Private investment mandatory for availing central funds: Centre okays new metro policy
The policy mandates that states will have to come up with innovative financing mechanism to make metro projects viable while ensuring private investments.india Updated: Aug 17, 2017 00:10 IST
The Union cabinet on Wednesday approved the new metro policy, which will promote private investments in a big way in all future projects while also ensuring that cities get to construct metro rail only after they have explored all other measures to de-congest.
“The policy makes the PPP (public private partnership) component mandatory for availing central assistance for new metro projects. Private participation either for complete provisioning of metro rail or for some unbundled components will form an essential requirement,” said DS Mishra, secretary, Union housing and urban affairs ministry.
The Centre has also introduced stringent appraisal process that will make it tough for states to send proposal for building metro rail in its cities.
Wary that many such metro projects – which are hugely capital intensive – may not be financially viable and can end up burning a big hole in the government exchequer, the ministry is tightening the norms for appraising proposals sent by states.
The new policy will allow Centre to approve only those projects that ensures a 14% return on investment. Currently, the Centre clears projects offering an 8 % financial internal rate of return (FIRR).
“Any project where the EIRR (Economic Internal Rate of Return) is less than 14% will not be considered. The EIRR, along with ridership will also capture long term economic gains accruing from a project such as job creation, environmental gains by reducing pollution, reducing road accident deaths, etc.,” said Mishra.
Also, states will have to ensure last mile connectivity for upto five kilometers on either side of metro stations.
The policy also mandates that states will have to come up with innovative financing mechanism to make the project viable. This includes floating bonds and commercially exploiting the land around metro projects.
Currently metro projects are jointly funded by the Centre and state. While the Centre provides 20 % of the capital cost, states put about 30 %. The remaining fund is borrowed from the market.
At present, metro projects with a total length of 370 kms are operational in eight cities while another 537 kms are in progress in 13 cities.
The Centre will also fix an appropriate ridership for considering metro projects, keeping in view the present and future traffic projections in the context of expansion of cities. Currently, the minimum ridership has been fixed at 12000 PHPDT (Peak Hour Peak Direction Traffic) but many cities do not adhere to it.
First Published: Aug 17, 2017 00:10 IST