Urban Transport -How to address the commercial

road blocks
Urban Transport Congress India 2010, Mumbai
25
th
June, 2010
Brijgopal Ladda,
Head CRISIL Infrastructure Advisory
2.
In Nutshell- The Indian Transport sector
There is a huge transit demand

In large cities public transportation however inadequate, high level of
rider-ship is observed during peak-hours

Incidence of car trips are bound to rise due to raise in income levels
and affordability

Consensus and policy framework is in place for mass transits system
that is sustainable, efficient, reliable and affordable- The National Urban
Transport Policy

Few initiative exist in this direction, their success would need to be
reviewed and to be replicated in other cities

3.
Urban Travel Demand- In India Cities
759
1039
2511
0
500
1000
1500
2000
2500
3000
1994 2001 2021
Year
M
i
l
l
i
o
n

P
a
s
s
e
n
g
e
r

-

K
m
s
By 2021 the travel demand is likely to increase by over 2.5 times
Current level of Public Transport system will not be able to meet this
demand
Planned & Mass Public Transport System is the need of the hour
4.
Mode Share In India Cities
A recent study indicated that during the period 1994 - 2007 the share of public
transport has declined considerably across all category of cities



City Category WSA- 2007 Rites 1994
% Trips by Public Transport
Cities with Population < 0.5 Million 0-15 12-23
Cities with Population 0.5-1.0 Million 0-22 23-29
Cities with Population 1.0-2.0 Million 0-51 28-36
Cities with Population 2.0-4.0 Million 0.2-22 36-46
Cities with Population 4.0-8.0 Million 11-32 46-59
Cities with Population > 8 Million 35-54 60-79
Note: WSA Results based on survey of 87 cities, while RITES results are based on 21 cities
Source: Traffic & Transportation Policies and Strategies on Urban Areas- A study by WSA Inc & CRISIL
However in large cities public transport is still the single largest carrier

The lower patronage can be attributed quality & reliability of public transport
system..
5.
The Key challenges in urban transport 1/2
Arriving at the right affordable transport model for the city to address:
Dispersed growth low-medium density
Expansion of cities -increasing trip lengths

Ridership demand estimation need to be realistic
In most projects demand estimation have surpassed than what was conceived

Issues- related to planning process
In most cities urban transport is not primary responsibility of ULBs
Substantial delays in land acquisition leading to cost escalation
Overlapping jurisdiction in large urban agglomerations need for unified transport
authority
6.
Implementing Agency- Perspective
High investment needs and budgetary constraints
Fare-box revenues alone not sufficient for viability
Need to explore alternate revenues to finance projects
Need to have densification and TDR policy
Need to capture incremental benefits & indirect revenues
Developers Perspective
Large project size
Long gestation period
Non availability of attractive PPP Models
Financial institutions
Reluctant & Selective to fund large projects
Lenders expects higher equity contribution
Concerns on contractual provisions to protect lenders interest
The Key challenges in urban transport Stakeholders perspective (2/2)
7.
High Investment Need Limited Finances
By 2027 an investment of Rs. 4,350
bn is required to meet the urban
transport needs
Investments leaning towards capital
intensive mass transit systems- BRT &
Rail based

Financing shall be a constraint
19 BRTS projects have been
sanctioned under JNNURM with a
project cost of Rs 47.73 bn
But funding under JNNURM is limited
Few MRTS projects in pipeline
Viability Gap Funding is limited to a
maximum of 20%-40% of project cost
Source: Traffic & Transportation Policies and
Strategies in Urban Areas in India, MoUD Study by
WSA Inc
Above estimates are based on study of 87 cities in
India for a period of 20 years
8.
How these concerns are impacting the Projects?
Mumbai Metro- Line 2
Project Cost : Over Rs. 7,500 crores
Of the seven qualified bidder only one submitted the Financial
Requested for 27% VGF

Mumbai Sea Link Project
Project cost : Over Rs. 4000 crores
Only 2 out of 17 qualified bidders submitted bids

Hyderabad Metro ?
9.
Should these concerns tempt for public funding in UT ?
Currently private sector investments are low in urban transport
Currently real estate component is not that attractive
Should government move towards public funded infrastructure ?- No
Government is constrained by its budget, so cant finance many projects
These large project need new skills sets
It would discourage private sector to invest in infrastructure
Having developed PPP market Government should:
Facilitate & promote more private finance in infrastructure :
Explore alternate project finance options intermittent to Public funding and PPP
Increase project viability by targeting indirect beneficiaries/sources


10.
Explore Intermediate options
The extreme ends of the PPP continuum are not workable in situations
of crisis
Hence need to develop intermediate
Public funded
and private
operated
Private funded
and private
operated
Continuum of PPPs
Service contract
Management
contract Concession
Annuity
projects
Viability Gap
Funding
assisted
projects
Unlocking
value
Intermediate options
11.
Direct and Indirect beneficiaries
Passengers of a public
transport system
Vehicle owners using a
flyover/facility
Businesses based on the
infrastructure- advertisers
on the system, vendors
Indirect Beneficiaries
Property owners near the
developed transport system-
gaining from higher potentail
value of property
Business around the transport
system- gaining from better
connectivity
Local Government- gaining higher
property taxes in the region due
to escalation in property prices
Direct Beneficiaries
12.
PCMC BRTS Model Is a model to be replicated ?
13.
Concept of Pimpri Chinchwad Municipal Corporation
Corridor Densification by TDR -linked Land Use Control and
Infrastructure Financing Mechanism
14.
Pimpri Chinchwad Municipal Corporation (PCMC) is developing 130 km of bus
based mass transit corridors
PCMC has set up an Urban Transport Fund (UTF) to finance the project
The UTF to be managed by a SPV wholly owned by PCMC
A zone of 100 m on either side of the corridor designated as BRT influence zone
Loading of Transferable
Development Rights (TDR)
PCMC allows TDR from other parts
of the city to be loaded on the BRT
influence zone on the payment of
a loading premium

Building permission charges in the
zone
The building permission charges
in the influence zone allowed to
the UTF

Incremental Property Taxes
The BRT influence zone is
designated as high tax rate zone-
the incremental revenue is allowed
to the UTF
Real Estate,
Advertisements &
lease of utility ducts
Value unlocked from Indirect
Beneficiaries
Unlocking value from indirect beneficiaries in Pimpri-Chinchwad
15.
Design of the fund
Notified 100 m on either side of BRT route as BRT corridor zone
Increased ceiling FSI from 1 to 1.80
0.80 loading is through TDR with payment of a premium

Advantages
Does not release additional FSI in the city; only realigns the FSI
from other zones to BRT Corridor
Will protect the value of TDR and make it more attractive
PCMC can plan higher order infrastructure in BRT corridor and
facilitate focused service provision by densification
Ensures the attractiveness of mass transit

16.
SPV for BRTS PCMC Infrastructure Company Ltd
The SPV is 100% owned and controlled by PCMC

Will help PCMC to raise long term loans (12 yrs +) from
multilateral agencies IFC, ADB

SPV ensures focussed and timely implementation, necessary for
projects with borrowing

SPV will focus on generating the revenues for the projects

Strengthens the transit corridor densification approach for project
sustainability

17.
Sustainability of the model
The road network designed to cater to future growth patterns of the city
It is a priority based approach
Will spur substantial real estate development

Funding model is designed to capture this future growth benefits to
fund road development

Fund makes the revenues secure which helps raise finance from
lending agencies

Without fund structure it will be difficult to channelize earnings from
indirect beneficiaries into development
18.
Strategies to make to BRT attractive
State of Art BRT system for fast and cost effective transit
Higher order infrastructure for attracting densification
24/ 7 water supply
100% sewerage provision
Dust Bin free zone
Road design
Service lanes for mobility of local traffic
Provision for pedestrians under pass, walk ways
Provision for non motorized vehicles cycle track
Facilities for vehicle parking
100% extra parking;
25% to be handed over to PCMC for public parking
Miscellaneous
Wi Fi connectivity
Hawker zones
19.
Key Take aways
The key factors for success of PCMC Model
The model requires real estate momentum to ensure that TDR loading
Mumbai Pune corridor has already been commissioned land rates have seen upward revision
Mumbai Pune and Aundh Rawet will create the necessary momentum for sustaining the cycle
for other roads
The stage is now set for scaling up
Key aspects for success of public transport
Planning
Proposals to be backed by comprehensive traffic studies and realistic forecast
To be linked with land use
Financing
Exploit all sources of revenue to improve the financial viability
Creation of an Urban Transport Fund (UTF) by pooling non fare based revenue to fund
projects
Create of a Special Purpose Vehicle to manage the UTF
Contracting/Management
Risk allocation between government and private sector need to realistic
It is impossible to plan for all contingencies- Need for flexibility in concession agreement
to renegotiate

Thank You