Metro rail cost overshoots estimates
B.V. Shankar, Times of India, Mar 8, 2012.
HYDERABAD: The Hyderabad Metro Rail Project, plagued with initial hiccups, is poised to be the costliest urban rail service in India with each day's delay in commencement of construction work adding Rs 5 crore to the escalating project cost, now estimated at Rs 15,957 crore. Going by the calculations of Hyderabad Metro Rail limited (HMRL), the fare would be the most expensive in the country. The reason: escalation of project cost because of the tardy pace of work.
In a counter affidavit filed before the high court, N V S Reddy, managing director of HMRL, has said he was concerned over the escalation of project cost due to delay in beginning of the construction work that is already a year behind schedule. As per the concession agreement, the construction work of the Hyderabad metro rail project should have commenced on March 3, 2011. The official estimated cost of the project at present stands at Rs 14, 132 crore but at an interest rate of 13%, a day's delay would increase the cost of the project by Rs 5 crore.
Since the project has already been delayed by a year, the interest component has accumulated to Rs 1,825 crore. As a result, the final current cost of the project stands at Rs 15, 957 crore. N V S Reddy had said the HMRL would give right of way (ROW) to L&T executing the project this month so that works would start and stage I - an 8 km stretch between Nagole and Mettuguda - in corridor III would be operational in December 2014. But, till date, there has been no progress on this front and the possibility of the construction work starting in March has become virtually impossible. The escalation of project cost will only result in higher fares, as sale of tickets is a major component of cost recovery for the L&T, the concessionaire executing the project on a public private partnership (PPP) model. "The ticket rates are fixed according to the concession agreement and subsequent government order. It is true that the delay costs money, so we are as anxious as anyone that the project should take off at the earliest," said Vivek B Gadgil, chief executive and managing director of L&T Metro Rail Hyderabad.
Among the three metro rail services of the country- Delhi, Kolkata, and Bangalore- Namma Metro of Bangalore is the costliest at present and Hyderabad Metro is all set to overtake it in terms of fare price. Now, the basic price of a metro ticket (minimum rate up to 2 km) in Bangalore is Rs 10, while the average basic prices are Rs 5.60 and Rs 5.00 in Delhi and Kolkata respectively.
In Hyderabad, it would be a little higher than Rs 14, in case the metro rail is thrown open to service in 2016, the deadline as per the concession agreement signed between the state government and L& T in (Detailed Project Report) prepared in 2003, when the project was conceived with two corridors. Fixing the deadline at 2008, the DPR pegged the basic fare at Rs 5. The DPR said each day's delay would add Rs 35 lakh to the cost of project, considering inflation alone that would enhance the basic fare.
A second DPR was prepared in December 2006 adding Corridor III, and the estimated project was revised upwards to Rs 7711 crore and the basic fare fixed at Rs 6 with 2011 as the deadline for the commissioning of the project. The second DPR also said that each day's delay would add Rs 35 lakh to the project cost.The cost of the project was estimated at Rs 4,206 crore in the DPR Project.
"Tracing the footprints of the project since its conception, one can understand that the delay in starting the works is creating huge burden on the users of the service. The delay is caused due to ill conception of the project and we are not sure whether it would be commissioned before 2020. Even if that deadline is achieved, the fares will be so high that the service will not be affordable to the people for whom the public transport was aimed for," said Dr Chigurupati Ramachandriah, professor in urban studies, Centre for Social and Economic Studies.
September 2010. As HMRL is unlikely to meet the deadline, the fare prices are destined to travel further north with each day's delay. A Government Order notified, on April 14, 2011, has said the basic fare of HMR ticket would be Rs 8 keeping April 1, 2014 as the date of commissioning of the project. The GO has authorized the concessionaire to increase the fare by 5% annually according to which the basic fare would be Rs 8.40 from April 1, 2015. Apart from this, the concessionaire is authorized to enhance the fare price based on the prevailing rate of inflation, insurance, currency fluctuation, rate of interest on escalated project cost.
The concessionaire is allowed to revise the fare considering 60% of WPI (Wholesale Price Index, measuring inflation) and accordingly, the basic price would be Rs 9.40, on April 1, 2015. Considering other factors - insurance, currency fluctuation and floating interest rate - it would increase further and by April 1, 2016 the basic fare would be just a little more than Rs 14. And as per the BMRCL (Bangalore Metro Rail Corporation Limited) calculation, the basic fare for Bangalore Metro as on April 1, 2016 would be Rs 12.
In a counter affidavit filed before the high court, N V S Reddy, managing director of HMRL, has said he was concerned over the escalation of project cost due to delay in beginning of the construction work that is already a year behind schedule. As per the concession agreement, the construction work of the Hyderabad metro rail project should have commenced on March 3, 2011. The official estimated cost of the project at present stands at Rs 14, 132 crore but at an interest rate of 13%, a day's delay would increase the cost of the project by Rs 5 crore.
Since the project has already been delayed by a year, the interest component has accumulated to Rs 1,825 crore. As a result, the final current cost of the project stands at Rs 15, 957 crore. N V S Reddy had said the HMRL would give right of way (ROW) to L&T executing the project this month so that works would start and stage I - an 8 km stretch between Nagole and Mettuguda - in corridor III would be operational in December 2014. But, till date, there has been no progress on this front and the possibility of the construction work starting in March has become virtually impossible. The escalation of project cost will only result in higher fares, as sale of tickets is a major component of cost recovery for the L&T, the concessionaire executing the project on a public private partnership (PPP) model. "The ticket rates are fixed according to the concession agreement and subsequent government order. It is true that the delay costs money, so we are as anxious as anyone that the project should take off at the earliest," said Vivek B Gadgil, chief executive and managing director of L&T Metro Rail Hyderabad.
Among the three metro rail services of the country- Delhi, Kolkata, and Bangalore- Namma Metro of Bangalore is the costliest at present and Hyderabad Metro is all set to overtake it in terms of fare price. Now, the basic price of a metro ticket (minimum rate up to 2 km) in Bangalore is Rs 10, while the average basic prices are Rs 5.60 and Rs 5.00 in Delhi and Kolkata respectively.
In Hyderabad, it would be a little higher than Rs 14, in case the metro rail is thrown open to service in 2016, the deadline as per the concession agreement signed between the state government and L& T in (Detailed Project Report) prepared in 2003, when the project was conceived with two corridors. Fixing the deadline at 2008, the DPR pegged the basic fare at Rs 5. The DPR said each day's delay would add Rs 35 lakh to the cost of project, considering inflation alone that would enhance the basic fare.
A second DPR was prepared in December 2006 adding Corridor III, and the estimated project was revised upwards to Rs 7711 crore and the basic fare fixed at Rs 6 with 2011 as the deadline for the commissioning of the project. The second DPR also said that each day's delay would add Rs 35 lakh to the project cost.The cost of the project was estimated at Rs 4,206 crore in the DPR Project.
"Tracing the footprints of the project since its conception, one can understand that the delay in starting the works is creating huge burden on the users of the service. The delay is caused due to ill conception of the project and we are not sure whether it would be commissioned before 2020. Even if that deadline is achieved, the fares will be so high that the service will not be affordable to the people for whom the public transport was aimed for," said Dr Chigurupati Ramachandriah, professor in urban studies, Centre for Social and Economic Studies.
September 2010. As HMRL is unlikely to meet the deadline, the fare prices are destined to travel further north with each day's delay. A Government Order notified, on April 14, 2011, has said the basic fare of HMR ticket would be Rs 8 keeping April 1, 2014 as the date of commissioning of the project. The GO has authorized the concessionaire to increase the fare by 5% annually according to which the basic fare would be Rs 8.40 from April 1, 2015. Apart from this, the concessionaire is authorized to enhance the fare price based on the prevailing rate of inflation, insurance, currency fluctuation, rate of interest on escalated project cost.
The concessionaire is allowed to revise the fare considering 60% of WPI (Wholesale Price Index, measuring inflation) and accordingly, the basic price would be Rs 9.40, on April 1, 2015. Considering other factors - insurance, currency fluctuation and floating interest rate - it would increase further and by April 1, 2016 the basic fare would be just a little more than Rs 14. And as per the BMRCL (Bangalore Metro Rail Corporation Limited) calculation, the basic fare for Bangalore Metro as on April 1, 2016 would be Rs 12.
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