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The ambitious NCR Rapid Rail Connectivity project that aims to connect Delhi with Alwar, Panipat and Meerut depends on betterment charges for its majority positive cash flows from the start of operation in 2017. The one-time betterment charge, proposed along the three corridors, would be applicable every time a property in the identified area is bought or sold.
“The rationale behind imposing betterment charges is that the citizens become partners in development of the concerned area,” said Ashwini Parashar, vice-president, Delhi Integrated Multi-Modal Transport Systems (DIMMTS), which is involved in making the detailed project report.
The NCR Rapid Rail Connectivity project has proposed two models to implement the betterment charges. One is based on the percentage of the circle rate, paying five per cent during the construction period of the proposed rapid rail corridor and 5-7.5 per cent during the operational period of the corridor, depending on the type of property. Every time a property is bought or sold, the specified percentage would be paid to National Capital Region Transport Corp (NCRTC), which was recently formed with participation of four state governments.
Another option floated is the fixed rate square metres basis, charging Rs 1,000 per sq m during construction of the project and between Rs 1,000 and Rs 1,500 during operational period, depending on the type of property.
Planned to be completed under the public private partnership (PPP) model, the private partner would be responsible for rolling stock, signalling, elevated stations, operations and management and generates majority of its revenues through fares. On the other hand, the only source of income for the government or NCRTC would be the betterment charges. On the Delhi-Meerut corridor, the cash-flow sheet shows that NCRPB would be in red by 2021, making losses of Rs 179 crore for that year and continue to remain in red till 2036.
In 2017, the project feasibility report expects cash-flows of Rs 608 crore at the Panipat line and Rs 498 crore at the Meerut line, the only source of cash flows expected till 2046 for NCRTC. These betterment cash flows are expected to provide the oxygen to NCRTC till 2045, with no alternative source of funding to repay the soft loans.
This heavy reliance on betterment charges raises questions of financial sustainability for the project. At many instances, courts and governments have withdrawn betterment charges amid local resistance. Officials working on the project are positive, though. “We have kept the projections reasonably conservative and that should make our projections realistic,” says an official.
Betterment charges in India were planned to be imposed when Delhi Metro was in the initial stages, but the proposal was never accepted by the Delhi government. Similarly, the Karnataka High Court struck down a Bangalore Municipal Council circular for collection of uniform circular charges for widening of roads and other amenities.
The Ghaziabad Development Authority (GDA) has also passed similar betterment charges on any new construction in the metro influenced area, charging 15 per cent of the hiked property cost. This money would be used to fund the Ghaziabad metro development and help the GDA raise funds for its share of metro fund amounting to Rs 1,016 crore.
DEVELOPMENT FEES ELSEWHERE
* Similar charges proposed for DMRC but never approved by the Delhi government
* Bangalore High Court struck down a Bangalore Municipal Council circular for collection of uniform circular charges that it wanted to collect for widening of roads and other amenities
* Proposed by Maharashtra government near major infrastructure projects like monorail and metro in 2010, under a separate fund called Mumbai Development fund
* Ghaziabad Development Authority recently decided to charge 15 per cent of hiked cost in metro-influenced areas
* Delhi Mumbai Industrial Corridor also plans to levy similar charges
