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Case Study 1: The Delhi Airport Metro Express Project

November 2013

Case Study 1 - The Delhi Airport Metro

Express Project

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Case Study 1: The Delhi Airport Metro Express Project

November 2013

Part 1: Introduction

This case study has been prepared as a basis for discussion of a range of issues associated with the
development, structuring and management of Public Private Partnership (PPP) projects.
Part 2 of this case study describes the development and outcomes of the Delhi Airport Metro
Express project. This description has been prepared based on the sources set out in Appendix A 1.
The case study is not intended to be a complete examination of all aspects of the project rather, it
is intended to provide a narrative as a basis for discussion of a broad range of issues associated with
Part 3 sets out a range of questions for discussion in relation to the case study.

The content of this case study has not been confirmed with primary sources. The case study should not be
taken as either endorsement or criticism of any aspects of the Delhi Airport Metro Express project.
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Case Study 1: The Delhi Airport Metro Express Project

November 2013

Part 2: The Delhi Airport Metro Express Project


The Delhi Metro Rail Corporation (DMRC) was established in the mid-1990s as a company owned 50
percent by the national government and 50 percent by the local Delhi government. It was set up to
oversee the construction and operation of a metro system for the city of Delhi. Construction of the
metro system began in 1998. The first line opened in 2002.
Delhis metro was widely regarded as a success. Patronage was somewhat lower than projected, but
was sufficient to make Delhi one of the few metro systems in the world that did not need operating
Airline travel in India grew rapidly from the year 2000. As a result, roads leading to airports in most
large cities in India became severely congested. Delhi experienced particularly rapid growth in air
traffic. The only public transport services to Delhis airport were a few city bus lines that stopped at
the airport on route to and from other destinations.
Delhi was awarded the 2010 Commonwealth Games, a major event that would see a large influx of
competitors, spectators and media to the city, most of whom would arrive through the airport.
Recognizing the increasing traffic to the airport, DMRC proposed to build a dedicated and high speed
metro line to the airport. The line would reduce the travel time between New Delhi Railway Station
and the airport to 18 minutes. This journey could otherwise take two hours by road due to traffic
Figure 1: Delhi Airport Metro Express Route

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Case Study 1: The Delhi Airport Metro Express Project

November 2013

Key Project Parameters

Estimated Project Cost: US$1.26 billion.

Hours of operation:

5:30 am to 11:30 pm.

Frequency of Service:

Every 20 minutes, with the potential to increase services to every 10



INR 100 (US$2.00) per trip.

Required completion:

October 2010 (in time for the Delhi Commonwealth Games).

Project Packaging

DMRC built and operated the first two phases of the metro system itself. In contrast, it decided to
offer the airport line as a public-private partnership (PPP) in which a private concessionaire would be
responsible for building the line and operating it for a period of 35 years. As the cost of building the
airport line was high, the concessionaire would not be able to recover the full capital and operating
costs of the project from fares alone. DMRC therefore proposed to undertake all the civil works
itself, including the viaduct, the tunnels and the stations. The private concessionaire would be
responsible for financing only the operating systemsprimarily the track, signals, power distribution
system and rolling stockand for paying operating expenses.

Proposed PPP Payment Structure

DMRC suspected that the proposed private concession would not be financially viable on a stand
alone basis, as the capital cost of the operating systems was estimated to be INR 15,380 million
(approximately US$ 300 million). DMRC therefore invited potential concessionaires to bid based on
the amount of additional capital subsidy they would require from government in order to make the
concession viable (that is, government agreed to provide viability gap funding). The concession
would be awarded to the bidder who requested the least amount of viability gap funding from the

Key Risks faced by the Concessionaire

The concessionaire would assume a variety of risks, including:

Construction and supply risks for the operating systems, including the risk of cost and time
Performance risks for the operating systems, including the risk that the cost of meeting the
performance requirements is higher than expected
Patronage risk.

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Case Study 1: The Delhi Airport Metro Express Project

November 2013

Patronage Forecasts

DMRC forecast that around 46,000 people would use the airport express each day soon after the
project was commissioned in 2010, and that ridership would grow to 86,000 per day in the next 10
years. DMRCs forecast was based on hourly counts of passengers at the airport terminals and
surveys of departing and arriving air passengers who were asked where in Delhi their trip began or
would end.
The passenger counts revealed that the airport was busy around the clock. DMRCs forecast for the
airport express also seemed consistent with the experiences of Tokyo and the major cities of Europe,
which showed that public transportation could capture 28 to 62 percent of the airline passengers,
with half or a bit more typically arriving by bus and the rest by rail.

Tender Process

Procurement of Concessionaire was based on a two stage competitive bid. Criteria for eligibility
included, in addition to a financial profile of bidding consortia, technical criteria as follows:

The bidders were required to have prior experience of developing or operating and
maintaining rail based urban transport system or as a major equipment supplier for a rail
based urban transport system
The bidders were required to have prior experience installing systems including testing and
commissioning for rail systems, signalling equipment or rolling stock in the last ten years.

Delhi Airport Metro Express Private Limited (DAMEPL) an SPV formed between Reliance
Infrastructure Ltd. of India and Construcciones y Auxiliar de Ferrocarriles, S.A. (CAF) of Spain was
awarded the contract in January 2008, 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 the Spanish firm. 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.

The Commercial Outcome

As a concessionaire, DAMEPL was expected to recover its investment through fare box collection,
advertisements, leases of commercial space built along the rail infrastructure, and from vending
machines and retail outlets.
DAMEPL agreed to pay DMRC concession fees of $10.53m at an exchange rate of Rs48.41 per dollar
every year, and also share 1 to 5% of the gross revenues with DMRC for 15 years.

Track technology

The project was the first in India to use ballast-less high speed track technology. This would allow
trains to travel at a speed of 135 km per hour.

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Case Study 1: The Delhi Airport Metro Express Project

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Ballast-less tracks cost 40-50 per cent more than standard railways tracks, but can be laid more
quickly. Ballast-less tracks also need less maintenance than standard tracks.


The project was to be completed in 30 months with commissioning scheduled for 31 July 2010,
before the Commonwealth Games. Reliance Infrastructure appointed a world renowned consultant
from Hong Kong, MTR Group, as the engineering and project management consultants for the
Construction of the project took longer than expected. DMRC gave a one month extension to a 31
August 2010 deadline for the commencement of operations, as there was delay on the part of DMRC
in handing over the stations. The line was denied a statutory safety clearance after a two-day
inspection in the last week of September 2010. The inspector found that false ceilings, emergency
staircases and exit points, ticket counters, electrification work, software and signalling were
Having missed the Commonwealth Games deadline, DMRC required the payment of compensation
of Rs 37.5 lakh per day from 31 September 2010, which was doubled to Rs 75 lakh per day from 15
October 2010.

Commencement of Operations

Operations commenced on 23 February 2011, with four of the six stations operational. The line was
to be serviced by a fleet of six trains supplied by CAF. However, as of April 2011, only four trains
were in operation.

Actual Patronage

Passenger volumes on the line fell far short of the estimated target. In the initial 18 months,
DAMEPL carried about 6.8 million passengers, an average of 11,111.1 passengers in a day.
Only 30 per cent of the lines passengers accessed the airport. There were anecdotal reports that
people found the line inaccessible and unsafe at nights. Connectivity from the stations was also
reported to be poor, with good access to only one of the three airport terminals.
Patronage was also affected by the decision to close the line at 11:30 p.m. Delhi airport has many
flights (particularly international services) taking off and landing late at night and in the early hours
of the morning.

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Case Study 1: The Delhi Airport Metro Express Project

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Figure 2: Delhi Airport Metro Express carriage

Defects are found

On 8 July 2012, services were suspended as a result of faults being identified in the civil structure.
Bearings between the pillars and girders in the elevated section of the structure were found to be
defective. An initial inspection revealed that, out of 2,100 bearings, nearly 230 needed correction.
The Government initially claimed that services would resume in two months, after the necessary
Before the suspension of services, patronage had risen to around 14,000 to 17,000 passengers per
day. At the time, Reliance Infrastructure admitted that the line was not making profits, but they
claimed the suspension of services was purely linked to safety and they would continue to run the
line once the problems were resolved.
Less than two weeks later, it was reported that the defects were more serious than previously
thought. According to a joint inspection team consisting of representatives of both parties, not only
did 25% of the bearings need to be repaired, but some girders were been found to have cracked.
Thousands of track clips, on which the rails rest, were also found to be broken. Unlike the girders
and bearings (which formed part of DMRCs civil works), the track clips had been installed by
DAMEPL as part of their role in constructing the operating systems.
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Case Study 1: The Delhi Airport Metro Express Project

November 2013

Operations Re-commence

The line re-opened on 23 January 2013. Trains were initially restricted to travelling at 50 kilometres
per hour. The speed was gradually raised to 70 kilometres per hour. After the resumption, the
patronage was around 10,000 passengers per day.

Change in Ownership of the SPV

In August 2012, Reliance Infrastructure transferred 65 per cent of its stake in DAMEPL to associate
companies of the Anil Dhirubhia Ambani Group.
It was reported that DMRC officials feared Reliance Infrastructure was trying to exit the partnership
or reduce its liability. DMRC officials issued notices to DAMEPL demanding an explanation why
Reliance Infrastructure did not consult them before diluting its stake. DMRC considered this a
violation of the concession agreement. The concession agreement stated that the concessionaire
can restructure equity only two years after the commencement of the agreement. Reliance
Infrastructure maintained that it did not violate the agreement as the PPP was signed in March 2008.

The Blame Game

By late September 2012, DMRC and DAMEPL were reported to be locked in an acrimonious blame
Under the PPP contract, if DAMEPL found any problem in the project within the first 12 months, it
was required to inform DMRC. According to DMRC, DAMEPL did not approach DMRC in the first year
of operation, nor did it carry out a rigorous inspection.
DAMEPL, in turn, claimed that it had repeatedly expressed concern over passengers safety but
DMRC insisted that the trains could run at slow speed.
DMRC also claimed that DAMEPL started talking about the defects in the civil structure when the
DMRC refused to defer payment of the concession fees, despite DAMEPLs mounting revenue losses.
In April 2012, DAMEPL had conveyed to DMRC that its cash flow was badly affected and needed
support from the public sector partner.
DAMEPL also demanded compensation from DMRC for the lost earnings for being unable to operate
the airport express line during the Commonwealth Games, on the basis that this was due to delays
by DMRC in completion and handing over of the civil works.

Termination and Arbitration

In October 2012, DAMEPL served a termination notice, which was rejected by DMRC. The matter
went to arbitration. A senior DAMEPL official said, "It was breach by DMRC as the defects debilitated
the line for us completely."

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Case Study 1: The Delhi Airport Metro Express Project

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Reliance Infrastructure also claimed that DMRC was liable to pay DAMEPL a termination payment
equal to 130 percent of the project equity and 100 percent of the project debt, as the termination
has arisen owing to a default by DMRC.
DMRC has proposed that the debt be repaid by both the Government of India and Delhi
government. The urban development ministry rejected this, arguing that the contract was between
DMRC and DAMPEL. A ministry official was reported to say that responsibility lay with DMRC, as its
projections of patronage had been inaccurate.


As problems mounted and became irreconcilable, DAMEPLs principal sponsor, Reliance

Infrastructure, bailed out. DMRC took over the operations of the line with effect from 1 July 2013.

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Case Study 1: The Delhi Airport Metro Express Project

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Part 3: Questions for Discussion

Defining the Problem

1. What problems was government seeking to solve through the Delhi Airport Metro Express

Proving the Solution

1. Was the Delhi Airport Metro Express project financially viable?

2. Was the project economically viable?
3. Was the business case for the project sound?

Project Packaging

1. What were the key reasons for the packaging of this project into separate PPP and non-PPP
2. What risk management consequences arose as a result of the packaging decision?

PPP Suitability

1. What are the possible reasons for choosing to deliver the operation and maintenance
component of this project as a PPP?
2. Could other forms of PPP be used for the operation and maintenance of the rail line?

The Tender Process

1. On what basis did DMRC select DAMEPL as the winning bidder?

2. How might the selection process have affected the bidders tender strategies?

Construction Risk

1. How was construction risk allocated in this project?

2. What construction risks materialised?
3. Did the party or parties who were allocated construction risk ultimately bear this risk?

Operating Risk

1. How was operating risk allocated in this project?

2. What operating risks materialised?
3. Did the party or parties who were allocated operating risk ultimately bear this risk?

Demand (Patronage) Risk

1. How did DMRC initially propose to allocate demand risk?

2. How was demand risk allocated in the PPP contract agreed between DMRC and DAMEPL?
3. What other techniques for allocating demand risk could have been used in this project?
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Case Study 1: The Delhi Airport Metro Express Project

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1. What monitoring processes were in place for this project? Were these processes effective?

Change in Ownership

1. What risks might lead DMRC to restrict changes in the ownership of the SPV in this project?
Are there other ways in which these risks could be mitigated?
2. What reasons might Reliance Infrastructure have for wanting to dispose of its equity in the

Dispute Resolution

1. What consequences have arisen as a result of the choice of arbitration as a dispute

resolution mechanism?


1. Why did DAMEPL claim to be entitled to terminate the concession agreement?

2. Why did DAMEPL claim that DMRC was liable to pay a termination payment? What purpose
does this payment serve?

Financiers Cure Rights

1. Why did DAMEPLs financiers not step-in to resolve the issues with the project?


1. What information and resources would DMRC require in order to effectively take over
operation of the rail line?

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Appendix A: Sources
Text Sources
-, Airport Express, a 5-year saga of non-stop trouble, The Times of India (29 June 2013). Available
-, Delhi Airport Express Rail Link, India, (n.d.). Available at:
-, Delhi Airport Metro Express to resume services in two months: Govt, The Hindu Business Line (7
July 2012). Available at:
-, Delhi Airport Metro to close from Sunday, News 24 Online (7 July 2012). Available at:
-, New technology for faster travel at the Metro Airport Express Link, The Hindu (25 August 2009).
Available at:
-, Not lost hope on Delhi's Airport Metro, PPP projects: Official, Daily News (16 December 2012).
Available at:
-, Rel Infra raises funds for Delhi Airport Express railway line, The Financial Express (25 March
2009). Available at:
-, Reliance Airport Metro Saga Not an end of line for PPP projects, Govt., Rail News (9 July 2013).
Available at:
-, Reliance Infra refuses to run Airport Metro line after June 30, dna (28 June 2012). Available at:
Amit Bhatt, Life Sucked Out of the Delhi Metro Express, The City Fix (24 August 2012). Available at:
Anupam Chakravartty, High-speed derailment, Down to Earth (30 September 2012). Available at:

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Case Study 1: The Delhi Airport Metro Express Project

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Dipak Kumar Dash, IGI Metro to go on, but who pays Rs 2,000 crore debt?, The Times of India (29
June 2013). Available at:
Moushumi Das Gupta and Subhendu Ray, Who will bear debt burden?, Hindustan Times (28 June
2013). Available at:
O.P. Agarwal and Jose A. Gomez-Ibanez, Delhi Airport Metro Express (case study), The World Bank
(n.d.). Available at:
Rumu Banerjee, Airport Metro Express line flaws worse than thought, The Economic Times (17 July
2012). Available at:
Sweta Dutta, Airport line clears fire hurdle, now for safety nod, The Indian Express (30 November
2010). Available at:

Picture Sources

Figure 1: Author Wikipedia user Abhishek971, licenced under Creative Commons Attribution 3.0
Figure 2: Author Wikipedia user Craigdietrich, licenced under Creative Commons Attribution-Share
Alike 3.0 Unported license.

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