FINANCING URBAN TRANSPORT INFRASTRUCTURE

1. FINANCING URBAN TRANSPORT INFRASTRUCTURE

2. Presentation Structure • Urban Scenario • Investment Needs • Financing Structure • Financing Options

3. Urban Scenario

4. Rapid Rate of Urbanization • Urban population in India increased from 62 million in 1951 to 377 million in 2011. • In 2011, 3 cities with a population greater than 10 million and 53 cities with a population greater than 1 million. • By 2031, it is projected that there will be 6 cities with a population greater than 10 million.

5. Rapid Motorization • From 2001 to 2011, the annual growth of population 1.6%, but motor vehicles increased by almost 10% • Average vehicle speed during peak hour in many Indian cities is as low as 10 kmph Source: Road Transport Year Book (2009-2010 &2010 2011). Ministry Of Road Transport & Highways Government Of India New Delhi . IIHS 2011. “Urban India 2011: Evidence”

6. “Urban transport is the single most important component instrumental in shaping urban development and urban living.” National Commission on Urbanization (NCU)

7. Investment Needs

8. Investment Needs – Next 20 years • The total expenditure on roads and urban transport together out of the total expenditure is about same order (as a percentage) as the Mckinsey estimate. • However, there is a major difference in the estimate for roads vis-a-vis urban transport.

9. Key Issues Affecting Investment In Urban Transport • High Capital and Operation cost • Long Gestation Period • Project Viability • User Charge • Fare Revision • Cost Recovery • Demand Risk • Social Linkages • Macro economic policies

10. Financing Structure

11. Financing Structure

12. 12th Five Year Plan - Goals • To create an effective institutional framework to manage investments • Capacity building of State & City Officials • Create walking & Cycling facilities • Augment public Transport • Improve accessibility and mobility • Provide grade separated entries and by passes for through traffic • Improve road safety • Use of technology for multimodal integration, safety etc • Promote research in guided transport

13. A total of Rs 3,88,308 cris estimated to achieve the goals of the 12th 5 year plan 12th Five Year Plan - Investments Sources for the total investment

14. State Budgets • In 11th Plan – of the total investment state share was 32.6% • 12th Central Finance Commission recommended to augment Consolidated Fund of the State to supplement resources of panchayats and municipalities Sources of Investment

15. Financing Options

16. Financing options

17. Central Schemes • Jawaharlal Nehru National Urban Renewal Mission (JnNURM) • Urban infrastructure Development Scheme for Small & Medium Towns (UIDSSMT) • Viability Gap Funding (VGF) • Central Assistance for doing Technical Studies like CMP, Metro DPRs etc.

18. Private Sector Funding • Advantages • Easing Budgetary Constraints •  Improved Value For Money •  Sharing Of Risks Between Public & Private Partners •  Reduction In Cost Of The Project • Main sources of Private Sector Funding • Debt • Equity • PPP

19. Key Benefits of PPP • Rigorous project preparation • Delivery of whole life solution • Focus shifts to service delivery • Time bound implementation plan • Better overall management of public services PPP Options

20. Examples – Metro Projects

21. Examples – Bus Operations • Indore City Bus Service • Bhopal City Bus Service • Rajkot City Bus Service • Surat City Bus Service • Bhubaneswar – Puri City Bus Service • Ahmedabad BRT operations • Delhi Bus Service

22. Case Study: Bus Operations – Indore(AtalIndore City Transport Services Limited) Before City Bus- Unorganised Transport

23. About AICTSL • Inception in 2006 with a seed capital of Rs. 5 million. • Adopted the net-cost based PPP model of bus operations… widely copied in other cities across India. • Started with 37 buses with 4 operators. • Installed vehicle tracking systems on the entire fleet, that is the best in the country even till date. • Initiated the BRT project in Indore which is in the final stage of implementation. • Funding from JnNURM allowed modernising the fleet with CNG buses that have electronic displays and voice announcement systems.

24. PPP Model of Bus Operations • Public partners role: • Planning of routes • Inviting tenders for bus operations • Providing support infrastructure • Objective: Providing affordable • & quality public transport Safety & Quality has helped attract trips from private travel modes • Private operator responsibilities: • Owns, operates & maintains fleet • Collects fare from passengers • Pays premium to AICTSL for right to operate on route

25. Lives Saved, Emissions Reduced • Lives saved due to Indore City Bus :: 6 /year • (0.024 fatalities/mill PKT * 0.64 mill PKT per day * 365 days) • Hundreds of accidents avoided. • CO2 Reduced ~5.5 ton/day

26. Challenges • CNG fuel prices have increased by 64% in 24 months, thus reducing profitability to operators • AICTSL has limited financial resources (premium from operators, advertising) for additional infrastructure • Passenger ridership per bus has increased only marginally, not keeping pace with input costs Modernising the system by way of better workshop infrastructure, improved information for passengers and customer service is necessary for expanding the system.

27. Multilateral Development Banks (MDBs) • Multilateral development banks (MDBs) provide finance for investments in human and physical capital that promote development. • MDBs assist in Urban Transport Funding through the following: • Loans • Grants • The Global Environment Facility (GEF) • Clean Development Mechanism (CDM)

28. Innovative Financing Mechanism • The issue of urban transport financing has become increasingly prevalent in recent years as costs of providing transport services have expanded more rapidly than traditional revenue resources. • The National Urban Transport Policy of April 2006 also lays emphasis on the innovative use of land as a resource for financing public transport projects. • Urban Transport Fund • Financing Through Cross-Subsidy Projects • Property Development • Land Value Capture • Kiosks and Shops at Stations • Taxes and Fiscal Incentives • Cross Subsidy

29. Examples- Innovative Financing Scheme • Non Fare Box Revenue

30. Case Study- BRTS Project – PCMC • PCMC has planned for 10 BRT routes for quick and effective transit and the cost for the first phase is about Rs. 1540 crore • PCMC has set up an Urban Transport Fund (UTF), managed by an SPV, PCMC Infrastructure Company Ltd (PICL), to finance its share of the BRT project.

31. Urban Transport Fund – PimpriChinchwad • 100 metres on both sides of the corridor have been earmarked as the “BRT Influence Zone’ • PCMC has raised the FSI in the influence zone from 1 to 1.8 with the added FSI of 0.8 being achieved through loading of TDR. • Based on the total influence zone area along the 60 km BRTS corridor, additional 0.8 FSI permissible in the influence zone, the project can generate close to 5000 Crs of revenue

32. Case Study-The TTMC Concept • BMTC developed the innovative concept of ‘Traffic and Transit Management Centres (TTMCs)’ • The TTMC concept combines the development of passenger terminals with the creation of commercial real estate space. • Revenue from rent of the commercial real estate space would cross subsidise the construction cost of the passenger terminal and amenities, and also form a source of continuing additional revenue for the corporation. Implementation • 10 TTMCs have been constructed since 2009 • Initial funding was provided by JNNURM

33. Thank You!