Arbitration payment to Reliance Infrastructure (RInfra) is going to hit Delhi Metro Rail Corporation (DMRC) hard, as the loss-making metro body will have to shell out over Rs 5,000 crore as loan repayment with interest to Airport Express Line.
Earlier this month, the Delhi High Court directed DMRC to service the entire debt of RInfra. "As per the interim order, DMRC will have to start servicing Delhi Airport Metro Express Private Ltd's (DAMEPL) debt to 11 banks, which had lent to the infrastructure major's subsidiary to run the Airport Express Line," said RInfra's spokesperson.
DMRC refused to comment on the arbitration amount payment to RInfra and stated that "the matter is subjudice".
In August 25, 2008, DMRC and RInfra had signed concession agreement wherein the former was to undertake civil works, excluding the depot, while the project system works were to be executed by DAMEPL. The project was commissioned on February 23, 2011 after an investment of over Rs 2,885 crore by DAMEPL.
On June 30, 2013, DAMEPL handed over the project, which DMRC claims RInfra had abandoned and did not allow it to remain shut forever. Later in August 2013, arbitration process commenced.
DAMEPL's total debt amounts to Rs 1,618 crore, apart from the capital infused by RInfra into the project.
The court observed that DMRC cannot shy away from paying 80% of the debt owed by RInfra's subsidiary DAMEPL to the banks.
"Given their financial situation, DMRC will have to arrange funds from extra-budgetary resources to pay to RInfra. Secondly, it will take about 5-7 years for them to clear this amount from their balance sheets," said a Mumbai-based analyst to DNA Money.
DMRC's losses, borrowings and finance cost has been piling up every year, and now with Delhi High Court's judgement the debt level to service will further hurt its financials. As of March, India's largest metro operator is supposed to pay Rs 5,164.79 crore to RInfra's subsidiary DAMEPL.
During the fiscal period 2012-13, DMRC registered a net loss of Rs 90.90 crore, after having earned Rs 2,687.48 crore from fares and non-fares. In the same year, its borrowing stood at Rs 19,175.70 crore while interest and finance cost was Rs 216.55 crore.
In 2016-17, the metro operator's net loss widened to Rs 229.35 crore, despite an increase in revenue to Rs 5,387.98 crore. However, borrowings shot up to Rs 34,173.64 crore on higher capex incurred by the company to reach into more areas of Delhi. Similarly, its interest and finance cost also increased to Rs 240.12 crore during the period.
Further, the network size increased from 8.5 km in 2002 to 190 km in 2012-13 and from 217.87 km in 2016-17 to the current 252 km. In order to create the fourth largest metro network in the world, the plan is underway to expand the network to about 360 km on completion of third phase later this year.
Thereafter, it wants to add another 104 km as part of its fourth phase and the same is under the consideration of the government. Of the six lines proposed as part of Phase 4, DMRC has also sought the approval of three corridors as priority sections. These sections being Tughlakabad – Aerocity (20.20 km), RK Asram – Janakpuri West (28.92 km) and Maujpur – Mukundpur (12.54 km).
In order to implement these plans, DMRC will have to take more debt on its books, and hence ways to increase revenues and cutting down losses will be key.
"In order to keep the organisation afloat this amount may even come from the government resources in the form of either grant, aid or debt. Earlier, even for the expansion plans, the union government has extended finances," said an ex-DMRC official.
Of the total Rs 5,164.79 crore of arbitration payment due last month, Delhi High Court had directed DMRC to pay Rs 306 crore to consortium of banks to ensure that Delhi Airport Metro Express's account doesn't turn into non-performing asset by March 31. However, DMRC is yet to transfer the amount, prompting RInfra to once again move the court to get metro operator's accounts attached.
Due to financial crunch the organisation has been taking several measures for years now; one such innovative method to cut capital expenditure is a move to lease 25 metro trains under a new Public-Private-Partnership (PPP) model instead of buying them for its day-to-day operations. Under this arrangement, DMRC will not be required to make an upfront capital expenditure apart from spending on maintenance of the trains for a period of 30 years, but would have to pay on an hourly basis of the trains made available for ferrying passengers.
If this PPP experiment is fruitful, DMRC has plans to call for as many as 100 more coaches. Given the exponential increase in ridership, the metro operator requires around 916 more coaches to ferry passengers, leading to a capex requirment of around Rs 13,000 crore.
TROUBLED LANE
- Delhi Airport Metro Express Private Ltd's total debt amounts to Rs 1,618 crore
- DMRC will have to start servicing DAMEPL's debt to 11 banks
- As of March, India's largest metro operator is supposed to pay Rs 5,164.79 crore to RInfra's subsidiary DAMEPL
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