Wednesday, Nov 30, 2022

Reliance Infra wants three-fold hike in Mumbai Metro fare

Anil Ambani’s Reliance Infrastructure-led Mumbai Metro One Private Ltd (MMOPL) has demanded an almost three-fold hike in fares of Mumbai Metro from what it had originally committed.

Anil Ambani’s Reliance Infrastructure-led Mumbai Metro One Private Ltd (MMOPL) has demanded an almost three-fold hike in fares of Mumbai Metro from what it had originally committed. With Lok Sabha and Assembly elections just about a year away and Maharashtra Chief Minister Prithviraj Chavan keen to project the metro as a showpiece project,the fare-hike demand has put the government in a tight spot.

“A three-fold hike is politically unacceptable,” said a source in the Chief Minister’s Office. But the MMOPL has argued that without a fare hike,it would be difficult to roll out the metro service since it was necessary to recover an almost Rs 1,935 crore cost escalation in the project. Mumbai Metro is the country’s first public private partnership metro project in which all the three phases — construction,operation and maintenance — have been given to a private player.

The fares at 2003-04 level were pegged at Rs 6 for less than three km,Rs 8 for travel between three to eight km and Rs 10 for travelling beyond eight km. The agreement provided for an 11 per cent fare revision after every four years. Even if one allows for such an increase thrice over till 2016,the fares in 2013 should be Rs 13.7 in the highest distance bracket. The MMOPL,however,has demanded Rs 28-30 fare for travelling eight km and beyond.

A spokesperson of the MMOPL said a government notification issued on August 19,2004 provided for an option to recover cost from revenue. “Even otherwise,the detailed project report (DPR) said the metro fare can be 1.5 times of the fare of the buses run by BEST,which works out to Rs 28,” the spokesperson added.

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The original cost of the 12-km-long Versova-Andheri-Ghatkopar elevated metro was Rs 2,356 crore. This was to be funded by a 70:30 debt equity ratio. Awarded in 2007,the project was scheduled for completion in March 2012. However,due to various reasons,including addition of extra coaches,rupee depreciation,design changes,delays in obtaining right of way and permissions from Indian Railways,the project cost rose to Rs 4,291 crore. RInfra has funded almost 60 per cent of the increased cost — Rs 1,935 crore — through a loan. The balance 40 per cent has been raised through debt.

“Reliance has claimed that costs have risen. We have not gone through the details yet. If the cost has gone up,it is not necessary that the fares have to rise in the same proportion,” said UPS Madan,commissioner of the state-owned Mumbai Metropolitan Regional Development Authority,which owns the 26 per cent stake in MMOPL. The MMOPL board is learnt to have appointed an independent engineer to scrutinise the costs.

But the state government is miffed that when the MMOPL board approved the cost escalation,its three representatives — two from MMRDA and one from the state urban development department — did not object to it. Madan,however,defended it saying: “We are a minority shareholder,but have to look at the company’s interests too. Board members cannot take a rigid stance. The concession agreement provides for fare increase if the company justifies it,” he said.


A government official said that in addition to the 26 per cent shareholding in the Rs 512-crore equity of MMOPL,the government has provided a viability gap funding of Rs 690 crore. While,Reliance’s equity contribution is Rs 353 crore for the 69 per cent stake,the remaining 5 per cent is held by Veolia Transport.

First published on: 12-08-2013 at 04:10:43 am
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