Covid-19 outbreak: Metro operators lose Rs 700 crore amid lockdown

Topics Coronavirus | DMRC | Lockdown

Metro systems earn revenue from both charging fares from passengers and non-fare box collections. These include advertising and leasing of space at stations to eateries and other commercial activity.
Metro operators – public and private – across the country have accumulated a revenue loss of up to Rs 700 crore, due to the lockdown.

Delhi Metro Rail Corporation, which operates the country’s largest metro rail network, is set to lose over Rs 500 crore in revenues by May 17, the last day of the third phase of nationwide lockdown.

 
Private operators — Reliance Infrastructure (RInfra) and Larsen & Toubro — are estimated to lose Rs 90 lakh and Rs 2.5 crore as revenue on a daily basis.

 
Services for RInfra’s Mumbai Metro the Delhi Metro were suspended on March 22 (the day of the Janta curfew). A nationwide lockdown for three weeks was announced on March 25. Since then, the lockdown has been extended twice by the Centre, with the new extended day now set at May 17. Operations for L&T’s Hyderabad Metro was suspended on March 25 and continues to remain suspended.

According to estimates, RInfra, so far, would have lost Rs 41.4 crore for 46 days and L&T’s net revenue loss was Rs 105 crore for 42 days. Both companies did not comment. The revenue loss was arrived at based on available figures.

 
According to its latest annual report, DMRC generated a revenue of Rs 6,461.52 crore in the year 2018-19, including income from traffic operations, real estate, consultancy and external projects as against Rs 6,210.94 crore in 2017-18. Under the business head ‘Traffic Operations’, Rs 3,582.80 crore was earned during the year, against which the expenditure incurred was Rs 2,558.56 crore yielding an operating profit of Rs 1,024.24 crore.

 
The revenue from fare box collection for FY19 stood at Rs 3,119.02 crore and other revenue was to the tune of Rs 3,342.5 crore. Metro systems earn revenue from both charging fares from passengers and non-fare box collections. These include advertising and leasing of space at stations to eateries and other commercial activity.

Japan International Cooperation Agency’s (JICA’s) loan, amounting to Rs 3,026.21 crore was received during the year. DMRC made the repayment of JICA loan amounting to Rs 622.71 crore in 2018-19 and interest amounting to Rs 440.92 crore was paid to the Centre. DMRC was unavailable for comment.

The Consulting Engineers Association of India (CEAI), the apex body of engineering professionals in the country, in a letter to finance minister Nirmala Sitharaman, urged the government to declare Covid-19 as a force majeure event for all infrastructure consultancy contracts under implementation. This is because both parties – neither the client nor the consulting companies – are able to meet contractual performance in ongoing projects.

 
According to experts, metro contracts cover political events under force majeure. “For metro, political force majeure-related costs will be reimbursed fully by the government. Indirect political event cost is to be shared equally between the concessionaire and the government. Options like extension of concession period and revenue shortfall loan provision are also available for concessionaires,” said Shubham Jain, senior vice-president and group head for ICRA.

Force majeure clause is a contractual provision that addresses circumstances in which contractual performance becomes impossible or impractical due to events that could not be foreseen, and are not within a party’s control.

 
However, it is not clear whether fare revenue loss-related compensation will come in. A top official from Mumbai Metropolitan Region Development Authority said he is not sure if the fare loss for Mumbai Metro will be covered under force majeure. The official had earlier said compensation for under construction road projects will be decided through discussion at a later stage.

 


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