The arbitration over Delhi metro’s controversial airport express line, decided by a three-member committee after more than three years of hearing, has ended in favour of the Anil Ambani-owned Reliance Infrastructure Ltd.
RInfra said it won an arbitration of Rs 2,950 crore against the Delhi Metro Rail Corporation, which the latter may challenge in a higher court.
Previously operated by the Delhi Airport Metro Express Private Limited (DAMEPL), a subsidiary of Reliance Infrastructure (Rinfra), the airport line was mired in controversy soon after it started operations in February 2011.
After Rinfra pulled out of line in 2013, the three-member committee was formed for an ‘out- of-court settlement,’ sources said. Rinfra wanted the money invested in the project but DMRC’s contention was ‘who was at fault’.
The 22.7-km line connects the New Delhi railway station with airport terminal T3 and was jointly developed by DAMEPL and DMRC as public a private partnership (PPP) project.
Its operations were suspended in July 2012 after DAMEPL complained of construction defects in the rail lines built by DMRC. In 2013, DAMEPL terminated the agreement and the tussle ended in an arbitration.
“We welcome the award and hope it will encourage the private sector to participate in the nation-building process,” said a company spokesperson.
The three-member arbitration committee, forked out of a DMRC panel, began hearing the case in September 2013 and gave its verdict after three-and-a -half years.
“We are studying the award given by the arbitrators in the airport express line case and will decide our further course of action in the matter after due deliberation,” said Anuj Dayal, executive director of corporate communications, DMRC.
The verdict held the agreement termination by DAMEPL as valid and awarded the amount the company.
Metro built the infrastructure and DAMEPL brought in the rolling stock and was supposed to run it for 30 years. The project was built on a shared cost of about Rs 6,000 crore.
Under the guidelines approved by the Cabinet Committee on Economic Affairs and issued by Niti Ayog last year, DMRC is expected to pay 75% of the award amount against a bank guarantee even if they challenge the order.
“Therefore, RInfra is expected to get Rs 2,210 crore as per the guidelines against bank guarantee in case DMRC proposes to challenge the award,” the company statement said.
Sources in the company said DMRC will also have to pay interest charges, which may take the compensation to Rs 4,800 crore.
After the dispute with DMRC, DAMEPL had suspended the airport metro operations for six months, which the company claimed led to significant losses.
RInfra through its subsidiary also operates the Mumbai metro. Top sources in the company said, “We will not enter projects under PPP again unless the government makes significant changes in it”.
Experts have long pointed out the challenges of developing metro rails through the PPP model, as the cost of development is high and the return on investment is low because ticket prices are subsidised.
E Sreedharan, the man behind Delhi Metro, had warned against the delay in the Hyderabad metro project and bearing that may have on a private company.