Delhi Metro Rail Corporation (DMRC) former managing director E Sreedharan has sparked off a sharp debate on the financing models for Indian metros, which has led the Andhra Pradesh government threatening to file a defamation suit against him.
CNN-IBN's Vivian Fernandes met him at the Bombardier Metro Site in Hyderabad and tried to get some explainers regarding the issue.
Vivian Fernandes: Your comments on Hyderabad metro has provoked the Andhra government to threaten a defamation suit. Has a notice been served on you, Sir?
Elattuvalapil Sreedharan Not yet, not on me but it’s there in the media. That's all.
Vivian Fernandes: Your charge is that 263 acres of prime land was given to Hyderabad metro to make it viable and you have called it a real estate-political scandal waiting to happen. Now the Hyderabad metro people are telling us that this land was given with the knowledge of Delhi Metro, because you were the consultants.
E Sreedharan: Actually, 269 acres of land has been given free of cost. We had never recommended that so much of land be given to real estate developers. What we have recommended in our report is that certain property development will be necessary to partly fund the whole project. Our estimation was not more then 7 or 8 per cent of the total cost of the project.
Vivian Fernandes: But you were the consultant, you were in the know throughout?
E Sreedharan: We were not consultants right through the process. Our job was only to prepare a proper project report. After the detailed project report (DPR) was prepared, the Andhra Pradesh government went ahead and shortlisted the contractors. After the short listing was over, when they wanted to call real financial bids — what they call they RRP — then they engaged us as interim consultants for a short period. So we helped to finalise the tender document that is all. When the final financial bid was received and processed, we were not in the picture at all.
Vivian Fernandes: You are suggesting that you never recommended giving this 269 acres of prime land to any of the concessors?
E Sreedharan: We never recommended that. Our recommendation was that if you want to give land like that then the HMRL, that is the firm for this purpose, they themselves should exploit it, raise money and utilise it for the project. We have always been telling them that if they handover such prime land to a private operator, there will always be a scandal.
Vivian Fernandes: You also said that the alignment of the route has been extended to flatter the value of a large tract of land. Now Hyderabad Metro people are saying that that is true and they have extended the alignment but that has happened with the knowledge of Delhi Metro Rail Corporation and the reason they extended the alignment was because the earlier terminus at Osmania University was not possible because of political sensitivity.
E Sreedharan: The original network that we had purposed was only 61 kilometers. Thereafter, Hyderabad government wanted line number 3 to be extended by another 5 kilometers on the excuse that the line for metro depot is not available. We protested against it. We said that this was not a right move. There was ample land available in Osmania University. I don't think any honest efforts were made to get the land from Osmania University. However, they decided to extend it. We protested it, but Andhra Pradesh government still insisted that we should at least do the survey and give them the cost of the land. So we did the survey, gave them the cost of the land, but we never carried out any traffic survey. We never carried out any financial evaluation of this extension. We told them that by this extension you are only incurring lot of cost with no advantage.
Vivian Fernandes: Are you suggesting that the entire bidding has been done with a particular concessor in mind and is totally opaque?
E Sreedharan: I will not say that. I would only say that after the pre-qualification of the contractors was done, the whole network was changed. With that the pre-qualified contractors gained a lot. So the transparency in the process has been lost. That's what we are trying to say.
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Vivian Fernandes: In the light of worldwide experience, do you think that public private partnership projects can succeed? What is the experience elsewhere in the world with metros that have gone in for private-public partnership?
E Sreedharan: PPP project can succeed only if the metro project is fairly financially viable. Normally, no metro project is financially viable. However, there are rail projects like connection to the airport where we can charge very high ticket cost. That's where it can be made viable. It can go for PPP route. We have got PPP route for airport connection in Delhi. We have recommended a PPP route for airport connection in Bangalore and Hyderabad. Even for Hyderabad metro, we did recommend the build operate transfer (BOT) route mainly for one reason, because it is all elevated and there is high number of passengers. So there is a good chance of PPP model succeeding there. For that, we recommended that about 40 per cent of the cost of the project will be given as viability gap funding by the government, then only would it succeed. On the other hand, what had happened was that a lot of land was handed over. About 20 million square feet of real estate development has been handed over which means that the project has become a real estate project not a metro project.
Vivian Fernandes: Can a project succeed if it is entirely financed with real estate revenues?
E Sreedharan: There are lots of risk involved in it. The real estate is highly volatile. These are projects covering 30 to 35 years time. Anything can happen during that time. Today, you may find it very attractive, five years down the line real estate prices will crash then what will happen to projects?
Vivian Fernandes: Are you suggesting that if real estate is made available, then it should be made available to a government agency like DMRC?
E Sreedharan: I would say that even if you want to give real estate, then the contribution should not be more than 10 per cent of the total cost, so that risk involved will not completely upset the workability of the project. So the best thing is to avoid all sorts of scandals like these. It is better that the government agencies exploit the land like what DMRC has done, then raise the funds and fund the project. If that happens, the land is always with the government.
Vivian Fernandes: Even in this case, the land is with the government because after the 35 year concession period, the land is going to revert to the government?
E Sreedharan: That is a very false hope. First of all in the agreement, there is a provision that from 30 years, it can be extended for 25 years. Any clever concession will be extended by another 25 years. After 55 years, we don't know what is going to happen in this country. That is as good as the land having been given free of cost. Delhi metro never got the land free of cost, we had to pay for it.
Vivian Fernandes: People say that Mr Sreedharan is opposed to Hyderabad metro, the PPP model because he wants no competition?
E Sreedharan: This is totally wrong. We have taken interest in Hyderabad metro. The interest did not come from the Hyderabad government. We prepared the project report.We recommended the BOT model. Then how do you say that I have no interest in this.
Vivian Fernandes: Despite the defamation threat, are you sticking to your charges?
E Sreedharan: I am not making any charges. I am only saying that if they want to go for defamation against me, they are welcome. The tender process as it turned out later on, we didn't know in the initial stages. The tender was aborted only after we came to know that it had not been a transparent process.
Vivian Fernandes: Thank you very much for joining us.
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