Monday, October 30, 2006

Mumbai Metro Rail - potential hiccup

Just when you thought that with the Prime Minister himself flagging off the Mumbai Metro Rail Project, it would finally take off. Not quite.

After first haggling over the amount of viability gap funding (VGF) with the contractors, Reliance Energy, the State Government is facing what could be another hurdle. Newspaper reports suggest that the Government could reject the Rs650cr VGF because – get this – bidding for the Mumbai Metro happened before the Govt made its Public Private Partnership Appraisal Committee (PPPAC).

As per this DNA article
A senior Union government official said central assistance is reserved for future projects. "The government’s schemes are implemented only with prospective effect" he said. In the circumstances, funding cannot be made available for Mumbai’s metro project because its bidding process preceded the finalisation of the VGF guidelines. [Link]

As per this FE article
"....North Block now feels that the project cannot be considered under the PPP-AC, as the bidding was finalised before the committee was set up. So it does not fulfill the technical parameters. Now the finance ministry is of the opinion that the project should seek sanction from the ministry of urban development under the Jawaharlal Nehru Urban Renewal Mission (JNUURM). For this, it has also written a letter to JNUURM. Sources said the finance ministry was not very happy with the project cost and the terms of the concession agreement, and if it agreed to consider it under the PPP-AC, it might ask for a revision of both." [link]

After getting, Brimstowad approved for full centre funding, the Maharashtra State Government has already lined up many other projects under JNNURM. Considering the strict riders that come with the JNNURM, I doubt the State Govt. would want to club the Metro under the JNNURM as well. More so, given that the Metro has already been flagged off, versus all the other projects (even the Brimstowad) which are only in the report and approval stage.

Worst case scenario ? MMRDA - i.e. the Maharashtra State Government - foots the Rs650cr bill, which is not particularly good for the already tottering state finances.

However, there seems to be hope. Or at least, so the MMRDA would want us to believe.

As per this follow-up DNA article
"[MMRDA] Officials told DNA that since Prime Minister Manmohan Singh himself had inaugurated the project, there was no room for the Centre to back out. "The secretary-level clearance has already come through, and on November 1 there is a meeting with Finance Minister P Chidambaram," said T Chandrashekhar, MMRDA metropolitan commissioner." [Link]

Final decision due in a couple of days, Nov 1. Given that the Congress is playing the development card ahead of the BMC elections, I'd think that this issue will be quickly - and favorably - resolved.

Earlier posts on Mumbai Metro Rail :
Sept-06: Route changed
June-06: Flag-off
May-06: Contract awarded
May-06: Viability gap issue resolved
May-06: Issues over viability gap
Apr-06: Project details

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