SilverLine DPR poses questions on viability, puts LDF on backfoot

Anil S

THIRUVANANTHAPURAM: The Detailed Project Report (DPR) of the LDF government’s pet SilverLine project raises questions on its financial viability. With an estimated project cost of Rs 63,940.67 crore and completion period of five years as per the March 2020 data, the Economic Internal Rate of Return (EIRR) for the project has been calculated at 24.04% in 50 years. 

A glance at the executive summary of the DPR shows that the total daily ridership has been estimated as 79,934 by 2025-26. As per the assessment, by 2052-53, the ridership would go up to 1,58,946. As per the fare box revenue estimates, passenger revenue has been calculated at Rs 2,276 crore in 2025-26, which will go up to Rs 81,139 crore by 2072-73. Similarly, the revenue from RORO freight traffic has been estimated at Rs 237 crore in 2025-26, going up to Rs 3,844 crore by 2072-73. 

The calculated 24.04% EIRR in 50 years comes to Rs 19,020 crore Economic Net Present Value (ENPV) at 14%. This includes benefits from a slew of other factors, including savings in travel time, vehicle operation cost, reduced environmental pollution, accidents and savings reduced road stress. 

A Sensitivity Analysis shows that in a worst-case scenario, where there’s a 15% increase in capital cost and reduction in benefits, the EIRR could go down to 17.36% which would be around Rs 7,619.99 crore of ENPV. As per the DPR, since the project EIRR is more than 14% -- which is the specified social cost of capital -- the project is considered economically viable. 

However, experts say the DPR raises questions on the financial viability of the project. “There’s  no clarity on estimated revenue figures. The primary revenue would come from fares. The financial calculations are based on the five-year period (2020-2025). We are already entering 2022. There would obviously be a delay in project implementation, and hence the financial calculations are bound to change,” said Nishank from the Centre for Financial Accountability Delhi, who has done a study on the project. 

He said the EIRR calculations mentioned in DPR do not take external economic factors into account such as cost overruns, inflation, possible economic recession in the long run and changes in economic landscape in other countries from where international loans would be taken. 

“Five years ago, the project calculations did not cater for the still raging Covid pandemic that has had an unprecedented impact on how global economies currently function. Fifty years is a long duration,” he said.
Economist B A Prakash too observed that the project has not taken ground realities into account.

A government which has been reeling under financial crisis should think about the financial scenario too. “The EIRR is calculated based on purely assumptions. The project has been envisaged without considering ground realities that tend to lag road and rail projects for long in the state. The doubling and electrification of the railway line from south to north have not been completed for 20 long years,” he said.

Going by the existing scenario and data, the DPR is not realistic, said John Samuel,  Congress state policy head. “It’s going to be a development mirage. The cost projection of Rs 64,000 crore is just not possible. Similarly, the ridership of 79,934 per day is highly overrated. It defies all logic. The present timeline is unrealistic. Talking of actuals, land acquisition in itself would take a couple of years. It’s impossible to even begin the project by 2024,” he said.