Aug 8, 2008

India - Hyderabad to get 71km metro 'free of cost'

Delhi’s 65-km metro cost the state and central governments Rs 10,500 crore. In comparison, Hyderabad is about to get a 71-km metro without the central or state government paying a rupee. Instead, the Andhra Pradesh government will receive Rs 1,240 crore (calculated at present value) by simply giving the concession to a private consortium.
The state cabinet approved the concession agreement and the winning bid at its meeting in Hyderabad earlier this week. The winning consortium is led by the city’s Satyam group, which has so far focused on its software business.
This dramatic bid result was so unexpected that the bid documents had not even considered the possibility of the government being the net financial gainer. Instead, the central government had expected to fork out about 20 per cent of the project cost of Rs 12,410 crore as a capital subsidy, with the possibility of a further 10 per cent funding from the Jawaharlal Nehru Urban Renewal Mission. The state government, in turn, had been prepared to fork out about 10 per cent of the project cost.
The combined saving for the Centre and state is, therefore, about Rs 4,800 crore or more, over and above which the state government will now receive Rs 30,300 crore from the concessionaires over the life of the concession. Discounted (at 13.5 per cent a year) to get its present value, that money is worth Rs 1,240 crore today.
Officials who have steered the project argue that the Hyderabad experience opens up a completely new way of building metro services in the big cities, at zero cost to governments and city administrations.
In contrast, Bangalore’s 42-km metro is a state-funded project costing Rs 6,500 crore. Mumbai has given the contract for the 11-km first phase of its metro project (costing Rs 2,356 crore) to a consortium led by the Reliance Anil Ambani group, with a government-paid capital subsidy of Rs 650 crore.
Five consortia had been shortlisted for the Hyderabad metro concession, which is to run for 35 years, with a possible extension by another 25 years. Of these, a GVK-led consortium did not bid finally.
An Essar-Alsthom consortium asked for a subsidy from the government of Rs 3,100 crore, while a Reliance Energy-Bombardier consortium wanted Rs 2,811 crore. The bid that came closest to the one by Satyam was from a Malaysian-led group which included Siemens and Nagarjuna, which had offered to pay the government Rs 151 crore.
The tariff has been set at Rs 8 to Rs 20. The tariff on the Delhi Metro for comparable distances is Rs 6 to Rs 22.
The project team that is celebrating its success now was led by NVS Reddy, a railway accounts service officer in Hyderabad, while the political leadership was provided by the Andhra Pradesh chief minister, YS Rajshekhar Reddy. In Delhi, the mentoring with regard to the concession agreement and the specifications manual was provided by Gajendra Haldea of the Planning Commission.
Based on the success of the Hyderabad model, Planning Commission Deputy Chairman Montek Singh Ahluwalia is understood to have written to the Prime Minister, suggesting that this be the model followed for other metro projects—a view that is apparently being opposed by the Ministry of Urban Development, which prefers the Delhi metro model.

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