FINANCING URBAN TRANSPORT

INFRASTRUCTURE

Presentation Structure

Urban Scenario

Investment Needs

Financing Structure

Financing Options

Urban Scenario

Urban population in India increased from 62 million in 1951 to 377 million in 2011.

In 2011, 3 cities with a population greater than 10 million and 53 cities with a population greater than 1 million.

By 2031, it is projected that there will be 6 cities with a population greater than 10 million.

Rapid Rate of Urbanization

. IIHS 2011. “Urban India 2011: Evidence”Source: Road Transport Year Book (2009-2010 &2010 2011).Ministry Of Road Transport & Highways Government Of India New Delhi

From 2001 to 2011, the annual growth of population 1.6%, but motor vehicles increased by almost 10%

Average vehicle speed during peak hour in many Indian cities is as low as 10 kmph

Rapid Motorization

“Urban transport is the single most important component instrumental in shaping urban development and urban living.”

National Commission on Urbanization (NCU)

Investment Needs

Investment Needs – Next 20 years

Study Total Investment for Services

Investments in Transport Infratsructure

Investment in Mass Transit

Investment in Road

Mckinsey Global Institute (2007)

Rs 53 lakh crs.

Rs 27 lakhs Crs (51%)

Rs 18 lakh crs. Rs 9 lakh crs.

High Powered Expert Committee (HPEC)

Rs 39 lakh crs.

Rs 22 lakhs Crs (56%)

Rs 5 lakh crs. Rs 17 lakh crs.

The total expenditure on roads and urban transport together out of the total expenditure is about same order (as a percentage) as the Mckinsey estimate.

However, there is a major difference in the estimate for roads vis-a-vis urban transport.

Key Issues Affecting Investment In Urban Transport High Capital and Operation cost

Long Gestation Period

Project Viability

User Charge

Fare Revision

Cost Recovery

Demand Risk

Social Linkages

Macro economic policies

Financing Structure

Financing Structure

National Level – 12th Five Year Plan

State level – State Budgets

City Level - Municipal Budgets

To create an effective institutional framework to manage investments

Capacity building of State & City Officials

Create walking & Cycling facilities

Augment public Transport

Improve accessibility and mobility

Provide grade separated entries and by passes for through traffic

Improve road safety

Use of technology for multimodal integration, safety etc

Promote research in guided transport

12th Five Year Plan - Goals

Sources for the total investment

A total of Rs 3,88,308 cr is estimated to achieve the goals of the 12th 5 year plan

Source Rs (in Crores)

Central Government 85,843

State Government/ Development Authorities 1,07,585

Property Development 5,268

Private Sector 1,35,560

Debt from Multilateral/ Bilateral institutions 31,606

Debt from domestic financial institutions 22,447

12th Five Year Plan - Investments

State Budgets

In 11th Plan – of the total

investment state share was

32.6%

12th Central Finance

Commission recommended to

augment Consolidated Fund

of the State to supplement

resources of panchayats and

municipalities

Sources of Investment

Financing Options

Financing optionsPublic Financing Schemes

Multilateral Investments

Innovative Financing Mechanisms

Financing Sources

Jawaharlal Nehru National Urban Renewal Mission

(JnNURM)

Urban infrastructure Development Scheme for Small &

Medium Towns (UIDSSMT)

Viability Gap Funding (VGF)

Central Assistance for doing Technical Studies like CMP,

Metro DPRs etc.

Central Schemes

Advantages

Easing Budgetary Constraints

 Improved Value For Money

 Sharing Of Risks Between Public & Private Partners

 Reduction In Cost Of The Project

Main sources of Private Sector Funding

Debt

Equity

PPP

Private Sector Funding

PPP Options

Rigorous project preparationDelivery of whole life solutionFocus shifts to service deliveryTime bound implementation planBetter overall management of public services

Key Benefits of PPP

Examples – Metro Projects

Metro LinkConcessioni

ng Authority

ConcessionaireTotal Cost

(Rs./Crore) VGF (Rs./Crore)

Concession Period

Delhi Metro Airport Link DMRC Reliance

Infrastructure Limited 5800 1786 30 Years

Mumbai Metro Line-1 MMRDA Reliance Energy

Limited 2356 650 35 Years

Mumbai Metro Line-2 MMRDA Reliance Energy

Limited 8250 1532 35 Years

Gurgaon Metro Rail Link HUDA DLF & ILFS Limited 1088 - 99 Years

Hyderabad Metro HMRL L&T Metro Rail 11814 1458 35 Years

Examples – Bus Operations

Indore City Bus Service

Bhopal City Bus Service

Rajkot City Bus Service

Surat City Bus Service

Bhubaneswar – Puri City Bus Service

Ahmedabad BRT operations

Delhi Bus Service

Case Study: Bus Operations – Indore(Atal Indore City Transport Services Limited)

Before City Bus- Unorganised Transport

About AICTSL Inception in 2006 with a seed capital of Rs. 5 million.

Adopted the net-cost based PPP model of bus operations… widely copied in other cities across India.

Started with 37 buses with 4 operators.

Installed vehicle tracking systems on the entire fleet, that is the best in the country even till date.

Initiated the BRT project in Indore which is in the final stage of implementation.

Funding from JnNURM allowed modernising the fleet with CNG buses that have electronic displays and voice announcement systems.

Private operator responsibilities:

• Owns, operates & maintains fleet

• Collects fare from passengers

• Pays premium to AICTSL for right to operate on route

PPP Model of Bus Operations

Public partners role: • Planning of routes

• Inviting tenders for bus operations

• Providing support infrastructure

Objective: Providing affordable & quality public transport

Safety & Quality has helped attract trips from private travel modes

Mode of Transport Passenger Km Travelled

Modal Split (PKT)

Fatalities [3]

Caused (2010) Fatalities Per Travel

Kms

Private Vehicles 9.40 million 62.8 % 80 0.0233 /mill. Km. PT – City Bus 0.64 million 4.29 % 0 0.0 /mill. Km. PT – IPT 1.31 million 8.77 % 12 0.0251 /mill. Km. Bicycle + Walk 2.91 million 19.4 % 0 0.0 /mill. Km. Others 0.72 million 4.74 % 128 0.4871 /mill. Km. TOTAL 14.98 mill. 100 % 220 0.0402 /mill. Km.

Lives saved due to Indore City Bus :: 6 /year

(0.024 fatalities/mill PKT * 0.64 mill PKT per day * 365 days)

Hundreds of accidents avoided.

CO2 Reduced ~5.5 ton/day

Lives Saved, Emissions Reduced

Challenges CNG fuel prices have increased by 64% in 24 months,

thus reducing profitability to operators

AICTSL has limited financial resources (premium from

operators, advertising) for additional infrastructure

Passenger ridership per bus has increased only

marginally, not keeping pace with input costs

Modernising the system by way of better workshop infrastructure, improved information for passengers and customer service is necessary for expanding the

system.

Multilateral Development Banks (MDBs) Multilateral development banks (MDBs) provide finance

for investments in human and physical capital that

promote development.

MDBs assist in Urban Transport Funding through the

following:

Loans

Grants The Global Environment Facility

(GEF) Clean Development Mechanism

(CDM)

The issue of urban transport financing has become increasingly prevalent in recent years as costs of providing transport services have expanded more rapidly than traditional revenue resources.

The National Urban Transport Policy of April 2006 also lays emphasis

on the innovative use of land as a resource for financing public transport projects.

Urban Transport Fund Financing Through Cross-Subsidy Projects Property Development Land Value Capture Kiosks and Shops at Stations Taxes and Fiscal Incentives Cross Subsidy

Innovative Financing Mechanism

Examples- Innovative Financing Scheme

Non Fare Box Revenue

Sl. No. Project NameFarebox

Revenue (%)Non Fare Box Revenue (%)

1 Singapore Metro 89 11

2 Bangkok Metro 88 12

3 London Metro 83 17

4 Washington Metro 77 23

5 New York Metro 70 30

6 Hong Kong Metro 37 63

Case Study- BRTS Project – PCMC PCMC has planned for 10 BRT routes for quick and

effective transit and the cost for the first phase is about Rs.

1540 crore

PCMC has set up an Urban Transport Fund (UTF),

managed by an SPV, PCMC Infrastructure Company Ltd

(PICL), to finance its share of the BRT project.

Urban Transport Fund – Pimpri Chinchwad

100 metres on both sides of the corridor have been earmarked as the “BRT Influence Zone’

PCMC has raised the FSI in the influence zone from 1 to 1.8 with the added FSI of 0.8 being achieved through loading of TDR.

Based on the total influence zone area along the 60 km BRTS corridor, additional 0.8 FSI permissible in the influence zone, the project can generate close to 5000 Crs of revenue TDR Potential TDRs (mn

sqft)Revenue from TDR use (Rs.cr)

Max potential, assuming absorption in 80% of influence zone

83 4980

Case Study-The TTMC Concept

BMTC developed the innovative concept of ‘Traffic and Transit Management Centres (TTMCs)’

The TTMC concept combines the development of passenger terminals with the creation of commercial real estate space.

Revenue from rent of the commercial real estate space would cross subsidise the construction cost of the passenger terminal and amenities, and also form a source of continuing additional revenue for the corporation.

Implementation10 TTMCs have been constructed since

2009 Initial funding was provided by JNNURM

Thank You!