‘Centre’s push, not Delhi’s, got Metro cost escalation down’

In January 2017, after giving in-principle approval to the project, the Delhi government had urged the DMRC to explore the possibility of working out the completion cost of the project based on an “escalation factor of 5%-6% instead of 7.50%.”

The AAP government is expected to clear the Phase IV project this week. (Archive)

The Delhi Metro brought down the annual cost escalation of the Phase IV project from 7.5 per cent to 5 per cent on the prodding of the Centre, not the Delhi government, official documents reveal.

The Delhi Metro Rail Corporation (DMRC) revised the Detailed Project Report (DPR) of Phase IV after the Union ministry wrote to it on October 27, 2016, directing that “all Metro rail projects will henceforth be based on an escalation factor of 5 per cent”.

In January 2017, after giving in-principle approval to the project, the Delhi government had urged the DMRC to explore the possibility of working out the completion cost of the project based on an “escalation factor of 5%-6% instead of 7.50%.”

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In July, the then Delhi Chief Secretary had sought clarity from the Metro on the distribution of taxes under the new GST regime. The Metro had written back, stating that the government’s Cabinet note was based on the DPR submitted by it in 2014 and not the revised one.

“The DPR was revised based on the comments received from Ministry of Urban Development, Government of India, vide letter dated 27.10.2016. It was desired by the MoUD (Ministry of Urban Development) that all Metro rail projects will make the provision of general charges in their cost @ 5% and also escalation of only 5% be considered to arrive on the completion cost as against any norms earlier,” the DMRC wrote back.

Accordingly, a Cabinet note was prepared taking the 5% escalation into account. The cost of the project had come down to Rs 52,625 crore from Rs 55,208 crore. In the latest Cabinet note, the cost has further reduced to Rs 45,603 crore.

A comparison of the fund distribution in the 2017 Cabinet note and the latest one makes it clear that the reduction is mainly owing to a drop in the share of subordinate debt for taxes of both Delhi and the Centre, and the pass through assistance from Centre against loan from JICA (Japan International Cooperation Agency).

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Another key factor is the fact that in the new funding pattern, Rs 1,963 crore will come through PPP agreements that DMRC will enter into under the Metro Rail Policy, 2017. The AAP government is expected to clear the project, under which six new corridors measuring over 103 km will come up, this week. The DMRC had submitted the first DPR of Phase IV to the government way back in 2014. The 2017 in-principle Cabinet nod meant little as the government was silent on the financial aspect of the project.

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