Big Push For Private Players As Government Unveils New Metro Policy

The government has made public-private partnership mandatory for states to avail central assistance for new metro rail lines as part of its new policy to execute these capital-intensive transport projects.

“Private participation either for complete provision of metro rail or for some unbundled components (like automatic fare collection, operation & maintenance of services) will form an essential requirement for all metro rail projects seeking central financial assistance,” according to the metro rail policy cleared by the Union Cabinet on Wednesday.

An economic rate of return of 14 percent will now be the new criteria for approval, a shift from the existing norm of internal rate of return of 8 percent. The policy empowers state governments to set up permanent authorities for timely revision of fares.

More than Rs 50,000 crore worth of metro projects are underway in the country and this pile will probably grow, Bloomberg said in a report in April. At present, metro projects with a total length of more than 350 km are operational in eight cities – Delhi, Bengaluru, Kolkata, Chennai, Kochi, Mumbai, Jaipur and Gurugram. Metro projects are also underway in Hyderabad, Nagpur, Ahmedabad, Pune and Lucknow.

“PPP, last-mile connectivity, rigorous analysis to provide right solution to the right city, a shift from financial rate of return to economic rate of return for large infrastructure projects, and fare fixation authority. All these would set the pace for great expansion of metro rail in this country,” said Vinayak Chatterjee, chairman of infrastructure services provider Feedback Infra.

Earlier, only financial rate of return, which is the rate of return on capital invested, was looked at for metro projects. The economic rate of return is a social cost benefit analysis. “It takes into account multiplier effects that railways brings,” said Chatterjee.

The new policy also mandates evaluation of various modes of mass transit like the bus rapid transport system, light rail transit and tramways. Executing authorities must ensure last-mile connectivity through environment-friendly infrastructure like walkways and cycling corridors, according to the policy.

Strict pre-conditions on financial aspects will see fewer projects being taken up, said Anwarul Hoda, professor at the Indian Council for Research on International Economic Relations, a think tank. “The government has done this in a situation of high demand and less resources. This is to match the available resources for the projects that have been taken up.”