The Delhi Metro Rail Corporation (DMRC) is the first urban rail project in the country with state government equity participation. The project is being undertaken on the same mechanics as the Konkan Railway Corporation (KRC). DMRC managing director E Sreedharan, who also saw KRC during the most difficult times in project implementation, speaks to Business Standard over some of the issues involved .
Now that you have shortlisted the consultants, when do you expect to finalise the Engineering Procurement and Construction contractors?
The general consultants, a consortium led by Pacific Consultants International of Japan, are expected to be in position shortly. The consultants will first review the detailed project report, lay down system specifications and do the designs. However, we expect the process of pre-qualification of the contractors will be completed by the year-end. The contracts for the civil works for the underground corridor and the remaining surface corridor are likely to be awarded by the mid next year. As regards work on the Shahadara -Tis Hazair corridor, two civil work projects have already been awarded. Work is expected to start after the monsoons.
Has financial closure been achieved ?
The funding is as follows. Thirty per cent by the Centre and the Delhi government, 56 per cent through a soft loan from the OECF of Japan, subordinate (interest free) loan, 8 per cent being contributed equally by the Centre and GNCTD and 6 per cent by property development. It may be seen that the entire funding has been tied up.
Has costs been frozen at Rs 4,860 crore or will changes in the exchange and interest rates lead to some revision in the estimates?
The project cost at the time of completion is estimated at Rs 8,000 crore ( assuming a 10 per cent increase in input cost on account of inflation). Exchange and interest rates are not expected to materially affect the project cost. The exchange risk at the time of repayment of loan is being shared equally by the Centre and the GNCTD. Consequently, the rates will not have any effect on the repayment.
What about the designs? Have you frozen it to the existing broad gauge or will there be a different garage for the metro transport?
At present, the system, as approved, stands on broad gauge , Several international metro systems are on standard gauge and the issue is being examined.
You had targeted an Economic IRR of 26 per cent and a financial IRR of 3 per cent. Are the fares you have estimated sufficient to support the IRR estimates?
It was seen that a fare level of Rs 5 for an average distance of 8 km at April 1995 price levels yielded highest financial IRR for the project at 2.8 per cent. This fare was about 66 per cent more than the corresponding DTC fare and in line with the that charged by chartered buses. It was estimated that at this level , about 75 per cent of the total public transport trips will be carried by Delhi MRTS.
It was also assumed that the input cost would increase by 10 per cent per year and the fare by 7.5 per cent .
Q. How long will the project take for full fixed cost recovery?
A. In line with the practice of the Railways , the detailed cash flow expenses for the project was done for 30 years ( 10 years for construction and 20 years for operation ). All the costs including fixed costs will be fully amortized over this period. The fixed cost will be recovered in less than 20 years of operations at a fare of Rs 5.
Q. You have a very tight time schedule and an equally tight resource base. So are you drawing on all the project management skills of Konkan to meet these deadlines??
A. The time schedule for implementation of the project given to us was 10 years out of which 3 years have already elapsed. To remain on target , we have reduced the implementation time to 7 years, and with th4e highly skilled engineers & consultants in our team , we should be able to achieve the target schedule . The first phase of the project will be ready for operation by 2005 . Konkan Railway was an engineering challenge and we shall draw on the experience fully . Team work is the ky to success and that is is culture we promote in the DMRC.
