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Why Reliance Infrastructure wants to quit Delhi Airport Express project

According to industry experts, the Airport Express route was not planned well. There are just three stations between New Delhi Railway Station and the airport, leading to low fare collections.

twitter-logoManu Kaushik | November 1, 2012 | Updated 00:29 IST

Manu Kaushik
Manu Kaushik
On July 8 this year, operations on the Delhi Airport Express, which connects New Delhi Railway Station to Terminal 3 of the Indira Gandhi International Airport, came to a halt.

Delhi Airport Metro Express Private Ltd (DAMEPL), the company operating the line through an agreement with Delhi Metro Rail Corporation (DMRC), closed the line citing defects in the civil structure on the elevated section of the line.

DAMEPL is a company promoted by Reliance Infrastructure, which is owned by Anil Ambani.

A blame game followed between DMRC and Reliance Infrastructure. Reliance held DMRC, which constructed the line, responsible for the defects . Some senior DMRC officials claimed that Reliance could not run the line profitably and was therefore looking for an exit route.

In July, Reliance Infrastructure CEO Sumit Banerjee admitted that "the corridor was not making profits". Nevertheless, he said the company would continue to run the line and would not close it down. "This decision is purely linked with safety," he noted.

Nearly four months have passed and the case seems to be taking a different twist. On October 8, DAMEPL sent a notice to DMRC terminating their agreement. The notice seems to suggest a change in the concessionaire's stance.

DMRC has stated that DAMEPL has raised issues over the financial viability of the project.

In a press release on the matter, Mangu Singh, Managing Director of DMRC, said: "The issue of termination of the concession agreement has been disputed and the same has been referred for resolution through arbitration proceedings."

The Airport Express line's total project cost was Rs 5,800 crore. Of this, a little over half - Rs 2,915 crore - was borne by DMRC. Reliance Infrastructure, through DAMEPL, contributed the rest.

DAMEPL's desire to quit the airport line seems to have emerged from its inability to run the line profitably.

According to industry experts, the Airport Express route was not planned well. There are just three stations between New Delhi Railway Station and the airport. Few people chose to ride on it and this led to low fare collections.

DAMEPL was aiming to generate 75 per cent of its revenue through non-fare businesses such as retail operations, property development, advertising and other commercial activities. But, in a letter to DMRC in April this year, the company said that efforts to raise revenue through these sources had not succeeded.

The same letter also sought a deferment of the annual concession fee of Rs 51 crore.

DMRC may not be entirely free of blame. In July, it was reported that out of 2,100 bearings on the elevated section, nearly 230 were defective. Later, a joint inspection committee comprising experts from Reliance Infrastructure, DMRC and Indian Railways found out that 91 per cent of the bearings were dislocated.

This was on a line that was commissioned less than two years ago.

Repair work is nearing completion and the airport express is expected to restart operations next month. In his press release, DMRC's Singh said: "DAMEPL will run the services pending resolution of disputes through arbitration."

Until that process is complete at least, the two sides will have to work together.

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