The Union Cabinet has sanctioned the new Metro Rail Policy that focuses on urban development and cost reduction. The new policy requires thorough assessment of new proposals and provides for a third party assessment through government identified agencies.
One of the highlights of this policy is the mandatory PPP component for taking advantage of central assistance in new projects. Noting the rounded benefits of metros, the policy also shifted the earlier financial rate of return of 8 per cent to a new economic rate of return of 14 per cent, in line with what is practised worldwide.
This new policy also requires states to take on inventive techniques such as Value Capture Financing tools and it asks for transit oriented development which will cut travel distance and make urban land use more efficient. To guarantee feasibility of the projects, the policy seeks for the states to show the measures taken for property development, urban development and other non-fare revenue generation.
Under the new policy, states are empowered to set regulations and a permanent fare fixation authority for revising fares. They can take up projects using PPP with central assistance, 50:50 equity sharing model with central government and through grant by the Government wherein 10 per cent of the cost will be central assistance.