Metro: PIB raises issue of project costs

PIB raises issue of project costs
The Times of India

Bangalore: Even as the Bangalore Metro Rail project appears to be chugging on encouragingly, the Public Investment Board (PIB) has asked for some clarifications regarding the cost.

The PIB is in the process of sending the proposal, based on the detailed project report (DPR) prepared by the Delhi Metro Rail Corporation (DMRC), to the Cabinet Committee on Economic Affairs (CCEA).

The PIB meeting held on August 5, 2005, has said that the cost estimates for Bangalore Metro Rail are stated to be 25 per cent less than those for the Delhi Metro Rail and has expressed certain apprehensions regarding the reasonableness and reliability of these cost estimates.

The PIB has also stated that drawing from the experience of the Delhi Metro project for which demand projections have been quite off the mark from actual ridership, the PIB felt that projected ridership of 8.2 lakh trips per day, according to the Bangalore DPR, is probably an over-estimate. The PIB has noted that the FIRR (Financial Internal Rate of Returns) of the project is around 6 per cent and is less than the desirable 12 per cent required for infrastructure projects.

The PIB has also recommended that cost estimates be reworked on a current cost basis (April-June 2005) with general charges of 8 per cent, including contingency of 3 per cent, and keeping in view project management and implementation.

The PIB has clearly said that the Centre would not share any costs towards the envisaged additional investment of Rs 347 crore for procurement of additional rolling stock, to be made in the second year of operation, as this requirement is not part of the project cost. It has maintained that cost overruns, if any, may be shared by the Centre only to the extent of escalation in equipment cost within the approved project parameters and time cycle.