Mumbai MRTS Corridor

- V. K. Rane,
ex-MD, IRCON

1) IMF report on Public – Private Partnership (PPP) dated 12th March 2004, states that “better management in private sector and its capacity to innovate can lead to increased efficiency, this in turn should translate in to better quality and lower cost services” and it further states that “Private financing can support increase infrastructure investment without immediately adding to government borrowing and debt, and can be source of Govt. revenue.” However, in case of Mumbai MRTS corridor under consideration, the project has neither added to the Govt. revenues but instead the Govt. had to pay Rs. 650 /- Crs, as VGF grant to the bidder, nor have been able to provide any innovation or increased efficiency, nor reduced the capital cost of the project. The DMRC corridor, which was implemented on NON - PPP / EPC route, was executed in Delhi, at a capital cost (without IDC) of Rs. 100 Crs per Km, while, the proposed Mumbai Metro Corridor bid was accepted through PPP route, at Rs. 200 Crs per Km, (including IDC)

2) It was brought to the notice of the Chief Minister, Chief Secretary of the Govt. of Maharashtra and MMRDA, in my presentation, in 21st April 2005, that adoption PPP route would unnecessarily inflate the capital cost, to double the estimated cost of MMRDA.

3) BID PRICE & Viability Gap Funding (VGF)-- Against the estimated cost of Rs 1250 crores(without cost of land)with around 300 crores of estimated VGF subsidy, the contract was accepted at an abnormally high price of Rs 2356 Crores with VGF subsidy of Rs 650 Crores (negotiated from Rs 1250 crors to Rs 650 crores reflecting the authenticity of bid price).This is a sad reflection of the competency of MMRDA in preparation of estimates or reliability of the bidder taking advantage of limited (TWO Bidders) competition. (In an exactly similar situation for Mumbai PUNE expressway, the PPP route was rejected by the then the Govt. and the work was completed by NON-PPP / EPC route in Rs 1250crors against the Govt estimates of Rs 1500 Crores and contractors bid price of Rs 3100 Crores (REL) via PPP route).

4) Abnormally High Price Quoted for Coaches--The bidder has quoted the price of a SG coach at Rs 9 crores per coach against the estimate price Rs 4.5 crores and assessment of 108 coaches for VAG corridor. A BG coach recently purchased by MRVC for Mumbai suburban section from ICF, costs Rs 2. crores. One can realize the inflated coach price of the bidder and accepted by MMRDA as reasonable at Rs 9 crores each. Secondly, if wider BG coaches were adopted, the number of coaches required for operations for the entire concession period would reduce to 72 as against 108 for SG This would further reduce the Maintenance, operation and energy costs there by reducing the VGF subsidy considerably.

5) Automatic Train Control (ATC) & Automatic Tran Operation( ATO) Signaling – This type of signaling is required only for improving the frequency (Headway), from 3min to 2 min. It is seen from traffic demand that for the entire concession period, there is NO need to operate at 2m frequency on this corridor. If that is so, there was NO justification to insist on provision of ATC & ATO signaling costing around Rs 70 crores initially and replace 70 % of it after 16 years. This has unnecessarily inflated the cost of VGF subsidy. This could have been avoided by keeping provision in Rolling stock for future provision of ATC as traffic demand increases. In fact for a country like India, there is NO need for ATO ( Driverless Operation) as in any case manning of Cab will be required for closing doors. The computer simulation carried out for this layout of the corridor indicates that, it is not feasible to improve the frequency at lesser than 2.75 Min. while the bidders have accepted, a provision of 2 min by installation of ATC & ATO from the date of commissioning the project. MMRDA and safety commissioner should ensured, that trials are conducted at 2 min frequency, before approving the fitness for commercial operations, on this corridor. It is also not known, whether test runs at 2 min frequency were carried out by DMRC on the Delhi Metro Corridor in operation at present at 5 min frequency.

6) Alternative Bid for BG-- While inviting alternative bids for BG, MMRDA deliberately did not ask for bids with wider coaches for BG. This eliminated competitive and capacity advantages for BG as compared to SG. Thus, there was a deliberate and mischievous attempt to eliminate capacity advantages of BG over those of SG. The project cost of BG with wider coaches, if compared on the basis of cost per unit carrying capacity would be lower by 20 % than that for SG and would further result in savings in energy and operation costs, in view of the drastic reduction in the number of coaches from 108 for SG to 72 for BG for VAG corridor. Further it would cater for future traffic demand of 100 years rather than limiting it to 25 years as planned today. For a given traffic demand, the length of the train for BG, would be reduced, thereby considerably reducing the land area required for the depot, due to reduction in length of the trains, for given volume of traffic, and would further reduce, the initial investments in platform lengths and corresponding lengths for platform covers. This would reduce the VGF amount quoted by the bidders.

7) The analyses of bid, shown below, actually quoted for VGF corridor and accepted by MMRDA, would reveal a) That the project cost has been exorbitantly inflated by Rs 600 crs, and b) And refusal to reduce the initial capital cost quoted by the bidder, (after negotiating a reduction in VGF amount) was to ensure that, the entire project could be executed, with the debt capital from the lenders (Rs 1645 crs) and VGF grant of Rs 650 crs together with 26 % equity of Govt. (both without interest) of Rs 183 crs, making a total amounting to Rs 2478 crs. This is much more than that required to actually execute the project (Rs 1750 crs). This is without bidders equity and gives surplus of Rs 728 crs (see table below).

ACCEPTED BID FOR MUMBAI METRO FOR VAG CORRIDOR

a)	Cost of the Project	Rs 2350 Cr
b)	Viability Gap Funding Originally asked for	Rs 1250 Cr
c)	Hence acceptable cost of the project without VGF (a--b)	Rs 1100 Cr

C)	Hence acceptable cost of the project withour VGF (a--b)	Rs 1100 Cr
d)	Negotiated VGF and accepted by bidder	Rs 650 Cr
e)	Thus the reasonable cost of the project required for execution (c+d)	Rs 1750 Cr

f)	Bidder refused to accept reduction in project cost of	Rs 2350 Cr
g)	Hence the project cost has been inflated by bidder (a-e) = Rs 2350 Cr - Rs 1750 Cr	Rs 600 Cr

h)	At 70 to 30 debt equity ration, the debt available from lenders id 0.70 X 2350	Rs 1645 Cr
i)	Equity at 30% of the Project cost is 0.30 X 2350	Rs 705 Cr

j)	Equity of the state govt at 26% of 705 (without interest)	Rs 183.30 Cr
k)	VGF grant from the govt (without interest)	Rs 650 Cr
l)	Total funds available to bidder (without interest) (j+k)	Rs 833 Cr

m)	Total funds available to Bidder (with interest on debt)=h	Rs 1645 Cr
n)	Total funds available to bidder (without bidders equity) = (l+m)	Rs 2478 Cr
o)	Total funds required for execute the project	Rs 1750 Cr
p)	Execess funds available with bidder without investment it its equity (n-o)	Rs 728 Cr

• Thus PPP projects are priced and executed without investment of there own equity
• 30 % of profit is realized and the end of construction period, in the name of risk provisions
• The return on equity during operation and maintenance period is an additional bonus
• The company, however, carry the liability of debt repayment for a loan repayment period.

8) It will be seen from the above analyses of bid price and acceptance of the same, that a proper evaluation, implications and cannons of financial propriety have not been observed, in award of contract, at such an abnormally high price, without ensuring public financial interest. It is presumed, that the auditor general will certain look in these aspects with unbiased mind.

9) Keeping in view, all the aspects mentioned above the Gov. of Maharashtra, should modify the gauge from SG to BG and adoption of wider coaches, from 3.20m to 3.66m for Charkop-Bandra-Mankhurd heavy density corridor, and make a provision for future increase from 8 coaches to 10 to 12 coaches, so as to make a provision for accommodating traffic demand for 75 to 100 years, in the interest of the future generation of this city. I would like to clarify that the 21 st century, best in the world technology, has been adopted on BG (1676 mm) by BART in San Francisco (USA), with 2 min service and 120m sharp curves, and is being continued on BG for future extensions, even though their main line systems are on SG. It is further added that the high-speed lines in Spain are on BG (1676mm) with the best in the world technology. The TGV High Speed trains in France, do negotiate tracks in Europe through different signaling and traction systems. The advice to the state Govt. that, the MRTS metro as proposed in Mumbai, cannot negotiate / run on the existing suburban / main line system is incorrect. The entire technical, financial and legal justifications given to the State Ministry, is based on wrong statements and need to be urgently debated further, with the representatives of the promoters of BG in the overall of interest of this city’s planning and its future commuters.

10) With the Chief Minister’s dream of developing Mumbai on Shanghai pattern by adoption of high-rise buildings in the city, the density of population and the accelerated rate of increase of commuters demand for MRTS, will reach its inhuman crush capacity, on these corridors in 15 to 20 years. The Govt. Therefore, should take immediate steps, to review their present policy of adoption of restricted width of coaches on SG, and provide for adoption of wider coaches from future capacity considerations, which would necessitated provision of BG track, in the overall interest of the future generation.

SYNOPSIS The author analyses the economic considerations in the award of the contract for the construction, maintenance and operations of the elevated Versova-Andheri-Ghatkopar Mass Rapid Transit Railway a stand alone corridor on standard gauge via PPP route instead of EPC route, as adopted for Delhi Metro. MMRDA took more than 3 years, to finalize tenders and pre-award formalities, and ultimately adopted a price, which resulted in double the estimated cost for this project, with a limited competition of two bidders prior to accepting the financial bid. The cannons of financial propriety do not seem to have been observed while awarding the contract on a 35-year concession period. This was probably to prevent further delay, and justified the exorbitantly high price. Though, it is too late to make any changes at this stage, the Govt. of Maharashtra need to look in to this aspect of a high cost for SG limited capacity (with 3.2m wide) coaches and make a provision for future adoption of BG with higher capacity (3.66m wide) coaches, so that after 25 years, the capacity of this corridor can be suitability increased, to meet future traffic demand. It is considered essential to adopt BG with 3.66m wide coaches, for Charkop-Bandra-Mankhurd heavy density corridor, and make necessary changes in the bids, which are yet to be received and finalized.