Friday, April 28, 2006

Centre gives green signal to Bangalore Metro Rail project

Centre gives green signal to Bangalore Metro Rail project

The Hindu

Project estimated to cost Rs. 6,395 crore with a debt-equity ratio of 70:30

# Centre and State Government to contribute 15 per cent each to equity
# 45 per cent of debt portion to be taken care of by BMRC through loan from JBIC
# Karnataka Government to waive its duties and taxes for the project

NEW DELHI/BANGALORE: The Union Cabinet on Thursday finally gave the green signal for the much-awaited Bangalore Metro Rail Project.

Announcing the decision, Union Minister for Urban Development, Jaipal Reddy, said the project was estimated to cost Rs. 6,395 crore, including an escalation at the rate of five per cent per annum in the costs during the five years it would take to complete the construction work. The project would be on the pattern of the Delhi metro rail, he added.

The project would have a debt-equity ratio of 70:30. The Centre and the Karnataka Government would contribute to the equity portion, each providing 15 per cent equity. As for the debt portion, 45 per cent would be taken care of by the Bangalore Metro Rail Corporation (BMRC) in the form of borrowing from the Japanese Bank for International Cooperation (JBIC) and the remaining 25 per cent would be raised as subordinate debts. The JBIC was providing loan to BMRC at an interest rate of 8.75 per cent, sources said.

Sources said while the Karnataka Government would waive its duties and taxes for the project, the Centre would not do so. "If the Centre agrees to waive its taxes and duties, the cost could have come down to Rs. 5,747 crore.''

Govind D. Belgaumkar reports from Bangalore: Work on the biggest infrastructure project to decongest Bangalore's roads "can now actually begin" with the Union Cabinet approving the metro rail project.

The BMRC, which is implementing the project to provide 36.5 km of urban rail network, "can now start spending money," BMRC sources told The Hindu.

Hitherto, it had been doing preliminary or preparatory works where there was no financial commitment. When ready, the metro rail project will transport 10.7 lakh commuters a day.

The work such as shifting of underground utility lines (BESCOM, BWSSB lines for example) to ensure that they do not come in the way of erecting the elevated structure was on. The BMRC has conducted a survey and has found that several utility lines crisscross the locations where it has to erect pillars for the elevated structure.

The project provides for two lines - one from Jalahalli Circle to R.V. Teachers' College in Jayanagar, and the other from Mysore Road to Byappanahalli.

The project recently got a shot in the arm with the JBIC signing a memorandum of understanding with the Union Government to give a loan of Rs. 1,795 crore for the project. This is a "prestigious" loan as it comes under a special rate of interest. While the bank charges an interest rate of mere 1.3 per cent per annum, the project will have to bear a rate of 3.6 per cent.

This is because the BMRC will have to bear 2.3 per cent as commission to be charged by Barclay's Capital, an international bank which 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.

The JBIC had pointed out that the problem of traffic congestion was serious with the population of Bangalore (over 60 lakhs now) doubling in over the past two decades and the number of motor vehicles increasing from 3.30 lakh in 1986 to 25.6 lakh in 2005.Mr. Kumaraswamy has thanked the Union Cabinet for approving the project.

In a statement issued here, he said Prime Minister Manmohan Singh, Union Urban Development Minister K. Jaipal Reddy and Finance Minister P. Chidambaram took personal interest in the approval of the project. "I would like to extend my thanks on behalf of the State Government. The project will be taken up on priority," Mr. Kumaraswamy said.


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