MMRDA plans to offer metro lines under the toll operate transfer model

The Mumbai Metropolitan Region Development Authority (MMRDA) is planning to offer its metro lines, once operational, under the toll operate transfer (TOT) model in a bid to attract global pension funds.

Of the planned 337-kilometre metro network, two lines — 2A and 7 — are expected to be operational in this year. RA Rajeev, metropolitan commissioner of MMRDA, hopes to monetise operational lines partially and fund construction of the remaining lines. 

“We are tying up with pension and sovereign funds. These funds like Canada Pension Fund have shown interest in taking up a 30-year concession, where all revenue — fare and non-fare — for the period will go to them. We will monetise only 70 per cent of the revenue to these funds upfront,” Rajeev said. He plans to monetise more metro lines as and when they turn operational. 

The city is developing projects worth Rs 1.4 to Rs 1.5 trillion to improve infrastructure. This includes the Mumbai Transharbour Link (MTHL), the planned citywide metro network, including the operational metro line-Mumbai Metro One. A major part of these projects is being executed by MMRDA.

“The MMRDA model is that it does not take funds from the state and the Centre for infrastructure development,” the metropolitan commissioner said. For the planned metro network alone, negotiations for Rs 30,000-crore financing is on with bilateral and multilateral funding agencies, he said. The MMRDA, however, still needs to arrange Rs 80,000 crore between now and 2026 to fund ambitious infrastructure plans.

In addition to pension funds, Rajeev said the development authority had its own cash availability of close to Rs 14,000 to Rs 15,000 crore. The planning authority is also expected to receive annually Rs 500-600 crore from the state government as a share in the stamp duty applied on nearby projects. 

Another Rs 1,000 crore is expected annually through development charges applied on real estate projects in and around the underconstruction infrastructure. To be sure, MMRDA is yet to receive these proceeds. “The stamp duty was applicable since 2015, development charges from last year,” Rajeev said. 

The development authority will also look to monetise its land bank through long-term lease arrangement to fund these projects. “Last year, funds worth Rs 2,000 crore were raised through land auction on a lease basis,” Rajeev said. 

A major hitch in the city infrastructure projects like metros and monorail systems is its financial viability. Rajeev, however, is confident Mumbai’s metro lines will be profitable. “We expect our line to breakeven in 4 to 5 years and can be earlier than that… and there is a Cabinet decision, which gives us that liberty to increase the fares when required,” Rajeev said, adding: “If metro has to viable anywhere in this country, it has to be in Mumbai. We expect these lines to operate full capacity from Day 1.”

Mumbai Metro One, the only operational metro line in the city at present, however, is making losses. The authority, however, does not see that as a concern. It last week announced fare rates for the metro network. “With the announced fares, these lines are expected to show an internal rate of return (IRR) between 8 per cent and 12 per cent. I cannot comment on Mumbai Metro One, that is their capital expenditure,” Rajeev said. 

Mumbai Metro One line was built under the public-private partnership model.

Monetisation Plan 

• Project cost for Metro Line 2A is Rs 6,410 crore

• Project cost for Metro line 7 is Rs 6,208 crore

• Expected to be operational in 2020

• MMRDA looks to unlock 60-70% investment through TOT model

• Unlocked funds to finance remaining metro lines