Delhi Metro vs PPP PDF Print E-mail
Wednesday, 14 March 2012 00:00
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Given his stellar record with the Delhi Metro, anything E Sreedharan has to say about urban transport carries a lot of weight, and that’s what makes the Planning Commission’s working group report on urban transport, headed by him, so significant. The gist of the report—that the public private partnership (PPP) model isn’t suited for developing core urban infrastructure projects and, in particular, metro rail projects—is an argument Sreedharan has made before, notably in a 2008 letter to Planning Commission deputy chairman Montek Singh Ahluwalia. Sreedharan has trotted out a series of statistics to buttress his argument—of the 113 cities that have a metro service, 88% were developed and operated by the public sector, with only 12% having some form of PPP arrangement. The report goes on to say the PPP models in metro rail development in London, Bangkok, Malaysia, etc, “have not been encouraging”, that outside India no city in the world has attempted the provisioning of a full city metro service on a PPP model (with the exception of the failed Malaysian Star Putra metro rail).

In itself, however, this is hardly a damning critique, since many of these metros were built before PPP had developed into an acceptable form of constructing infrastructure—if we can have well-functioning airports in Delhi and Mumbai that were built on a PPP basis, it seems difficult to see what makes a metro so different. Sreedharan’s biggest critique is about costs. Using the Hyderabad metro as an example, Delhi Metro’s ex-chief has argued in the past that PPP models require the government to give too many concessions to the private party and that these concessions can be abused. But while the government gave the Hyderabad metro the rights to use 269 acres of real estate, the Delhi Metro has been given 960 acres of land as well, very low-cost loans, excise/customs exemptions, etc—Delhi Metro even wants to be exempted from paying property taxes on the land it is developing for commercial use. The Delhi airport also has been given 250 acres of land to help defray costs—in each case, it is the government’s job to ensure all conditions are met, regardless of their ownership structure.

The DMRC model, where the Union and Delhi governments own 50% each of the equity, has an additional problem since it means that there’s nobody really in charge—it works when there is a capable man like Sreedharan at the top, but you can’t make a model based on the assumption that everyone will be a Sreedharan. The fact is that, more often than not, projects run by the government tend to be poorly executed, with large time and cost over-runs. But even a well-designed PPP can run into trouble if the government doesn’t hold its side of the bargain—Hyderabad’s metro has run into all manner of problems in terms of land acquisition. Instead of revisiting the whole PPP-versus-government mode of ownership, let’s just move on and get the projects on track.

Last Updated ( Wednesday, 02 May 2012 08:39 )

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