executed between 1999 and 2002 A.D. (Fig. 3.1-2, Fig.3.1-3) The second phase is planned to be taken up by UBTSL only after the commercial success and viability of Phase One are established.
It is well known from experience around the world that MRT systems are financially unviable due to their extremely high capital costs and the need to charge low fares. The revenue from fares alone is inadequate to repay the capital costs and meet the operating costs as well. For this reason, transit systems have traditionally been funded entirely by the Government, with little or no reference to the financial viability of or returns from, the project. As a result, MRT systems require substantial financial support from the Government in some form every year to keep them operational.
However, where the Government is unable to build the system on its own, private sector investment becomes necessary, and this is invited in a number of ways. One of them is the BOOT (Build-Own-Operate-Transfer) arrangement, under which the private sector will provide the major part of, or even the complete funding for, the project and will build, own and operate the system for a given number of years under a Concession from the Government.
This will allow the Concessionaire to recover his investment and get adequate commercial returns on it.
At the end of the Concession Period, the transit system may be transferred free, or at some agreed cost, to the Government. However even in such a case, the financial participation of the Government is essential if the project implementation is to be successful. This can be by providing financial guarantees for minimum return on investment or by actual injection of funds (equity loans, annual subsidies or grants, etc.)
The Bangalore ELRTS was estimated in 1994 to cost about Rs. 4,200 crores which included the interest during construction and provisions for inflation, but excluded the cost of (Government-owned) land. The revised cost for the Project is being estimated, based on current prices, by UBTSL as part of the Detailed Feasibility Study, but it is expected to be considerably more than the 1994 figure. The UB Group Consortiurn will be given a Concession to own and operate the ELRTS for 30 years after it is commissioned. During the Concession Period, they will recoup their investment and get adequate returns on the same. The land on which the system is built will be leased to the Concession Company for the same duration as the Concession Period, and on expiry of the lease, the ownership of the ELRTS and all its facilities will be transferred to the State Government free of cost.
However, in the case of the Bangalore ELRTS, neither the State nor the Central Government is giving any financial guarantees to UBGC. It is proposed that UBGC will provide nearly 75% of theprotect cost and the Government will supply the balance of about 25% in the form of equity and subordinate debt. The subordinate debt with accrued interest will be repaid by the Concession Company after its senior debt (or commercial borrowings) is repaid. This
