IN A major policy shift, the Ministry of Urban Development is set to pave the way for private construction and operation of Metro rail projects across the country. The ministry has drafted the proposed Metro Rail Bill 2016 and a Metro policy to push further privatisation of urban infrastructure.

The proposed Bill will, for the first time, insert an enabling provision for private initiatives or public private participation (PPP) in Metro Rail. The private Metro Rail Administration will be allowed to take up property development and commercial activities to cover costs.

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“PPP brings with it the innovative financing of the private sector and its efficiency. The enabling feature in the proposed Bill will give a push to PPP,” said a ministry official.

The official said that in addition to the Bill, the proposed Metro policy will give state governments a “menu of options” for the concession agreements with the Metro rail developer. These include equity sharing, grant model and PPP or hybrid PPP where infrastructure is provided by the government and operations are conducted by the private firm.

Until now, Metro rails were constructed with public funding, with the Central and state governments pitching in with 50-50 per cent equity. The only exceptions have been in Gurgaon, Mumbai, Hyderabad and the airport line of Delhi Metro. Metro rails in all other cities, including Delhi, Lucknow, Kolkata, Bengaluru, Kochi, Chennai, Ahmedabad, Nagpur and Jaipur have or are being constructed through government funding. This is true of all proposed Metro rail projects, too, including those in Pune, Noida, Greater Noida, Vishakapatnam and Vijayawada.

The argument against PPP in Metro rail projects has been that with the exigencies of keeping public transport affordable, which translates into slow returns on investment, such an extremely capital-intensive project cannot be taken up by private firms. In the case of Rapid Metro Gurgaon, the country’s only fully privately funded Metro rail, the flat fare (Rs 20) charged by the private operator is far higher than the minimum (Rs 8) charged by DMRC for Delhi Metro.

The PPP models, with viability gap funding by the central government, were followed in two Metro rails: line one of Mumbai Metro phase one and Hyderabad Metro. In the case of the 11-km line one of Mumbai Metro, the government agencies of Maharashtra have challenged in the Bombay High court a proposed fare hike by Reliance Infrastructure-owned Mumbai Metro One Pvt Ltd.

In the Delhi airport line, the government bore the civil costs while that for systems and running of the trains were taken up by a private operator, which abandoned the project in a little over a year. In the case of the Hyderabad Metro PPP, the project is beset by cost escalation and delays. Presently, there are three legislations for Metro Rail construction: The Metro Railways (Construction of Works) Act, 1978; The (Delhi) Metro Railways (Operation and Maintenance) Act, 2002; and, The Metro Railways (Amendment) Act, 2009.

“The proposed Act will compile provisions of all existing Acts. It will also factor in provisions of the new land acquisition act of 2013,” said the official.

The legislation proposes to transfer to the Ministry of Urban Development both the technical planning of Metro Rail from the Ministry of Railways and Commissioner of Metro Rail Safety (CMRS) from the Ministry of Civil Aviation. It also proposes the setting up of a permanent fare fixation authority for “timely revision of fares”.