How Metro, Infrastructure projects can be made Viable on PPP mode

NEW DELHI: The Urban Development (UD) ministry has red flagged overdependence on real estate revenues to make Metro rail and other infrastructure projects viable on public private partnership (PPP) mode.

After the failure of Delhi Airport Metro Express Line and Hyderabad Metro, where private players were banking heavily on revenue from realty sector, the ministry has come to the view the revenue expectation from such activities should be limited to 20%.

In a recent confidential Cabinet note circulated to elicit responses of other ministries, Nirman Bhawan has cited how the concessionaire of airport express line projected income from property development to the extent of 70% of gross revenue for 20-25 years, and later it would taper to 37%. “With the slump in the real estate business, the entire revenue collection of this line got jeopardized eventually seeking exit of the concessionaire from the project,” the note says. It proposes that such public transport projects should not be converted into “real estate projects open to various market risks”.

For the Hyderabad Metro project, the successful bidder in 2007-08 banked heavily on revenue from real estate development and had even quoted negative grant. The note says though this was hailed as a successful model and it was assumed such Metro projects would be money-spinners, the “euphoria” was “short-lived” due to the 2008 economic slowdown. The project was bid out again in 2010. Even the new concessionaire is facing upheaval task due to present financial condition.

The note backs auditing by Comptroller & Auditor General of India (CAG) of expenditure of private parties in project development if the cost increases beyond 10%..

For smoother and timely completion of these major urban mass transport projects, the ministry has also suggested sweeping changes both relating to seeking clearance and permission to carry out construction without any hindrance.

The ministry wants that while providing land for Metro works no government agency should seek alternate land. Moreover, the price of the land made available should be at government rate.

Second, all departments concerned must issue working permission for speedier construction so that there is no time and cost overrun. The ministry has also sought exemption of Metro works from seeking clearance under the Ancient Monument and Archeological Sites & Remains Act to carry out construction close to monuments. In fact, it argues that Metro in other countries provides better link to such sites of historical and cultural importance.

Third, it pitches for exemption from getting forest clearances for such projects by treating these as important public utility key infrastructure works such as roads and water supply. The ministry has also underscored the need to appoint commissioners of Metro Railways safety considering its expanding reach to several cities.