New Metro policy pushes for private investment

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MetroThe new Metro policy, approved by the Union Cabinet recently, makes Private Public Partnership compulsary for upcoming metro projects, if they want to avail assistance from the Central Government.

To meet the huge demand for resources for Metro projects, it is now mandatory to generate private and other forms of financing.

“Private participation either for complete provision of metro rail or for some unbundled components (like automatic fare collection, operation and maintenance of services etc) will form an essential requirement for all metro ra il projects seeking central financial assistance” says the policy, to capitalise on private resources, expertise and entrepreneurship.

The new policy also aims to provide last mile connectivity through Metro. The catchment area has been kept at five kms on either side of metro stations. States will be required to invest in projects which provide  necessary last mile connectivity through feeder services, non-motorised transport infrastructure like walking and cycling pathways and introduction of para-transport facilities.

Before commencing any Metro project, States will now be required to mention in their proposals, the investments that would be made for such services.

According to the new policy, alternate analysis, requiring evaluation of other modes of mass transit like BRTS (Bus Rapid Transit System), Light Rail Transit, Tramways, Metro Rail and Regional Rail in terms of demand, capacity, cost and ease of implementation will now be required . Every State will have to set up an Urban Metropolitan Transport Authority (UMTA) which will prepare Comprehensive Mobility Plans for cities for ensuring complete multi-modal integration for optimal utilisation of capacities.

With new policy in place,new metro proposals  will be rigorously assessed by third parties which will be identified by the Government.

The policy also shifts the ‘Financial Internal Rate of Return of 8%’ to ‘Economic Internal Rate of Return of 14%’ for approving metro projects, in line with global practices.

The new policy also mandates Transit Oriented Development (TOD) to promote compact and dense urban development along metro corridors since TOD reduces travel distances besides enabling efficient land use in urban areas.

The States are now required to clearly mention the measures to be taken for commercial/property development at stations and on other urban land and for other means of maximum non-fare revenue generation through advertisements, lease of space etc., backed by statutory support. States are also required to commit to accord all required permissions and approvals.

The States will be given freedom to make rules and regulations and set up permanent Fare Fixation Authority for timely revision of fares. States can take up metro projects exercising any of the three options for availing central assistance.

The policy envisages private sector participation in O & M of metro services in different ways. These include:

1.Cost plus fee contract:   Private operator is paid a monthly/annual payment for O&M of system. This can have a fixed and variable component depending on the quality of service. Operational and revenue risk is borne by the owner.

  1. Gross Cost Contract:    Private operator is paid a fixed sum for the duration of the contract. Operator to bear the O&M risk while the owner bears the revenue risk.
  1. Net Cost Contract:        Operator collects the complete revenue generated for the services provided. If revenue generation is below the O&M cost, the owner may agree to compensate.

At present, metro projects with  a total length of 370  kms are operational in 8 cities viz., Delhi (217 kms), Bengaluru (42.30  kms), Kolkata (27.39 kms), Chennai (27.36 kms), Kochi (13.30 kms), Mumbai (Metro Line 1-11.40 km, Mono Rail Phase 1-9.0 km), Jaipur-9.00 kms and Gurugram (Rapid Metro-1.60 km).

Durga Shankar Mishra, Secretary, Ministry of Housing and Urban Development gave more information on new metro policy.


Metro Projects with a total length of 537 kms are in progress in 13 cities including the eight mentioned above. New cities acquiring metro services are; Hyderabad (71 kms), Nagpur (38 kms), Ahmedabad (36 kms), Pune (31.25 kms) and Lucknow (23 kms).

Metro projects with a total length of 595 kms in 13 cities including 10 new cities are at various stages of planning and appraisal. These are; Delhi Metro Phase IV- 103.93 km, Delhi & NCR-21.10 km, Vijayawada-26.03 km, Visakhapatnam-42.55 km, Bhopal-27.87 km, Indore-31.55 km, Kochi Metro Phase II-11.20 km, Greater Chandigarh Region Metro Project-37.56 km, Patna-27.88 km, Guwahati-61 km, Varanasi-29.24 km, Thiruvananthapuram & Kozhikode (Light Rail Transport)-35.12 km and Chennai Phase II-107.50 km.

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