Significant Headway: New projects on the anvil

New projects on the anvil

In the past one year, the urban metro rail segment has made significant headway. Among the key developments that have taken place recently are the formulation of a new metro rail policy and the approval of several new metro rail stretches. However, certain areas still need attention, among them being increasing private sector involvement. Industry experts share their views on sector milestones and a future roadmap…

What has been the progress in the urban metro rail segment over the past one year?

Dr Brijesh Dixit

The metro rail segment has progressed well over the past year. At present, metro lines spanning about 300 km are operational across 10 cities in India and another 500 km of metro lines are under construction. Further, another 500 km of metro lines are in the planning stage, and proposals for these metro projects will be developed in the next few years. Moreover, plans to provide metro rail services to all cities with populations of 2 million and above are on the anvil, and a pipeline of projects is being planned accordingly.

Bharat Salhotra

The urban metro rail segment has evolved over the past few years but there is still a long way to go before Indian cities become fully developed. With rapid urbanisation, congestion and migration of 250-260 people per day to urban centres, there is an immediate need for a public transport system which is more energy efficient, in terms of total energy consumed per unit distance per passenger. Energy intensity is 6 to 10 times higher in road transport and even higher in personal transport such as cars. Considering the fact that Indian cities are becoming centres of economic development there is no way to beat road congestion apart from development of metros or rail connectivity. Considering about 70 per cent of the GDP comes from metros, their development and improvement becomes vital and critical for overall progress.

So far, about 360 km of metro lines are already operational, another 370 km are under construction and about 600 km have been proposed to be built in the next 10 years. Moreover, the earlier focus was predominantly on developing metro projects in Tier I cities such as Delhi, but it has now shifted to Tier II cities.

R.G. Saini

The urban transport segment has been expanding rapidly over the past few years. The development of urban metros has picked up pace not only in cities with populations exceeding 2 million, but also in smaller cities. Work has been progressing in cities such as Pune, Hyderabad, Bengaluru, Surat and Nashik to meet the demand of the growing population. New projects are on the anvil and ongoing projects have made significant progress.

In the past one year, many metro rail stretches have been operationalised. Under Phase I of the Chennai metro project, a few metro lines including an underground stretch have been made operational and Chennai Metro Rail Limited has aggressive plans to develop Phase II of the project, which will span over 80 km. In Hyderabad, the construction of 72 km of metro lines is being undertaken in the public-private partnership (PPP) mode. Meanwhile, work on the Mumbai metro project has progressed significantly. After facing initial hiccups, the underground metro section has been inaugurated and Mumbai Metropolitan Region Development Authority has recently awarded another 10 packages of 56 km for two elevated metro stretches which will provide a further impetus to the sector.

Further, the National Capital Region Transport Corporation has planned around 300 km of a regional rapid transit system (RRTS) in eight packages along three corridors – Delhi-Meerut, Delhi-Panipat and Delhi-Alwar – to enable seamless travel to these four destinations.

What have been the key policy developments over the past year?

Dr Brijesh Dixit

The government has come out with a new metro rail policy which has proposed innovative financing methods to augment the existing sources of funds for the sector. At present, the cost of the ongoing metro rail projects has exceeded the financial capacity of both the central and state governments. This dearth of resources is a key issue faced by the sector. With more metro rail projects being planned, there is a possibility of exhausting the government’s limited financial resources. The policy thus focuses on sanctioning new projects, defining the role of the central and state governments in their implementation, and identifying additional sources of funding through domestic and foreign investors.

The policy also envisages an important role for the private sector. In India, a few metro rail projects have already been developed with the help of private developers, and the policy

hopes to strengthen their role so as to achieve the targeted growth rate for the metro rail segment. Besides this, the policy is also expected to cover light rail transit, tramways and green buses to encourage healthy and sustainable growth in the years to come.

Bharat Salhotra

The government’s Make in India programme encourages and incentivises multinationals as well as domestic companies to manufacture their products within the country. Further, the Department of Industrial Policy and Promotion  has released the public procurement guidelines which provide for mandatory procurement of locally manufactured goods and locally provided services with a price preference clause to incentivise domestic manufacturing.

Further, the new metro rail policy envisages an important role for the private sector. It pushes for investments in metro projects either through the PPP model or joint collaborations involving state and private players. The policy therefore hopes to strengthen the role of the private sector so as to achieve the targeted growth rate for the metro rail segment.

Initial steps have been also taken to standardise norms for rolling stock and signalling equipment. Earlier, a bottom-up approach to designing metro projects was being followed. For instance, a total of 75 metro coaches were to be supplied for the Kochi metro. However, the entire train had to be designed, which led to a non-productive effort. Different cities adopted different specifications which went against the standard design. The government has now standardised all metros either to three, four or six cars. There are gaps that are yet to be bridged with respect to technical feasibility, but over the years a lot of effort has been made.

Further, an impetus has been given through government initiatives such as the Smart Cities Mission to invest in transport and infrastructure to improve mobility, which not only leads to economic development but also helps in social development.

R.G. Saini

The introduction of the new Metro Rail Policy has provided the required impetus to the sector. A major thrust has been given to encouraging innovative financing mechanisms through transit-oriented development. Focus has been laid on standardisation of norms for rolling stock and signalling equipment. Going forward, for the effective implementation of the new policy, proper coordination is required among authorities.

What are the key challenges that remain unaddressed?

Dr Brijesh Dixit

A major challenge faced by metro rail corporations at present is inadequate non-fare box revenue sources. These corporations have a great potential to enhance such revenues through advertisements, leasing out space, etc., which will help in improving the financial viability and sustainability of metro projects.

Besides, transit-oriented development should be made mandatory for every metro project. For instance, such development is an integral component of the detailed project report of the Nagpur metro project. The Maharashtra government has already issued a final notification for implementing a policy to increase the floor-space index (FSI) up to 500 metres on either side of the metro corridor. The development of nearby areas can lead to an increase in population residing near the metro rail. This can translate into higher ridership, thereby augmenting the modal share of metro rail in public transport. To this end, the Maharashtra government has also assisted Nagpur Metro Rail Corporation Limited (NMRCL) in capturing the value of the land near the project. It has provided the corporation an increased share of stamp duty so as to augment its revenue.

Moreover, the Maharashtra government has also given in-principle approval to grant NMRCL the status of a planning authority. Elevating the status of metro corporations to that of authorities can help them take advantage of land value captures and enhance their financial capacities to take up new projects. Meanwhile, there is an absence of efficient and sustainable mass transit systems in the country. As a result, the modal share of public transport is only 10-15 per cent in most Indian cities, with citizens preferring personal transportation. Thus, there is a need to develop integrated bus rapid transit (BRT) systems, tramways, metro systems, and suburban/ regional rail systems. In addition, private participation in the sector remains limited. Some PPP projects, such as the Gurgaon Rapid Metro project or Line I of the Mumbai metro, have been successfully implemented. However, issues such as inadequate dispute resolution continue to hold back private investment. Thus, a healthy dispute resolution mechanism should be incorporated as a part of the concession agreement.

Bharat Salhotra

A major challenge currently being faced by the metro rail segment is that of financial constraints resulting from tighter loans. Bilateral and multilateral funding agencies such as the Asian Development Bank, the World Bank, the  Japan International Cooperation Agency and KfW provide loans for executing projects at lower interest rates but insist on and stipulate conditions which are against the policy of open and fair competition in the segment. These agencies are pushing for clauses like the appointment of lead contractors and consultants from their country of origin, which undermines the fundamental concept of a level playing field or an open competition bidding framework. Moreover, these banks have limited bandwidth for providing loans, which is not sufficient to execute projects and so there is a greater need for private participation and private equity funds. Moreover, bigger companies such as the Delhi Metro Rail Corporation (DMRC) had the capability and expertise to manage and integrate different works such as civil works, track, rolling stock and signalling executed in packages under the Delhi metro project. However, Tier II cities lack the expertise to design interface and integration systems for different works involved in a project. A turnkey contract should therefore be taken up for executing projects in these cities as this would save time by assigning all the engineering and management works to one entity.

The sector also faces other challenges like that of leasing. The country needs a lot of investment in rolling stock for developing metro rail projects but funds are a major constraint. There can be models where rolling stock can be leased from companies. In this regard, the DMRC is about to issue an expression of interest for leasing rolling stock.

Lack of innovation and apprehensions in the uptake of new technologies are other challenges that the metro rail segment has been facing. The procurement document essentially pushes for the latest technology which has been proven over the past few years. However, companies are unwilling to take up new technologies and conventional techniques are still being used.

R.G. Saini

Indian cities have grown tremendously not only in terms of population, but in geographic size as well, and this has created significant challenges for authorities executing metro projects. Further, rapid urbanisation has led to issues such as congestion and parking problems which impede the progress of metro projects.

A major challenge currently faced by metro corporations in developing these projects is their financial incapability, even though funds had been allocated by the government in earlier five-year plans for metro project development. Timely release of funds to concerned authorities remains an unaddressed issue. To further exacerbate the crisis, funds are being allocated only to specific states. In order to deal with this challenge, the government needs to frame dedicated policies to allocate funds to different states proportionally or on pro rata basis.

Besides, the Ministry of Urban Development should work towards strengthening the capacity of regional authorities of smaller cities so that development can be fast-tracked. At present, responsibilities are managed at three levels of government – central, state and local. A consolidated policy mechanism is required to solve the bigger issue of lack of coordination. Besides, there is also a need to incorporate an integrated organisation.

The lack of land availability is another hurdle which needs to be dealt with. Big metro projects require large tracts of land. In the case of elevated metro rail system, each pier requires a land area of 10 metres which becomes difficult to acquire due to non-availability of land and low floor area ratio and FSI. To further add to the woes, landowners claim exorbitant compensation for their land, and this discourages agencies from taking up work.

Another drawback that the sector is facing is a lack of innovative ideas and experts. Even after so many years, conventional methods of designing and constructing metro systems are being used. There is also an immediate requirement to meet international standards of design.

What is the sector outlook for the next one to two years?

Dr Brijesh Dixit

Over the past 15 years or so, about 300 km of metro lines have been operationalised in the country, with an average of 20 km of metro lines operationalised per year. With improvements in project development, 30 to 35 km of metro lines are expected to be commissioned annually in the coming years. At the same time, indigenisation of the equipment required during project implementation can help increase the country’s economic growth.

Going forward, focus is also expected to be given to last-mile connectivity, without which mass transit systems are rendered useless. Ideally, no metro station should be more than 500 metres away from any part of the city so that people can walk or cycle to the stations. Such connectivity and multimodal integration will enhance metro ridership, making mass transit systems viable.

Further, the concept of a unified metropolitan transport authority can be explored. Under this, all transport services such as the BRT systems, metro rail, tramways, local taxis and parking are regulated by one authority. That authority independently coordinates and optimises the services, so as to improve the viability and functionality of the transit systems. However, currently these responsibilities are being managed at three levels of the government – central, state and local. Significant legislative changes will be required to place these services under one unified authority.

Bharat Salhotra

The urban metro rail segment provides a vibrant space for all domestic and global companies since several metro rail projects are on the anvil. For instance, Mumbai Metro Rail Corporation Limited is about to issue tenders for about 200 km of metro lines and the Delhi metro will also be expanded. Meanwhile, metro projects in several other cities such as Kozhikode, Guwahati, Pune, Varanasi, Trivandrum, Agra, Indore, Bhopal and Surat are being planned.

The sector is poised to grow further with major technological innovations like intelligent signalling and lighter trains with better propulsion systems.

R.G. Saini

The sector is poised to grow rapidly, as new projects are being implemented and the demand for metro projects is increasing. Ten big cities in the country have been accounting for 15 per cent of the country’s GDP and another 50 cities for 30 per cent. These cities have a lot of potential which is being tapped by developing various projects including metro rail systems. This will create huge opportunities for all stakeholders.

Going forward, the introduction of high speed metro systems such as the Delhi-Meerut RRTS will save transit time and will provide higher ridership. Further, with the introduction of the new metro policy and innovative funding mechanisms such as land value capture and foreign investments, the sector is expected to grow even faster.

“At present, metro lines spanning about 300 km are operational across 10
cities in India and another 500 km of metro lines are under construction.
Further, another 500 km of metro lines are in the planning stage.”

Dr Brijesh Dixit, Managing Director, Maharashtra Metro Rail Corporation Limited

 

 

“A major challenge being faced by the metro rail segment is financial constraints
resulting from tighter loans. Lack of innovation and apprehensions
in taking up new technologies are other challenges the metro rail segment
has been facing.”

Bharat Salhotra, Managing Director, Alstom Transport

 

“The urban transport segment has been expanding rapidly over the past
few years. The development of urban metros has picked up pace not only
in cities with populations exceeding 2 million, but also in smaller cities.”

R.G. Saini, Director, Mega Metro Engineering Private Limited