The Ministry of Urban Development has moved a proposal to pay Rs 1,820-crore as termination fee to Reliance Infra-promoted concessionaire Delhi Airport Metro Express Private limited (DAMEPl) for the Airport Metro Express line.
The MoUD has asked Delhi Government, Ministry of Home Affairs, Department of Economic Affairs, Department of Expenditure, Department of legal Affairs, Planning Commission and Department of Finance Services to give comments within a week.
After comments, the same would be put up before the Empowered Group of Ministers (EGoM) on Mass Rapid Transit System. Besides termination fee claim, the concessionaire is claiming Rs 1,200-crore towards several project-related works, that will be decided in the arbitration.
The Pioneer has a copy of the proposal which states: “Pending outcome to the arbitration issue, directions to Delhi Metro to either immediately make termination payments from its internal resources and or domestic borrowings with facilitation like Government guarantee from Delhi Government.”
The proposal also further seeks direction to Delhi Metro to take over the concessionaire’s debt from lenders and start servicing the debt.
“As per the present position, the Concessionaire Agreement stands terminated and the only issue to be settled is whether it is on DAMEPl’s default or on Delhi Metro’s default, as this will determine the exact amount of termination payment. Furthermore, the debt is neither being serviced by DAMEPl nor by Delhi Metro which is certainly not a healthy state of affairs for the lenders, a consortium of banks, and faith of lenders in the PPP mode of project implementation in general,” the Ministry stated in the proposal.
It further stated that the minimum termination payment considering the best case scenario — termination on default by concessionaire, would also mean payment of Rs 1,820 crore while it might be Rs 2,274.13 crore if the termination is on default by Delhi Metro.
The proposal also stated that Delhi Metro is investing its internal resources, to the tune of about Rs 2,400 crore, in fixed deposits for a period of about one year and earning only about 8-9 per cent in interest.
As such, it does not make any economic sense to keep the internal resources in fixed deposits and earn just 8-9 per cent interest while delaying the termination payment and gathering huge penal interest, on account of correspondence with the Government.
“Even if borrowing from the market becomes a necessity, Delhi Metro should borrow and make the termination payment.
In case, the loan taken in the short-term is at a high interest rate, the same can be retired early by a better term loan which Delhi Metro can avail later after the credit rating by CRISl and loan facilitation by Delhi Government through Government guarantee, since this project was taken up mainly on insistence of Delhi Government despite serious reservations of Ministry of Urban Development,” the proposal said.
According to the proposal, DAMEPl demanded Rs 2,823-crore from Delhi Metro towards termination payment on July 8, 2013. The said amount is due by August 9, 2013, failing which Delhi Metro is to pay an interest at a rate of two per cent (amounting to approximately Rs 1.3-crore per day) from expiry of 30 days from the filing of termination payment.
The proposal said as per the Concessionaire Agreement, this termination payment is due within 30 days of demand being made by the concessionaire and failure of Delhi Metro shall attract penal interest at an annualised rate of two per cent of the period on delay on the unpaid amount.
The total cost of the project was Rs 5,000 crore. This was the first project of the country commissioned on PPP mode and the line was sanctioned by the EGoM in two stages — from New Delhi Railway Station to IGI airport (19.2 km) and further to Dwarka Sector 21 (3.5 km) in April 2007 and January 2008 respectively. The Airport Metro line was closed for 6-7 months due to a default in the line. The Concessionaire refused to operate the airport line due to huge losses in July 1, 2013 and moved arbitration for seeking compensation from Delhi Metro. At present, Delhi Metro is currently running operations with a team of 100 officials.
The operational losses on the line are also in the range of Rs 5-crore a month. The proposal states that the airport line is currently incurring a loss of Rs 60-crore per annum. In addition, there would be a result outgo of about Rs 182-crore annually assuming an interest at the rate of 10 per cent on the amount of Rs 1,820 crore.
Top officials said on condition of anonymity that Delhi Metro has proposed that the liability arising on account of the termination payment should be taken care of by the Central Government and Delhi Government.
Interestingly, in 2006, Public Investment Board (PIB) of the Finance Ministry had termed the projected ridership figures of 42,500 passengers daily as highly exaggerated. It may be noted that the lack of ridership was one of the main reasons for Reliance Infra pulling out of the project. The PIB had even questioned the need for a special Metro line given the fact that the airport was not far away from the existing Metro lines. It had suggested connectivity to the airport through an alternative route on the normal Metro system.