Fresh concern over subsidy in Tunnel Road project
BENGALURU: Of the array of concerns associated with the controversial North-South Tunnel Road project, a new one has now emerged that the Tunnel Road Detailed Project Report (DPR) is recommending subsidies beyond what is needed for viability.
The draft DPR (September 2024, Volume 1) stated that the entire project is viable with a 30% subsidy, ensuring an internal rate of return (IRR) (an estimate of the profitability of investments), which in this project is a minimum 15%, is met.
However, the draft concession agreement for the Tunnel Road project stated that the state government will cover 40% of the project cost. But the draft DPR showed that the project is already financially viable with just 30% support and meets the profitability requirements. This has raised questions, because if at a 30% subsidy, the builders’ profits would meet the required targets, why is the government paying 40%?
There are ‘Intermodal Interchange Hubs’ that are being built as part of the project, which include facilities for seamless transfer between buses, Metro and other transport modes. They feature escalators, elevators, clear signage, emergency exits and wide platforms for safe passenger flow. Amenities include comfortable seating, clean facilities, Wi-Fi, charging stations, and retail outlets to enhance commuter convenience. As part of the project, the concessionaire is required to develop two intermodal hubs that will serve as large transit-oriented complexes.
The agreement also stated that profits from the proposed intermodal hubs give the builder 100% rights over the profits made for 25 years. In addition, the rights over ancillary revenues, supported by a maximum floor space index (FSI) of 5, are also given to the builder.
Experts argued that when the profitability conditions are already met at a 30% subsidy, the increase to 40% warrants greater scrutiny.
Speaking to TNIE, Satya Arikutharam, an independent mobility expert, said, “The capital costs of this project since it was mooted last year have seen a 50% increase without any significant change in scope. Calculating subsidies based on unreliable cost estimates is fraught with dangers.”
“The subsidy offered by the government is really closer to 70% than the stated 40%. This is because the concessionaire gets 100% rights over the real estate revenues with negligible investments and can also reduce costs through value engineering,” he added.
Environmental activist and Bangalore Environment Trust trustee Dattatraya Devare noted, “This adds to the long list of concerns already raised that includes environmental, geological, hydrological, and potential damage to Lalbagh, a heritage site. Quantum of subsidy is yet another critical question that needs to be answered.”