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Sunday, Sep 22, 2019

Rapid Metro had profit in last quarter: IL&FS

Chetan Mittal, advocate for the HSVP and Haryana Mass Rapid Transport Corporation Limited (HMRTC) concurred.

gurugram Updated: Sep 11, 2019 05:20 IST
Prayag Arora-Desai
Prayag Arora-Desai
The financial liability/debt, they said, arises from additional loans and interest accrued by the service (at least Rs1,800 crore, according to the operator), which nullifies any profits.
The financial liability/debt, they said, arises from additional loans and interest accrued by the service (at least Rs1,800 crore, according to the operator), which nullifies any profits. (HT image)
         

The Rapid Metro, which is facing closure on account of financial crisis, recorded an operational profit of Rs 3.81 crore in the last financial quarter, shows a response sent by the operator, Infrastructure Leasing & Financial Services Limited (IL&FS), to the Haryana government which sought an inquiry into the finances of the privately run service. The letter states that the service’s gross revenue for April, May and June 2019 was Rs 18.49 crore. The revenue from passenger fare was ₹8.40 crore, whereas non-fare revenue was Rs 10.09 crore.

A senior IL&FS functionary, speaking to the HT on the condition of anonymity, said “operation of the service itself is not a challenge”, and that the Rapid Metro has been breaking even on operational costs, which come to about Rs 6 crore per month. The financial liability/debt, they said, arises from additional loans and interest accrued by the service (at least Rs1,800 crore, according to the operator), which nullifies any profits.

Chetan Mittal, advocate for the HSVP and Haryana Mass Rapid Transport Corporation Limited (HMRTC) concurred. “The Haryana government can take over the Metro and run the service comfortably if the assets were to be transferred without any encumbrances. It’s the additional debt claimed by the respondents which is in dispute,” he said.

WAY FORWARD

As the two parties continue negotiations through the week, experts expressed concern over the inevitability that the Rapid Metro will be transferred to the state government. While the HSVP, the GMDA and the HMRTC are all legally eligible to take over (from Rapid Metro Gurugram Limited and Rapid Metro Gurugram South Limited), none have any the executive experience. “This is an unenviable position for Haryana,” said Sanjay Gupta, head of transport planning at Delhi’s School of Planning and Architecture.

However, experts said the predicament could also be viewed as a window of opportunity.

“We have a ready transport corridor along which the government can implement a dedicated transit-oriented development policy,” said Gupta, who spearheaded a survey to gauge the Rapid Metro’s performance as part of a larger mobility study for Gururgam.

He added that with a few short-term and long-term strategies, the Rapid Metro’s performance could become viable, or even be enhanced.

“For one, they need to regulate services like autos and shuttles, which move parallel to the Rapid Metro. They can be shifted to routes not currently serviced by autos. The other need is to create a seamless transfer at Sikanderpur station. Presently, shifting to the DMRC from the Rapid Metro needs a double check-in, which is deterring passengers from using the service,” he said.

ABYSMAL RIDERSHIP DATA

According to an SPA survey, the daily average ridership on both phases of the Metro is around 61,000 people. At the Sikanderpur, which is the interchange between the Rapid Metro and DMRC’s Yellow Line, the ridership is lowest at just 2,000 people per day, when the Yellow Line station sees an average ridership of about 45,000 per day.

Experts said these data points are symptomatic of the larger issue that the government will have to confront as it takes over operations.

“Sikanderpur is the only interchange point between Rapid Metro and DMRC, therefore it should have the highest footfall. But the opposite is happening because people prefer intermediate public transport, such as shared autos, after alighting at Sikandepur, instead of taking the Rapid Metro. This is one of the first course corrections which will have to be made,” Gupta said.

DLF Phase 3 sees the highest at 11,500 people a day, according to the survey.

NEED FOR PARALLEL BUSINESS MODEL

Other experts called for fares to be rationalised, as was recently done on the Delhi Metro’s airport line. “Prior to the DMRC’s takeover, the airport line had a cost to revenue ratio of 2.5:1, after the exit of the private operator the cost has reduced to below 1,” said Sunil Ashra, professor of economics at MDI Gurugram, who has been studying the Rapid Metro’s performance over the years. Lowering fares, he said, bodes well for the Rapid Metro in the short-term, but this alone will not be enough to remediate the financial loss the government will incur at the end of the arbitration process.

“Some sort of parallel business model will be needed to offset the cost incurred. Providing incentives for construction around the Metro line, for example, would lead to more development along the corridor. Commercial and residential establishments can come up around it, which will boost demand for mobility and, in turn, the service’s ridership,” Gupta said.

CHALLENGE FOR HARYANA govt

Drawing another parallel with the Airport Metro, experts pointed out that the Haryana government, like the DMRC, was being strong-armed into taking over the project against its will, and against its capabilities.

“It is an inherent problem with private involvement in infrastructure projects. The DPRs are gold-plated, and based on overestimation of ridership. In multiple Metro projects across Delhi, Mumbai and now Gurugram, the project proponent has increased capital costs after being awarded the project, alleged breach of contract and then moved to arbitration to resolve the dispute,” Ashra said.

While officials from the HSVP and the HMRTC did not respond to requests for comment or declined to comment, a senior GMDA official in the know of the matter said, “The Rapid Metro is a prime example of the undue benefits that the private sector manages to avail from the state. The original project proponent should never have been allowed to exit. We will now have to pick up the slack and find a way to keep the service viable.”

First Published: Sep 11, 2019 05:20 IST