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Case Study on The Delhi Metro Project Phase I
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The Delhi Metro Project: Saga of an Effective Project Management
“Everyone who has traveled by the Delhi Metro wants one in his or her city. Today, there is a national resurgence in public interest in urban public transport” Dr. Manmohan Singh, Prime Minister of India, in 2006
The need for a reliable public transportation was felt in Delhi for a long time. The first step to build a metro system in city was taken in the early 1990s. In 1995, The Government of India (GoI) and The Government of the National Capital Territory of Delhi (GNCTD), a 50:50 joint venture, formed the Delhi Metro Rail Corporation Ltd (DMRC) under the Companies Act to construct the Delhi Metro. The Delhi Metro Project is: Second project in country after Kolkata Metro: 1984.
In 1995, RITES (Rail India Technical & Economic Services Limited) submitted a detailed project report for Phase I of the Delhi Metro Project. The DMRC was to complete Phase I of the project within 10 years, i.e. by the end of 2005. E. Sreedharan was appointed Managing Director (MD) of the DMRC and project manager for Phase I of the project in November 1997. Work on line 1 of Phase 1 started in October 1998.
Total land needed was 340 hectares (58% government, 39% private agriculture and 3% private urban land). Final cost of project was approximately Rs 99 billion with Rs 7 billion saving. Challenges:
Delhi Metro Project was going to be the biggest urban invention in India since independence in 1947. Project has to be executed in a very difficult urban environment. Being the capital city, all actions were under close scrutiny of VIPs. Project implementation period got compressed to 7 years from 10 years, since project started late. Low Financial IRR (3%) prompted second thoughts on the project Estimated loss of Rs. 5 million if one day is lost.
Expertise and technology was not available in the country to construct Metro of world class standards with frontline technologies. DMP faced criticism due to inability to recruit and 70% were deputed from Indian Railways.
Strategic Intent of Delhi Metro Project:
Delhi Metro Project was conceived as a social sector project aimed to solve Delhi’s traffic problems, which had almost become unmanageable and to improve both the quality and availability of mass transport services in Delhi. Almost all the studies on Delhi traffic recommended the Mass Rapid Transit System (MRTS) as a means to solve the problem but the project was very expensive, so the GoI and GNCTD bore the capital costs to make it financially viable on a commercial basis. Government of India decided to go ahead with the project, keeping in mind that it was essentially a social sector project, expected to benefit the regional economy in more ways than one, even though the financial IRR for the project worked out to be 3%.
Project Statement of Work:
Phase I of DMP was planned to connect Delhi’s business, education and shopping areas through construction of 3 lines, total length of 56 km, 50 stations out of which 10 are underground and 3 maintenance depots. (Refer Exhibit 1 for the Delhi Metro Map of Phase I) For Phase I of the metro to become viable, it was estimated that it would have to transport 1.5 million passengers per day. The DMRC planned to generate around Rs. 6 billion by developing real estate projects in and around the metro stations. This included an IT park, a mega shopping mall cum multiplex, restaurants, ATM counters, beverage counters, web stores, chemist’s shops, and coffee parlors, to repay the OECF loan. (Refer Exhibit 2 for Cost Structure of the DMP)
Project Life Cycle:
Stage 1 (Specification of Project):
Phase I of Delhi Metro Project of 3 lines, total length of 56 km, 50 stations out of which 10 are underground and 3 maintenance depots, is planned to be constructed in 10 years duration,...
Project Finance & Infrastructure Finance, Apr2010, p32-32. 1p
Business Today, 8/24/2008, Vol. 17 Issue 17, p192-192, 1/4p. 1 Color Photograph
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