L&T exits Hyderabad Metro project who are the victims of the PPP models?
R Lakshmaiah
The aim of promoting public transport and the role of governments across the globe are quite different to how the Government of India and most state governments look at public transport.
L&T, a joint partner of the Hyderabad Metro Rail, left the project well before the expiry of the agreement period and the Government of Telangana took it over, accepting L&T’s conditions of paying the Rs 13,000 crore debt burden. This is the second such metro project in the country. The Delhi Airport Express Metro project between New Delhi Railway Station and Indira Gandhi International Airport was built under a PPP model on Build-Operate-Transfer (BOT) basis as a joint venture of Reliance Group and Delhi Metro Rail Corporation. The estimated cost of the project was Rs 5,700 crores. The DMRC was to build the infrastructure, including land acquisition, civil structures like tunnels, stations, depots, etc, at a cost of Rs 2,850 crores while Reliance was to be responsible for the design, supply, installation, etc at a cost of Rs 2,850 crores. The agreement period was to be 30 years extendable by another 30 years. The fare and non-fare revenue was to go to Reliance, which was to pay Rs 51 crores to Delhi Metro Rail Corporation. The Reliance Group would operate the services.
The operations of that Metro service were started on February 23, 2011. The fare was then Rs 80. In June 2013, the Reliance Group gave an ultimatum that it would not continue operations after June 30, 2013. The DMRC had to take over the operations and reduced the fare from Rs 80 to Rs 60. Till date, the DMRC is operating the Airport Express. Reliance, which left the project irresponsibly, demanded that the DMRC pay a huge amount and raised a dispute in court. The tribunal has given an award in favour of Reliance and directed the DMRC to pay Rs 2,782.33 crores to Reliance. The DMRC went in appeal; in April 2024, the Supreme Court finally set aside the tribunal award.
The Mumbai Metro Rail project was also a joint venture under PPP between the Mumbai Municipal Corporation with 26% stake and Reliance with 74%. It was agreed that the fare should be between Rs 9 and Rs 13. The operations started on June 8, 2014. But Reliance violated the agreement and fixed the fares at Rs 10 and Rs 40 when the operations started. The Mumbai Municipal Corporation approached the court against the unilateral fare enhancement and violation of the agreement by Reliance. The court did not declare the unilateral fare enhancement illegal and allowed operation with fares at Rs 10 and Rs 40. Reliance later proposed enhancement of fares to Rs 10 and Rs 110. But the Bombay High Court stayed the proposal and the litigation is still pending.
These are the two experiences with Reliance in Metro Rail projects. Now L&T has left the Hyderabad Metro Rail and dumped it on the Telangana state government. This means the money of the people of Telangana has to be spent. In spite of these experiences, governments are aggressively adopting the PPP model. PPP has become a “mantra” for them. Private players will expropriate more and more profits at the cost of the people. When it is not possible, they simply violate the agreements and quit.
Should metro rail projects be measured in terms of profit and loss? What is the global experience?
There are 970 metro rail projects in operation in 204 cities in 65 countries. Not one of them is making profits if investment and operational costs are calculated. This is true not only for metro projects, but for public transport as a whole. Some metro projects like in Hongkong are in surplus of operational costs. They get huge amounts of money through development of real estate business around the metro stations. According to studies conducted by the Ministry of Housing and Urban Affairs (India), UITP and CAG, the fare box revenue typically covers only 30 to 60% of metro operational costs. Governments support metro projects financially not for profits but for the public good and long-term urban sustainability with the following 5 aims:
1. Urban mobility and congestion relief: Provide high capacity, rapid and reliable public transport. Reduce road traffic congestion and travel times.
2. Environmental benefits: Reduce air pollution and greenhouse gas emissions by reducing usage of cars and two wheelers.
3. Safety & Comfort: Safer mode of transport with no road traffic accidents. More predictable, air conditioned and comfortable rides.
4. Inclusive Growth & Accessibility: Affordable transport for daily commuters especially middle and lower-income groups. Better connectivity for the urban poor and women.
5. Urban Development & Economy: Stimulate transit-oriented development around stations. Boost local economy and property values. Create jobs in construction, operation, and related services.
Most countries which follow the above aims in promoting public transport are not socialist. They are implementing neo-liberal economic policies dictated by the World Bank and others. But, cruelly, the Government of India measures public transport on the scale of profit and loss and is taking up all projects under the PPP model. The people of India are made the scapegoats. Should we allow this atrocity? It is for the people of India to rise to the occasion and make the Government reverse this policy.
