Govt seeks private sector participation in MRTS projects

New Delhi: Even as the Government stressed on the need to take up Mass Rapid Transit System (MRTS) projects on a public private partnership (PPP) basis, industry experts stressed on the need to exercise caution while allocating risk so that projects are not required to be re-negotiated at a later stage as has been the practice for several MRTS projects world-over.

“Despite logging a growth rate of more than nine per cent, the Government cannot fund infrastructure needs because of resource constraints. Only PPPs can create Metros in big cities. The private sector should come forward to fund public projects,” said Mr Gajendra Haldea, Advisor, Infrastructure, Planning Commission, said while speaking at the National Seminar on MRTS organised by CII.

However, the industry pointed out that for the Mumbai Metro Line-1 project, which is being taken up on a PPP basis, action on ground is yet to start.

“Action on ground is yet to start after two years of Mumbai Metro line being awarded,” said Mr Akhileshwar Sahay, Feedback Ventures.

Legal needs

Mr Sahay further pointed out the examples of MRTS projects taken up on a PPP basis in Malaysia and Thailand that had to be re-negotiated. Mr Rajeev Jyoti, Chairman, Rail Equipment Division-CII and Managing Director, Bombardier, underlined the legal obstacles faced by MRTS and called for the involvement of legal experts and financial engineers while finalising the model concession agreement (MCA).

The MCA for MRTS projects should appear attractive to the developers by taking into account risks like changes in law and fiscal regime during the long concession period, non-fare revenue risks on account of problems in land conversion, L&T’s Mr N. Subramanian, Business Development Manager (Railways), stated.

He further called for standardisation and indigenisation in the industry as that would drive down the cost of services and assets, apart from bringing down the inventory levels.

Mr Sahay said that the key reason for Government to invite private participation in these projects should be to build in efficiencies rather than lack of funding options.

Earlier, Mr Haldea said: India needs investment of $550 billion in infrastructure.

The Government can chip in only 30 per cent of this amount, the rest should come from the private sector.