INDIAN INSTITUTE OF TECHNOLOGY ROORKEE

CTN- 502 Infrastructure Systems

Risk Assessment

Mumbai Metro
Versova – Andheri – Ghatkopar Corridor

Ankit Khatoliya | Nabh Hirwani | Sk Sahin Uddin

Centre for Transportation Systems
Contents
• Introduction
– Timeline
– Demand Analysis
– Concession Agreement
• Risk Assessment
– Agenda
– Risk Management
– Risk Allocation
• Different types of Risk
– Financial Risk
– Material Risk
– Site Risk
– Site Safety Risk
– Design & Technical Risk
– Legal Risk
– External Risk
– Organizational Risk
– Management Risk
– Contractual Risk
– Environment Risk
– Operational Risk
– Construction Risk
– Human Resource Risk
– Value for Money
• Key Learnings
• References
2
Introduction

• Concessioning Authority –
Mumbai Metro Region
Development Authority
(MMRDA)
• Concessionaire – Mumbai
Metro One Private Limited
(MMOPL)
• Project Name – Mumbai Metro
(First Corridor)
• Project Brief – Elevated MRTS corridor from Versova – Andheri – Ghatkopar
• Project Capacity – 11km,12 Stations & a car depot at DN Nagar
• Project Cost – Rs 2,356 Crore
• Type of PPP (Variant of PPP model adopted for implementation of the project) – Build-
Own-Operate-Transfer (BOOT)
• Project Status – Operation and Maintenance Stage
• Concession Duration – 35 Year (including 5 years construction period)

3
Timeline
Project
1st Conceptualization Feasibility Study approved by GoM Invitation of Bids
1997 1997-2000 Aug-2004 Aug-2004

Negotiations Financial Proposal Technical Bids Pre-bid meeting

Feb-May 2006 Jan-2006 May-2005 Nov-2004

SPV Created Signing of CA Construction Started Financial Closure

Dec-2006 7-Mar-2007 8-Feb-2008 3-Oct-2008

End of CA Actual COD COD as per CA

Mar-2042 8-June-2014 Mar-2011

4
Demand Analysis
Scenario of Public Transport
• 11 million people travel daily by Public Transport (share of PT more than 90%)
• Many areas in city and suburbs are not served by rail system
• Suburban rail traffic increased by 6 times while the capacity increased by only 2.3 times
• 4500 passengers travel per train against the carrying capacity of 1750 resulting in unbearable
overcrowding
Feasibility Report
• A detailed feasibility study was carried out under the Indo-German Technical Co-operation by
entrusting the consultancy work to TEWET in association with DE-Consult & TCS, during 1997-
2000.
• As per the report, Andheri to Ghatkopar MRTS as potentially bankable and economically viable
• Will reduce 90 min travel time to 21 min.
MRTS will grow to 6 lakhs commute per day

5
Process - 2 Stage Bidding

• Mumbai Metro Region Development Authority (MMRDA) invited proposal

by Tender for BOOT based development of Mumbai MRTS.
• Global bids were invited through Expression of Interest (EoL). 150
bidders responded and pre-bid meeting held on November 2004.
• Only those consortia whose technical bids met the criteria were allowed
to submit financial bids. 5 Technical Bids were submitted:
– Hindustan Construction Company and RITES
– Reliance Energy Limited and Connex-France
– Shaktikumar Sacheti Limited and Lingkaran Metro
– Siemens, L&T, Gammon, BEML
– IL&FS and ITD Thailand and Unity Infraprojects
• 3 qualified to submit Financial Bid, which 1 withdrew their bid.
– Reliance Energy Limited and Connex-France
– IL&FS and ITD Thailand and Unity Infraprojects
– Siemens, L&T, Gammon, BEML (withdrew)
• Negotiations was held with the lowest financial bidder, i.e., Reliance
Energy, Connex France, Veolia Transport and Hong Kong MRT.

6
SPV

• A Special Purpose Vehicle (SPV) named Mumbai Metro

One Private Limited (MMOPL) formed.
• Public Partner –
– Mumbai Metro Region Development Authority (MMRDA) (26% equity
stakes)
• Private Partner –
– Reliance Energy Limited (69% equity stakes)
– Veolia Transport (5% equity stakes)
• It was one of the first project in mass transportation based on
PPP, thus government felt need to closely monitor the project
and took 26% of stake in the SPV.
• MMRDA contributed Rs 134 crore equity towards 26% of
stake.

7
Scope of Project

• Design, construct, operate, maintain, own & transfer the

MRTS.
• Performance and execution by Concessionaire of the
financing, design, engineering, procurement, construction,
completion, commissioning, operation and maintenance, of
the project as per all Standards and Safety guidelines.

8
Grant

With the Concession period of 35 Year MMRDA grant Concessionaire to-

• obtain right of way, access and license to the Site for the purpose of and to the extent
conferred by the provision of this Agreement;
• finance, develop, design, engineer, procure, construct, test, commission, operate, maintain,
own & transfer the MRTS Project;
• upon completion of project, operate and maintain the MRTS Project;
• levy, demand, collect and appropriate fare from commuters liable for payment of fares for
using the MRTS Project or any part thereof and refuse entry of any commuter, if the fare is
not paid;
• impose fines, penalties on defaulting any commuter and initiate any action
• perform and fulfill all the Concessionaire’s obligations under and in accordance with this
Agreement;
• bear and pay all costs, expenses and charges in connection with or incidental to the
performance of the obligations of the Concessionaire under this Agreement; and
• not assign, transfer or sublet or create any lien or Encumbrance on this Agreement, or
the Concession hereby granted or overall or any part of the Project Highway nor transfer,
lease or part possession thereof save and except as expressly permitted by this Agreement
or the Substitution Agreement.

9
Advertising Grant

MMRDA grant following additional concessions that Concessionaire

may-
• use hoarding for advertising at
– MRTS station platform
– MRTS station and sub-station building
– Elevators & staircase at the MRTS stations
– And other place upon the station building
– Car depot location
– Inside-outside MRTS coaches
– Any vehicles as may be used for the MRTS project
• be allowed to avail rights for advertisement on CCTV/PA system and advertisement on
smart card type tickets.
• be permitted to undertake Commercial Activities for Commuter facility on the concourse
area at the stations subject to maximum 100 square commuters per station.

10
Condition Precedent

MMRDA shall provide – Concessionaire shall –

• Right of Way to the site free from all • obtain all the applicable permits/clearance,
encumbrances; form the GoI/GoM (save approvals required
from Railway Department);
• Permission/license to enter & utilize
• deliver true copies of all the Project
the site for construction
Agreement, including Financing Document
and Shareholders Agreement;
• provide Performance Security to the
MMRDA;
• delivered to the MMRDA confirmation of the
correctness;
• executed and procured execution of the
Escrow Agreement;
• executed and procured execution of the
Substitution Agreement;

11
Performance Security

• Within 120 days from the date of agreement, concessionaire

must provide performance security to MMRDA.
• Performance Fee – Rs 14 Crore in 2 lots of 50%
• MMRDA is entitled to encash and appropriate this amount as
damages for concessionaires' fault
• Max. 50% of the Performance Security shall be released 12
months after of issue of completion certificate, and the
balance 50%, 12 months after completion of Concession
period.

12
Risk Assessment

• Infrastructure is the key to economic growth, poverty

alleviation, and environmental sustainability.

• The risk is a measurable part of uncertainty, for which we are

able to estimate the occurrence probability and the size of
damage. The risk is assumed as a deviation from the desired
level. It can be positive or, which most often happens, it can
be negative.

• Therefore, the risks analysis is so important for project

selection and coordination of construction work. The risk
analysis is regarded as the analysis of adverse events even
at the stage of planning and programming of a construction
project.
13
Methodology

Risk Management – Mumbai Metro

14
Risk Assessment Steps
Risk analysis involves three main steps
1) Identification of risk:
This is the first step in risk analysis. In order to tackle or mitigate
the impact of any future adversity, it is important to first identify
that risk. There are many types of risks in a construction project.
Some of them are political risk, market risk, economical risk,
contractual risk, environmental risk, technical risk etc. Once
identified, steps can then be taken to mitigate the impact.
2) Assessment of risk:
This step involves analyzing the impact of all the risk. It helps to
identify more severe and important risks.
3) Allotment of risk:
After the first two steps, risk are then allotted to respective
parties which can tackle a particular risk.

15
Agenda
 PPP Projects are complex projects that require effective
attention to risk and their mitigation.
 Risks are inherently related to returns and the
service/expertise which yields those returns
– This gives a good perspective on who is best placed to bear
the risk
– Objectives of the government in taking up a ppp project is
essential to decide who bears a particular risk
• Some General Principles in Risk Management
– Thoroughness in identification of risks
– Lessons from similar projects
– Should be borne by party best placed to bear it
– Quantification of financial impact to the extent possible
– Thoroughness of documentation
16
Risk Management

Governance
Description: Financial management for projects needs to be
separated from overall accounting system
Risk Level: Medium
Responsibility: MMRDA
Mitigation Measures: A financial management assessment was
carried out, which indicates that the MMRDA has an accounting
system that allows for the proper recording of project financial
transactions in accordance with international principles generally
accepted in India, and has sufficient financial management capacity
to administer the project.

ADB = Asian Development Bank, DMRC = Delhi Metro Rail Corporation, MMRDA
= Mumbai Metropolitan Region Development Authority.

17
Risk Management

Governance
Description: The executing agency is unfamiliar with ADB
procurement process
Risk Level: Low
Responsibility: MMRDA and ADB
Mitigation Measures: Procurement is governed through various
laws and decrees, consistent with internationally accepted
principles and practices to ensure transparency, safeguard the
integrity of the procurement process.
Goods and consulting services will be procured in line with the
relevant ADB guidelines, with prior review by ADB at key steps in
the procurement process.
ADB = Asian Development Bank, DMRC = Delhi Metro Rail Corporation, MMRDA
= Mumbai Metropolitan Region Development Authority.
18
Risk Management

Others
Description: The executing agency is inexperienced in implementing
metro projects
Risk Level: Low
Responsibility: MMRDA
Mitigation Measures: The MMRDA has been assisted by the DMRC
in the implementation of Line 2A. All equipment, including the
rolling stock, is being procured by the DMRC. The DMRC has a
sound reputation and track record in executing metro systems in
Delhi and in assisting with startups in other major cities in India.

ADB = Asian Development Bank, DMRC = Delhi Metro Rail Corporation, MMRDA
= Mumbai Metropolitan Region Development Authority.
19
Risk Management

Others
Description: Ridership projections are not realized owing to external
factors such as inadequate feeder systems

Risk Level: Medium

Responsibility: MMRDA

Mitigation Measures: ADB is supporting the procurement of feeder

vehicles that will ensure good last-mile connectivity and enhance
the attractiveness of the metro.

ADB = Asian Development Bank, DMRC = Delhi Metro Rail Corporation, MMRDA
= Mumbai Metropolitan Region Development Authority.
20
Risk Management

Others
Description: Delays in construction of tracks due to unpredictable
engineering problems may subsequently delay the commissioning
of rolling stock and signaling, train control, and telecommunications
systems.

Risk Level: Medium

Responsibility: MMRDA
Mitigation Measures: Ground conditions have been assessed
through detailed soil tests, and engineering works are being closely
monitored to avoid unexpected delays.

ADB = Asian Development Bank, DMRC = Delhi Metro Rail Corporation, MMRDA
= Mumbai Metropolitan Region Development Authority.
21
Risk Management

Others
Description: Delays in approval of operational and organizational
plans due to prolonged government processes.

Risk Level: Low

Responsibility: MMRDA

Mitigation Measures: Continuous dialogue with government

counterparts and close monitoring of activities for operationalizing
the organization.

ADB = Asian Development Bank, DMRC = Delhi Metro Rail Corporation, MMRDA
= Mumbai Metropolitan Region Development Authority.
22
Risk Mitigation Overview

Risk mitigation by MMRDA Risk mitigation by Private

party
Detailed feasibility study carried out by 35 years Concession agreement with
TEWET in association with DE-Consult MMRDA
& TCS, during 1997-2000

Plan updated by MMRDA in 2004 Capital contribution of Rs 650 crores with

Clearances obtained beforehand
Deep political backing by GoM
a 70:30 debt-equity ratio
Independent parties assigned the review
and monitoring job
Technical consultants appointed for
planning & reviewing the engineering &
construction phase

23
Risk Allocation

Risks borne by Private

Risks borne by MMRDA
party
• Land acquisition • Design &
• Force Majeure Construction
• Environmental • Operation &
• Political & social Maintenance
• Financing
• Revenue
• Finance
• Technology
• Project completion

24
Finances Risk
Finance of Mumbai Metro
Total Project Cost ₹ 2356 Crores
Viability Gap Funding (VGF) ₹ 650 Crores
₹ 470 by GoI (20% of project)+ ₹ 180 by GoM (7.5% of project)

Debt : Equity 7:3

Total Equity ₹ 513 Crores
MMRDA Equity 26% = ₹ 134 Crores
Reliance Energy 69% = ₹ 353 Crores
Connex-France & Others 5% = ₹ 26 Crores
Debt ₹ 1194 Crores
IDBI
Corporation Bank
Karur Vysya Bank 75% = ₹ 895.5 Crore
Interest Rate = 12%
Canara Bank Total Loan Repayment Time – 15 years
Indian Bank
Oriental Bank of Commerce
IIFCL (U.K.) LIBOR + 3.5%

25
Financial Risk
Financial Risk of a Metro project mainly depends on three
components-Project Cost, Liquidity and Cash Flow.

Project Cost Funds Cash Flows

Actual project All required fund Cash Flows from
should be less should be available the revenue and
than or equal to at time and at advertisement
estimated project lower interest rate should be equal
cost or more than the
estimated cash
flows in DPR

26
Financial Risk: Project Cost
Project Cost Overrun
Estimated cost of Project- Rs. 2356 Crores
Actual cost of Project- Rs. 4300 Crores
There was an escalation of 82% in the project cost

Risk Mitigation-
Due to increase in project cost, MMOPL decided to increase the fare
and asked CM to increase the fare and got approval
Slabs Fare as per DPR Revised fare
(2004) 2013
A 9 10
B 11 20

C 13 30
D 40

27
Material Risk
• To mitigate such a risk the MMRDA should first be aware about the purchasing of
the materials, the dealers of the material should be approved by ISO certification.
Also, they should provide the quality certificate for each materials, like ballast,
sleepers, rails etc.
• Again, the department should have multiple options i.e., multiple number of
dealers of the materials. So that if one fails due to deliver the required material on
time, other could deliver that item on site on time, to avoid risk associated with
delay.

Material not conforming to Selection of material and

Delay in supply
the specification equipment

Abnormal Increase in
material prices compared
Availability of material
to
the original bid amount

28
Material Risk

• Mitigation Process

Selection of material and equipment

Safety and Standard Clauses
specified in Concession Agreement.
Material not conforming to the Responsibility of MMOPL to adhere.
specification

Availability of material
Responsibility of MMOPL for material
procurement and liable to pay penalty
for delay.
Delay in supply

Abnormal Increase in Financial budget fixed for the project.

material prices compared to Any other cost to be bear by private
the original bid amount sector.

29
Site Risk
• The risk associated with the land acquisition can be mitigated with the project
starting only after all the required land is procured and handed over by the
government.
• Sending pre notice to the landowner for the acquisition, so that acquisition
process can easily be done.
• For proper site investigation, the Daily Project Report (DPR) system should be
installed properly, and the format of DPR should contain site photographs, daily
material consumption, daily manpower used, and amount of work done etc.

Land use and Poor communications

Improper site
acquisition/resettlement between the site and
investigation
and rehabilitation risk head offices

RoW / Government Delay due to land

Access to Land acquisition

30
Site Risk

• Mitigation Process
Land use and
Planning metro path on min. private
acquisition/resettlement and
lands at pre-fixed rates
rehabilitation risk

GoM promoted Metro1 and gained

RoW / Government Access to Land
public support

Hiring third-party companies for site

Improper site investigation
investigation and feasibility report

Delay in permission from Railway

Department.
Permission from Railway Department
Govt. should ensure all permissions
form the state and central authorities.

31
Site Risk

• Cost Estimate

13% of the
total
estimated
budget.

32
Site Safety Risk
• And the measures to mitigate such a risk is also very common like wearing safety
equipment like helmets, hand glows, boots, goggles etc. most of the government
enterprises and private firms do not follow such a measures, which they should be aware
of.
• Apart from this, many acts are there for the welfare of labors for example
– The Workmen’s compensation act, 1923
– The Employees Compensation act, 1923
– The Trade Unions Act, 1926
– The Payment of Wages Act, 1936
– The Employers Liability Act, 1938 and many more.

Security of material and

Poor safety procedures Labor safety
equipment

Varied labor and

Machinery Breakdown Fire
equipment productivity

33
Site Safety Risk

• Mitigation Process

Installation of fire extinguishers, long

Fire
hose pipe and warning signs.

Safety engineer assigned and all-

Machinery Breakdown
time monitoring

Several safety precaution issued,

Safety of workers
helmet, anti-fire cloth, safety belt

Surveillance by sub-contracted
Theft & Anti-social Elements
security services.

34
Site Safety Risk

• Risk Analysis

35
Site Safety Risk

• Safety Precautions used

36
Design Risk + Technical Risk
• As the major time required for the completion in railway project is Design and
survey phase, Perfect design is must necessary, as millions of kg of load is going
to transfer on that way. So, MMRDA spent more time for preparation of design
and survey reports.
• Here in this case, TEWET with DE-Consult & TCS, who is preparing the feasibility
reports of this project took 3 years to complete whole reports.
• So, it can be mitigated by ensuring good design report and vetted by owner and
consultant before the project commences. And also, by hiring experience
surveyors and designers or giving proper training to the fresher employee under
the guidance of experts such a risk can be mitigated.
• Also, by providing Defect liability clause in contract it can be done.

Defective design Awarding the design to

Design Changes
(incorrect) inexperience Designer

37
Design Risk + Technical Risk
• MMOPL must submit all the drawings and the schedule of the project to
MMRDA. These would be reviewed by MMRDA and scrutinized by the
Independent Engineer. MMRDA would not be responsible for any delays
caused due to the drawings of the project.
• The technology risk would vest with the both the private operator/
governments as the project would be executed in conformance with the
Specification and Standards specified in the Schedules of the
Agreement.

Defective design Awarding the design to

Design Changes
(incorrect) inexperience Designer

38
Legal Risk
• So, it can be mitigated by ensuring good design report and vetted by
owner and consultant before the project commences. And also, by hiring
experience surveyors and designers or giving proper training to the
fresher employee under the guidance of experts such a risk can be
mitigated.
• Also, by providing Defect liability clause in contract it can be done.
• MMOPL must submit all the drawings and the schedule of the project to
MMRDA. These would be reviewed by MMRDA and scrutinized by the
Independent Engineer. MMRDA would not be responsible for any delays
caused due to the drawings of the project.

Disputes among
Ambiguity of Difficulty to get
the parties of Change in Law
work legislations permits
contract

39
Legal Risk

• Mitigation Process
MMOPL must apply for all the
Difficulty to get permits permits/approvals required & bear
the risk of delays

Disputes among the parties of 2-staged bidding process, with

contract technical pre-qualification

No compensation from MMRDA is

Change in Law promised. Although amendment in
good faith is possible

40
External Risk
• Major dependence on one client - So, it is found that private consultancies who
work for such a government body should establish their office on every site
locations to overcome such an unnecessary cost and comfort.
• New stakeholders emerge and request changes - Unsupportive stakeholders
& loggerhead between shareholders are the major source of such a risks. Which
can be mitigated by working closely with the major stake holders and by knowing
their aspirations.

New stakeholders
Laws and local standards
emerge and request Public objections
change
changes

Major dependence on
Tax change Reputation Risk
one client

41
Organizational Risk
• Again, in this case such a kind of risk happens in private consultancies, the
subcontracted items and other design reports like GADs, Hydrological reports
etc. could not reach on time to the head office or respective site locations, which
aims to delay in getting permits and delay in execution of work as well.
• So, to overcome such a risk the private consultancies should manage proper
transportation systems. Also, the materials stored on site should be protected
well against rain, wind and other unnecessary things like thief, wasting etc.

Inexperienced workforce Lack of protection on a

Delayed deliveries
and staff turnover construction site

Failure to disclose
Bankruptcy changes and resulting
extra work

42
Organizational Risk

• Mitigation Process

Inexperienced workforce and staff Hiring based on previous

turnover experiences and projects handled

Hiring experienced project manager

Delayed deliveries
and penalties on delays

MMRDA is liable, if the MMOPL is not

Bankruptcy
able to pay the debt.

Schedules of all the required work is

Failure to disclose changes and
attached to Concession Agreement.
resulting extra work
MMRDA will bear cost if any.

43
Management Risk

• MMRDA gave the tender to MMOPL to work in their comfort

according to available resources. Sometimes resources are
not available on time so to mitigate such a risk they should
have alternate options of dealers available, so that project
should not stop due to unavailability of resources.

Poor site
Management of
Project manager's Resource management and
Contracts & Joint
technical capability management supervision by the
Ventures
contractor

Poor
Lack of leadership
communication Changes in
Improper planning quality of project
between involved management ways
manager
Parties

44
Management Risk

• Mitigation Process

Selection of competent consultant for

Global bids were invited by MMRDA
bid process management

Proper pre-qualification and 2-staged bidding process, with

selection process technical pre-qualification

Reasonable equity stake in project Rs 513 Crore of equity provided by

vehicle compulsory for main operator SPV

Rs 14 crore performance security

Adequate Performance Guarantees
and MMRDA will take over assets
from the Concessionaire
and action acc. to defined clause.

45
Contractual Risk
• The contractual Liability types of risk found very serious effect on project.
• If in case for private consultancy firm failed to carry any work, so breach of
contract happens, to complete such an incomplete work, MMRDA must float
tender again, and after all the tedious procedure of tendering some another
consultancy firm will take the responsibility to complete the remaining work, which
causes lots of miss interpretation and tedious work.
• To mitigate such a risk the MMRDA should be strictly aware of breaching of
contract initially in tendering process.

Contractual Liability Liquidated, Consequential

Force Majeure Clauses
(Breach, Third Party and Punitive Damages
(Schedule Delay)
Action) Clauses

Subcontractor Default, Private Operator Event of

MMRDA Event of Default
Abandonment Default

46
Contractual Risk

• Mitigation Process
Only lenders are protected. MMRDA
takes over the assets and is liable to
Private Operator Event of Default
pay 90% of the debt due less
insurance claims.
MMRDA takes over the assets and is
liable to pay 110% of adjusted equity
MMRDA Event of Default
and 100% of debt due. Lenders are
covered.

Clauses mentioned in the concession

Force Majeure Clauses
agreement with shared risk bearer.

MMRDA will freeze security deposit

Contractual Liability (Breach, Third
and action acc. to the Breach of
Party Action)
Contract Schedule in the agreement.

47
Environmental Risk

Environmental Risk involves various components which contributes to the

risk of a project-

Ecology Air Pollution Noise Pollution

Soil Pollution Water Pollution

Environmental Risk involves various components which contributes to the

risk of a project-

48
Environmental Risk: Aarey Forest
• Metro Car shed area was
proposed on Aarey colony on a
plot of 1 acres.

• It includes the construction of

Metro Car shed on 33 acres, a
labour camp for construction
workers and a centralised
operation control centre for the
entire Mumbai Metro network
• The project was affecting 5,012 trees, of which 1,331 trees has to be cut
and the remaining 3,681 has to be re-planted in other parts of the city

49
Environmental Risk: Aarey Forest
• Environmental groups Vanashakti and
Aarey Conservation Group (ACG) filed
a petition with the National Green
Tribunal (NGT) in January 2015
requesting that the Aarey Colony be
protected as a no-development zone
• On 16 April 2019, the Supreme Court
rejected a petition filed the Aarey
Conservation Group, a non-government organisation, seeking an
alternative site to construct the depot.
• On 5th October 2019, people protested against cutting of trees at night
at Aarey forest, then Supreme court issues stay order on cutting of
trees.
• In March 2021, it was decided that the Metro shed car will be shifted
to Kanjumarg.
This delayed the opening of project by atleast 2 years

50
Operational Risks

51
Construction Risk
Major construction risks of a metro project are-

52
Construction Risk

To identify the most probable risk of the construction, risk

likelihood matrix is developed-

Source: Vishwas H S, G D Gidwani, 2017, Hazards Identification and Risk Assessment in Metro
Railway Line Construction Project at Hyderabad ​

53
Construction Risk

Source: Vishwas H S, G D Gidwani, 2017, Hazards Identification and Risk Assessment in Metro
Railway Line Construction Project at Hyderabad ​

54
Risk Matrix

Source: Vishwas H S, G D Gidwani, 2017, Hazards Identification and Risk Assessment in Metro
Railway Line Construction Project at Hyderabad ​
The risk matrix shows the combination of impact and probability that in turn yield a risk
priority. In construction risks with high impact and high probability are design errors and
omissions, construction cost overruns and scheduling errors, contractor delays, and these
risks require further analysis, including quantification, and aggressive risk management.

55
Human Resource Risk
• Here, such a risks again happens majorly with private consultancies, due
to some trained employees working on such big projects leaves the jobs,
so the companies must hire some other new employees and must train
them first, which consumes too much time which indirectly effects the
project delay.
• MMOPL is the operating partner, hence it bears this risk.
• MMOPL must plan and manage its human resources according to the
demands and needs of the project.

Manpower Risks -
Inadequate succession Inability to attract quality
Specialized manpower
planning personnel
leaving the jobs

Private Operator Event of

Less manpower
Default

56
Assessing Value for Money
• A VfM analysis for the project has not been undertaken in the Feasibility Study.
– The only other comparable is the Delhi Metro where the (DMRC), is a public sector organization,
has been very successful in managing project timelines and costs.
– There is no precedent of similar institution in rail based public transport in Maharashtra.
– Neither can data on other public works contract be adapted for the Mumbai Metro One project.
– Therefore, a quantitative analysis to assess VfM was not practical for this project.
• But a qualitative assessment of what has been achieved by the private operator
based on publicly available information and discussions with officials working on
the project was attempted.
– Reduction in financial burden on the state budget – VGF was reduced from ₹1250 Cr to ₹650 Cr.
Compensation for shifting of public utilities add ₹50-60 Cr. Taxes in return are estimated to be
₹300 Cr.
Hence, net spending = ₹400 Cr. Return after 35-year assets worth = ₹ 2300 Cr
– Substantial Risk Transfer – The private sector has undertaken substantial project risks, such as
financing, construction, operations and traffic/ revenue risks. Traffic risk, which is one of the
major risks of a user fee-based model, is completely vested with the private operator with no
clauses that provide for any compensation by the state government if the rider ship of the metro is
low.

57
Key Learnings

• Assessing bid process is crucial – The process of bid for choosing the
successful bidder took more than 2 years. This led to a lesser number of
bidders to bid for the project. The concession agreement was based on
the model concession agreement. These delays resulted in only one
bidder finally submitting a bid for the project.
• Delays in approval can derail the project – There was a delay in
obtaining approvals for the over bridge that passed over the railway line
from the railway authorities. Project gets delayed from scheduled
deadline because a railway was exploring the feasibility of another
project invading the path of the metro line. It is recommended that
authorities be cognizant of all other upcoming infrastructure projects that
have the potential to affect operations of the planned project while
bidding out such projects and resolve the same prior to the appointment
of a developer.

58
Key Learnings

• Performance Security – Release of performance security of Rs 7 Cr

after 36(35+1) year is loss of value for money for the concessionaire.
With 6% inflation this Rs 7 Cr, after 36years, would have value for Rs
60.3 Cr.
• Specification on Assets transfer – On the termination of the project, 5
years before the expiry of the concession period a survey of the assets
would be carried out to determine whether they are in working condition
as given in the agreement. However, the schedule in the concession
agreement does not have clear and robust specifications. Thus, there is
a risk of a difference of opinion between the concessionaire and the
government and this can potentially lead to a dispute.
• Public support for the project – For projects like this public support is
necessary to ensure proper implementation. MMRDA ensured adequate
public support for land acquisition and road expansion activities by a
dialogue with the affected individuals.

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Key Learnings

• Delay in Obtaining VGF approval: There was substantial delay in

obtaining approval for VGF from the Government. While this was
attributed to the model concession agreement not being in place, the
PPP Appraisal Committee not be constituted and only tentative
guidelines with respect to VGF approval being available at the time, this
issue was a deterring factor for developers and is also likely to have
impacted the level of interest in the Phase 2 bid.
• Role of Good Project Preparation: The viability gap funding used in the
project (650 crore) makes up a significant component (27.5 percent) of
the project cost. This project cost has been shared between the central
and state governments. The initial quote submitted by the successful
bidder quoted an amount (1250 crore) which was subsequently revised
to the current figure through negotiations. Thus, there is an increased
need for good project preparation prior to the procurement process to
ensure that the fair bids are received for the projects. This would
eliminate private operators colluding with each other and/or speculative
bids.
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Reference
• Concession Agreement for MRTS for Versova-Andheri-Ghatkopar Corridor Mumbai
• Compendium of Case Studies, Dec 2010 by PPP Cell, Department of Economic
Affairs
• Detailed Project Report – Mumbai MRTS Project
• CIRC – Economic Regulatory Issues
• ADB – Proposed Loan India: Mumbai Metro Rail Systems Project
• Shah, D., 2015; India’s Metro PPP model- A Case of Mumbai metro
• Vishwas H S, G D Gidwani, 2017, Hazards Identification and Risk Assessment in
Metro Railway Line Construction Project at Hyderabad
• Sharma, P., Nov 2017; Risk Assessment of Metro Construction Project
• Nguyen, T.H.; Bhagavatulya, G.; Jacobs, F., Sept 2014; Risk Assessment: A Case
Study for Transportation Projects in India
• Patil, M.; Shinde, R.D.; Hailkar, S.S., June 2017, Risk Management in Railway
Projects

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 Thank You

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