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Union Cabinet approves new Metro Rail Policy; PPP must for central govt funds

The new policy empowers States to make rules and regulations and set up permanent Fare Fixation Authority for timely revision of fares.

BT Online | August 17, 2017 | Updated 13:27 IST
Union Cabinet approves new Metro Rail Policy; PPP must for central govt funds

At a time when rapidly growing cities across the country are clamouring for metro rail projects, union government's new Metro Rail Policy couldn't have come at a better time. Besides making provisions that commit states to provide last mile connectivity, the new policy approved by the Union cabinet also pitches for alternatives where investing in a metro project would not be feasible.

The new Metro Rail Policy promises to open a big window for private investments across the country. Cabinet has made public-private partnership (PPP) component mandatory for availing central assistance for new metro projects.

"Private participation could be either for complete provision of metro rail or for some unbundled components like automatic fare collection, operation and maintenance of services" the policy noted.

The policy ensures that least cost mass transit mode is selected for public transport. It makes evaluation of all modes of mass transit like BRTS (Bus Rapid Transit System), Light Rail Transit, Tramway mandatory before going ahead with cost intensive metro projects. Jaipur Metro, which was the first metro in a Tier-2 city in the country, had witnessed a steep fall in its ridership in the last two years of its operation. It's not just the footfall that came down, the operational cost of the metro was way more than the revenue.

The new policy empowers states to make rules and regulations and set up permanent Fare Fixation Authority for timely revision of fares. It also provides for rigorous assessment of new metro proposals and proposes an independent third party assessment by agencies to be identified by the government.

The policy offers three options to states for availing central assistance. These include; PPP with central assistance under the Viability Gap Funding scheme of the Ministry of Finance, Grant by Government of India under which 10% of the project cost will be given as lump sum central assistance and 50:50 Equity sharing model between central and state governments. Under all these options, private participation, however, is mandatory.

Under the policy, states need to adopt mechanisms like Value Capture Financing and issuance of corporate bonds to raise capital for financing metro projects.

To provide last mile connectivity for commuters, the new policy focuses on a catchment area of 5 kms. on either side of metro stations which requires states to commit in project reports to provide necessary last mile connectivity through feeder services, walking and cycling pathways.

Taking note of substantial social, economic and environmental gains of metro projects, the Policy stipulated a shift from the present 'Financial Internal Rate of Return of 8 per cent' to 'Economic Internal Rate of Return of 14 per cent' for approving metro projects, in line with global practices.

Currently, metro projects with a total length of 370 kms are operational in 8 cities such as Delhi (217 kms), Bengaluru (42.30  kms), Kolkata (27.39 kms), Chennai (27.36 kms), Kochi (13.30 kms), Mumbai (Metro Line 1-11.40 km, Mono Rail Phase 1-9.0 km), Jaipur-9.00 kms and Gurugram (Rapid Metro-1.60 km).

Metro Projects with a total length of 537 kms are in progress in 13 cities including the eight mentioned above. New cities acquiring metro services are; Hyderabad (71 kms), Nagpur (38 kms), Ahmedabad (36 kms), Pune (31.25 kms) and Lucknow (23 kms).


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