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Construction : Urban Infrastructure | October 2015 | Source : Infrastructure Today

We have lagged behind in pacing up with the implementation

Abhay Kumar Mishra, CEO, Mumbai Metro One Pvt Ltd, takes stock of the sector´s project implementation process and points out the policies that are crying for change.

How many metro rail projects are underway? Are there any backlogs?
Currently, there are many metro rail projects being implemented in the country which are under different stages of execution.

There are cities like Delhi, Kolkata, Chennai, Bangalore, etc., where the metro rails are already operational and the construction work is underway for further expansion of the existing metro network. Then there are cities like Hyderabad, Lucknow, Kochi, etc., where the project execution is underway for their respective maiden metro projects.

At present there are around 10 cities where the construction work is already under progress and if implemented as per the announced schedule, will add up around 212 kms (28 new lines) of metro network in coming three-four years. Though, in India the first metro started almost 30 years ago, we have lagged behind in pacing up with the implementation of metros. The implementing agencies need to provide a more conducive environment to all the stakeholders and adopt a collaborative approach in resolving the project related issues.

What are the major impediments in the completion of metro rail projects?
The major challenges for any metro rail projects in general would be:
Availability of land or Right of Way: generally the implementing agencies commence the project without acquiring a substantial part of the land or a clear road map for land acquisition and dealing with project affected persons (or PAPs). Due to this, projects are subjected to time and cost overruns. Thus, there is a need for a more detailed planning programme for the metro projects.
Unmapped underground utilities, encroachments and religious structures are also major bottlenecks for timely completion of the projects.
Since the metro rail projects are being implemented along the dense urban corridors in India, working on heavy traffic condition is a challenge.
Due to its capital intensive nature and with a fare structure to serve the socio- economic objective of the society, business viability is one of the major challenges for metro projects.
Single window clearances for all permissions and approvals need to be implemented.
The financing of the metro projects need to be looked at carefully. Being in utility service wherein fares are supposed to be affordable for all section of society, the commercial bank interest rate makes the projects unviable. In other words, if the funds for implementation are not provided at a cheaper rate (say around one-two per cent), the fare will be unaffordable for the commuters. The government needs to provide funds at a cheaper rate irrespective of the implementing agency (be it a government-owned or under PPP).

How far has the government´s target of of Rs 56 lakh crore investments in infrastructure benefited metro projects?
Private sector investments look for assurances in terms of regulatory stability, political willingness to develop infrastructure on commercial principles, and fair policies to protect the investments of private developers through guaranteed returns. The PPP framework and the associated policies need to be revamped in view of the above. The government also needs to address the challenges faced by existing infrastructure projects in PPP so as to create a favourable atmosphere .

How far have the government´s policies been successful?
Although the government has taken various initiatives to identify cities for metro development, the implementation framework needs to be revamped to ensure timely completion especially if the projects are opted to be implemented in a PPP framework.

What reforms do you expect to speed up progress?
The planning for the infrastructure development needs to be undertaken in a cohesive manner, keeping in view the interplay amongst various sub-sectors, viz., roads, expressways, mass rapid transit systems, smart cities, etc. Standalone planning and implementation of any one of the sub-sector creates imbalance in the intra and inter city planning and project implementation.

Robust planning and a complete road map regarding right of way, land or project affected persons (PAPs), environmental issues, religious structures, various approvals and permissions are to be structured to address in a time-bound manner through one window.

Apart from cohesive development, the government needs to revamp policies to promote private sector participation, providing a well-defined road map of projects, appropriate and stable regulatory system or mechanism and a strong political will to take necessary decisive steps to address road blocks in a time-bound manner. The financing of infrastructure projects is a challenge across the globe, especially when the projects are implemented with the participation of the private sector. Innovative financing plans that support private sector participation and results in affordable charges for a larger section of the society need to be formulated and implemented. Decision on infrastructure bond markets, utilisation of pension funds for financing long or mega projects and availability of multilateral and other foreign government funding are few examples that may be considered for infrastructure projects.

What kind of VGF subsidy has been extended by the government?
The total project cost for the Mumbai Metro Line 1 is Rs 4,026 crore. The Viability Gap Funding provided by the government is Rs 650 crore which is around 16 per cent of the total project cost. The promoters have infused Rs 1150 crore in the project which is slightly above 28 per cent of the total project cost.

In terms of ROI, how many metro rail projects in India have been successful?
Metro Systems, being mass transportation system, are required to serve larger socio-economic goals and are therefore, expected to charge low fares from its commuters which invariably lead to a gap between the cost to carry a commuter and the fare structure.

For a government organisation like DMRC, where all of the required funds come in the form of equity or interest free loans from the government and nominal interest bearing loans from the multilateral agencies due to sovereign guarantees, the project economies becomes favourable as there is nominal interest burden on the project SPV. Whereas in the case of private metro rail projects, the project funding is arranged through banks at commercial rates and private equity. The financing schemes under these assumptions make the project cash flow stressed unless the same is subsidised by cheaper sources, including government support.

 
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