Important Topic: New Metro Rail Policy

Important Topics for Competitive Exams

Important Topic

Key points of the New Metro Rail Policy

The policy gives a big boost to private players by making private participation mandatory for all the three funding options be it a public-private partnership (PPP) model with central assistance under the Viability Gap Funding scheme of the Finance Ministry, a grant from the Centre under which 10% of the project cost would be given as a lump sum, or a 50:50 equity sharing model between the Central and State governments.

Private participation “either for complete provision of metro rail or for some unbundled components” such as automatic fare collection will form an essential requirement for all metro rail projects seeking central financial assistance. The policy also seeks to ensure that metro projects are initiated for sound reasons. Every proposal for Metro Rail should necessarily include proposals for feeder systems that help to enlarge the catchment area of each metro station to at least 5 km. It also stipulates rigorous project evaluation by a third party. The policy also makes it mandatory for state governments to set up a unified metropolitan transport authority. This would be a statutory body entrusted with preparing a comprehensive mobility plan for the city.

As per the policy, States are required to adopt innovative mechanisms such as ‘value capture financing’ and ‘betterment levy’ to mobilise resources for the project. States will also get a free hand in implementing the projects. In cases where States opt for central assistance of 10% of project cost, the Union government will not concern itself with project execution. Noting that metro projects should stop turning into white elephants, the policy stipulates an increase in rate of return from the current ‘Financial internal rate of return’ of 8% to ‘economic internal rate of return’ of 14%.

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