RTI query: MMOPL had estimated losses in Metro till 2018

Indian Express: Mumbai: Friday, 24 July 2015.

A government-appointed committee has recommended a hike in the tariff of the city’s first Metro, with the operator in the red, documents obtained under the Right to Information (RTI) Act show the Reliance Infrastructure-led operator, Mumbai Metro One Pvt Ltd (MMOPL), had in its initial bid for the project shown willingness to bear losses till 2018.

According to information sought by RTI activist Anil Galgali from the Mumbai Metropolitan Region Development Authority (MMRDA), the MMOPL had expected to complete work on the Versova-Andheri-Ghatkopar Metro in 2010.

Going by the information provided to Galgali, the MMOPL had assumed losses for eight years, till 2018.

The MMOPL is a consortium of Reliance Infrastructure, Veolia Transport and the MMRDA, which has a 26 per cent stake in the venture.

The company has constructed the 11.4-km Versova-Andheri-Ghatkopar Metro on a public-private partnership model. It has been locked in a dispute with the MMRDA over the structure fare after the project cost ballooned to Rs 4,321 crore from the original Rs 2,356 crore.

After slugging it out in the Bombay High Court and the Supreme Court, a Union government-appointed fare fixation committee was formed to look into the tariff revision according to the Metro Act.

Citing high cost of construction and lack of parity with other Metro projects owing to it being the country’s first such corridor built on a PPP model, the committee recommended a fare of Rs 10-110, up from the current Rs 10-40.

Galgali said, “In the business plan submitted by Reliance Infrastructure, it was estimated that the company will require eight years to break even in this project, and hence had planned to sustain a loss up to 2018. Instead of sticking to its business plan, right from Day One the company started cribbing about the loss.”

The MMOPL said the RTI reply was based on incomplete information.

A company spokesperson said, “The fare fixation committee has considered all aspects of the cost to operate the line, including long-term sustainability of the project. In our final financial bids to MMRDA with a viability gap funding (VGF) of Rs 650 crore, we had not envisaged any cash loss even in the first year of operation.”

The original bid was on the assumption of a VGF of Rs 1,250 crore, which was later brought down to Rs 650 crore after negotiations.

VGF refers to the government’s contribution in a PPP project to make it viable.

An MMOPL official said the financial projections, which the MMRDA had released in response to the RTI application, did not assume any VGF and were based on the entire project cost of Rs 2,356 crore.