Public-private partnership good for Kochi Metro rail project: Elias George

Kochi: People expressing opinion throughout the state over the metro rail project in Thiruvananthapuram and Kozhikode is in a way a welcome development. Such debates over even the technical aspects of the project are uncommon even in European countries, which we consider developed states. People should take active interest in the development projects that affect them and express opinion. The role played by media in setting stage for such debates is also noteworthy.

However, it is doubtful whether current debates are going in the right direction, because they are spreading half truths and misleading ideas. New ideas and models are given special labels and they are presented in a bad light. For example, there will be few societies who give such a bad meaning to the word corporate. The suggestion of public-private partnership for Thiruvananthapuram and Kozhikode metros has been labelled in this manner.

Generally, two models are used today to implement urban transport projects. The taxpayers’ money is given to the relevant government agency to build the metro. It hands over this money to private corporate companies that have taken the contract for civil work, signalling and coach building. In this model, the work is done by private companies, who leave once it is done.

Then the government will have to bear the financial burden of the metro and manage its operation. Private companies take into account their profit while fixing the rate. Future losses and complexities of running the completed project become taxpayers’ liability. Since only a handful of the 200 metros in the world are making a profit, debates about this model are very pertinent.

The model suggested by the state’s finance department for Thiruvananthapuram and Kozhikode metros is slightly different from this traditional method. In this model, the government’s investment is limited to land acquisition and civil work. Instead of the government bearing the financial and commercial burden of the metro fully, it seeks private partnership for coaches, signalling and telecommunication and shares any possible loss with private companies.

The government invites tenders from private companies for coaches, signalling and telecom systems and to operate the project for a fixed period. The contract is given to the company that makes the lowest bid. Every year, the government gives money to the company as per the contract. Thus, the responsibility of operating the project and bearing any loss shifts from the government to the private company.

Both cities get metros without making huge investment at the beginning, lowering the government’s financial liability. It becomes the responsibility of the private company to ensure effective and timely operation of the metro, adhering to assured rates. This is where the question mentioned earlier becomes pertinent. Which model should be adopted for Thiruvananthapuram and Kozhikode metros — the old model of giving money directly to the private company or the partnership model? In the first model, the company in charge of construction has no responsibility once it completes the project and leaves with taxpayers’ money.

In the second model, the full responsibility of running the metro and its maintenance at a fixed rate for a specific period rests with the private company. In the partnership model, the government has to give money to the company only if it operates the metro effectively and stably. What determines the success or failure of the project is the contract that the owner enters into with the construction company. If the government has a carefully drafted contract, private companies will not be able to exploit it in the partnership model.

Each model has its deficiencies and the possibility to make a loss. What is needed is a decision after discussing all matters in detail. Before that such recommendations should not be nipped in the bud by giving them specific labels. Such moves will only destroy the arrival of a cheaper and lasting metro project in Thiruvananthapuram and Kozhikode.

(The writer is the managing director of Kochi Metro Rail Limited and additional chief secretary)

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