NEW DELHI: Metro rail companies may soon be able to raise money from the market by floating tax-free bonds; similar to what is being done in the rail and road sector.
This is one of the financing options that the Union urban development (UD) ministry has proposed in its draft Metro Rail policy to garner resources to fund the expansion of the hugely capital intensive mass rapid transit system, many of which rely heavily on central funds.
“We will move the cabinet shortly to get the metro rail policy approved,” said a UD ministry official Bangalore’s Namma Metro has already raised Rs 300 crore from the market to fund its expansion. “But the bonds were not tax-free. Also it was a one-off case. To reduce the pressure on public exchequer, more and more metro companies will have to be facilitated to raise money from alternate sources,” said a UD ministry official.
The policy says that state governments should facilitate metro rail companies to raise cheaper long term debt through corporate bonds, secured by identified land banks and revenues from levying betterment charges. A separate metro rail development fund could also be created to support such bonds.
Officials admit that raising money from bond market will be easier said than done. “None of the metro companies are running at a profit. The loss of Delhi Metro is to the tune off Rs 700 crore,” said a Delhi government official.
Besides tapping the bond market, the ministry has proposed other innovative financing options such as charging a premium for additional FAR (Floor Area Ratio Space) in areas through which the metro line passes, imposing betterment charges in areas benefiting from metro rail development among others.
Delhi, Bangalore and Lucknow metro have already started charging for additional FAR in areas through which the metro line passes.
Currently, in majority of metro projects including Delhi, Mumbai (Line 3), Chennai, Bangalore, Nagpur, Lucknow, Kochi and Ahmedabad, the Centre and state have a 50:50 stake. Only Hyderabad and Mumbai metro Line-1 run on PPP (public private partnership) model.
Once the policy is approved, it will also become mandatory for state governments to ensure that projects have all the regulatory permissions for exploiting non-fare box revenue such as advertisements, leasing of space, etc. Also, all new projects should include proposals for feeder systems that help to enlarge the captive area of each metro station from 0.5 kms to 5 kms.