Airport line delays cloud rail PPP hopes

The commissioning of the Rs 4,000-crore Airport Express Line of Delhi Metro, the country’s first public-private-partnership (PPP) project in the rail sector, has been delayed by over five months. For the showcase project, which was meant to be completed before the Commonwealth Games in October last year, issues do not seem to be ending.

While the project has already been impacted by failed safety clearances and technical glitches, a parallel tussle is on between Delhi Metro Rail Corporation (DMRC) and DAMEPL — a Reliance Infrastructure subsidiary executing the project — over the issue of penalty for the delays.

After the line had failed to get mandatory safety clearances from the Commissioner of Metro Rail Safety in September last year, DMRC had slapped a penalty of Rs 11.25 crore on Reliance as liquidity damages, as it failed to meet the deadline of August 31 for starting the operations.

Reliance has not only contested DMRC’s claim to levy the penalty, it has blamed the metro train operator for the delay, arguing it did not complete the civil structures on time.

While both DMRC and DAMEPL did not provide figures for overall quantum of penalty as it stands on Friday and the rate of its accumulation, unconfirmed calculation suggests the penalty has been building at a rate of Rs 75 lakh, half a per cent of the performance security, per day of delay since September and must have accumulated to over Rs 125 crore. This is the revenue loss DMRC would face in case it fails to insist on claiming the damages.

However, both sides are still negotiating. “Once the line is operational, we will decide how much penalty is to be charged, depending upon our discussions with them (DAMEPL),” said a senior official from Delhi Metro.

The Reliance subsidiary, too, is hopeful of finalising a compromise formula. “We have contested DMRC’s decision to levy the penalty and are in discussions with them to resolve the issue,” a DAMEPL spokesperson said in an e-mail reply to a questionnaire by Business Standard.

The delays in the airport metro line has caused experts to doubt PPP as a model for setting up other rail metro projects. Apart from inexperience, getting clearances and sanctions becomes difficult for private entities leading to delays in PPP projects, according to DMRC Chief E Sreedharan.

Another expert agreed with this view. “PPP should not be wished away as a model based on the single instance of the airport metro which is an unusual combination of a highly experienced public body working with Reliance, which has relatively limited experience in this area. The problems have occurred because getting clearances for private company becomes difficult,” said a senior analyst from an accounting and consultancy firm. “The debate over PPP in metro projects is on the viability issue, where doubts are raised over a private company’s ability to invest into and run a metro service successfully,” he added.