Robust Project Pipeline

Status of urban rail projects

Mass rapid transit systems (MRTS) form the backbone of transportation in large cities. Rail-based MRTS comprises metro rail, monorail and light rail systems. The choice of developing an MRTS depends on cost and benefit, demand level on the corridor, capacity of the mode, land use along the corridor, location of the building lines, and the financing options available.

Urban transport has been a much neglected sector for much of the country’s history. Cities face  a transport crunch due to inadequate infrastructure, limited and inefficient public transport, poorly maintained and unpaved roads and high pollution levels. The good news is that the current government is mindful of existing service level backlogs in urban transport in general and metro rail systems in particular.

Operational MRTS networks

The attempt to develop an efficient, fast and convenient metro system in India was initially made in Kolkata, where the first metro line was completed in 1984. Subsequently, the success story of the Delhi Metro encouraged the development of metro systems in Mumbai, Gurgaon, Chennai, Jaipur and Bengaluru. Prior to the launch of metro projects, the public mostly relied on buses, autorickshaws and personal modes of transportation.

Currently, metro rail systems are operational in seven cities – Bengaluru, Kolkata, Delhi, Gurgaon, Jaipur, Mumbai, and Chennai, and cover around 285 km in length (in addition to a 8.26 km monorail network operational in Mumbai) and entailing an investment of over Rs 600 billion.

Despite issues related to land acquisition and the need to secure multiple clearances which can delay project execution, metro networks are being extended in these seven cities.

Ongoing projects

At present there are 17 metro and monorail projects under implementation in India. Of these, 16 are metro projects while one is a monorail project. Together these projects have a scope of over 720 km in ten states – Delhi/Uttar Pradesh (149 km),  Karnataka (114 km), West Bengal (103 km), Uttar Pradesh (72 km), Telangana (74 km) Maharashtra (69 km), Tamil Nadu (54 km), Gujarat (37 km), Kerala (36 km) and Rajasthan (12 km).  Segment-wise, metro projects worth Rs 1.89 trillion offer development opportunities across 703.64 km and the monorail project (Rs 30 billion) across 19.54 km.

Announced projects

At present, there are 25 projects which have been announced and are yet to take off. Most of these projects are in the detailed project report (DPR) preparation or approval stage. Together these projects offer an investment opportunity worth Rs 2.56 trillion across 1,107 km in 11 states. Of these, the states with the maximum investment opportunity are Uttar Pradesh (385 km), followed by Delhi (126 km), Bihar (91 km), Tamil Nadu (88 km) and Maharashtra (74 km) . Segment-wise metro projects offer opportunities worth Rs 2.52 trillion and the monorail project Rs 45 billion.

The biggest project announced in 2015 is the Chennai Metro Rail Project Phase II which offers an investment opportunity of Rs 420 billion with a project scope of 88 km.In terms of ownership, 16 projects entailing an investment of Rs 1.92 trillion are being developed by the government (central, state and local) while one project worth Rs 200 billion is being developed on a public-private partnership (PPP) basis.

Financing and PPP

Metro rail projects in India have been financed either through public funding or through the PPP route. A look at recent projects has shown that the engineering, procurement and construction (EPC) mode through public funding has been the most prevalent mechanism in completed as well as ongoing MRTS projects. Publicly-funded metro projects use a combination of equity, subordinate debt and senior debt from the central as well as state governments.

Significant funding also comes by way of loans from multilateral agencies (Japan International Cooperation Agency, the Asian Development Bank and the French Agency for Development). Meanwhile, PPP projects are financed through debt from financial institutions and commercial banks, equity contributions from private players, and grants from the central and state governments in the form of viability gap funding.

Most of the upcoming projects are also being carried out in the EPC mode with the bulk of the funding coming from central and state governments, and multilateral agencies. Some of these include the Navi Mumbai, Ahmedabad, Bengaluru, Kochi, and Chennai metro rail projects.

The overall role of the private sector in executing metro projects in the country has been limited so far. The track record of projects executed on a PPP basis has been poor, as exemplified by the Delhi Airport Express Line and the Mumbai Metro Line 2. The Delhi Metro Rail Corporation (DMRC) took over operations of the Airport Express Line in 2013 after its PPP partner Reliance Infrastructure’s subsidiary Delhi Airport Metro Express Private Limited (DAMEPL) terminated its concessionaire agreement. This was due to DMRC’s inability to cure civil structure defects. Similarly, in the case of the Mumbai Metro Line 2, the Maharashtra government awarded the contract to Reliance Infrastructure. However, it was cancelled in 2014 due to a dispute among the stakeholders which caused inordinate delays in the commencement of project work.

Mobilising funds through property development has been an under-explored source of finance so far, due to the relatively easy availability of government funds and the absence of a proper mechanism to leverage increased land value. So far, only the Delhi Metro has managed to leverage this option to raise a small portion of the project cost of Delhi Metro Phases I and II.

Technology and fare collection

Over the years, urban transport projects have gradually adopted advanced technology solutions across rolling stock, signalling and fare collection systems. Automatic fare collection (AFC) systems are the most popular mode for fare collection in metro projects. All the seven operational metro systems in India use AFC systems based on closed-loop stored-value contactless smart cards and radio-frequency identification (RFID) tokens. The AFC system comprises readers/writers for ticket status and passenger access control, back office computers as well as a central clearing house to gather revenue data, settle transactions and prepare system performance reports.

Most upcoming metro systems (except the Ahmedabad metro) have been designed on standard gauge systems, and advanced signalling systems and communications-based train control (CBTC) systems are to be used for the Hyderabad and Ahmedabad metro projects.

Issues and challenges

One of the primary factors responsible for delays in MRTS projects is the multiplicity of institutions that undertake urban transport projects. There is no credible effort made in deciding alignment and transport integration at the master planning stage. Furthermore, changing the scope and alignment of a metro project during the construction period has an adverse impact on project timelines, cost and viability. In addition, land acquisition continues to be a major hurdle for developers resulting in cost escalation and delays.

Moreover, mobilising private investment for metro projects has also been a serious concern due to the non-availability of attractive PPP models and the time consuming processes. The capital-intensive nature and long gestation period of projects, cash-crunched project developers, and the reluctance of financial institutions to fund large projects have led to limited private participation.

Future outlook

As per the recommendations of the Working Group on Urban Transport under the National Transport Development Policy Committee Report on Urban Transport, 2013, an outlay of Rs 23 trillion has been envisaged for the development of urban transport by 2032. Of this, Rs 5 trillion has been earmarked for rail transit development.

To make MRTSs sustainable, the government needs to use hybrid models where infrastructure development is undertaken by the government while the onus of operations and maintenance is on the private player. On the supply side, the government should increase the coverage and frequency of trains and improve transit facilities, thereby creating a passenger-friendly system. On the demand side, the use of public transport must be encouraged by reducing dependence on private modes of transportation. This could be achieved through the levy of higher parking charges, restriction on the movement of private vehicles on certain stretches etc.

Smart mobility is a core concept in smart city development. The “Smart Cities Mission” focuses on providing smart solutions for urban mobility by way of multimodal integration, parking management, use of non-motorised modes, implementing transit-oriented development measures and intelligent traffic management. The Smart Cities Mission bodes well for urban rail transport as it is expected to recast the urban landscape of the country.

As investment needs grow along with demand, traditional funding sources are insufficient. A shortage of funds in the urban transport sector has created financing gap. Thus, the need of the hour is to come up with innovative funding methods which can tap the private sector as well as multilateral agencies.


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