Table of Contents Background Company Information Main Case Factors affecting sustainability Project Timeline Course Correction References Background As the population in cities increases, so does the number of vehicular trips made by people. As the road width is fixed at the time of city planning, the volume of traffic that can pass through is limited. The result is increasing traffic congestion in the city. This leads to increased commute time coupled with greater difficulty in commuting. Air passengers miss their flights stuck in traffic, ambulances have difficulty in taking emergency cases to the hospitals, and professionals reach late to office. Road rage, traffic accidents are some of the incidents experienced as commuters strive to reach their destinations at the earliest. A picture of chaos and lawlessness emerges; people become dehumanized to their environment. A pragmatic solution to problems of traffic is to discourage the use of private vehicles and encourage the use of public transportation. But it is easier said than done. Public transport has to be not only cheaper than private transport but also must be quicker/save time. Although modes like buses, auto rickshaws, bicycles may make economic sense, but they do not have any advantage in travel time over private vehicles. It is in this context that Mass Rapid Transit Systems (MRTS) come in. A rail base MRTS can be introduced in any corridor where the level of traffic in any direction exceeds 20,000 persons per hour. However, MRTS are capital intensive and have long gestation periods. It is this reason why they have not been taken up on a large scale in many developing countries. The city of Delhi has experienced phenomenal growth of people (18 m) and vehicular population. Vehicular population increased from 5.62 lakh in 1981 to over 65 lakh today. About 1000 vehicles are added to Delhi roads every day. The heterogeneous nature of traffic has decreased vehicular speed. To cater to the needs of the public and to gear up the city for hosting the Commonwealth games in 2010, rail-based MRTS, named Delhi Metro was introduced in the city. With wide roads and ownership of most land with the govt., the city was suitable for introduction of rail based MRTS. Delhi Metro has had phenomenal success since its introduction in 2003. As airline travel grew rapidly in the early 2000s, the roads leading to the airports in most cities became congested. In Delhi, there were only a few buses that serviced the airport on route to and from other destinations. Further, Delhi was hosting the commonwealth games in 2010 that would increase the influx of tourists, spectators and media to the city through the airport. Therefore, to service such travelers, DMRC proposed to build a dedicated and high speed metro line, connecting the airport to the New Delhi railway station. The line would reduce travel time between the two places to 18 minutes from the 2 hours taken by road. This was the beginning of the airport express line. Company Information Delhi Airport Metro Express Private Limited was incorporated in 2008. It is a Special Purpose Vehicle (SPV) incorporated under the Indian Companies Act with joint venture between Reliance Infrastructure Limited and Construcciones Y Auxiliar De Ferrocarriles (CAF). CAF is also the technical partner and supplies the rolling stocks for the project. DAMEPL was awarded the contract on the basis of their highest quote for annual concession fees to be paid to DMRC. Reliance Infrastructure Ltd. held a 95 per cent stake in DAMEPL, with the remaining 5 percent held by CAF. Debt was arranged by the lead banker Axis Bank along with India Infrastructure Finance and eight other banks. The debt to equity ratio was 70:30.
Corporate Identification Number
U74210DL2008PTC176177
Name
DELHI AIRPORT METRO EXPRESS PRIVATE LIMITED
RoC
RoC-Delhi
Registration Number
176177
Company Category
Company limited by shares
Company Sub Category
Indian Non-Government Company
Class of Company
Private Company
Authorised Capital (in Rs.)
8,700,000,300
Paid up capital (in Rs.)
100,000
Number of Members(Applicable only in case of company without Share Capital)
0
Date of Incorporation
01 April 2008
Address 1
DELHI AIRPORT METRO EXPRESS DEPOT, NEAR SECTOR 8
Address 2
DMRC METRO STATION, SECTOR 21, DWARKA
City
NEW DELHI
State
Delhi
Country
INDIA
Pin
110075
Whether listed or not
Unlisted
Date of Last AGM
20 September 2013
Date of Balance sheet
31 March 2013
Company Status (for eFiling)
Active
Main Case The Delhi Airport Express line was the first public-private partnership project in metro rail. The agreement was signed in 2008 between Delhi Metro Rail Corporation (DMRC) and Delhi Airport Metro Express Private Limited (DAMEPL). The 22.7 km line proposed to connect the New Delhi Railway station to the Delhi International Airport. The idea was to reduce the congestion on roads that led to the airport, and enable the passengers to continue their onward journey to/from the airport to the adjoining areas through the rail network. The DAEL was designed to be a dedicated high speed metro line (135 km/hr as opposed to 80 km/hr), with only 6 stations on a 22.7 km route so as to provide faster service. The line started from New Delhi railway station and ended about 4 km beyond the airport till Dwarka, a fast growing residential area. The line was to be commissioned by October 2010, in time for the Commonwealth games being held in New Delhi. Under the PPP agreement, Build Operate Transfer (BOT) model was followed whereby the concessionaire was to operate the line for a period of 30 years, build the extension line, and then hand over the project to the public sector. DMRC was well aware that the project costs would be prohibitively high. It had estimated that the concessionaire would not be able to recover all capital and operating costs from fares alone. To reduce the financial burden on the concessionaire, DMRC undertook the responsibility for building and financing all civil construction – including the viaduct, tunnels and the stations – while the private concessionaire was asked to finance operating systems – signaling system, track, rolling-stock, power distribution system etc. Land for real-estate development was also offered to concessionaires. Even this was thought to be insufficient to make the project financially viable as capital costs for operations alone were estimated to be USD 300 m. Therefore, there was a provision of additional capital subsidy from the govt. to make the project viable. DMRC invited bids from potential concessionaires on the basis of least requested amount of viability gap funding from the govt. The private concessionaire was expected to undertake a variety of risks including ridership ie the number of passengers using the system. Ridership was a key risk because it was the main source of revenue for the concessionaire. DMRC made a daily ridership estimate of 46,000 passengers in 2010, growing to 86,000 people per day in the next 10 years.(Exhibit 1). The forecasts were based on hourly counts of passengers at the airport terminals and surveys of departing and arriving air passengers about their starting/terminal destination. The contract was won by Reliance Energy- CAF consortium. CAF provided the rolling stock and held 5% equity in the project, with Reliance holding the rest. However, problems started emerging even before the operations could be started. Originally set to open by August 31, 2010, the line finally opened on Feb 23, 2011, after missing 4 previously set deadlines. The DMRC fined Reliance Infra 37.5 lakh every day from 30 September and 75 lakh every day from 31 October for repeatedly missing the deadlines. Further, the daily ridership projections came to naught. The average ridership remained at 11,000 persons per day, with a peak of 22,000. Such poor load factor doomed the project since the beginning. To compound the problems further, structural defects were found in the civil construction leading to , first reduction in speed to 105 km/hr, and then to complete halt of operations due to safety concerns from July 2012. The halting of operations led to a tense stand-off between the private concessionaire and DMRC. It ultimately culminated in the exit of the private party, with DMRC taking over the operations of the Airport Express Line. Operations resumed from Jan 2013. It was estimated that DAMEPL was running a loss of Rs 40 m every month. We examine the mistakes made in project planning, financing, and the role of external factors in affecting the feasibility of the project.
Exhibit 1
Year
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Projected Ridership
46000
48970
52132
55498
59082
62897
66958
71281
75884
80784
86000
Actual Ridership
-
11000
11000
10069
12856
-
-
-
-
-
-
Factors affecting sustainability
Cost structure: The high cost structure undermined the feasibility of the project from the very beginning.
License fee: Rs 10,000 per annum
Concession fee: Rs 510 million. It shall be increased every year by 5%
Additional concession fee: Rs 30 million for retail space at concourse level of New Delhi and Shivaji Stadium station
Cost of operation and maintenance of clearing house: To be shared between DMRC and DAMEPL.
Revenue sharing: From COD (Commercial Operations Date), the following percentage of Gross Revenues would be apportioned to DMRC;
One percent of Gross Revenue from first to fifth year
Two percent of Gross Revenue from sixth to tenth year
Three percent of Gross Revenue from eleventh to fifteenth year
Five percent of Gross Revenue from sixteenth year onwards till Termination date
Capital Structure
Rs million
Debt
20000
Subordinate debt
8000
Equity
0.1
Debt to Equity ratio to be maintained
30:70
Ridership: The overly optimistic forecast of daily ridership was the primary factor in the failure of the project. The average ridership remained at 11,000 persons per day, with a peak of 22,000 persons. It was assumed that the project would be able to capture up to 62% of the airline passengers. However, it was only able to capture 30% of the airport bound traffic. RITES, a Railway’s consultancy arm, had based its passenger numbers on the development of Aerocity ( a bunch of five-star hotels) around the Delhi airport, which was being developed by GMR on a public-private-partnership (PPP) basis. The Aero city never materialized.
Low ridership was also because of poor frequency of trains. Instead of six trains, only four were made operational. The decision to close the line at 11:30 pm cut off many passengers who would be arriving/leaving late at night and in the early hour of the morning.
Over-estimated returns: Instead of claiming viability gap funding, Reliance offered money to DMRC in the form of concession fee to operate the project. This was in contrast to the second highest bidder – L&T-GE consortium – that asked for a subsidy of Rs 3460 m or interest free debt of Rs 14400 m for a longer term.
The success of the project depended upon the ability of DAMEPL to execute real estate developments as planned. Revenues from real estate were expected to account for 70% of the total revenues in the initial years, and more than 50% of the total revenues during the entire concession period. However, revenues from real estate development were never realized.
Technical problems: The Airport line has recorded 0.375 failures per route kilometer, which is high as compared to the Blue line of DMRC which has 0.14 failures per route kilometer.
Time & Cost-overruns: Non-availability of labor and heavy rains interrupted construction activity in Delhi. Further delays occurred in obtaining various clearances like safety and security. DAMEPL was given a one month extension on account of construction delays. But penalty was imposed subsequently for missing each deadline. DMRC imposed penalty on the concessionaire at the rate of Rs 3.75 m per day from September 2010 and Rs 7.5 m per day from Oct 31 2010. It led to a total estimated penalty of Rs 900 m. Exhibit 3 gives the implementation schedule.
Exhibit 3: Project Implementation schedule
Signing of Agreement
Withing 60 days of LOA
Financial Close
Within 120 days of LOA
Key dates and Milestone Dates
Start of Design & Interface with DMRC Contractors
30 days from LOA
Completion of Design interface
6 months from LOA
Completion of Design for execution
9 months
Delivery of 1st train set
31-Oct-09
Testing of Rolling stock
31-Jan-10
Integrated Testing and Commissioning
1-Apr-10
Commissioning of Project & COD
31-Jul-10
Actual Commissioning
23-Feb-11
Project Timeline Aug 2006: (DMRC) finalizes a detailed project report for the airport line Sep 2007: DMRC awards the first tenders for building the railway line 23 Jan 2008: DMRC awards a 30-year build-operate-transfer contract to the Reliance Energy led consortium with the Spanish railway equipment CAF Mar 2009: Delhi Airport Metro Express Pvt. Ltd, a special-purpose vehicle floated by Reliance Infrastructure Ltd (R-Infra) to build the airport line, says it has managed to raise the debt required for the project. Nov 2009: DMRC completes 95% of the tunneling and civil construction on the line and hands over the stations to concessionaire R-Infra for laying tracks. 31 Aug 2010: The airport line misses the first deadline to begin operations, but R-Infra is given a one-month extension on account of delays in handing over the stations by DMRC 30 Sep 2010: The line fails to get the mandatory safety clearance from the Commissioner of Metro Rail Safety (India). DMRC slaps a fine of Rs.37.5 lakh per day from 30 September on R-Infra for missing the deadline 10 Jan 2011: CMRS grants safety clearance to the airport line, except for the Dhaula Kuan and Delhi Aerocity stations 23 Feb 2011: The airport line starts its first train services from New Delhi railway station to terminal T3 of the Indira Gandhi International Airport 15 Aug 2011: CMRS grants safety clearance to Dhaula Kuan and Delhi Aerocity stations Dec 2011: DMRC managing director E. Sreedharan meets R-Infra executives to discuss the areas that need improvement, particularly the train coaches May 2012: DMRC chief Mangu Singh expresses dissatisfaction with the operation of the line Jun 2012: DMRC asks consultants Shirish Patel and Associates to conduct an inspection of the line due to safety concerns, after the operator reduces the speed of the trains from 105 kmph 7 Jul 2012: The operations suspended indefinitely for safety repairs. The ministry of urban development constitutes a committee to investigate the defects in the civil construction of the railway line. January 2013: Operation resumed. Course Correction After taking over the operations of Airport Express line, DMRC has taken to following steps to improve the popularity and financial sustainability of the project:
The frequency of trains was reduced from 15 to 10 and-a-half minutes
Maximum speed was increased from 70 km/hr to 80 km/hr, reducing travel time by 19 minutes
Parking facilities have been created at Aerocity Metro station; feeder bus services have also been started.
The total number of train trips was increased from 148 to 166.
In July 2014, it reduced fares by 40%
Proposal to extend the line to IIFCO Chowk in Gurgaon and a Delhi-Alwar link to make the airport line operationally profitable.
As a result of the steps being taken by DMRC, the total ridership per day has increased 28 % from 10,069 in July 2013 to 12,856 in June 2014. References
Factors affecting sustainability 
