Project Overview

Chennai, the capital city of the Indian state of Tamil Nadu is located on the Coromandel Coast off the
Bay of Bengal. It is one of the biggest industrial and commercial centre of South India, and a major
cultural, economic and educational centre. It is also known for its automobile industry. The City is
divided into four broad regions: North, Central, South and West. The City is home to a growing
number of information technology firms, financial companies and call centres.
Large-scale urbanization in IT/ITES and industrialization with rapid growth of vehicular population
has laid severe stress on urban transport system in City. The City has about 48 lakh vehicles as per
Tamil Nadu government vehicle statistics. The usage of private modes is increasing unabated mainly
due to inadequate public transport facilities.
Various developmental activities in the Chennai Metropolitan Area (CMA – 1189 sq km) as presented
in Figure 1.1, have attracted people to migrate from Tier-II cities and even from other states. The
Census 2011 population of CMA is about 89 lakh. Chennai Master Plan 2026 has estimated a
population of 125.82 lakh for Chennai Metropolitan Area (CMA).
With a view of developing effective and efficient mass transit system in addition to the existing public
transportation and Phase-I Metro rail system, the Phase-II of the Chennai Metro will be developed.
City level transportation demand is catered predominantly by Metropolitan Transport Corporation
buses (MTC), Intermediate Public Transport System (IPT) in the form of shared services along major
arterials and Commuter Rail System including elevated MRTS. The Phase-I of Chennai Metro covers
54 km in two corridors
The Chennai Metro Rail Phase-II would cover 107.55 km covering 3 corridors - C3, C4 and C5

 Corridor 3: Madhavaram Milk Colony to SIPCOT (45.8 km)

 Corridor 4: Lighthouse to Poonamalle Bypass (26.1 km)
 Corridor 5: Madhavaram Milk Colony to Sholinganallur (47.0 km)
 Asset Characteristics
 Standard Gauge - 1435 MM
 Route Length – 118 kms
 Number of Stations – 128
 Traffic Forecast
o 2025 – 19.2 Lakhs
o 2035 – 32.6 Lakhs
o 2045 – 37.7 Lakhs
o 2055 – 43.5 Lakhs
 Station Planning & Intermodal Integration - Various designs namely Elevated,
Underground, Underground with Extended Concourse and Elevated along with split
concourse have been suggested for various station types and these will form basis for
planning of all the 128 stations
 Speed
o Design Speed – 80kmph
o Scheduled Speed – 32kmph
 Fare Collection – Automatic Fare Collection System with facilities available like recharging
of travel card using Cash/Debit Card/Credit Card/Net banking/Web Portals
 Total Coach Requirement

Year 2025 2035 2045 2055

Total Coach Requirement 414 537 633 762

 Total Estimated Cost

Corridor-3: Rs.29,192 Crore
Corridor-4: Rs. 14,761 Crore
Corridor-5: Rs. 16,382 Crore
Total: Rs. 60,335 Crore
 Completion Cost with Tax and Duties – Rs 69,180 Crores (with 5% Escalation)
 Net Cash Flow from Transit Oriented Development

Particulars Total Revenue (in Crores)

2025 2035 2045 2055
Net Cash Flow from TOD 411 1155 2789 5816

 Construction Period – 6 Years

 Commencement of Operation – 2025-26
 EIRR – 17.78%
 FIRR – 12.05%
 Macro-economic Factors
Rapid urbanisation and low share of public transport have exacted a heavy toll on major cities in India
—it holds the dubious distinction of being home to 22 of the top 30 most polluted cities in the world.
To ameliorate this situation, the government has rolled out metro rail network at a dizzying speed in
the country.

Rising urbanisation
India’s urban population, which was ~29% as per 2001 census, had crossed the 31% mark by the time
of 2011 census. In 2017, it had surged to 34%, according to the World Bank. According to a UN
survey, by 2030, ~41% of India’s population will reside in urban areas. While the number of cities
with population of over 10mn is expected to increase from two (Mumbai and Delhi) in 2011 to eight
by 2035, the number of cities with a population of over 1mn is expected to jump from 59 in 2015 to
78 by 2035. India, along with China, Indonesia, Nigeria, and the US, will lead the world's urban
population surge by 2050. By 2030, urban areas are likely to contribute ~70% to India’s GDP. Such a
sharp rise will exert more pressure on the already overburdened infrastructure.
High vehicle ownership and low share of public transport
Government data indicates that the total number of registered cars per 1,000 population has catapulted
from ~5 in 2001 to ~20 in 2015. This number (currently ~22) is expected to jump 8x to 175 by 2040.
Similarly, the number of registered two wheelers per 1,000 population has surged from ~37 in 2001 to
~127 in 2015 and is expected to continue growing at a similar pace. The main reason for such a
significant rise in private vehicles is the lack of quality public transport options in urban areas. The
share of public transport in overall urban transport in India is at an abysmally low of 30%.
Share of public transport in India is much below the desired levels
While this is higher than developed countries/regions such as US, Western Europe and UAE (where
personal vehicle ownership per capita is much higher), it is lower than peers like Singapore, South
Korea, China, Russia and Japan. The current share of public transport, i.e. 30%, is significantly lower
than the desirable share. This shows that there is an urgent need to scale up the public transport
infrastructure in major cities.

Increasing congestion in all major cities

Major Indian cities are now consistently ranked amongst the world’s most congested cities. This is not
just a matter of inconvenience; these high levels of congestion have huge costs attached in the form of
reduced productivity, fuel waste and accidents.

Transport is a major contributor to pollution

Major Indian cities are afflicted with high levels of air pollution causing major health problems
including asthma, tuberculosis, lung infections and skin infections. Various studies estimate that the
use of public transportation can result in 90–95% reduction in CO, VOCs and 50% reduction in CO2
and NOX emissions compared to private vehicles.
 Policy Framework
transportation is a state subject under the Indian constitution, urban transport has not been defined as a
separate subject. Instead, the allocation of subjects between central and state list is mode-wise.
However, as urban transport is closely linked to urban development, urban transportation is primarily
a state subject. On the other hand, “Metro railway” is a “railway” as per List I, Entry 22 of the
Constitution; accordingly, metro rail projects are to be implemented as central sector projects. Thus,
due to the unique nature of metro projects, participation of both central and state governments
becomes crucial to ensure successful implementation of metro projects. To clearly specify the
responsibilities of individual shareholders as well as to limit liabilities of shareholders, generally, a
shareholder agreement is signed.
Metro Rail Policy 2017

 The policy seeks to ensure that the least cost mass transit mode is selected for public transport
by mandating alternate analysis, requiring evaluation of other modes of mass transit like
BRTS (Bus Rapid Transit System), Light Rail Transit, Tramways, Metro Rail and Regional
Rail in terms of demand, capacity, cost and ease of implementation
 policy provides for rigorous assessment of new metro proposals and proposes an independent
third-party assessment by government identified agencies.
 Policy stipulates a shift from the existing Financial Internal Rate of Return (FIRR) of 8% to
Economic Internal Rate of Return (EIRR) of 14% for approving metro projects
 Private participation, either for complete provision of metro rail or for some unbundled
components (like automatic fare collection, operation & maintenance of services etc), must
form an essential requirement of all metro rail projects seeking central financial assistance.
 State governments should mandatorily explore the possibility of having a PPP arrangement.
 The policy requires state governments to mandatorily explore the possibility of having a PPP
arrangement. However, in our opinion, the high capital costs and the need to keep fares
affordable limit the viability of metro projects for private developers.
 Requirement of a metro system will depend on the spatial pattern of the city
 Options for Central Financial Assistance

 Public Private Partnership (PPP): Central financing for this model will be governed by the
Viability Gap Funding (VGF) scheme of the government.
 Grant by the Central Government: Central government will consider providing a grant of
10% of project cost, excluding private investment, cost of land, rehabilitation & resettlement
and tax, to the state government for the construction of a metro rail project. However, public-
private partnership in some form for implementation, operation & maintenance, fare
collection or any other
 Equity Sharing Model - In this model, projects will be taken up under equal ownership of
the Centre and the state government concerned through equal sharing of equity. Government
of India will provide financial support to metro rail projects in the form of equity and
subordinate debt (for part of taxes), subject to an overall ceiling of 20% of the cost of the
project

Other Policies
The Ministry of Housing and Urban Affairs has recently prepared a Draft National Urban Policy
Framework (NUPF) which outlines an integrated and coherent approach towards the future of urban
planning in India.

 The provision of public transport will be subsidised by the Centre.

 Last mile connectivity and creation of infrastructure for safe commute of pedestrians and
cyclists must be focussed upon.
 All future airports, buses, trains and metro stations should be designed in a way to ensure
seamless transit for commuters switching modes.

Industry Background
Metro projects in India have generally been undertaken in phases, keeping in mind the huge
investments involved and specific requirements of a network. Even within a particular phase, more
than one line has been constructed, depending upon the need for passenger connectivity. To this
extent, most cities have a dynamic metro network with some phases already operational and others,
either under construction or at planning stages.

Status City
Operation Ahmedabad, Bengaluru, Chennai, Delhi, Gurugram, Hyderabad,
Jaipur, Kochi, Kolkata, Lucknow, Mumbai, Nagpur, Noida
Under Construction Ahmedabad, Bengaluru, Bhopal, Chennai, Delhi, Hyderabad, Indore,
Jaipur, Kochi, Kolkata, Mumbai, Nagpur, Navi Mumbai, Pune
Planning Stage Prayagraj, Agra, Guwahati, Kanpur, Meerut, Patna, Surat
Concept Stage Gorakhpur, Nashik, Vijaywada, Vizag

While Delhi boasts of the largest operational metro rail network in the country, Mumbai has the
maximum length of metro network under construction
 Environmental Impact Assessment
The negative impacts due to location of Phase II corridors include:

 Project Affected People (PAPs),

 Change of Land use,
 Loss of trees/forest and
 Utility/Drainage Problems.
The impacts due to construction include:

 Soil erosion
 Pollution
 Health risk at construction site
 Traffic diversion
 Risk to existing buildings
 Excavated soil disposal problems
 Dust generation
 increased water demand
 impact due to supply of construction material.

Anticipated Impacts due to operation are:

 Noise pollution
 Water supply and sanitation at stations
 Traffic congestion issues and
 Impact due to depots.

Positive impacts that can be anticipated:

 Employment opportunities
 Benefits to economy
 Quick service and safety
 Reduced fuel consumption
 Reduction in air pollution.
Mitigation measures and management plan for Compensatory Afforestation, Construction
Material, Labour Camp, Energy Management, Hazardous Waste, Housekeeping, Air Pollution
Control, Noise and vibration Control, Traffic Diversion/Management, Soil Erosion Control, Muck
Disposal, Draining of Water from Tunnel, Water Supply, Sanitation and Solid Waste, Rain water
harvesting, Construction Waste, Depot have been suggested.
The total estimated environmental management cost for the project is about Rs. 48.7 Crores

Social Impact Assessment

The Project shall require acquisition of 120.9882 Ha in which 27.1931 Ha is private land and
remaining 93.7951 Ha is Government land. Total 1309 properties will be affected out of which 104
are residential, 937 are commercial. There are 2865 affected families consisting 1924 PAFs shall be
partially affected and remaining 941 families shall be fully affected. Compensation for land
acquisition, resettlement and rehabilitation has been considered as per Right to Fair Compensation
and Transparency in land acquisition, Rehabilitation and Resettlement Act, 2013(RTFCTLARR Act)

The proposed project will have several positive and negative impacts. In general, the project shall
bring following positive impacts:

 Generate Employment opportunities and economic growth

 Mobility and safe travel
 Traffic decongestion
 Save fossil fuel
 Reduce air pollution.

The anticipated negative impacts include:

 Loss of Land
 Loss of Residential Structures
 Loss of Commercial Structures
 Loss of Livelihood
 Loss of Common Property Resources

The tentative cost for implementation of Resettlement and Rehabilitation Plan is Rs.291.3 Crores

Project financials
Capital cost of the project
The construction cost of project at December’ 2018 prices is estimated at Rs. 43126 Crore. The cost
of land and R&R is estimated at Rs. 9884 Crore. The total cost of project including land and R&R, is
estimated at Rs. 53011 Crore. The Central and State Taxes & duties amounts to Rs. 7325 Crore. Thus,
the total cost of the project works out to be Rs. 60335 Crore at December’ 2018 price level. A
detailed break-up of cost at 2018 price levels is:
The Project is proposed to have a construction period of 6 years starting from the year 2019-20 but the
payments are expected to spill over to seventh year as well. Hence capital expenditure is assumed to
be in ratio of 5:15:20:20:20:15:5. The operation would start from the year 2025-26. Escalation is
considered at 5% p.a. from Dec’ 2018 onwards and no escalation has been considered in cost of land.
The completion cost (without IDC) is calculated as Rs. 69180 Crore.
Financing plan
A national metro rail policy was ratified by the union cabinet in 2017. It laid down the following
provisions for financing the project:

 Central government will consider providing a grant of 10% of project cost, excluding private
investment, cost of land, rehabilitation & resettlement and tax, to the state government for the
construction of a metro rail project. However, public-private partnership in some form for
implementation, operation & maintenance, fare collection or any other unbundled activities
of the proposed metro rail project, wherever feasible, will be required.
 Projects will be taken up under equal ownership of the Centre and the state government
concerned through equal sharing of equity. PPP in some form for implementation, operation
& maintenance, fare collection or any other unbundled activities of the proposed metro rail
project, wherever feasible, will be required. Government of India will provide financial
support to metro rail projects in the form of equity and subordinate debt (for part of taxes),
subject to an overall ceiling of 20% of the cost of the project excluding private investment,
cost of land, rehabilitation and resettlement.
 Seeking to ensure financial viability of metro projects, the new Metro Rail Policy requires
states to clearly indicate in the project report the measures to be taken for
commercial/property development at stations and on other urban land and for other means of
maximum non-fare revenue generation through advertisements, lease of space etc., backed by
statutory support
The following financing options were proposed:

Terms of ODA loans

Financing under STEP Loan

Terms of STEP loans