While Reliance Infra has won itself a reprieve from the Bombay High Court in the matter of raising fares for the Versova-Ghatkopar stretch of the metro railway in Mumbai, the episode is another reminder of not just how the legislation surrounding PPP needs to be revisited, but also its spirit needs to be revived—the 3rd ‘P’ in ‘PPP’, it has to be remembered, is ‘Partnership’. The Mumbai Metro project makes for an interesting case study not only because some of the decisions appear arbitrary, but also because of the regulatory uncertainty that continues eight years after the project was bid out. It is also a lesson on how quickly the partners—in this case, Reliance Infra and MMRDA—can fall out; it was the MMRDA that had opposed the fare hike and gone to court. When there was a huge cost escalation—from R2,356 crore to R4,321 crore due to delays in the first phase—this needed to be sorted out, and not left to drag. A big learning is that in such cases of escalation, the matter needs to be tackled quickly, if need be, by raising the viability gap funding (VGF)—ironically, in this case, the VGF was reduced from the original R1,251 crore to
R650 crore, possibly because of the agreement that allowed for compensation in case of unanticipated increases in the project costs.
Instead of the matter being fixed, when the metro started operations, the chief minister said he would not inaugurate it due to the high fares being charged. The confusion over whether metros come under the Tram Act or under the Metro Act also continues—RInfra claims it comes under the Metro Act and a tariff committee can raise fares after the initial period—and needs to be resolved since, going by the Rakesh Mohan committee, India needs R1.3 lakh crore for metros in just the current Plan period. Given the public utility nature of metros, it is clear any solution found to keep investors happy has to ensure the public doesn’t get taken for a ride either.