Lucknow Metro was flagged off on 1st December for its first ever trial run. It will be open for use by the people by March 2017 but till then Akhilesh Government has worked out a plan to start making profit from the first day of operations itself. The team is making sure to make the project profitable and hence sustainable from the very beginning. A profitable project means that the train makes sufficient money while on the go to meet operation and maintenance cost and also recovers its investment cost within the deadline.
Lucknow Metro Rail Corporation, MD Kumar Keshav said, “We have worked on a comprehensive strategy to run profitable from day 1. This would be achieved through fare box and non-fare box revenue.” Fare box means whatever revenue is generated though ridership fares and non-fare box revenue implies various forms of advertising, on the train, in the corridor, and at stations. It also includes revenue earned by LMRC through real estate development. Lucknow Development Authority recently approved transfer of 147 acre of land in CG City to LMRC to develop colonies and commercial blocks and earn revenue through it.
The project report of any Metro project needs to give at least 8% Financial Internal Rate Return (FIRR) to get a nod from the Centre and foreign agencies for loan. It is the rate at which the project would earn financial return on an investment of an income-generation project.
“Lucknow Metro has projected 8.41% FIRR to recover its loan and manage its operational cost. If there is any escalation in cost or inflationary pressure, that would also be taken into account,” Says Kumar. The FIRR of 8.41% implies that if the LMRC has spent a total of Rs. 100 on the project, it would have to make Rs. 108.41 from day 1 to meet its expenses. Likewise, Economic Internal Rate Return (EIRR) is projected as 19.46%. This includes total impact on society in terms of saving energy and time and mitigating pollution that would increase productivity in city. LMRC has received about Rs. 3,502 crore loan from European Investment Bank (EIB) for the 23 km North-South Corridor from Munshipulia to Amausi Airport.
LMRC would have to pay this loan within 20 years of disbursement. The first four years are the moratorium period where the borrower doesn’t have to pay any money. The cost of the priority section, ready to commence from March, is about Rs. 2,000 crore. LMRC has already spent about Rs. 1,300 crore on it and is expecting to receive EIB’s first instalment of Rs. 700 crore early next year. Till date, LMRC has received about Rs. 300 crore from the Centre, Rs. 900 crore from state government and about Rs. 240 crore through innovating funding from agencies like LDA, UP Housing Board, and UPDESCO.
Akhilesh Yadav, the Chief Minister of Uttar Pradesh has thought of all the aspects even before the project launch. Well done, Sir!