The new metro policy framed by the central government has made public-private partnership (PPP model) mandatory for states which will seek central's assistance for new metro rail lines. The move is definitely going help private players in executing these capital-intensive transport projects.
The metro rail policy which was cleared by the Union Cabinet on Wednesday said, participation of private entities will be an essential requirement.
"Private participation either for complete provision of metro rail or for some unbundled components like automatic fare collection, operation & maintenance of services will form an essential requirement for all metro rail projects seeking central financial assistance," the metro rail policy stated.
The policy came up with a major change, as it shift from existing financial rate of return to economic rate of return, set as the new criteria for the approval of the project. An economic rate of 14 percent was set in the new policy, which was previously at 8 percent internal rate of return. State governments are empowered to constitute permanent authorities for revision of fares from time to time, BloombergQuint quoted the metro rail policy.
Vinayak Chatterjee, chairman of infrastructure services provider Feedback Infra told BloombergQuint that, "Earlier, only financial rate of return, which is the rate of return on capital invested, was looked at for metro projects. The economic rate of return is a social cost benefit analysis."
Currently, metro projects with a total length of more than 350 km are active in eight cities – Delhi, Bengaluru, Kolkata, Chennai, Kochi, Mumbai, Jaipur and Gurugram.
Projects worth more than Rs 50, 000 crore are underway in cities like, Hyderabad, Nagpur, Ahmedabad, Pune and Lucknow.
"PPP model, last-mile connectivity, rigorous analysis to provide right solution to the right city, a shift from financial rate of return to economic rate of return for large infrastructure projects, and fare fixation authority would set the pace for great expansion of metro rail in this country," Chatterjee told BloombergQuint.