At a time when the Maharashtra government is at loggerheads with Anil Ambani’s Reliance Infrastructure (RInfra)-led Mumbai Metro One Private Ltd (MMOPL) over cost escalations and fare hike of the Mumbai Metro rail services, a new option has been kept on the table to resolve the wrangle.
With the country’s first public-private partnership Metro project bleeding heavily within just 14 months of being rolled out, the MMOPL has suggested that the state extend a Rs 2,000 crore loan guarantee, enabling it to raise loans at lower interest rates from global lending institutions like the Japan International Cooperation Agency (JICA).
For sustaining project operations, the MMOPL claims to have so far raised Rs 2,136 crore in debt from a consortium of lenders led by the IDBI Bank Ltd. This includes a debt of Rs 943 crore raised at a later stage for continuous funding of the project amid cost overruns. The average interest rate to service this debt works out to 11.75 per cent, a senior MMOPL official said, adding that the overall interest expenses worked out to Rs 135 crore.
The MMOPL has argued that extension of a government guarantee will enable raising loans at 1 to 1.5 per cent interest rates from JICA or other global lending institutions that extend loans on a government-to-government basis.
Abhay Kumar Mishra, Chief Executive Officer, MMOPL, in an official communication to the state government dated July 29, has referred to loans being made available at low rates to the Delhi Metro Rail Corporation for the Delhi Metro to justify the case.
On Thursday, Mishra told the Indian Express, “We would like to have an amicable solution for the sustainable running of the Mumbai Metro line one. We are open to discussions with the government to work out all possible solution. We feel that actions by all stakeholders should be towards finding solutions.”
With the original project cost for the 12-km Metro line, running along the Versova-Andheri-Ghatkopar route, pegged at Rs 2,356 crore, a concession agreement entered into in 2007 had RInfra holding 69 per cent share capital in the MMOPL. The Mumbai Metropolitan Region Development Authority (MMRDA), a state-run undertaking, holds 26 per cent equity, whereas the remaining 5 per cent is held by Veolia Transport.
The MMOPL now claims that the project cost has shot up to Rs 4,026 crore, a 71 per cent escalation, a contention that the state and the MMRDA are unwilling to accept just yet.
Blaming the state and the MMRDA for delays in meeting legal obligations including right of way for the project, handing over land for the Metro car depot, failure to shift utilised, besides worsening of global economic indices for cost overruns, the MMOPL has also suggested that the state extend an operational subsidy of Rs 21.75 crore a month, extension of a one-time capital grant of Rs 1000 crore, and allow it to further monetise real estate in its possession to mop up the losses.
The state has however turned these options down, with government functionaries even questioning the basis and the extent of cost overruns and blaming these on the MMOPL itself. On August 10, Maharashtra’s minister of state (Urban Development) Ranjit Patil had argued that “the project cost overruns have not been factually determined and fructified.”
The government has issued MMOPL a notice seeking a Comptroller and Auditor General of India (CAG) audit on all accounts, arguing that it would help ascertain the extent and the nature of cost overruns.
The MMOPL has also petitioned to the government for considering lower tariff for electricity. It has argued that it was paying Rs 11 per unit for power, whereas the DMRC was paying just Rs 5.60 per unit. The wrangle between the state and the MMOPL escalated after a government-appointed Fare Fixation Committee (FFC) suggested last month that the MMOPL may fix the fare slab from Rs 10 being the minimum fare and Rs 110 as the maximum. The present fare band ranges from Rs 10-Rs 40.
Acknowledging that a sharp increase in fare hike might inconvenience commuters and impact Metro’s ridership, the MMOPL has invoked the state government for apportioning the increased cost. A viability gap fund of Rs 650 crore has already been extended for the project.
Both the sides are also warring over who will get administrative control over the Metro project. Under the Metro Railway Act, 2002, the MMOPL has been identified as the Metro rail’s administrator. The government has however argued that the Mumbai Metro One project was awarded as per the Tramways Act, and has invoked the Union government for denotification of Mumbai Metro from the former Act.