People First

Mumbai metro’s journey towards becoming a PfPPP

The United Nations Economic Commission for Europe (UNECE) develops international public-private partnership (PPP) standards for meeting the United Nations Sustainable Development Goals. This provides project models, templates and legal practices that can be adopted and used by governments to alleviate poverty, boost their economies and protect the environment. The International PPP Centre of Excellence (ICoE) supports People-first PPPs (PfPPPs). In the Indian context, though the PPP concept has come a long way, it is still evolving and will take some time to mature further.

Urban rail projects influence the lives of millions of people who use it to commute as well as those living in the influence zone along a rail line. Thus, a PPP project in the urban rail sector must essentially be able to expand in scale, speed and spread – extending access to more and more people at affordable prices. The Mumbai metro project is a fit case for examining how and to what extent it has been able to meet the “people first” objective set by the UNECE’s ICoE.

The ICoE supports PfPPPs that enhance the developmental impact of PPPs, inter alia, their contribution towards poverty eradication, more equitable income allocation, lower dependence on fossil fuels, greater level of engagement with stakeholders, and capacity building in both the public and private sectors to deliver such projects.

PfPPPs are projects which are economically viable and ideally have an economic transformational impact as well. Of all the stakeholders of a project, the focus of PfPPPs is obviously on people. The ICoE evaluates the quality and quantity of difference made to the people affected by the project. It further examines the level of integration with and involvement of local people in orchestrating, constructing, operating and improving the project.

The Mumbai metro is the only successfully running PPP project in the Indian urban rail segment. The special purpose vehicle (SPV) for the project – Mumbai Metro One Private Limited (MMOPL) – is a joint venture between Reliance Infrastructure Limited, Veolia Transport (France) and the Mumbai Metropolitan Region Development Authority (MMRDA) holding a 69 per cent, 5 per cent and 26 per cent equity share respectively. The MMOPL entered into a concession agreement with the Maharashtra government to design, finance, build, operate, maintain and transfer the ownership and assets at the end of the concession period of 35 years. Procurement for the project and its construction and operations have been undertaken based on the norms laid down by the government for PPP projects.

Notably, it is the first metro project in the country financed by Indian banks. The cost of the project was initially estimated at Rs 23.56 billion; however, due to delays the cost rose by Rs 16.7 billion. A viability gap funding (VGF) of Rs 6.5 billion was provided by the central and state governments. The remaining cost was financed through debt and equity in the ratio 70:30. The SPV initially raised debt of Rs 11.94 billion through a consortium of banks comprising IDBI Bank, Corporation Bank, Karur Vysya Bank, Canara Bank, Indian Bank and the Oriental Bank of Commerce.

The metro’s ridership has been rising consistently. According to an MMOPL official, “In February 2017, the daily ridership at Ghatkopar was 94,053, which is an increase of nearly 16 per cent over the corresponding period in 2016.” This shows that more and more commuters prefer to travel by the metro. Many hitherto unconnected areas have also been connected. The public is also cognisant of the safe and healthy travel option provided by the operator. It is thus appropriate to infer that the objective of accessibility, comfort, safety and healthy travel is being achieved.

The Mumbai metro is the city’s first metro rail and covers a distance of 11.4 km. This efficient, comfortable and quick urban transport system has boosted east-west connectivity in the city. The housing ecosystem in the corridor has received a fillip in terms of reliability of connectivity, pollution reduction, decongestion of roads, comfort and safety of travel, and enhanced accessibility. Real estate prices in the area though have not appreciated; in fact, there has hardly been any increase. The reason appears to be the high base rates at the time of commissioning of the metro project. As a result, the provision of metro connectivity without an associated increase in housing prices has improved the liveability of the existing residential areas.

The metro has provided a quick, timely mode of commuting to the population in the Versova-Ghatkopar corridor. Commuters have a sense of security while travelling by the metro. The enhanced presence of security personnel too adds to the feeling of security. Good infrastructure and smooth operations have ensured that travel is safety compliant.

A project of such magnitude generates many direct and indirect jobs right from the planning stage to the construction and operation phases. It was projected that during the peak construction period about 5,000 people would work on the project. Further, as per estimates about 45 people per km were required to be employed for the operations and maintenance phase. The actual data, however, suggests that job creation has been much more than the projections. On the flip side, the MMOPL has effectively replaced the company that provided chartered buses, leading to a loss of employment and business to some, but that has been more than adequately compensated by the employment created.

The mobility options offered by the MMOPL are not only safe, reliable and comfortable but also provide the much-needed choice in terms of time and scale of movement. This flexibility is unique and well appreciated by users. Thus, it is obvious that the MMOPL has been able to adequately meet the objective of PfPPP.

The metro corridor and its linear infrastructure are conducive for locating/relocating utilities and support services. While the relocation of utilities is a big challenge during the construction phase, it becomes useful to align the utilities and support services along the metro corridor. In the case of the Mumbai metro, the process of relocation and location of utilities and support services has now stabilised. Not only is it proving to be a boon for locating and maintaining such services but these are also a source of revenue for the metro project.

An extensive metro network leads to a substantial reduction in the dependence on cars and thereby reduces congestion. An enhancement of economic activity leads to more jobs and more revenue at various levels. Eventually, such activities influence taxation rates and prompt them to move south. With regard to the Mumbai metro project, the network is small and its impact on various parameters is only incremental. Thus, it is yet to result in any nominal or substantial decrease in tax rates of any kind in its area of influence. Maybe it would be more pronounced when various metro systems which are under construction in Mumbai become operational.

The connectivity from Versova to Ghatkopar has reduced the travel time between the two locations to less than one-fourth of what it was earlier. This reduction is substantial. It has enhanced productivity of citizens. This is the most visible “people first” PPP objective which the MMOPL has achieved.

The MMOPL has made a serious endeavour towards balancing the community’s requirements vis-à-vis the associated revenue streams. Such capital-intensive projects may appear barely bankable but when suitably structured with the necessary VGF component, financial viability is achieved. Meanwhile, the government gains in the long term by creating high-value infrastructure which boosts the real estate value and economic activity in the area. The MMOPL has thus been suitably formed with VGF within a sound regulatory regime. Having made substantial progress in achieving the “people first” objective, it appears to be on a profitable and progressive path.

 

B.P. Awasthi, Executive Director (Track-P), Railway Board, Ministry of Railways

 

 

 

Naresh Bana, Member, Project Team on Urban Rail Transport, UNECE International PPP Centre of Excellence

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