Hyderabad Metro rail project in fresh trouble

Hyderabad Metro rail project in fresh trouble
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First Published: Sun, Jan 31 2010. 11 11 PM IST
Updated: Sun, Jan 31 2010. 11 11 PM IST
Hyderabad: Some infrastructure firms that have bid for the Hyderabad Metro rail project concede that they are mulling opting out of final bids due to concerns about its financial viability.
Eight global and Indian consortia filed initial bids for the Rs12,132 crore project on 16 January. Considered to be the country’s largest such project at one go, it includes developing three traffic corridors over 71.16km as well as 66 stations.
The government has offered a viability gap funding—or financial support to make public-private partnership projects commercially viable—of Rs4,853 crore. That is 40% of the projected cost. The Union government has already sanctioned Rs2,363 crore as its share.
Fresh bids for the project were called last July after the state government of Andhra Pradesh scrapped the award of the project to a consortium led by Maytas Infra Ltd, a firm run by the family of Satyam Computer Services Ltd’s jailed founder B. Ramalinga Raju.
The latest bidders include Larsen and Toubro Ltd; Lanco Infratech Ltd-Obrascón Huarte Lain SA of Spain consortium; Reliance-Anil Dhirubhai Ambani Group; Essar Group- Leighton Holdings Ltd of Australia-Gayatri Constructions Ltd-VNR Infrastructure Pvt. Ltd consortium; GVK Group-Samsung Group of South Korea consortium; GMR Group; Transstroy Corp. of Russia-OJSC of Russia-CR 18 of China-Bharat Earth Movers Ltd consortium; and Soma Enterprise Ltd-Strabag SE of Austria consortium.
State municipal administration minister Anam Ramanarayana Reddy had said the government was overjoyed by the “good response” it received in the fresh round of bids.
But the managing director of one of the bidders, who did not want himself or his company to be identified, said many of the bidders may not file final bids for the project in its current format.
“We are concerned over the project’s financial viability owing to high actual end-cost of the project, inadequate viability gap funding, unrealistic projections of passenger traffic and revenues from the realty component,” he said.
The executive added that the implementation cost could run up to Rs16,000-18,000 crore. At a 70:30 debt-equity ratio, he said, the developer may have to bear an interest burden of Rs700-800 crore.
GVK Group, which had pulled out the last time just before financial bids, is highly cautious while evaluating the project this time. “We don’t believe in crazy numbers and that’s why we had withdrawn from the race last time, considering the project financially unviable,” said group managing director G.V. Sanjay Reddy.
Bidders also doubt the government’s projections of passenger traffic, which stand at 1.5 million a day in the first year of operation.
“You can see that Delhi Metro Rail (Corp.) reported only 850,000 passengers a day in 2009 after being in existence for over six years and reported passenger revenues of only Rs393 crore in 2008-09,” said the managing director of another bidder, who also did not want to be named.
c.sukumar@livemint.com
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First Published: Sun, Jan 31 2010. 11 11 PM IST