Title - Betterment Charges to fund the viability gap in NCR Rapid Rail Connectivity

he ambitious NCR Rapid Rail Connectivity project that aims to connect Delhi with Alwar, Panipat and Meerut depends on betterment charges for its majority positive cash-flows from start of operation year 2017. The one time betterment charge proposed along the three corridors would be applicable every time the property in the identified area is bought or sold.“The rationale behind imposing betterment charges is that the citizens become partners in development of concerned area”, said Ashwini Parashar, Vice President, Delhi Integrated Multi-Modal Transport Systems (DIMMTS) which is involved in making the detailed project report.NCR Rapid Rail connectivity project has proposed two models to implement the betterment charges. One is based on the percentage of the circle rate, paying 5% during the construction period of the proposed Rapid Rail Corridor and 5-7.5% during the operational period of the Rail Corridor, depending on the type of property. Every time a property is bought or sold the specified percentage would be paid to National Capital Region Transport Corporation (NCRTC). NCRTC was recently formed with participation of four state governments.Other option floated is the fixed rate square metres basis charging Rs 1,000 per square metre during construction of the rail connectivity project and between Rs 1,000-1,500 during operational period of rapid rail corridor, depending upon the type of property.

Planned to be completed through the PPP model- the private partner would be responsible for rolling stock, signalling, elevated stations, operations and management and generates majority of its revenues through fares. On the other hand, the only source of income for the government or NCRTC would be the betterment charges. On the Delhi-Meerut corridor, the cash-flow sheet shows that NCRPB would be in red by 2021 making losses of Rs 179 crore for that year and continue to remain in red till 2036.

In 2017, the project feasibility report expects cash-flows of Rs 608 crore at Panipat line and Rs 498 crore at Meerut line, the only source of cash flows expected till 2046 for the NCRTC. These betterment cash flows are expected to provide the oxygen to the National Capital Region Transport Corporation (NCRTC) till 2045 with no alternative source of funding to repay the soft loans.

This heavy reliance on betterment charges raises questions of financial sustainability for the project. At many instance courts and governments have withdrawn betterment charges amidst local resistance. Officials working on the project are positive over this way of generating revenue. “We have kept the projections reasonably conservative and that should make our projections realistic” says an official working on the project.

Betterment charges in India were planned to be imposed when Delhi Metro was in the initial stages, the proposal was never accepted by the Delhi government. Similarly Bangalore High Court struck down a Bangalore Municipal Council circular for collection of uniform circular charges that it wanted to collect for widening of roads and other amenities.

Ghaziabad development authority has also passed similar betterment charges on any new construction in the metro influenced area, charging 15% of the hiked property cost. This money would be used to fund the Ghaziabad Metro development and help Ghaziabad development authority to raise funds for its share of metro fund amounting to about Rs 1016 crore