Time to dump public-private partnership model in crucial infra projects

The Gurgaon Rapid Metro is quite an icon for those visiting the gleaming corporate towers in the capital’s extension of Gurugram. The problem is it is now struggling to survive as the original concessionaire, Rapid Metro Rail Gurgaon Ltd, has decided to dump the 11.6 kilometre transport corridor. It was handed over on September 18 to a reluctant state government’s Haryana Shahari Vikas Pradhikaran (HSVP, earlier known as HUDA) along with liabilities of Rs 3,771 crore.

Rapid Metro Rail Gurgaon (RMRG), a private consortium floated by IL&FS (Infrastructure Leasing & Financial Services Ltd) and several subsidiaries of DLF (Delhi Land and Finance), knows the Haryana government will not let the Gurugram Metro die. In court and outside, the stakeholders are now attempting to arrange a smooth passage to the State-owned Delhi Metro Rail Corporation (DMRC). It is probably the only body that can run the metro by adding it to its Delhi network. 

The Gurgaon Rapid Metro was promoted from 2009 to provide transport infrastructure to the rapidly expanding corporate hub of Gurgaon. The builders and financiers were aware it added value to their corporate parks; and they managed sweet gains like additional building rights (Floor Area Ratio). RMRG was the sole bidder. It spent Rs 3,000 crore developing the corridor, juicing out concessions from government by painting a rosy picture of a ridership of 6 lakh a day. And the actual turnout: about 50,000 a day. 

Having profited and made a mess, the private Rapid Metro Rail Gurgaon has exited; and now it is the government-owned DMRC that will run the show. What prevented the Haryana government from opting for DMRC from the beginning? A cozy relationship with builders? 


The Gurgaon Rapid Metro mess is a carbon copy of the Delhi Airport Metro that the Anil Ambani-promoted Reliance Infrastructure abandoned in 2013. The PPP project, operated by a Reliance Infra SPV, launched with a projection of a ridership of 40,000 a day. It turned out to be less than 10,000, and the Ambani company was soon grappling with losses of Rs 300 crore and more.

Here too, the State-owned DMRC turned out to be the white knight, taking over operations after Reliance Infra exited. But why wasn’t DMRC allowed to run the Airport Metro from the beginning? 
After years of debate, urban planners have come around to the view that crucial infrastructure projects, and especially those of key transport corridors, cannot be trusted to the public-private-partnership (PPP) model. They provide crucial public services and cannot be put to risk. Moreover, investments are large, and the gestation period for returns long and unpredictable. It is the government that will therefore have to shoulder the responsibility of funding and operating these projects. 

A working group of the Planning Commission on urban transport, as far back as 2012, rejected the PPP model. Headed by the former managing director of DMRC, E Sreedharan, the group said: “It has been proposed that urban rail transit system should be taken up with primarily government funding…” Providing details, the working group showed that the PPP model was a failure worldwide. Of 113 international cities which had developed Metro Rail, 88 per cent had been funded and operated by the public sector. 


The logic in transport infrastructure can be extended to the crucial housing sector too. The Pradhan Mantri Awas Yojana (PMAY), launched in 2015 and which envisages the construction of 2 crore affordable homes by 2022, has been a slow train to nowhere as many of its arms like in-situ slum redevelopment and the construction of affordable homes with public-private partnership are largely dependent on private investment and initiative. 

The learning from the failures of Maharashtra’s Slum Redevelopment Authority has been particularly instructive. Not having the money to develop Mumbai’s sprawling slum lands, the Shiv Sena government in 1995 launched the Slum Redevelopment Scheme, where slum lands were offered to private developers with higher development rights (floor-space index). The math was: developers would rehouse the slum families for free, and use part of the land to construct saleable units to cross-subsidise the free homes. 

The math and logistics never worked, and the scheme has been a non-starter. Some of the big failures have been the housing project for the airport slums given to the now disgraced builder, HDIL; the transformation of Asia’s largest slum, Dharavi, where half-a-dozen open bidding attempts to bring in large private consortiums have found no takers; and the stillborn redevelopment of the BDD chawls (tenements) in Worli, central Mumbai. 

Private investment can never drive urban transformation. At best, it can be an adjunct. The government has to be the primary mover. Yes, generating the funds is an issue, but that is the subject matter of another discussion. 

Rs 3,771 crore worth of liabilities were handed over to Haryana government along with 11.6-km Gurgaon Rapid Metro work.