The feud between the city’s development authority and the Reliance Infrastructure-led operator of the city’s first Metro corridor is likely to intensify with the former now planning to challenge the Union government-led Fare Fixation Committee’s (FFC) recommendation at the “appropriate legal forum.”
The FFC has recommended a tariff structure of Rs 10-110 for the 11.4-km Versova-Andheri-Ghatkopar Metro, much higher than the current fare of Rs 10-40. The Mumbai Metropolitan Region Development Authority (MMRDA) has been in dispute with the Mumbai Metro One Pvt Ltd (MMOPL), which constructed the Metro on a public-private partnership (PPP) basis, over the fare structure even before the corridor was opened to public in June last year.
The development authority was insisting on a fare structure of Rs 9-13 as per the concession agreement, while the MMOPL being designated as the ‘Metro Rail Administrator’ as per the Metro Act, under which the project was brought midway, fixed the tariff as Rs 10-40. The MMRDA had challenged the MMOPL in the Bombay High Court and subsequently the Supreme Court, which set a deadline for the FFC to come up with its recommendation.
U P S Madan, Metropolitan Commissioner at the MMRDA, said, “We haven’t seen the FFC report yet and have asked the MMOPL for a copy. We were basically challenging the maximum fare of Rs 40 as being too high. A tariff of Rs 110 is extremely unreasonable. We will decide the course of action on seeing the report, but this will be challenged at the appropriate forum.”
As per the Metro Act, the designated Metro Rail administrator gets to decide the initial fare, while all further increases are to be decided by the Union government-appointed FFC. The committee for the Mumbai Metro comprises Justice (retd) E Padmanabhan, former law secretary T K Vishwanathan and former Maharashtra chief secretary J K Banthia.
An MMOPL spokesperson said, “The MMOPL is examining the FFC report submitted on July 8. We will work towards a phased implementation of its recommendations with gradual fare increases together with the mitigating impact of potential real estate development and subsidy from the state government.”
An expert involved in the FFC’s process of determining the tariff for the Metro said the recommendations were guided by two principles – sustainability and affordability. “Sustainability depends on the cost of construction, which is entirely different for private or public private partnership projects due to the cost of capital. Delhi Metro gets a loan at a 1.4 per cent interest rate with a 30-year tenure and the foreign exchange fluctuations are borne by the government. For PPP, the loan has to be raised from the open market.”
Besides, he said, the FFC has to consider a return on equity for PPP projects, which is not a factor in case of government projects.
However, Madan said this was not a valid argument as the company was aware of all these factors at the time of entering into a PPP contract and decides to take certain business risks. “The government opts for PPP to bring in efficiency and technology. The company decides to enter into a contract after going through over all these parameters. There will be no incentive for the government to go for PPP if this is what the result is going to be.”
Meanwhile, the MMRDA has been following up with the Union Ministry of Urban Development to amend the Metro Act for it to be able to cater to projects on PPP to avoid long-drawn disputes like the one between the development authority and the MMOPL. The Versova-Andheri-Ghatkopar Metro is the country’s first Metro project to be implemented on a PPP basis.