The Urban Mass Transit project proposed for the cities of Thiruvananthapuram and

Kozhikode has been dogged by recent controversy about the relative merits of the

transportation solutions proposed: Monorail vs. Light Metro vs. Standard Metro; as

well as regarding its financing structure. Even in advanced western societies, there

may not be public debates of such intensity and passion regarding technical aspects

like the coach-width and curvature radius of the proposed metro systems. Such

debates are all for the good, signaling an intense level of involvement and engagement

of civic society in governance issues, and this should be a matter of pride for all of

Kerala; since these are matters that are too important to be left to the hands of

politicians or bureaucrats. The print and visual media have a key role in setting the

tone and tenor of such debates, and in arousing public consciousness in these matters.

However in the recent public discussions concerning the technology specifications

and the funding models of the Thiruvananthapuram and Kozhikode metro systems, a

lot of half-truths and misleading ideas have been injected into the public domain, and

it is necessary to bring out the facts in their true perspective.

 

In Kerala, there is a tendency to attach labels to new models or concepts, and then

invest those labels with a derisory value judgment. For instance, Kerala must be one

of the few societies in the world where the word `corporate’ is often used as a

negative adjective. While it is a fact that many large corporates have been practicing

predatory capitalism, it is also a truth that the corporate limited-liability company has

been one of mankind’s greatest innovations, which has fostered economic

development across the globe.

 

In this vein, the debate on the Thiruvananthapuram and Kozhikode metro systems has

chosen to label ‘public-private partnership’ as a term of derision. To clarify matters,

there are basically two basic models of undertaking such urban transportation

projects:

The conventional model is when the taxpayer’s money is spent upfront by the metro

administration to invest in metro construction, and this money is given over to private

corporate companies who undertake the various components of the project like the

civil structure, the coaches, signalling, etc. In this model, the actual works are

executed by the private companies who collect their money upfront and go away,

while all subsequent operational and financial risks are left to be shouldered by the

Government or the metro administration. So basically in this model, the private

companies, who actually execute the project make their profits and leave the scene

after the project is commissioned, while the likely losses and the operational risks of

the system are left to be borne by the metro administration and the public. It is

pertinent to remember in this context, that out of the 200-odd metro projects

operational worldwide, only a very small handful are making money, while all the rest

are bleeding financially.

 

It is in this context that a slightly different model was apparently proposed by the

State’s Finance Department for the Thiruvananthapuram and Kozhikode projects,

whereby the Government’s initial expenditure would be confined to the cost of

acquiring the land, and for constructing the essential civil structures like the metro

pillars and the viaduct. The idea was that instead of the Government taking the entire

commercial and financial burden upfront for the total metro system; a part of the risk

would be shared by the private sector; by stipulating that certain elements of the

metro, like the metro coaches, the signalling system, the telecom system, etc. would be

invested by the private sector. In this model, bids would be invited by the metro

administration from various companies for supplying the Rolling Stock and other

systems for the metro, and for operating them over a stipulated number of years. The

bids would be evaluated on the basis of the least amount of money that the

Government would have to pay annually to the operators to run the systems. Such a

system would have the advantage of transferring the operational and financial risks

from the Government to the private operator, while also ensuring that huge initial

capital investments needed for such projects could be saved. Moreover, in this model,

the responsibility for ensuring efficient and reliable operations within the annual

quoted price will be squarely the responsibility of the private companies; with huge

financial disincentives for any lapses.

 

Thus the question to be considered is : Which is the model that is more pro-private

sector – the conventional model whereby the Government uses public funds to pay

private sector companies upfront for executing metro projects, or the partnership

model; where the private sector is responsible for ensuring effective operations and

maintenance of the Metro system within a competitively discovered price to be paid

annually by the Government? In the first model, public funds are transferred in their

entirety to private entities while in the second model, public moneys are doled out

only on the basis of sustained and satisfactory operational performance over a

stipulated number of years. The success and failure of the PPP system is reliant on the

contract agreement the holding company designs with the private partner. No private

company can exploit the system if there is a carefully designed agreement for the

system.

Of course, every model of metro construction will have its own disadvantages and

risks, but the right thing would be for us to dispassionately discuss all aspects and

options, and come to considered decisions; instead of affixing labels to some

alternatives and then denigrating them. A reasoned and mature debate regarding

these issues will surely throw up solutions that would facilitate the construction of

cost-effective, viable and sustainable urban transportation solutions for the cities of

Thiruvananthapuram and Kozhikode.

 

By

Elias George

MD, KMRL

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