The Union Cabinet chaired by Prime Minister Narendra Modi today approved a
new Metro Rail Policy imposing set of tough conditions including putting the
onus on state governments on fulfilling various criteria before the Centre
The conditions include enhancement of rate of return to decide on the
viability of the project. Metro rail project for a city will be cleared only if
it had a minimum of 14 per cent Economic rate of return as against the present
standard of eight per cent financial rate of return. Global standards are being
attributed to the steep hike on rate of returns.
States have been told to go in for least cost mass rapid system like bus
rapid transit system, light rail transit and regional rail before seeking the
expensive Metro rail.
Public private Partnership component has been made mandatory and states
should also contribute funds to the project costs. The states also should
ensure last mile connectivity for five kilometers before a metro rail project
is considered by the Centre
The policy makes private investments across a range of metro operations
including PPP component mandatory for availing Central assistance for new metro
projects. Private investment and other innovative forms of financing of metro
projects have been made compulsory to meet the huge resource demand for capital
intensive high capacity metro projects.
Private participation either for
complete provision of metro rail or for some unbundled components (like
Automatic Fare Collection, Operation & Maintenance of services etc) will
form an essential requirement for all metro ra il projects seeking central
financial assistance” says the policy, to capitalize on private resources,
expertise and entrepreneurship.
In view of inadequate availability and even absence of last mile
connectivity at present, the new policy seeks to ensure it focusing on a
catchment area of five kms. on either side of metro stations requiring States
to commit in project reports to provide necessary last mile connectivity
through feeder services, Non-Motorised Transport infrastructure like walking
and cycling pathways and introduction of para-transport facilities. States, proposing
new metro projects will be required to indicate in project report the proposals
and investments that would be made for such services.
Seeking to ensure that least cost mass transit mode is selected for public
transport, the new policy mandates Alternate Analysis, requiring evaluation of
other modes of mass transit like BRTS (Bus Rapid Transit System), Light Rail
Transit, Tramways, Metro Rail and Regional Rail in terms of demand, capacity,
cost and ease of implementation. Setting up of Urban Metropolitan Transport
Authority (UMTA) has been made mandatory which is to prepare Comprehensive
Mobility Plans for cities for ensuring complete multi-modal integration for
optimal utilization of capacities.
The new Metro Rail Policy provides for rigorous assessment of new metro
proposals and proposes an independent third party assessment by agencies to be
identified by the Government like the Institute of Urban Transport and other
such Centres of Excellence whose capacities would be augmented, as required in
Taking note of substantial social, economic and environmental gains of
metro projects, the Policy stipulated a shift from the present ‘Financial
Internal Rate of Return of 8 per cent’ to ‘Economic Internal Rate of Return of
14 per cent’ for approving metro projects, in line with global practices.
Noting that urban mass transit projects should not merely be seen as urban
transport projects but more as urban transformation projects, the new policy
mandates Transit Oriented Development (TOD) to promote compact and dense urban
development along metro corridors since TOD reduces travel distances besides
enabling efficient land use in urban areas. Under the policy, States need to
adopt innovative mechanisms like Value Capture Financing tools to mobilize resources
for financing metro projects by capturing a share of increase in the asset
values through ‘Betterment Levy’. States would also be required to enable low
cost debt capital through issuance of corporate bonds for metro projects.
Seeking to ensure financial viability of metro projects, the new Metro Rail
Policy requires the States to clearly indicate in the project report the
measures to be taken for commercial/property development at stations and on
other urban land and for other means of maximum non-fare revenue generation
through advertisements, lease of space etc., backed by statutory support.
States are also required to commit to accord all required permissions and
The new policy empowers States to make rules and regulations and set up permanent
Fare Fixation Authority for timely revision of fares. States can take up metro
projects exercising any of the three options for availing central assistance.
These include; PPP with central assistance under the Viability Gap Funding
scheme of the Ministry of Finance, Grant by Government of India under which 10%
of the project cost will be given as lump sum central assistance and 50:50
Equity sharing model between central and state governments. Under all these
options, private participation, however, is mandatory.
The policy envisages private sector participation in O & M of metro
services in different ways. These include:
1.Cost plus fee contract: Private
operator is paid a monthly/annual payment for O&M of system. This can have
a fixed and variable component depending on the quality of service. Operational
and revenue risk is borne by the owner.
2. Gross Cost Contract: Private
operator is paid a fixed sum for the duration of the contract. Operator to bear
the O&M risk while the owner bears the revenue risk.
3. Net Cost Contract: Operator
collects the complete revenue generated for the services provided. If revenue
generation is below the O&M cost, the owner may agree to compensate.
At present, metro projects with a total length of 370 kms are operational in 8 cities viz., Delhi
(217 kms), Bengaluru (42.30 kms),
Kolkata (27.39 kms), Chennai (27.36 kms), Kochi (13.30 kms), Mumbai (Metro Line
1-11.40 km, Mono Rail Phase 1-9.0 km), Jaipur-9.00 kms and Gurugram (Rapid
Metro Projects with a total length of 537 kms
are in progress in 13 cities including the eight mentioned above. New cities
acquiring metro services are; Hyderabad (71 kms), Nagpur (38 kms), Ahmedabad
(36 kms), Pune (31.25 kms) and Lucknow (23 kms).
Metro projects with a total length of 595 kms in 13 cities including 10 new
cities are at various stages of planning and appraisal. These are; Delhi Metro
Phase IV- 103.93 km, Delhi & NCR-21.10 km, Vijayawada-26.03 km,
Visakhapatnam-42.55 km, Bhopal-27.87 km, Indore-31.55 km, Kochi Metro Phase
II-11.20 km, Greater Chandigarh Region Metro Project-37.56 km, Patna-27.88 km,
Guwahati-61 km, Varanasi-29.24 km, Thiruvananthapuram & Kozhikode (Light
Rail Transport)-35.12 km and Chennai Phase II-107.50 km.