Contract Management for Mumbai Metro Rail Project”
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The national commission on urbanization (NCU) has noted that “urban transportationis the single most important component instrumental in shaping urban development & urbanliving” In the next millennium, almost all the metropolitan cities are a serious threats ofenvironmental pollution, traffic congestion, parking problem, population burden etc.Massrapid transit systems (MRTS) are rail based urban transit systems and the only mode of
public transportation capable of carrying large number of people in the most energy efficientand eco-friendly manner. They provide the commuter a more reliable, faster, safer and morecomfortable journey than by the bus mode. Since everything is going to be the modern/advance in all the trends now a day, so on the same way we need modern modes of the
transportation of which one mode is the “Metro Rail”. Few days before Govt. of India haslaunched Delhi Metro railway this is now a success story. Day by day, standard of living ofpeople is increasing. So the citizen of our India wants more mobility in all the aspects. So atthis time metro rail should be the preferred as a rapid transit solution for Indians because
cultivated Metro rail offers more mobility for the citizens in all the aspects. Metro rails rapidtransit will provide this mobility above and beyond that provided by the automobile, not at the expense of the automobile, but very less than that.
1.1 NEED OF METRO RAILWAY IN MUMBAI
Greater Mumbai, the capital of Maharashtra, the financial capital of India is the heartof commercial and trade activities of the country. The Island City of Mumbai is experiencingrapid growth in economic activity and suburbs are growing faster than the Island City interms of population distribution and activity location. The city with its present population ofover 12 million generates about 14 million trips in a day, with about 88 percent of the totaltrips catered by the suburban railway and the public transport bus service provided by BEST.The ever growing vehicular and passenger demands coupled with constraints on capacityaugmentation of the existing network have resulted in chaotic conditions during peak hours
of the day. Mumbai’s existing govt. transport facility (local train, BEST) could not fulfillrequirement of commuters. As cities grow in size, the number of vehicular trips on roadsystem goes up. This necessitates a pragmatic policy shift to discourage private modes andencourage public transport when the level of traffic along any travel corridor in one direction
exceeds 20,000 persons per hour. So as the population of any city exceeds 4 million or so,then the Mass Rapid Transit Systems (MRTS) has to adopt vigorously. In developingcountries including India, because of paucity of funds planning and implementation of railbased Mass Rapid Transit Systems has been lagging far behind the requirements. But to gain
something, investment has to be done. Public Transport System is an efficient user of spaceand energy, with reduced level of air and noise pollution. As pollution of city grows, theshare of public transport, road or rail-based should increase. With Mumbai’s populationcrossing 12 million, the share of public transport at 88% is quite good. However, over thepast decade, the share has reduced from 91% to 88% and is likely to reduce further ifcorrective measures are not taken immediately. The Metro is here to meet this demand, notonly between the east and the west, but also the north and the south, not only the divide dueto geography, but also that in the psyche of the city. Considering the fact that road buses canoptimally carry 10,000 persons per hour per direction (PHPDT), the metro system maybecome virtually indispensable if the traffic density on the corridor exceeds 20,000 PHPDT.
About metro rail
Metro rail is the most rapid transit system used all over the world by specific developedcountries only. It is nothing but like railway the only thing is it is advance verge of that,which it also having the two rails, numbers of wagons rolling over wheels. This metro rail isthe safest, fastest, chilliest and reliable mode of transportation, which is not only beneficial to
the passengers but also to all sorts of commodities.
A common definition of metro railway:
• An urban, electric mass transit railway system;
• Totally independent from other traffic, with high service frequency.
There are two types of metro rails:
1. Elevated metro rails
2. Under ground metro rails.
1.2 URBAN INFRASTRUCTURE
Rapid Industrialization has put increasing pressure on urban areas. There is dramaticincrease in urban population which has resulted in serious infrastructure constraints. Privatesector participation is envisaged for operations and management of water and wastewaternetworks. Demand in housing sector has been fuelled by availability of cheaper housing
finance, Tax incentives and Lower prices. The investment requirement for housing in urbanareas has been estimated at US$ 12.5 billion in the IX plan. Requirement of Urban Transporthas increased substantially by growing urban Population. Estimated population of India islikely to be 1451 million in 2021 out of which urban population shall constitute 37%, as
against 27% during 2001. Numbers of cities having population more than 1 million areexpected to increase to 53 by the year 2021 from present number of 35. Urban Transportdemand has been growing even faster. There is inadequate Urban Mass Transport Systemand proliferation of personalized motor vehicles. Numbers of personalized vehicles are
likely to increase by eight fold in next 20 years. This will result in excess energyconsumption, congestion in cities and environmental problem, thus necessitating LRT/MRTS options.
1.3 URBAN CONDITIONS IN INDIA
The most important factors common to India and other developing countries are populationgrowth, increasing urbanization, rising otorization, and low percapita income. The total urbanpopulation of India burgeoned over the past three decades, rising from 109 million in 1971 to160 million in 1981 (+47%), 217 million in 1991 (+36%), and 285 million in 2001 (+31%)(Office of the Registrar General, 2001a; Padam and Singh, 2001). The largest cities havegrown especially fast. By 2001, India had three megacities: Mumbai (Bombay) with 16.4million Kolkata (Calcutta) with 13.2 million inhabitants and Delhi with 12.8 millioninhabitants. Chennai (Madras), Hyderabad, and Bangalore each had more than 5 million
residents. And 35 metropolitan areas had populations exceeding one million, almost twice asmany as in 1991 (Office of the Registrar General, 2001b).The rapid growth of India’s cities hasgenerated a correspondingly rapid growth in travel demand, overwhelming the limitedtransport infrastructure. The sharply increasing levels of motor vehicle ownership and use, ing levels of congestion, air pollution, noise, and traffic
danger. For most segments of the population, mobility and accessibility have declined. India’spoor have been especially disadvantaged. They have such low incomes that they cannot evenafford public transport fares and thus must walk or cycle long distances. In 2002, the per-capita income of India was the equivalent of only US $2,600 (purchasing power parity), less than atenth of average incomes in countries of North America and Western Europe (CentralIntelligence Agency, 2002). With 26% of the population below the poverty line in 1999-2000(Ministry of Finance, 2001), roughly a fourth of urban residents cannot afford the basicnecessities of life, including virtually any form of public transport or even a bicycle. The urban
poor live in congested slums in older, deteriorating inner-city areas or in illegal squattersettlements on the outskirts of cities. Those living near the center suffer not only fromovercrowded housing but also from high levels of air pollution, noise, congestion, and trafficdanger. The poor living on the suburban fringe must endure ramshackle housing conditions,largely non-existent public services, and long, time-consuming trips to menial jobs in otherparts of the city.
1.4 SCOPE OF WORK
Mumbai metro rail project and implimentation is one of the most ambitious and costliest project and implimentations inMumbai city present now. The cost of phase I i.e. (Versova–Andheri–Ghatkopar )is about2350 CroreThe development & operation of mass rapid transit system (MRTS) for versovaandheri-ghatkopar corridor is carried out on build, own, operate and transfer (boot) basisthrough public- private partnership (PPP).MMRDA select Reliance energy & Connex co.France (in joint venture)for the phase I work. This is the first time in India, in which atransportation project and implimentation of this huge budget & time span (about 5 years) has been awardedthrough BOOT/PPP basis. Since Mumbai metro is one of the most ambitious project and implimentations inMumbai’s history, it is interesting to know in which manner they have implemented it. The
contract pattern adopted by MMRDA for this project and implimentation is BOOT/PPP basis, which is unique intransport infrastructure project and implimentation in India. The Concessionaire will carry out detailedengineering survey, investigation, detailed design in respect of differentelements/components of the project and implimentation as required for its implementation. The Concessionairewill arrange for finances and construct/implement the project and implimentation for its completion and will
undertake operation and maintenance required for safe and comfortable carriage ofpassengers. The concessionaire will collect the fare from the passengers as per the rate fixedby Independent Authority from time to time. The Concessionaire shall provide a level ofservice to the public commensurate with the traffic demand and in accordance with
performance specifications.The scope will be restricted to study of contract for Mumbai metro rail project and implimentation, ofwhich corridor comprising of versova-andheri-ghatkopar will be taken into consideration.
• Literature review of boot/ppp basis contract.
• Collection of data regarding Mumbai metro rail project and implimentation contract.
• Study of contract documents.
• Comments on collected data.
2 FINANCIAL MANAGEMENT OF METROPROJECT
Metro railways are generally built and operated by governments or their
organizations. The need for constructing a metro railway in Mumbai has been felt for a longtime but due to lack of resources the government has not been able to take any initiative.Meanwhile, traveling conditions in the city have become unbearable and unsafe. A group ofprivate consultants has completed a techno-economic feasibility study for constructing and
operating a metro system in Mumbai through private sector involvement. The growingdemand for public transport in mega cities has serious effects on urban ecosystems,especially due to the increased atmospheric pollution and changes in land use patterns. An ecologically sustainable urban transport system could be obtained by an appropriate mix of
alternative modes of transport resulting in the use of environmentally friendly fuels and landuse patterns. The introduction of CNG in certain vehicles and switching of some portion ofthe transport demand to the metro rail have resulted in a significant reduction of atmospheric
pollution in Delhi. The Delhi Metro provides multiple benefits: reduction in air pollution,time saving to pasengers, reduction in accidents, reduction in traffic congestion and fuelsavings. There are incremental benefits and costs to a number of economic agents:government, private transporters, passengers, general public and unskilled labor.
2.1 FINANCIAL COSTS AND BENEFITS OF THE DELHI METRO.
The financial evaluation of a project and implimentation requires the analysis of its annual cash flows of revenueand costs considering it as a commercial organization operating with the objective ofmaximizing private profits. The financial capital cost of DM represents the time stream ofinvestment made by it during its lifetime. The investment expenditures made by the project and implimentation
in one of the years during its life time constitutes the purchase of capital goods, cost ofacquisition of land and payments made to skilled and unskilled labor and material inputs forproject and implimentation construction. The operation and maintenance cost of the project and implimentation constitutes the annualexpenditure incurred on energy, material inputs for maintenance and payments made to skilled and unskilled labor. The investment goods and material inputs used by the project and implimentation are evaluated at market prices, given the definition of market price of a commodity as producer price plus commodity tax minus commodity subsidy. If the government gives some commodity tax concessions to DM, they are reflected in the prices paid by DM for such
commodities. If the financial capital cost of the project and implimentation is worked out as the time flow of annualized capital cost, the annual cost of capital has to be calculated at the actual interest paid by it. This could be done using information about the sources of funds for investment by DM and the actual interest paid by it to each source.
2.2 IDENTIFICATION OF ECONOMIC BENEFITS AND COSTS OF DELHI
Description of economic benefits and costs of the Delhi Metro requires the identification ofthe changes brought out by it in the transport sector of the economy. Most importantly, DMcontributes to the diversion of a very high proportion of current passenger traffic from roadto Metro and serves part of the growing passenger traffic demand in Delhi. As a result, there
will be a reduction in the number of buses, passenger cars and other vehicles carrying passengers on Delhi roads with the introduction of the Metro. There will be savings in travel time for passengers still traveling on roads due to reduced congestion and obviously also for those traveling by Metro. The Metro also brings about a reduction in air pollution in Delhi
because of the substitution of electricity for petrol and diesel and reduced congestion on the roads. There will also be a reduction in the number of accidents on the roads. Investment in the Metro could result in the reduction of government investments on road developments and
buses as also in the private sector investment on buses, passenger cars and other vehicles carrying passengers. There will be reductions in motor vehicles’ operation and maintenance charges to both the government and the private sector. There could be cost savings to passenger car owners in terms of capital cost and opera tion and maintenance costs of cars if
they switch over from road to Metro for travel in Delhi. The fare box revenue collections by Metro will be at the cos t of the revenue, accruing earlier to private and the government bus operators and hence constitutes a loss in income. The Delhi public will gain substantially with the introduction of the Metro service. It saves travel time due to a reduction of
congestion on the roads and lower travel time of the Metro. There will be health and otherenvironmental benefits to the public due to reduced pollution from the transport sector ofDelhi. Land and house property owners gain from the increased valuation of house propertyprices due to the Metro. The Metro has the effect of increasing the income of the regionaleconomy of Delhi Vis a Vis the rest of the Indian economy.