[sustran] A tale of two P P Project Metro rails Hyderabad and Delhi Airport

[Vinay Baindur]

http://www.thehindu.com/opinion/op-ed/a-tale-of-two-
metro-rails/article21615853.ece




A tale of two Metro rails
<http://www.thehindu.com/profile/author/Gajendra-Haldea-15057/>Gajendra
Haldea <http://www.thehindu.com/profile/author/Gajendra-Haldea-15057/>
DECEMBER 13, 2017 23:00 IST
A comparison of two projects with opposite outcomes has many lessons to
offer for the infrastructure road map

The Prime Minister inaugurated a 30 km section of the 72-kilometre-long
Hyderabad Metro Rail Project on November 28. There was much fanfare, and
justifiably so. After all, it is a state-of-the-art metro system, superior
to any other in India. Its technology is the latest, the stations and
structures are innovative and elegant, the trains are driver-less and
sleek, to count a few of its features.

Private enterprise

Hyderabad Metro is primarily financed through private investment, unlike
other metro projects that are entirely funded by the public exchequer. It
is also the largest PPP (public-private partnership) investment in India,
and one of the largest in the world. The total investment could well be
about ₹20,000 crore, if around 10% is assigned for real estate development.
Other than a viability gap grant of ₹ 1,458 crore from the Central
government, the rest will be private investment.

Besides assigning the right of way for the elevated metro tracks and
stations, the State government is only required to provide the land for
three maintenance depots where real estate development can be undertaken
above the ground floor. Some small plots of land have also been added for
parking and shopping purposes.

In particular, the fare structure laid down in the Concession Agreement
will always remain affordable on account of greater efficiencies as well as
the cross-subsidisation from real estate development.

The credit for this ambitious project largely belongs to the late Y.S.
Rajasekhara Reddy, then Chief Minister of Andhra Pradesh,
<http://www.thehindu.com/tag/86-81/andhra-pradesh/?utm=bodytag>who pushed
for an innovative PPP approach. Evidently, he did not wish to allocate the
scare budgetary resources for this capital-intensive project, as he was
pursuing several social sector initiatives, such as ‘Arogyashree’ for
universal health care. He gave me the mandate and a free hand to
conceptualise the model, write the concession agreement and supervise the
bid process.

There have been some defaults in discharging contractual obligations. The
spirit of partnership has also been a bit wanting. In particular,
construction was stalled at numerous locations because of inordinate delays
by the government in providing the right of way and depot land. This
delayed the project by over two years, thus causing a significant increase
in costs, which would have to be borne by whoever is adjudged as the
defaulter under the prescribed dispute resolution mechanism.

There will surely be some problems, especially on account of the scant
regard for sanctity of contracts. However, the accountability framework
laid down in the Concession Agreement is clear and precise as it can
identify and address any defaults or malfeasance.

‘Flawed’ project

The other PPP project in question is the Airport Metro Line project of
Delhi Metro Rail Corporation (DMRC), which was terminated by the
concessionaire, Reliance Infrastructure, with an arbitration award of about
₹5,000 crore [interest included] against the former, primarily on account
of a flawed concession agreement that enabled inflated costs and claims.

Notably, the arbitration panel comprising three engineers, empanelled by
DMRC itself, held that the construction works suffered from serious
defects, including over 1,500 cracks in concrete structures. Separately,
the Commissioner for Railway Safety reduced the stipulated train speed due
to safety concerns. The project is now being run by DMRC consequent upon
the demise of PPP. In sum, public interest has been ripped apart by means
of a huge termination payment as well as large recurring losses in the
years ahead.

The Hyderabad Metro is entirely based on the model concession agreement
(MCA) of the erstwhile Planning Commission whereas DMRC’s Metro Line is
based on a distorted version of the same MCA. Their comparison will clearly
reveal how critical the underlying contractual framework is. This is akin
to the software which determines the success of a satellite.

This tale reflects two extremes in the same sector, during the same period
and in the same country. Would NITI Aayog or any other think tank study the
two closely and draw lessons for the benefit of the government and the
people? The lessons learnt would be invaluable for accelerating the
much-needed infrastructure investment in India.

Gajendra Haldea was Principal Adviser, Infrastructure in the erstwhile
Planning Commission