Anil’s metro stuck at price signal

NEW DELHI: It is not just Anil Ambani’s airport plans that are jinxed. Now, even his Metro project appears to have run off track, with the Union urban development ministry questioning the high cost of the Mumbai Metro project.

The Rs 2,356-crore project has been promoted by Anil Ambani’s Reliance Energy (REL) and the Mumbai Metropolitan Region Development Authority (MMRDA). While the projected cost of the Mumbai Metro works out to Rs 215 crore per Km, the Delhi Metro Rail Corporation’s (DMRC) cost per Km had been half that amount, at Rs 120 crore.

Quite remarkably, the foundation stone of the project was laid by the Prime Minister on June 20, while the detailed appraisal of the project was still incomplete. While the Anil Dhirubhai Ambani Group-controlled REL had been selected to develop the project on the basis of its lowest claim on viability gap funding (VGF), the Union government now finds that both the VGF asked for and the per km cost are excessive. The finance ministry had floated VGF as an instrument to help part-finance infrastructure projects undertaken on a public-private partnership basis.

The Phase 1 of the Mumbai Metro is to be a 11km-long east-west corridor connecting Versova and Ghatkopar. Senior government officials told ET that REL’s demand for Rs 650 crore — or 26.7 % of the total project cost — as viability gap funding (VGF) goes against the stipulated cap on VGF of 20% of the total project cost.

When contacted, an REL spokesman said: “The Government of India norms for viability gap funding stipulate that the Central government would provide support in the form of VGF to the extent of 20% of the capital cost.

These norms are with a view to ensuring that GoI’s exposure does not go above 20%. In the Mumbai Metro case, the government of Maharashtra has committed to GoI that any excess above 20% shall be the commitment of MMRDA/GoM. So, the Centre’s exposure will remain restricted to 20% of the project cost as per norms.”

Senior government officials, however, said: “The cost of elevated systems should be far less than the quoted amount. Even after considering other factors like land development and resettlement, the cost still remains exorbitantly high.”

REL has also argued that the two projects are not comparable. While the Mumbai metro project is essentially a private project, which does not enjoy “government backing”, the DMRC project had the advantage of scale and soft loans from the Japan Bank for International Co-operation, it says.

Reliance Energy has a 74 % stake in the Mumbai Metro project, while MMRDA has a 26% stake. The project is proposed to be run on a BOOT or Build-Own-Operate-Transfer basis and the work is slated to be in full swing by October. The state government’s share in this mega project will work out to around Rs 1,340 crore.