<html> <head> <META HTTP-EQUIV="Content-Type" CONTENT="text/html; charset=us-ascii"> <meta name=Generator content="Microsoft Word 10 (filtered)"> <style>  </style> </head> <body lang=EN-US link=blue vlink=purple> <div class=Section1> <table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0 width=468 style='width:351.0pt'> <tr> <td style='padding:0cm 0cm 0cm 0cm'> Metro Rails: where’s the money? </td> </tr> <tr height=8 style='height:6.0pt'> <td height=8 valign=top style='padding:0cm 0cm 0cm 0cm;height:6.0pt'> <img width=1 height=1 src="cid:image001.gif@01C6BAB5.E0556EA0"> </td> </tr>  <tr height=10 style='height:7.5pt' colspan=1> <td height=10 valign=top style='padding:0cm 0cm 0cm 0cm;height:7.5pt' VSJrA=0 YtY3J=0> Bus Rapid Transit makes more <a href="http://www.financialexpress.com/fe_full_story.php?content_id=136535" target="_new" oncontextmenu="return false;" id=KonaLink0 onmouseover="adlinkMouseOver(event,this,0);" style='text-decoration:underline! important' onclick="adlinkMouseClick(event,this,0);" onmouseout="adlinkMouseOut(event,this,0);">financial</a> sense as an urban transport system </td> </tr>  <tr> <td width=468 style='width:351.0pt;padding:0cm 0cm 0cm 0cm'>   </td> </tr>  <tr colspan=1> <td valign=top style='padding:0cm 0cm 0cm 0cm'> <a href="http://www.financialexpress.com/about/feedback.html" VSJrA=0 YtY3J=0>RAMESH RAMANATHAN</a> </td> </tr>  <tr colspan=1> <td valign=top style='padding:0cm 0cm 0cm 0cm'> Posted online: Tuesday, August 08, 2006 at 0000 hours IST http://www.financialexpress.com/fe_full_story.php?content_id=136535 </td> </tr> <tr> <td style='padding:0cm 0cm 0cm 0cm'>   </td> </tr> <tr> <td style='padding:0cm 0cm 0cm 0cm'> <table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0 align=right width=179 style='width:134.25pt'> <tr> <td width=70 style='width:52.5pt;padding:0cm 0cm 0cm 0cm'>   </td> <td width=10 style='width:7.2pt;padding:0cm 0cm 0cm 0cm'>   </td> <td width=48 style='width:36.0pt;padding:0cm 0cm 0cm 0cm'>   </td> <td width=10 style='width:7.2pt;padding:0cm 0cm 0cm 0cm'>   </td> <td width=47 style='width:35.25pt;padding:0cm 0cm 0cm 0cm'>   </td> </tr> </table> </td> </tr> <tr height=10 style='height:7.5pt'> <td height=10 valign=top style='padding:0cm 0cm 0cm 0cm;height:7.5pt'> <img border=0 width=1 height=1 src="cid:image001.gif@01C6BAB5.E0556EA0"> </td> </tr> <tr> <td valign=top style='padding:0cm 0cm 0cm 0cm' VSJrA=1 YtY3J=0>  E Sreedharan, the driving force behind the Delhi Metro, is a living legend—a remarkable engineer. He delivered the Delhi Metro on time, within cost, and as a example of how public infrastructure ought to be built. In a country parched for projects that move from conception to delivery with no glitches, he is a shining example of how to do it right. Unfortunately, Sreedharan is not a magician. No matter what he does, he can’t make the Delhi Metro’s financials work, because the numbers don’t add up. <table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0 align=right width=300 style='width:225.0pt' height=250> <tr> <td style='padding:0cm 0cm 0cm 0cm'>   </td> </tr> </table> Phase 1 cost Rs 10,000 crore for 64 km — a whopping Rs 150 crore/km. With 66% debt financing, interest cost at 8% works out to Rs 550 crore p.a. And principal repayment would be Rs 500-600 crore p.a., assuming a 10-15 year repayment period. Where are the revenues coming from? Last year, the Metro had operating revenues (i.e. from passengers) of Rs 113 crore. Operating expenditures were Rs 102 crore, leaving barely Rs 10 crore as surplus before interest. And one other painful item: depreciation. When you build a Rs 10,000crore asset, depreciation can really start hurting. This was Rs 200 crore last year, but will balloon . Which means that the Metro is suffering massive losses, even before interest expenses, forget principal repayment. There is no way the Delhi Metro can generate surpluses. Ever. The only solution to this fiscal problem is to find alternative sources of <a href="http://www.financialexpress.com/fe_full_story.php?content_id=136535" target="_new" oncontextmenu="return false;" id=KonaLink1 onmouseover="adlinkMouseOver(event,this,1);" style='text-decoration:underline! important' onclick="adlinkMouseClick(event,this,1);" onmouseout="adlinkMouseOut(event,this,1);">financing</a>, which is what Delhi Metro has done. They are now developing real estate—a six-hectare property at Shastri Park, 93 acre at Khyber Pass, etc. Last year, one-time income from real estate came to Rs 300 crore, almost three times that which the Delhi Metro was originally set up for, mass transit. The reality: Metro Rail projects are financial white elephants. Who is <a href="http://www.financialexpress.com/fe_full_story.php?content_id=136535" target="_new" oncontextmenu="return false;" id=KonaLink2 onmouseover="adlinkMouseOver(event,this,2);" style='text-decoration:underline! important' onclick="adlinkMouseClick(event,this,2);" onmouseout="adlinkMouseOut(event,this,2);">lending</a> to Metro projects? The biggest — and, possibly, only — lender so far has been the Japan Bank for International Cooperation (JBIC). They financed Delhi Metro over Rs 4,000 crore, and have completed due diligence on phase 2 — debt of another Rs 4,000 crore. There is no public data available on JBIC’s rationale for lending to Metro projects. Strangely, just as the financial hole of Delhi Metro is increasing, the Metro bandwagon is moving across the country. Bangalore has just launched its Metro project, Mumbai followed suit a month later, Hyderabad and Chennai are busy preparing detailed project reports. If the numbers are so bad, why are cities interested in these projects? Actually, it is not the city governments that get to decide (topic for another debate) but their state governments. There are a number of reasons. Urban testosterone for one; metros have become a status symbol. But there are many other factors at play, which make the Metro lobby a force to reckon with. A World Bank report on urban transport in India states that our urban transport approach is “supply-oriented, and traffic growth-biased. It conflicts with the principles outlined in the government urban transport policy statement in a number of ways. In the short term, it neglects the mobility of low-income and poor travelers, especially the non-motorised one..(and) ..favors the most capital-intensive public transport modes (metros and other urban railways) which may not be warranted by either traffic density and passengers’ ability to pay, or their budget capacity to pay subsidies in perpetuity.” <table class=MsoNormalTable border=1 cellspacing=0 cellpadding=0 align=right width=200 style='width:150.0pt;border:outset #006699 1.0pt' hspace=3 vspace=3> <tr> <td bgcolor="#006699" style='border:inset #006699 1.0pt;background:#006699; padding:3.75pt 3.75pt 3.75pt 3.75pt'> Quick Take </td> </tr> <tr> <td bgcolor=white style='border:inset #006699 1.0pt;background:white; padding:3.75pt 3.75pt 3.75pt 3.75pt'> • Delhi Metro is suffering huge losses. And no way can it generate surpluses • The only solution is to look for alternative sources of financing • A Bus Rapid Transit system is possibly a more viable transport alternative </td> </tr> </table> What is preventing urban transport alternatives from emerging in India? One key reason, indeed the first reason, the World Bank report suggests is that these alternative proposals run counter to “the formidable urban rail lobby”, among others. But are there alternatives? Clearly, we need mass transport systems in our cities — private cars and two-wheelers are already choking the streets, and barely provide 20% of the total travel needs even today. One possible alternative is Bus-Rapid-Transit (BRT). Across the world, there is increasing support for BRTs. Remarkable scaled up solutions have emerged, none better than in Bogota and Curitiba in South America. A report prepared by Seema Parekh ,et al for ‘India Urban Space’, a conference on challenges in urban India, states: “Bogota today boasts of a world-class Bus Rapid Transit system of dedicated bus lanes called TransMilenio; Latin America’s largest network of bicycle ways called ciclo-rutas 150 miles long; world’s longest pedestrian-only street spanning 10.2 miles, hundreds of miles of sidewalks many through the city’s poorest neighborhoods; and the world’s biggest Car-Free Day (dia sin carro), during which private vehicles are not allowed to enter the entire city of 135 square miles.” Importantly, from a financial standpoint, the infrastructure was built at a cost of about $5.3 million per km (Rs 20 crore, or one-sixth of Delhi Metro). As a result, “TransMilenio requires no operating subsidies and earns substantial profits for its operators.” BRT systems make more financial sense than Metros. Ahmedabad seems to think so — it is the first Indian city to go for BRT. Jaipur, Indore and others are also moving in this direction. An alternative is emerging. Beyond finances, any urban transport system fundamentally defines the destiny of a city for decades, just by virtue of its impact. It is critical, therefore, that these decisions be integrated into an overall plan. Swati Ramanathan of Janaagraha says: “Introducing any rapid transit system without developing a Master Plan with integrated transport as a component is like putting the cart before the horse.” Most public policy decisions are like icebergs. Urban transport choices are no different. For those who want to improve the quality of the public debate on this issue, the Achilles heel of Metro Rail systems is their finances. Sorry, Mr Sreedharan-–I still think you are great engineer. —The writer is founder of Janaagraha,which aims at reforms in urban governance </td> </tr> </table>   </div> </body> </html>