Fund-short railways sits on Kolkata Metro project

40% cost overrun, work stoppage, contractors threatening to sue and no state stake leave east-west corridor project stuck

In July 2012, the Union railways ministry, then run by nominees of West Bengal chief minister Mamata Banerjee, enthusiastically took over the Kolkata Metro Rail’s east-west corridor project.

Subsequently, with Mamata’s Trinamool Congress (TMC) out of the ruling United Progressive Alliance (UPA) alliance, the project has been starved of funds. It now faces a cost overrun of 40 per cent, translating to about Rs 1,800 crore.

Usually, state governments push projects in their cities and even take equity in these. With the Kolkata metro, the railways was asked to take over the state government’s equity when a string of TMC leaders (Banerjee herself, Dinesh Trivedi and Mukul Roy) were ministers in charge. Officials said despite objections from the Planning Commission and the ministry of urban development, the Railways took over the state government’s equity in the project in August 2012.  The TMC walked out of the UPA alliance the following month.

The ministry has 74 per cent equity in the project, with the rest coming from the urban development ministry. Officials at the railways said the funding issue here was part of a larger financial crunch faced by them. There are pending projects of over Rs 1 lakh crore; about Rs 10,000 crore is released annually. “We don’t have funds. Why should any project get preferential treatment?” said a senior railways official.

Unlike the Jaipur metro rail, where the government of Rajasthan has keenly pursued the project and also managed a grant from the Asian Development Bank, development in the Kolkata metro has been stalled despite the presence of Japan International Cooperation Agency (Jica). The latter has been a key player in the success story of the Delhi Metro.

The project has also suffered an impasse over alignment issues. “Due to land acquisition issues in central Kolkata, a realignment was suggested but Jica was against it, as it could lead to further cost overruns,” said Abhaya Agarwal, partner, infrastructure and PPP, Ernst & Young.

The delay has not only caused a cost overrun but also invited claims from the contractors. Gammon has pulled out of the Duttabad stretch. Afcons, contracted to build tunnels between the Howrah Maidan and Central stations, has sough compensation of Rs 257 crore for the delay. Claims worth Rs 900 crore have been made by the contractors as the work is in limbo; no payments have been made so far, say government officials. The total cost of the 16-km east-west corridor was earlier estimated at Rs 4,874 crore. Jica had sanctioned a soft loan worth Rs 2,253 crore (45 per cent of the total cost), with a payment moratorium of 18 years. The railways ministry had committed about Rs 400 crore as equity in 2013-14. An equal amount of pass-through assistance from Jica was committed by the ministry. However, no money has been sanctioned till now.

Kolkata’s tryst with metro rail has not been a happy affair. The currently functional line-I took 17 years for completion. Line-II faces issues such as financing, land acquisition and agreement on project alignment.

Most Metro rail projects have state governments as stake holders, pushing the project. Experts say absence of a willing state government is one reason the project faces problems at various fronts.

Kolkata Metro Rail Corporation does not enjoy the same autonomy and an effective corporate structure that can give it the flexibility and authority to execute the project smoothly, unlike Delhi Metro Rail Corporation, argues Vishwas Udgirkar, senior director, Deloitte (India).