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E Sreedharan, known for his role in the development of the Konkan Railway and Delhi Metro Rail, today said that building metro rails under the Build-Operate-Transfer (BOT) or public private partnership (PPP) models is not viable.
Metros, he said, are highly capital intensive. For example, if it is an elevated type of Metro, the cost will be something like Rs 200 crore per kilometer. If it is an underground one, it is around Rs 450 crore per kilometer, Sreedharan told IIT Madras students after delivering the Dr Pitchai Endowment Fund for Environmental Engineering lecture.
The returns for Metro Rail are very slow, mainly because of the compulsion to keep the ticket prices low, he said.
"Maximum one can charge two times of the existing public transport charges. With this kind of return, no Metro can make profit," Sreedharan added.
An internal rate of return, generally for a Metro will be about 0.5% or even minor. In this case, no private party will come out to invest in the project. An investor expects a return of atleast 15%, he said.
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"Therefore, Metro Rail is not the area for Build-Operate-Transfer or PPP model," explained Sreedharan.
He said the PPP model was tried in the case of three Metros in India. One was the Airport-line in Delhi Metro, where the entire civil cost was undertaken by the government and only the system cost and the trains were run by another party. Within one and half year, the private partner abandoned the project.
In case of Mumbai Metro phase I, first line of 11 kilometers, inspite of a very heavy ridership, the revenue was not even able to meet the interest liability of the loan taken by the private partner.
For Hyderabad Metro, the first attempt to get a private partner was not successful and now L&T has taken up the project. "Since L&T is a very prestigious organisation, they will finish the work. But they will have to pay a very heavy price for taking that private venture," said Sreedharan.
On Bullet trains, he said, "At the present state of the economy, we cannot afford a bullet train. Bullet trains are expensive and power guzzlers. A bullet train would cost around Rs 150-160 crore per kilometer. I dont think at present state of economy, we should invest money in such trains. We should upgrade our existing train services, modernise it, bring more speed and make it more comfortable. We should have bullet train, but we should wait for some more time."
