Going off the rails-Seven years after PM laid its foundation
Seven years after PM laid its foundation, Mumbai's first Metro corridor is yet to see the light of day
Mumbai's first Metro corridor is yet to see the light of day. (IE Photo)
In 2013, the country's biggest metropolis still awaits the completion of the 11.05-km elevated corridor that will connect the western and eastern suburbs of the city.
During the same seven-year period, China managed to start Metro trains in seven cities, covering a total distance of about 250 km.
Back home, Mumbai is still struggling to open the first Metro corridor, from Versova-Andheri-Ghatkopar. Though authorities have set December 2013 as the latest deadline, uncertainty hangs over the project.
One of the primary reasons is that the inordinate delay has pushed up the project cost by more than 80 per cent, prompting the concessionaire, the Reliance Infrastructure-led consortium Mumbai Metro One Pvt Ltd (MMOPL), to propose a fare hike to start and sustain operations.
However, with the state elections due next year, the Congress-led state government is wary of antagonising voters with a fare hike, although it is equally keen on rolling out the Metro before the model code of conduct sets in.
MMOPL claims a fare hike could be considered as per the concession agreement, which says the concessionaire can approach the government for any upward revision beyond the fare permitted in the notification if there is any unanticipated rise in the project's operating cost.
While the issue has become a hot potato only now, it was first flagged to the Mumbai Metropolitan Region Development Authority (MMRDA), of which Chief Minister Prithviraj Chavan is the chairman, nearly one-and-a-half-years ago. Despite this, there has been little intervention by the state government in settling the issue amicably or even investigating the claims of a cost escalation.
The Versova-Andheri-Ghatkopar Metro is the first such project in the country to be constructed and operated on a public private partnership basis. Lead consortium partner Reliance Infrastructure has a 69 per cent stake in MMOPL, while Veolia Transport of France has a 5 per cent stake. The rest lies with the MMRDA.
Correspondence on cost escalation, fare hike
When the project was awarded in 2006, the base price as per a fare notification of 2004 was Rs 9 to Rs 13 for different distance slabs. The fare was to be 1.5 times the fare of the Brihanmumbai Electric Supply and Transport (BEST) undertaking. There was also a provision to increase the fare by 11 per cent every four years.
Now, citing cost escalation, the MMOPL has mooted the base fare in the Rs 22-33 bracket.
MMOPL first wrote to the MMRDA in February 2012, stating that the estimated project cost of Rs 2,356 crore had surged by Rs 1,935 crore and requesting that the base fares be hiked from Rs 9-13 to Rs 22-33.
In March 2012, MMRDA replied seeking details supporting the cost escalation claim. In May 2012, a formal presentation was made before the MMOPL board, which meets quarterly and comprises two representatives from MMRDA, three or four representatives from Reliance Infrastructure and the principal secretary of the state's urban development department.
In December 2012, MMRDA wrote to MMOPL saying the matter was being reviewed.
In January 2013, MMOPL raised the issue in a meeting with Sudhir Krishna, secretary of the union ministry of urban development, who said the project should be financially viable for a public-private partnership, according to an official who was present at the meeting.
In March, MMOPL wrote to the principal secretary of the state's urban development department, detailing reasons behind the cost escalation and the demand for fare revision.
In April, the consortium wrote to Chief Minister Prithviraj Chavan requesting him to intervene and asked for a meeting with him to discuss the issue.
In July, MMOPL wrote to Chief Secretary Jayant Kumar Banthia seeking his intervention.
"The state government should examine the claims made by the concessionaire and see how many of them fit into the framework of the concession agreement and deal with them accordingly. Tackling the issues at an early stage always helps,"says Ajay Saxena, an expert on public private partnership with the Asian Development Bank.
Reasons behind the cost escalation
At the time of concession agreement, the project cost was pegged around Rs 2,356 crore, which has now shot up to Rs 4,291.
In February 2008, MMOPL started work on the project, which winds through one of the busiest and most crowded parts of Mumbai. MMOPL, at the time of commencement of work, had said in a press statement that it was aiming to complete the project in a record 30 months, although the concession agreement specified the period of construction to be five years.
"Project cost has mainly increased due to delays in acquisition of right of way by MMRDA. Despite severe impediments, we are confident of making the project ready for commercial use by the end of the year," an MMOPL spokesperson said.
Although it was supposed to have been given a 59 per cent right of way with land free of encumbrances, MMOPL started work with right of way being made available only on 45 per cent of the land.
Most importantly, piece of land for the Metro car shed, the controlling hub of the entire system, was handed over by the state a good six months after work on the project had begun.
Although MMRDA did manage to clear the right of way to complete civil works by 2012, there are still hindrances in getting access to land to construct staircases at five locations. MMOPL fears that if the staircases are not constructed in time, the project will not get a final "no-objection" from the fire department, without which it would be impossible to commission the Metro.
The absence of a clear mapping of underground utilities criss-crossing beneath the surface of the road threw up more hurdles once the company started construction. These often necessitated changes in original designs, thus impacting the project cost.
For instance, the earlier plan to having only 11 foundation designs for the piers to hold the Metro viaduct had to go in for a toss due to the dense maze of water, telephone, gas and electricity lines below the surface. The presence of multiple unforeseen utility lines and a tight right of way meant that a unique foundation had to be designed for each pier. The 11 foundation designs turned into 219 different types of foundation designs for the 400-plus piers.
Similarly, the design of a bridge that will take the Metro line over the suburban railway tracks at Andheri was also changed on three occasions in order to get the permission of the Western Railway to undertake construction in that area.
The company also faced a substantial increase in its debt servicing as the project got prolonged.
Besides, the change in the rupee rate as compared to dollar has also impacted the project cost substantially.
Many players in this entire scenario, including the chief minister, say the present problems show how government officials and private players have still not been able to adjust to the system of public-private partnership model.
In fact, the CM went to the extent of saying that his bureaucrats were "not mature enough" to draft public-private partnership contracts and make them work.
NEED FOR THE PROJECT
It will ease traffic congestion and link eastern and western parts of the city. It will reduce the travel time between Versova and Ghatkopar from 90 minutes to 21 minutes and will provide rail access to MIDC, SEEPZ and other commercial hubs.
The MAKERS
Mumbai Metro One Private Limited (MMOPL) is the Special Purpose Vehicle (SPV) formed to implement the Versova-Andheri-Ghatkopar (VAG) Metro corridor. It is a joint venture company formed by Reliance Energy Limited, a Reliance ADA Group Company, Veolia Transport of France and Mumbai Metropolitan Region Development Authority (MMRDA).
THE FUNDING
The project cost of Rs 2,356 crore was to be met through capital grant from MMRDA of Rs. 650 cr, a debt of Rs 1,194 cr and equity of Rs 512 crore to be shared 74/26 between Reliance and MMRDA. The consortium was to recover its investment with a concession period of 35 years.
THE FIRST LINE
Versova-Andheri-Ghatkopar Project cost: Rs 4,291 crore (Rs 2,356 crore was the cost estimated when the construction began)
Length: 11.07 km
Will carry Six lakh commuters every day
STATIONS
Versova, Azad Nagar, D N Nagar, Andheri, Western Express Highway,Chakala, Airport Road, Marol Naka, Saki Naka, Subhash Nagar, Asalpha, Ghatkopar
HOW IT WILL OPERATE
The service will run for 18.5 hours every day (5:30 am till midnight), with the station dwell time of 30 seconds. The frequency of the trains would initially be 3.5 minutes, which would be further increased over a period of time.
PROJECT TIMELINE
June 2006: PM Manmohan Singh performs Bhoomipujan. Project deadline announced as June 2009.
February 2008: Problems with handing over Versova car shed and other litigations mean actual work starts only on February 2008. The work was to be completed in three years, by February 2011, but has been delayed. Concessionaire repeatedly claimed that the entire project would be completed in 30 months.
December 2013: After extending the completion date four times, the project is expected to be fully completed by end of the year.
FARE STRUCTURE
As per the initial plan
Rs 6 up to 3 km
Rs 8 between 3 km to 8 km
Rs 10 beyond 8 kms
The fares will be revised @ 11% every fourth year. MMOPL has now demanded that the fare should be
between Rs 22-33.
Going off the rails
Reliance Infrastructure's Mumbai metro is caught up in a dispute over a fare hike even before it starts operations.
Suprotip Ghosh Edition: Sept 29, 2013
STORY TOOLS
The demand to raise Mumbai metro fares has irked the Maharashtra government Photo: Nishikant Gamre/www.indiatodayimages.com
Mumbai's Ghatkopar railway station turned into a fish tank on many a rainy day this monsoon season, stopping trains from plying. While torrential rains are common in Mumbai, the station's troubles were man-made. A cascade of water would overflow from the under-construction Ghatkopar Metro station and flood the tracks on the city's busy central line rail network. Not a sight that inspires confidence in the future of Mumbai's transport infrastructure.
The confidence was shaken further in August when the company tasked with building, running and maintaining the metro sought a steep hike in fares even before it started operating the network. Mumbai Metro One Pvt Ltd (MMOPL), majority owned by Reliance Infrastructure, told the Maharashtra government last month that a fare hike was required because the construction cost has jumped 84 per cent from the original estimates due to delays.
Reliance Infrastructure, headed by industrialist Anil Ambani , owns a 69 per cent stake in MMOPL. The Mumbai Metropolitan Region Development Authority (MMRDA) controls 26 per cent while the remainder is held by French transport company Veolia.
People familiar with the development say MMOPL has asked for increasing the maximum fare to Rs 38. The company, however, says it has sought a maximum fare of Rs 33. Still, that is more than a three-fold hike from the current Rs 10.
The troubles with the Mumbai metro come barely months after Reliance Infrastructure exited New Delhi's airport metro line, citing disputes with Delhi Metro Rail Corporation.
The Mumbai project is the country's first privately built and operated metro railway. The first phase, from Versova in the west to Ghatkopar via Andheri, passes through 11.4 km of some of the most congested areas in the suburbs. Reliance Infrastructure won the bid for the project in 2007/08. Since then the project has undergone many changes in route, design and planning. It also faced delays in getting regulatory approvals. As a result, the project cost has surged to Rs 4,321 crore from Rs 2,356 crore estimated initially.
The state government isn't amused. Maharashtra Chief Minister Prithviraj Chavan has said the government might consider taking the project away from Reliance Infrastructure altogether. While that might be the last resort, there are few indications the state government will budge anytime soon.
The confidence was shaken further in August when the company tasked with building, running and maintaining the metro sought a steep hike in fares even before it started operating the network. Mumbai Metro One Pvt Ltd (MMOPL), majority owned by Reliance Infrastructure, told the Maharashtra government last month that a fare hike was required because the construction cost has jumped 84 per cent from the original estimates due to delays.
Reliance Infrastructure, headed by industrialist Anil Ambani , owns a 69 per cent stake in MMOPL. The Mumbai Metropolitan Region Development Authority (MMRDA) controls 26 per cent while the remainder is held by French transport company Veolia.
People familiar with the development say MMOPL has asked for increasing the maximum fare to Rs 38. The company, however, says it has sought a maximum fare of Rs 33. Still, that is more than a three-fold hike from the current Rs 10.
The troubles with the Mumbai metro come barely months after Reliance Infrastructure exited New Delhi's airport metro line, citing disputes with Delhi Metro Rail Corporation.
The Mumbai project is the country's first privately built and operated metro railway. The first phase, from Versova in the west to Ghatkopar via Andheri, passes through 11.4 km of some of the most congested areas in the suburbs. Reliance Infrastructure won the bid for the project in 2007/08. Since then the project has undergone many changes in route, design and planning. It also faced delays in getting regulatory approvals. As a result, the project cost has surged to Rs 4,321 crore from Rs 2,356 crore estimated initially.
The state government isn't amused. Maharashtra Chief Minister Prithviraj Chavan has said the government might consider taking the project away from Reliance Infrastructure altogether. While that might be the last resort, there are few indications the state government will budge anytime soon.
Reliance Infrastructure, which also builds highways and power projects, refuses to take the blame. "This project was mired in extremely poor planning by government agencies," a spokesperson for MMOPL said in an email to Business Today. MMOPL estimated the construction period and cost based on a project report prepared by Delhi Metro Rail Corporation, it said. In its email, the company provided details of much of the extra work it has done. But, there was little clarity on the amount it spent for the extra work.
They have given us the revised project cost, but they still have to give us the break-up of that cost and the justification of those items: U.P.S. Madan, Metropolitan Commissioner, MMRDA
Madan, the metropolitan commissioner, says the company initially estimated its rolling stock cost would be Rs 500 crore but is now expecting it to be Rs 700 crore. "They can't claim any fare revision for that. That is their miscalculation of market conditions," he says. MMOPL, however, says that, as per the contract executed in 2008, it had estimated Rs 500 cr for additional 44 coaches. "This will make metro future proof to handle increase in demand. We have not revised our estimate," it says.
Madan also says that the onus of proving the delays were the government's responsibility lies with Reliance Infrastructure. "The agreement talks about increase in operational costs. Operation has not yet started," he adds. "So, whether that increase in costs can be considered at all, that is the first legal issue."
Analysts say the issue will likely go into lengthy arbitration, and there are few indications how it will pan out. Meanwhile, project cost continues to escalate. Both parties say they are keen to start the Versova-Andheri-Ghatkopar line, probably by December. But while they battle it out, Mumbaikars will be hoping it won't take until next year's monsoons to end.
