Economic Analysis of Hyderabad Metro Rail Project Industry Academia Conference on Construction Management (IACCM 2015) NICMAR’s Construction Industry Staff College Economic Analysis of Hyderabad Metro Rail Project Ramakrishna Nallathiga Associate Professor NICMAR - Pune This presentation is based on the research work of Post graduate Students supervised by me for PGP ACM thesis at NICMAR Pune December 4-5, 2015

Structure of Presentation Introduction PPPs in Infrastructure Development Transportation Scenario in India Metro Rail Projects in India Literature Review Traffic and Transportation in Hyderabad Metropolitan Area Population Growth Motor Vehicle Population Accidents and Pollution Economic Analysis of HMRP Social Costs Social Benefits Conclusions

Introduction Infrastructure is vital to a nation’s economic growth and is considered to be the backbone on which the society is built. Poor transport and communications infrastructure inhibit participation of developing countries in global production networks (Limao and Venables, 2001). Funding constraints to construct and maintain such infrastructure has encouraged the use of innovative mechanisms like Public- Private Partnerships (PPPs) PPPs have the advantage of private sector operating efficiently (using technology and management) and thereby reducing costs. However, public involvement is needed to ensure this happens such that it benefits the society. Therefore, improvement in transportation infrastructure through PPPs is the way forward (Foster and Briceno- Garmendia, 2010).

PPPs in Infrastructure Development PPPs broadly refer to long term, contractual partnerships between the public and private sector agencies, specially targeted towards financing, designing, implementing, and operating infrastructure facilities and services that were traditionally provided by the Government and/or its agencies (Nallathiga 2006). These collaborative ventures are built around the expertise and capacity of the project partners and are based on a contractual agreement, which ensures appropriate and mutually agreed allocation of resources, risks, and returns. This approach of developing and operating public utilities and infrastructure by the private sector under terms and conditions agreeable to both the government and the private sector is the feature of PPPs.

Transportation Scenario in India Transport situation in most Indian cities is rapidly deteriorating because of the increasing travel demand and inadequate transportation system. Indian cities of all sizes are facing the crisis of urban transport. Large cities are facing an unprecedented growth of personal vehicles (two wheelers and cars) and in medium and small cities different forms of intermediate public transport provided by informal sector are struggling to meet the mobility demands. While researches show that the ideal modal share of public transport should be around 70%, however it is in tune to only 35%–40% in India's metro cities. Growing cities, growing population and growing traffic has invariably called for a shift from private modes of conveyance to public transport. A glance at the world's developing nations indicates that well planned Mass Rapid Transit Systems (MRTS) exist successfully.

MRTS Options in Indian Cities Mass Rapid Transit Systems Rail-based MRTS Sub-Urban Rail Transport Metro Rail Light Rail Transit System Bus Rapid Transit Systems

Metro Rail Transport Projects in India In 2009, it was decided to invest 2000 billion (US$33.2 billion) on metro rail projects in the following ten years. It is planned that all Indian cities having population more that 2 million will have metro rail system. Currently, rapid transit systems operate in 15 cities and more are under construction or in planning in several cities of India. India is looking to create a world class infrastructure with its existent Kolkata and Delhi Metros with the addition of Mumbai, Bengaluru, Hyderabad, Chennai, Jaipur, and Kochi metros in the next few years Metro rail proposals for Pune, Chandigarh, Ahmadabad, Kanpur, Ludhiana, Bhopal, Indore and Faridabad are being made.

Metro Rail Transport in Cities Cost Factors Larger the underground and elevated proposal, larger shall be the cost involved. It is advantageous to get funding through PPP model as in Hyderabad and Mumbai or by DMRC model by the state or the central government as in Bangalore, Chennai and Kolkata. Advantages and Disadvantages Metro rail, as a cheap mode of transport, helps in low energy consumption, is eco-friendly, averts the number of accidents, is efficient in terms of space occupancy and provides comfort with ultra modern coaches and modern systems like automatic ticketing, advanced signalling systems, automatic train protection system and integrated security systems.   The disadvantage is the congestion on roads at the time of construction which has to be taken care of while the cost factor as the disadvantage.

Literature Review ASSOCHAM (2011) study focuses on the rising urban population of Indian cities and the inefficient transit system which are inadequate to handle the growing cities and a rising population. It gives a complete report on the advantages of Metro Rail transit system to reduce traffic congestion and to connect the different areas of a city with the commercial and economic centres of a city. It gives the list of cities with potential for Metro Rail System and also gives the impact it will have on their economic growth. Murty et al (2006) performed social cost-benefit analysis of Delhi Metro. They tried to measure the benefits and costs from Phase I and Phase II projects covering a total distance of 108 kms in Delhi. The internal rate of return on investments in the Metro is estimated as 17 percent while the economic rate of return is 24 percent. Accounting for benefits from the reduction of urban air pollution due to the Metro has increased the economic rate of return by 1.4 percent.

Literature Review Tiwari (2011) is another study that deals with Benefits of a low cost and low carbon mass rapid transit system in Indian urban cities. The study in detail gives the various phases of the Delhi Metro Rail project and the shows the planning, financial and execution phases of the Delhi Metro. The study also shows the revenue generated and the saving the Government of India makes by successful execution of the Delhi Metro Rail project.   The current study was carried out to understand the technical features and economic importance of Hyderabad metro rail transit project as a successful PPP project. This paper proposes to understand importance of the project from transport and traffic conditions in the city and the socio-economic analysis of Hyderabad metro project towards meeting objectives.

Hyderabad Metropolitan Area The Hyderabad Metropolitan Area (HMA) is spread over 1905 Sq Km. This area is greater than that of other metropolitan cities like Delhi, Calcutta, Bangalore and Chennai. Hyderabad Metropolitan Development Authority (HMDA) is the nodal agency for promoting planned development of the city and the nodal agency for studying and implementing transport related projects within the urban agglomeration. The population of Hyderabad city grew from 0.448 million in the year 1901 to 6.383 millions in the year 2001. The metropolitan area comprise of the area under MCH (covering core city), 10 municipalities and remaining parts of HUDA area. The HMA recorded an increase in its population from 2.99 to 4.67 millions and then to 6.383 millions in 2001.

Population Growth in Hyderabad Source: City Development Plan of Hyderabad (2011)

Population Growth in HMA Constituent part of HMA Growth rate (1981-91) Growth rate (1991-01) MCGM 42 19 Ten Municipalities 158 72 Cantonment Board 26 13 Outgrowths 44 43 5 Census Towns 68 27 Panchayat areas covering Medchal, Gandipet and Ghatkesar 33 109 Total 56 37 Source: City Development Plan of Hyderabad (2011)

Motor Vehicle Growth Source: City Development Plan of Hyderabad (2011)

Accidents and Pollution Accident Type 1992 1993 1994 1995 1996 1997 1999 2000 2001* Fatal 312 310 337 347 342 357 380 425 214 Share (%) 18.9% 17.5% 15.2% 14.1% 12.9% 14.7% 14.9% 1.6% Injurious 1339 1463 1593 1932 2080 2404 2210 2422 1620 80.3% 81.1% 82.5% 84.8% 85.9% 85.3% 85.1% 88.4% Total 1651 1773 1930 2279 2761 2590 2847 1834 S.No. Year Total Load (Tonnes/Day) 1 1997-1998 934 2 1998-1999 978 3 1999-2000 1040 4 2000-2001 1123 5 2001-2002 1272

Economic Analysis of Hyderabad Metro Rail Project Cost-Benefit Analysis (CBA) is a tool for comparing alternate projects by reference to net social benefits that they produce for the community as a whole. The term ‘net social benefit’ refers to the difference between social benefits and social costs. Benefits and costs are ‘social’ i.e., they are measured to whom they accrue; they are not limited to specific market transactions. Thus, they are identified on a more comprehensive basis than private sector evaluations. Here cost-benefit analysis proceeds by estimating hypothetical values that reflect real economic values. Therefore, there values are measured as direct and indirect values. Here, we use the CBA framework established by Abelson (1996) for Metro rail projects.

Social Cost Benefit Analysis of Metro Rail HMRP CBA Framework Social Cost Benefit Analysis of Metro Rail Benefits of Metro Rail Direct Benefits - Time savings - Cost savings Indirect Benefits - Traffic improvement - Accident avoidance - Flood Mitigation - Air quality benefits Costs of Metro Rail Direct costs - Construction - Operation & Maintenance Indirect Costs - Social Costs - Traffic delays

Social Costs of HMRP Metro Costs Amount (Crores) Percentage Construction 5949.94 34.74 Rolling Stock 1810.85 10.6 Operating cost 4322.40 25.23 Land in RoW 1043.33 6.1 Other land 2009.58 11.73 Disturbance 498.44 2.91 Severance 1019.35 5.95 Traffic Delay 469.41 2.74 Total 17128.54 100

Social Benefits of HMRP Metro Benefits Amount(Crores) Percentage Rail user time 2932.46 15.97 Rail user comfort 910.7 4.99 Other time savings 3132.81 17.22 Bus cost savings 9817.35 53.9 Accident savings 764.98 3.99 Air quality 364.28 2 Flyover benefits 72.856 0.43 Flood mitigation 236.78 1.5 Total 18232.22 100

Conclusion Mass Rapid Transportation Systems like Metro Rail are the need of hour in most Indian cities Metro Rail projects under PPP model offer advantage of both public and private sectors Hyderabad metropolitan city has been growing in terms of population and motor vehicles and existing transportation systems are not able to cater to it The trend of growing high levels of pollution and accidents in Hyderabad also underline need for MRTS like Metro rail Hyderabad Metro Rail Project is an innovative project being developed under PPP for improving traffic and transportation The CBA of the Hyderabad metro rail project indicate that the economic benefits of project outweigh its costs. The cost-benefit ratio of 1.065 implies that the benefits are marginally higher than its costs.