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Reliance Infra's Mumbai metro phase II faces cancellation

Maha Govt & company on collusion course

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A 32 km second phase of Mumbai Metro project bagged by Reliance Infrastructure faces termination due to lack of substantial progress. The state-run Mumbai Metropolitan region Development Authority (MMRDA), which is a planning and nodal agency for the metro project, has written to the Maharashtra government to terminate the concession agreement it signed with the Reliance Infrastructure led consortium in January 10 and thereby scrap the project. The Rs 11,000 crore project,which would  stretch from Charkop in north west Mumbai to Mankhurd in north east fringe of the city, has been dogged by controversies, delays and litigation.

A final decision regarding the project's outcome  is awaited and is likely to be taken after the conclusion of ongoing state legislature session at Nagpur. A senior minister, who did not want to be identified, told Business Standard "The government in the receipt of MMRDA's communication and will take a call on the cancellation of the project," he noted.

If the government goes ahead to the scrap the project it will be the second vital infrastructure project after the Rs 5,000 crore Worli-Haji Sea Link to be buried. Incidentally the Haji Ali sea link project too was awarded to Reliance Infra and the company decided to walk out from the project over dispute with the government. In Delhi airport metro project, Reliance Infrastructure and Delhi Metro Railway Corporation are heading for arbitration. The project has been shut since July 8 and Reliance Infrastructure asked for a financial restructuring on the line from which it was losing Rs 1 crore a day.

The ground work to shelve the Rs 11,000 crore second phase of metro project began in September when the MMRDA wrote to Mumbai Metro Transport Private Ltd (MMTPL) to commence  construction work immediately. The company shot back stating that it can not commence work on the line unless  various issues related to environment clearance for car depots at Mankhurd and Charkop and right of way are sorted out. Moreover the company said there were other unresolved issued related to amendment in rules to allow commercial development at metro stations, restrictions on construction near Juhu airport and problems regarding shifting of undergound utilities. It said until the government sorted out these issues it was not in a position to begin work.

"The project can't be left hanging. There has to be a conclusion,'' a senior MMRDA official said.  Another  government official countered Reliance Infrastructure's claims regarding lack of government  support.  " Metro is a public infrastructure project and Reliance should have had faith in government. In case of first phase of metro land for car depot was made available after eight months after project launch. The government has been trying to provide alternate land which is clear of CRZ.  We had given right of way comprising stretches of three kilometre on 50% of the route. Even if right of way was made available on hundred% of the route the company would not be able to start work on the entire length. ''

A Reliance Infrastructure spokesperson said the company was not aware about the government plan to scrap the project. " We have fulfilled all our conditions precedent as per the concession agreement. We are waiting for the government to fulfill their conditions as prescribed in that agreement.'' The spokesperson said the company has so far spent Rs 100 crore on designing and related works besides Rs 160 crore deposited towards bank guarantee.


What is stalling the second phase ?

Environment Clearance:   The proposed sites for car depots at Charkup and Mankhurd fall under the coastal regulation zone. Earlier this year the union environment ministry gave a conditional clearance to construct the car depots. The clearance allows for construction of car sheds over stilts so that mangroves are not hacked and does not permit washing of trains at the site. R-Infra claims these conditions make car shed depot unviable.  The search for alternate plots has not been not successful.

Right of Way:  R-Infra claims that MMRDA was supposed to provide 100% right of way for the project by April 2011and till now only 51% has been provided which is not contigious

Commercial development: MMTPL has proposed development of retail areas spread over 4000 sq metre at each of 27 metro stations on the route. This construction can take place only if existing development control rules are amended. However the amendment has not yet been done.

Utility shifting: There is no concrete plan regarding shifting of utilities

Approval from Airport Authority:  AAI has imposed constraints on the construction height in area near Juhu airport

 

Project cost: Rs 8250 crore (MMRDA estimate) Rs 11,000 (R-Infra estimate)
Places to be covered  
From Charkup to Mankhurd via Bandra, covering 32 km, with 27 stations
August 2009:  President Pratibha Patil launches the project

Concession period : 35 years

Financial closure achieved: Achieved in March 2011; Axis Bank is the lead banker along with nine other PSUs. Debt portion - Rs 6931 crore.

Project equity: Rs 2332 crore. Reliance Infra's equity share is 74 percent and the balance 26 percent belongs to SNC Lavalin

Viability Gap Funding:  Rs 2298 crore (Rs 1532 crore from Centre,  Rs 766 crore from MMRDA)

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