Union Cabinet Approves ‘Make in India’ driven Metro Rail Policy, Check Details Here

Union Cabinet Approves ‘Make in India’ driven Metro Rail Policy, Check Details Here

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Date of Post : 17 Aug, 2017



Compact Urban Development, Cost Reduction & Multi-Modal Integration


The New Metro Rail Policy makes the private participation a must for the states to get assistance from Centre for the new metro projects in India.

The policy will focus on the innovative models of implementation and financing, as well as standardization and indigenization of hardware and software, to create jobs locally.

Finance Minister said, “There will be a system-based approach (for sanctions of new projects). Economic internal rate of return (EIRR) should be 14% for approving new metro projects.”


  • The new metro rail policy empowers the states to make rules & regulations.
  • It further empowers the states to set up a permanent fare fixation authority for fare revisions on timely basis.
  • Under this policy the states have 3 options for availing Central assistance in taking up the metro projects :
    1. Public Private Partnership (PPP) with central assistance under the viability gap funding scheme
    2. Grant by central government under which 10% of the project cost will be given as lump-sum central assistance.
    3. 50:50 Equity sharing model between central & state governments.
  • Under the policy, the states need to adopt innovative mechanisms such as value capture financing tools to mobilize resources for financing metro projects by capturing a share of increase in the asset values through ‘Betterment Levy’.
  • States would also be required to enable the low cost debt capital by issuing corporate bonds for metro projects.
  • The policy also mandates transit-oriented development (TOD) to promote compact and dense urban development along the metro corridors.
  • It has now become mandatory to set up an Urban Metropolitan Transport Authority (UMTA) to prepare comprehensive mobility plans for cities
  • The new policy also 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 Policy Envisages Private Sector Participation in O&M of Metro Services in different ways. Such as :

Cost Plus Fee Contract : The private operator is paid a monthly/annual payment for O&M of system. This can have a fixed and variable component depending on the quality of service.

Gross Cost Contract : The private operator is paid a fixed sum for the duration of the contract. Operator to beat the O&M risk while the owner bears the revenue risk.

Net Cost Contract : Operator collects the complete revenue generated for the services provided. If  revenue generation is below the O&M cost, the owner may agree to compensate.

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2 Comments on "Union Cabinet Approves ‘Make in India’ driven Metro Rail Policy, Check Details Here"

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David Philpott

Looks like a good policy that should stimulate growth of networks

Schalk Bradbeer

I am in total agreement with the analysis, as bullet-ed, of the New Metro Policy. However, the policy should also regulate the total Cost Of Risk by directing and channeling resources to the formulation and implementation of
1) an Integrated Safety Management System, 2) an Integrated Disaster Contingency Plan.