Gurgaon Rapid Metro sets a new trend of urban transport

Gurgaon Rapid Metro that started operating from November 14 is surely a trendsetter transport system in the nation. Although the train as of now only connects a few areas of the city, with a length of 5.1 km, it is a major growth driver of the city.

The rapid metro connects Delhi Metro with Cyber City, which is one of the prime suburban commercial hubs. Once the rapid metro proves to be a success, it is likely that it could largely change the façade of the urban transport.

Interestingly, the rapid metro project has certain distinguishing factors against other such projects in the country.

Privately funded venture

While major infrastructure projects like Delhi Metro, Gurgaon Metro, Mumbai Metro, received funds from government, Gurgaon rapid metro has taken no financial aid from the neither the central government nor the central government. At first, the project was envisaged as a collaborative venture between DLF and Infrastructure Leasing & Financial Services, or IL&FS. But later DLF moved back owing to its financial issues, after which IL&FS successfully completed the project.

Long concession period

Rapid Metro Rail Gurgaon Ltd or RMGL has been granted a 99-year concession by the government while most public-private partnerships have a 30-year concession period which is renewable for another 30 years. For instance, the second phase of the Mumbai Metro has been given a concession period of 45 years.

17 years of loan tenure

For the first time, a group of banks, led by Andhra Bank, has given a loan for a period of 17 years and nine months to a metro. So far, no other project in India has received a bank loan with tenure bigger than 15 years.

Funds flow

The total project cost summed up to around Rs 1,100 crore. Seven parts of the total funds were arranged through debt and three parts by equity. The debt carries interest of 13 percent per annum, though there is a moratorium of two-and-a-half years on the repayment of the principal.

The developer is planning to reduce the cost of funding by floating 30-year bonds, once the government permits it. This is in tune with the 30-year tenure of the loan given by the Japanese International Cooperation Agency to Delhi Metro. The developer expects to break even in the sixth year of operations on the current investment.

Ridership estimates

By the end of the first year, the developer expects over 90,000 commuters to be using rapid metro service every day. Sanjiv Rai, managing director of RMGL hopes that, by merely changing the frequency of the trains, it can accommodate as many as 250,000 to 300,000 commuters daily, without any sizeable investment.

But looking at the present scenario, many are doubtful that the estimates may be difficult to achieve. More than one week after starting operations, the average ridership is just 10,000 a day. Even if the numbers increase ten times in a year, the company, given the ticket of Rs 12, will make Rs 12 lakh a day and less than Rs 4 crore a month. This might not be enough to pay the monthly interest outgo of Rs 8.24 crore (13 percent annual interest on a debt of Rs 761 crore).

However, the developer is not bothered with the lower numbers of commuters as he is of the opinion that it will take some time to pick up speed and keep going. Cyber City is a home to several offices spread across 26 million sq ft. Moreover, there is a severe parking issue in the area. So the developer believes that people will gradually get used to the metro train as an alternative which is also very economical.

Gurgaon rapid metro phase II

Meanwhile, the company has started work on the second phase which connects Delhi Metro with the second commercial hub of Gurgaon on the Golf Course Road. This stretch will be 6.6-km long and will cost double the amount of the first phase: Rs 2,143 crore. At Rs 329 crore per km, it will be amongst the most expensive metro projects in the country.

The huge increase in cost of this project is because the line will be longer and it will have seven trains (compared to five in the existing line). Moreover, inflation is expected to take its toll on the cost because the project will take three years to build.

Tariffs to rise

The firm is planning to increase the tariff in a short period, because rapid metro tariff is linked to that of Delhi Metro. And Delhi Metro usually revises its tariffs every three or four years. As the current tariff was fixed three years ago, it expects an increase as early as next year. So far, Delhi Metro has raised tariffs by around 25 percent each time; so it is likely that a similar increase will be made in the next year too. Based on this estimates, Mr. Rai is looking to make 5-6 percent hike in annual tariffs. RMGL also earns good revenue through non-tariff ways including retail outlets and promotions at stations, advertisements on metro train, etc.