Going off track

PPP model has not succeeded in metro rail projects. New policy overlooks lessons from past ventures

By: Editorial | Updated: August 18, 2017 2:14 am
delhi metro,  Delhi Metro Railway Corporation, dmrc, metro rail projects India has, by and large, steered clear of PPP in its metro rail projects.

The government’s new metro rail policy marks a significant shift in its approach to urban mass transit projects. The PPP model, which was tried out without much success in Delhi Metro’s airport line — and is faltering in the Mumbai and Hyderabad metro rail projects — is back in the Centre’s scheme of things. The new policy, approved on Wednesday, makes private sector participation in metro rail projects an essential requirement for the Centre’s assistance to such ventures.

India has, by and large, steered clear of PPP in its metro rail projects. The capital-intensive nature of such projects does not allow private players to get a return on their investments unless they hike their fares steeply — a problematic prospect for more than one reason. The metro has several externalities that make it imperative for the government to subsidise it. From enhanced mobility to its relatively low carbon footprint, metro usage has benefits that cannot be measured through the purely commercial yardstick of profit and loss. In pressing for the PPP model, the government is ignoring an important lesson from the success of the Delhi Metro: The Centre and state government have footed much of the bills of the Delhi Metro Railway Corporation. The project, in fact, experienced one of its rare failures when the airport line, then run by Reliance Infrastructure, shut down for six months in 2012 — Reliance ultimately pulled out of the venture in early 2013. Private enterprise has also proved unreliable in Mumbai, with Reliance taking almost seven years to complete 11 km of the city’s metro project. The company now claims that it is losing Rs 50 lakh every day. The construction major L&T was scheduled to have completed work on the first phase of the Hyderabad metro by July; the deadline has now been extended to November 2018.

The fraught association between the private sector and the metro has been underscored by a number of studies, and most importantly by E. Sreedharan — whose stewardship of the Delhi Metro project earned him the sobriquet of India’s Metro Man. In an interview to this newspaper, Sreedharan has pointed out that nowhere in the world has the “construct and maintain model of PPP in metro rail completely succeeded”. Private players look for a return of around 12-15 per cent, while no metro project has yielded an investment return of more than 3 per cent. As Indian cities expand, the metro will be an important constituent of the transport mix. The government will do well to learn from past successes — and failures — in planning for this mode of transport. It will profit from paying heed to the counsel of India’s Metro Man.

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