VB Gadgil examines the opportunities in the metro sector and what can be done to give it a further push.
Governments around the world are pumping money to generate demands for goods and services by creating jobs through higher spending into physical and social infrastructure. Likewise, the Indian Government on its part is not lagging behind and has taken concrete steps to revive the infrastructure sector to regain its past glory. The country is also witnessing significant interest from international investors in the infrastructure space.
The Planning Commission has estimated that an investment of about $492 billion will be required for the infrastructure sector during the Eleventh Five Year Plan. Whereas private investment seems difficult to come by in the current scenario, public investment can be expected to materialise or even increase. While it is essential that the government plays a vital role in improving the pace of implementation of key projects, construction companies need to upgrade their project management expertise and ensure adequate capacity to undertake and execute projects on time.
Current scenario in the metro sector
Currently, the focus is on developing rail-based mass rapid transit systems (MRTS). Several cities across the country have launched heavy rail-based MRTS projects requiring large investments. A couple of them are also initiating monorail and light rail systems. As of now, seven cities, including Delhi, Mumbai, Kolkata, Bengaluru, Hyderabad, Chennai, and Kochi, have already initiated heavy rail-based transit system projects. Apart from this, some more state governments like Punjab, Uttar Pradesh and Gujarat are also inclined to introduce metros in their major city clusters. According to India Infrastructure Research, investments of over Rs 860 billion are lined up for heavy rail-based projects across the country, of which Rs 550 billion is planned to be mobilised in the next five years.
In the pre-construction stage, difficulties are being faced because no comprehensive map of underground utilities was available. Encumbrances related to land, such as acquiring continuous right of way and acquisition of private land, are also responsible for delays in project execution.
Challenges are also faced on support that government agencies should extend to metro rail concessionaires. Also, for private companies, there is a financial challenge for funding such long gestation projects. Unfortunately, special funding with low interest and for long duration or funding tied with international agencies to provide low interest is not available to them.
Policy moves Some measures addressed at the policy level can be very beneficial. A proper model of execution needs to be finalised giving suitable thought to the challenges envisaged in the Concession Agreement (CA) from the point of view of proper risk identification and mitigation and making PPP projects really work as a partnership. A number of statutory approvals should be made system-based, not personal, to avoid undue delays.
Ease in coordinated approvals from different agencies both at the Centre and state levels will definitely ease the pains being felt at present and enable speedier and more economical execution of projects. Standardisation of technical specifications and unification of the same across the country will also help greatly.
What´s more, the government should look into and facilitate special funding with low interest to private entities for PPP projects. One possible model to execute metro projects in Indian conditions would be to have the civil infrastructure required for metro projects, including the viaduct, done by government agencies and invite private companies with experience only to install and run the rail systems. This would mitigate risk and funding requirements, especially for public enterprises, can be drastically reduced.
About the Author:
VB Gadgil is Chief Executive & Managing Director, L&T Metro Rail (Hyderabad) Ltd.