New Metro Rail Policy gets Cabinet nod

Context:

The Union Cabinet chaired by Prime Minister Narendra Modi approved a new metro policy for expanding and regulating metro rail services in cities across India.

Introduction:

• This is the first such policy prepared by the union since metro rail operations began in Delhi in 2002
• Presently, metro projects with a total length of 370 kms are operational in 8 cities across the country.
• These cities includes Delhi (217 km), Bengaluru (42.30  kms), Kolkata (27.39 kms), Chennai (27.36 kms), Kochi (13.30 kms), Mumbai (Metro Line 1-11.40 km, Mono Rail Phase 1-9.0 km), Jaipur-9.00 kms and Gurugram (Rapid Metro-1.60 km).
• Metro Projects with a total length of 537 kms are in progress in 13 cities including the eight mentioned above.
• New cities acquiring metro services are; Hyderabad (71 kms), Nagpur (38 kms), Ahmedabad (36 kms), Pune (31.25 kms) and Lucknow (23 kms).

Key highlights of the new policy:

• The policy evaluates all modes of mass transit like BRTC(Bus Rapid Transit System), Light Rail Transit, Tramway mandatory before going ahead with cost intensive metro projects
• The policy makes it mandatory for state governments to set up a unified metropolitan transport authority for preparing a comprehensive mobility plan for the city.
• The policy mandates Transit Oriented Development (TOD) to promote compact and dense urban development along metro corridors.
• The policy also noted that states would also be required to enable low-cost debt capital through an issuance of corporate bonds for metro projects.
• The new policy promises to open a door for private investments across the country.
• It also stipulates rigorous project evaluation by a third party.
• States are required to adopt innovative mechanisms like ‘value capture financing’ and ‘betterment levy’ to channelized resources for the project.
• The policy stipulates an increase in rate of return from the present 8% to 14%.
• In cases where states opt for central aid of 10% of project cost, the centre will not concern itself with project execution.
• The policy also emphasized that the every proposal for Metro Rail should include proposals for feeder systems that help to enlarge the catchment area of each metro station to at least 5km.
• The policy also pointed out that the metro projects can be proposed only if it is found to be more cost effective as opposed to other transit projects like tramways, light rail transit, or bus raid transit system.
• The cabinet has made public-private partnership (PPP) component mandatory for availing central assistance for new projects.
• The new policy empowers states to make rules and regulations and to set up permanent Fare Fixation Authority for timely revision of fares.
• The new policy also proposes an independent third party assessment by agencies to be identified by the government.
• The policy proposed three options to states for availing central assistance. Under all these three options, private participation is mandatory. These options includes:

1. Public-private partnership with central assistance under the Viability Gap Funding scheme of the Ministry of Finance
2. Grant by government under which 10% of the project cost will be given as lump sum central assistance
3. 50:50 Equity sharing model between central and state governments.

• The policy stipulated a shift from the current ‘Financial Internal Rate of Return of 8% to ‘Economic Internal rate of return of 14 % for make metro projects in line with international practices.
• Establishing Unified Metropolitan Transport Authority (UMTA) has been made mandatory which is to prepare Comprehensive Mobility Plans for cities for ensuring complete multi-model integration for optimal utilization of capacities.

Significance of new policy:

• The policy is expected to promote Make-in-India’ initiative in metro rail projects.
• The new policy will also help in meeting the metro rail aspirations of various cities.
• Apart from financial returns, the policy lays emphasis on intangible benefits on the environment and safety fronts.
• For approving the projects, the government will take into account an economic rate of return of 14 per cent instead of financial rate of return of 8%.
• It will ensure financial viability of metro projects.
• The policy seeks to change the face of mass transit system in urban centres and make private investments mandatory.
• Inadequate availability and absence of last mile connectivity
• The new policy will enable realization of growing metro rail aspirations of a large number of cities in a more responsible manner.
• It will also help in employment generation.

Related statistics:

• From 2014 to 2017, the Union urban development ministry sanctioned Rs 30,653.78 crore for metro rail projects, out of which only Rs 12,345.33 crore was released to companies overseeing them.
• In the current fiscal year, the ministry has allocated around Rs 17,960 crore for metro rail companies, out of which Rs 4,650 had been spent till the first quarter ended June.
• The figure stands for Uttar Pradesh, Maharashtra, Gujarat, Rajasthan, Tamil Nadu, Kerala, Karnataka and Delhi NCR.

Challenges in implementing new policy:

• Limited resources and competing to meet increasing demand
• Limitations of monitoring large number of projects by the centre.
• Complementary modes, last mile connectivity and feeder services not completely developed.
• Capital intensive-increased recourse to centre and state budgets.
• There have been numerous road diversions, which are expected when large-scale project is underway.
• So far, only eight metro projects in India have seen private sector participation. These three projects includes Mumbai, Gurugram, and Hyderbad, Kolkata, Kochi, Chennai, Jaipur, and Bengaluru.
• Rests are joint ventures between the centre and state governments.
• Metro development in India had remained a real estate play and was not a bankable revenue model.
• Poor traffic management and dumping of construction materials and debris on roads and near construction sites.
• There has been no improvement in the available infrastructure facilities.
• Power cuts are frequent in summer and most states do not have a transformer facility available.
• Most of the metro rail projects face problem of land acquisition at several points.
• Slew of tunnels and bridges pose engineering challenges.

What need to be done?

In order to make new policy successful there is need focus on:

• For high-density populated cities infrastructure projects need to be constructed.
• The returns from these projects need to be assessed considering environmental costs, equity costs and so on.
• It is necessary to ensure that these projects are built on tight deadlines and cost control.
• There is need for capacity enhancement, upgradation, and creation of new passenger and freight corridors.

Conclusion:

• Government need to adopt much faster and efficient transportation system for successful implementation of new metro rail policy.