What Can Be Done to Redeem the Project?

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Source:  http://www.epw.in

The latest public-private partnership project to fall through, the Delhi Airport Metro Express, brings to light fl aws in the concession agreement between the public and private parties.

1Improper risk sharing and aggressive bidding, coupled with the application of the jugaad principle, have led to contractual disputes resulting in the cancellation of the partnership.

Kumar V Pratap (k_pratap@hotmail.com) is a civil servant with the Planning Commission, New Delhi.

Views expressed are personal.

The Delhi Airport Metro Express (DAME) is a metro rail connectivity project connecting the New Delhi central business district to the new and swanky T3 terminal of Delhi International Airport. It is 22.7 km long, has been built with a capital investment of about Rs 5,700 crore,1 and is the first public-private partnership (PPP) metro rail project to be operational in the country. It is also a showcase project designed to propel Delhi into the big league of cities like London, Hong Kong, Seoul, Tokyo, and Kuala Lumpur, with metro rail connectivity to the airport.

Though the project was completed within the budgeted costs, its time performance was poor. After missing several deadlines,2 the project finally became operational in February 2011. Delhi Airport Metro Express Private Limited (DAMEPL), a special purpose vehicle consortium formed by Reliance Infrastructure Limited and Construcciones y Auxiliar de Ferrocarriles, SA (CAF) of Spain with 95% and 5% stake, respectively, implemented the project. However, after some more hiccups,3 DAMEPL terminated the project in June 2013, which is now being run by the public sector Delhi Metro Rail Corporation (DMRC). DAMEPL has filed an arbitration claim against DMRC amounting to several thousands of crores of rupees.4 Subsequently, DAMEPL’s bank guarantee of Rs 55 crore has been encashed by DMRC because of the failure of the private partner to perform as per the concession agreement (The Economic Times2013). More info

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