This article is in response to the editorial Metro Rail - Let there be action! (Projectmonitor, September 1-7, 2008). The editorial has rightly brought out the differences in expert opinions regarding the suitability of methodology to be adopted for metro projects in view of their size and complexities.
In actual practice, none of the planning, designing, construction, operation and maintenance of metro railway projects has been taken over by the Union ministry of urban development, as the nodal agency for implementation and operation of these projects, as Indian Railways has refused to finance them as being un-remunerative. Although the urban development ministry has no organisational expertise in such projects, it has taken over the projects with investment and implementation with the help of international experts, keeping Indian Railways outside the loop even on technical matters.
International experts have created an impression that the metro rail they have proposed is quite different from the railway system in operation in India and that there is a need to induct the best of the world system for Indian metro rail. In fact, Indian Railways has experience of more than 150 years in railway system and more than 75 years in metro rail. MRTS on Western and Central Railways is being operated since 1930 and underground metro in Kolkata since 1980. The structure and operation of the proposed metro are superior than the MRTS proposed by Delhi Metro Rail Corporation, both in capacity and frequency and rated as one of the best in the world in efficient management of operations.
This article proposes the ideal model to be adopted for Indian MRTS in the backdrop of the recent differences between DMRC and metro organisations in Hyderabad and Mumbai, and awakens Pune Municipal Corporation and Pune-Chinchwad Municipal Corporation to learn lessons from the leveraging tactics adopted by DMRC for arrogating a decision making role to itself instead of an advisory role.

PPP model
PPP model is being considered as the only solution for all infrastructure projects of the 11th Plan. The Planning Commission and the finance ministry refuse to look at any other model for railway projects. The DFC railway corridor has been delayed by more than a year on this account. The main objective of a PPP model is improvement in quality, cost and efficiency of a given infrastructure service to the citizens. The private sector borrowing cost is more than the government borrowings; hence, efficiency gains in PPP should offset the higher private sector borrowing cost. Non-cooperative practices add to the project cost and in turn the cost burden impinges on the citizen, thereby offsetting whatever efficiency gains the PPP is expected to deliver.

Price impact
For metro systems in India, DMRC followed the EPC model for Delhi, while for Metro-I and Metro-II in Mumbai and MRTS in Hyderabad, the respective states of Maharashtra and Andhra Pradesh have followed the PPP model, which was accepted by DMRC till award stage. The financial implications of the project cost under the two models have 100 per cent variation in addition to viability gap funding (see table).

Why PPP costs more
The reasons for increased cost under PPP model are, apart from certain basic inputs required to be added to the cost, large amount of margins are made provision of, to cover project risk, operation risk, financial risk and political risk etc. Reasons for additional investment necessary in such projects in PPP models are summarised below:
u Cost of pre-tender feasibility studies i.e. technical, traffic and financial.
u Project completion risk including land acquisition delays.
u Provision for legal documentation financial closure etc.
u Additional cost for international partner in JV.
u Training cost internationally and locally for O&M.
u Payment to international consultants for PMC during construction.
u Additional margins and contingencies for political risks.
u Restricted competition for financial bid within three-five parties.
u Long concession period of 30-35 years for contractual obligation.
In case of road projects, the PPP contracts were generally higher than the EPC contracts by about 15-20 per cent. And, in case of railway projects, the responsibility of complex railway operations with risk of derailments, import of rolling stock, associated high element of import duties and high replacement cost of assets, long concession period and safer margin against risk have resulted in 75-100 per cent over EPC cost. It is, therefore, suggested that railway projects should be generated on EPC model.

New mixed model
u For railway projects, PPP model, if adopted, should be for fixed assets and maintenance with differed payment or on annuity basis. And EPC model should be adopted for mobile assets and operations, due to their technical complexities. If IR is unable to supply BG wider coaches, from its existing workshops at ICF and Kapurthala, DMRC should set up an exclusive manufacturing plant for BG wider coaches capable of negotiating 100m curves, with necessary induction of technology; or BEML may be asked to manufacture BG wider coaches as above, keeping in view the country's demand of coaches for new metros.
u Operations of metro systems being complex and IR having more 75 years of metro experience, backed by RDSO's research support, should be handed over to IR for operation on subcontract basis or operated by DMRC. This will give tremendous benefits and savings in O&M cost, thereby eliminating VGF subsidy with consequent heavy reduction in fares.

Reduction of risk and cost
Even though we have indigenous expertise in construction, supply of coaches, operation and maintenance of a BG system, the mistake done by DMRC is to adopt imported SG coaches, at three-four times the cost of indigenous coaches, with equal operational performance. Capacity, comfort and safety are more with BG indigenous coaches. Therefore, if BG with indigenous coaches of metro railway similar to that operated on Western and Central Railways-a mixed EPC-cum-PPP model-could be considered for partial investment by the private sector, in fixed railway assets only, along with its maintenance, and leave the mobile assets and operations on EPC basis, will eliminate to a great extent viability gap funding to such metro rail projects reduce the fare structures considerably.