Union Cabinet’s new Metro Rail Policy 2017 seeks to introduce Public-Private Partnership (PPP) as an essential component in the sector by making it mandatory for demanding Central assistance.
However, past experiences show that the PPP model in Metro projects has never succeeded.
In India, PPP was tried out in Mumbai, Hyderabad and the Airport line of Delhi Metro, writes the India Express, adding that all the three are failures.
The endorsement of PPP model in the new policy looks rather surprising as in a 2012 Ministry of Urban Development report on
'Innovative Financing of Metro Rail Projects' the use of PPP model was discouraged citing past examples.
The report states that a study of global experiences in Urban Rail Transit provisioning showed that PPP in Metro projects had failed.
"In 113 cities across the world having Metro rails, 88% have been developed and are being operated in public sector mode whereas in only 12% cities some form of PPP exists," says the report.
“In fact outside India, no city (expect the failed experiment of STAR and PUTRA Metro rail in Kuala Lumpur) has attempted provisioning of Metro rail in full city on PPP in the past few decades. Even the new Metro projects, which are being developed, are largely being taken up on public sector mode rather than PPP,” the report further says.
In an interview to the Indian Express, Delhi Metro Rail Corporation’s former Managing Director E Sreedharan said that in Delhi, PPP model was used to run the airport line, where DMRC invested 55 percent of the cost, and Reliance Infrastructure in the rolling stock, electrification, and signaling. However, after incurring losses, Reliance abandoned the project.
In Mumbai Metro Line 1, Sreedharan said, “Reliance Infrastructure took almost 7 years to complete 11 km of the relatively easier elevated line and they now claim to be losing 50 lakh per day in revenue every day despite the very high fares they are charging.”
Apart from PPP model, the new policy also talks about the commercial development of land along stations to help maximize Metro revenues. However, giving the example of Hyderabad PPP model, Sreedharan said, “300 acres of land for property development was offered as a sweetener and L&T came forward. But since then, property values have come down and real estate is not making the same kind of money as it used to.”
A Jaipur Metro Rail Corporation official, the Times of India spoke to said that PPP model is successful only in highway projects.
Metro rail being a highly capital intensive sector, the returns are not on the expected line, making the private players raising the prices unrealistically. Being a mass transport, the government can’t afford to let the prices go up beyond a point of time, and hence Sreedharan argues, the Metro rail should be in the hands of the government completely notwithstanding the losses.
Published Date: Aug 17, 2017 17:26 PM | Updated Date: Aug 17, 2017 17:41 PM