No SPV for Bangalore Metro, Plan panel for govt fund

No SPV for Bangalore Metro, Plan panel for govt fund
Oineetom Ojah
Posted online: Saturday , June 07, 2008 at 2303 hrs IST


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After almost two years of the Cabinet giving the go-ahead to the Bangalore metro rail project, the Planning Commission has said that the state-owned Bangalore Metro Rail Corporation (BMRC) should finance the project with grants from the government instead of sticking to the 50:50 equity model that involved setting up a special purpose vehicle (SPV) for the funds.

The Commission is of the view that in case a SPV is set up, then the ownership is not clear and the functioning is not transparent. Therefore, the funding should be done as grants instead of the equity route, which would not require a SPV, an official told FE .

The project, estimated to cost Rs 6,395 crore, has a debt-equity ratio of 70:30. As per the current funding model, the Centre and the Karnataka government are to contribute 15% each to the equity portion. For the debt portion, 45%would be taken care of by the BMRC in the form of borrowing from the Japanese Bank for International Cooperation (JBIC) and the remaining 25% would be raised through subordinate debts. The JBIC is providing the loan at an interest rate of 8.75 % per annum.

According to the MoU signed with JBIC, the Japanese bank will give a loan of Rs 1,795 crore for the project under a special rate of interest. While the bank charges an interest rate of mere 1.3% per annum, the project will have to bear a rate of 3.6 %.

This is because the BMRC will have to bear 2.3% as commission to be charged by Barclay’s Capital, an international bank that absorbs the exchange risks of the loan. The loan is repayable in 30 years. There will be no repayment of loan in the first 10 years.

Though the Bangalore Metro is to come up on the lines of the Delhi Metro, the Commission feels that replicating the Delhi model would not be the best option for the Bangalore metro project, it should instead be done on the lines of the Hyderabad Metro which is being undertaken under the public-private partnership mode.

With a slew of other cities like Chandigarh , Kochi and Ahmedabad in the pipeline waiting to get clearances for their metro projects, the Commission wants the Urban Development ministry to look into the issue and initiate necessary changes.

The mass-transit project envisages a 33-km elevated and underground rail network with 32 stations in the first phase. The proposed gauge would be standard gauge, unlike the broad gauge in the Delhi Metro network. The BMRC, executors of the project, has the Delhi metro as its consultant.

Construction work, which was scheduled to start in 2005, was delayed due to change in the coalition government in the state and continuous debate over the feasibility of the project. In April 2006, the UPA government cleared the project, which was likely to be fully commissioned by 2011.

The project would be taken up in two corridors--East-West and North-South, traversing through the main arterial routes of the city. BMRC officials are hopeful that the Centre would agree to waive its taxes and duties reducing the cost to at least Rs 5,747 crore. The metro rail project that was scheduled to be ready by 2011, is projected to transport around 10.7 lakh commuters per day.

The JBIC feels that the project would give the much needed respite to commuters in the city as traffic congestion would be a serious problem with the population of Bangalore at over 60 lakhs now, doubling in over the past two decades. The number of motor vehicles too increased from 3.30 lakh in 1986 to 25.6 lakh in 2005. With 1500 vehicles joining the road every day, the number of vehicles is projected to go up to 40 lakh by the 2010. The BEML that has procured special steel especially for the BMRC rolling stock (coaches) has been endowed with the rights of building the coaches. These coaches will be specially designed for BMRC and stated to be one above the cut of the coaches designed by the DMRC.