The Union Cabinet on Wednesday cleared the metro policy stating that future projects would be tendered keeping in mind their social and economic impact and not merely based on the financial returns from the contract.
The policy opens a big window for private investments across a range of metro operations making PPP component mandatory for availing central assistance for new projects. Private investment and other forms of financing have been made compulsory to meet the huge resource demand for capital-intensive high capacity metro projects.
According to the policy, “Private participation either for the complete provision of metro rail or for some unbundled components (like automatic fare collection, operation & maintenance of services etc) will form an essential requirement for all projects seeking central financial assistance". It aims to capitalise on private resources, expertise and entrepreneurship.
Taking note of substantial social, economic and environmental gains of metro projects, the policy stipulated a shift from the present ‘Financial Internal Rate of Return of 8%’ to ‘Economic Internal Rate of Return of 14%’ for approval of projects, in line with global practices.
The new policy provides for the rigorous assessment of new metro proposals and suggests an independent third party assessment by government agencies such as Institute of Urban Transport and other such centres of excellence whose capacities would be augmented, as required.
Seeking to ensure the financial viability of metro projects, the new policy requires states to clearly indicate the measures taken for commercial or property development at stations and on other urban lands. Also, other means of maximum non-fare revenue generation through advertisements, lease of space etc, backed by statutory support must be highlighted. States are also required to commit to accord all required permissions and approvals.