an interim stay on its order till January 31.
The division bench headed by Justice Mohit Shah observed that R-Infra and Mumbai Metro One had contended that at current rates (of the tickets), the project was incurring a daily loss of R85 lakh. If the fare band is revised to R10-40, the daily loss will come down to R62 lakh.
During the course of arguments, R-Infra and Mumbai Metro One told the court that average daily passenger traffic on the metro network was below estimates by over 30%.
MMRDA, the implementing authority of the project was insistent on an initial fare band of R9-13, based on the concession agreement signed between Mumbai Metro One and itself in 2007.