Metro phase II price escalation to cost BMRCL dearly

With the Union Cabinet on Thursday approving the Phase II of Namma Metro at 2011-12 price level, BMRCL will now have to find ways to mobilise funds for the project at current rates.

The Centre has approved the estimated cost of Rs 26,405 crore with a price escalation of five per cent per annum. To make matters worse, the price of US dollar mentioned in the presentation sent to the Centre by BMRCL for approval, has been taken at Rs 50 and based on this, the cost of the entire project has been chalked out. However, as on today, the US dollar is ruling at Rs 62.77. With 15-20 per cent import cost, the overall escalation will go up by at least Rs 1,000 crore assuming that the dollar rate stays at Rs 63-64, sources said.

Speaking to Deccan Herald, BMRCL Managing Director Pradeep Singh Kharola said Metro Phase II was a mega project in terms of sheer size and double the lines as in Phase I. “We will try and minimise the cost. Everything will be taken care of.”
The State government, while approving Phase II in 2011 had suggested various measures for additional resource mobilisation through land monetisation such as development cess on new layouts by BDA and private layouts which has been estimated to yield revenue of Rs 1,250 crore in five years.

Besides, cess on allowing additional floor area ratio (FAR) along the Metro Rail Corridor estimated to yield Rs 430 crore in five years, transferable development rights in lieu of compensation of land and issuance of taxable bonds depending on the market appetite, BMRCL may float bonds to pay off costlier loans, the government noted.

For funding Phase I, the State and the Centre had together contributed 54 per cent of the cost while 46 per cent was raised from senior term debt from international and domestic financial institutions, including the World Bank, JICA, ADB, AFD, HUDCO et al.