NITI Aayog finds serious flaws in Silver Line project, says proposed cost less than half of what it should be

It now appears that the Kerala government's recent move to take preliminary steps to acquire land for the ambitious Semi High-Speed Rail Corridor (Silver Line) project is a classic case of jumping the gun, a highly premature move.

NITI Aayog, the country's policy think tank, has informed Kerala, even before it set in motion the acquisition process, that the project's fundamental concept was "incorrect" and its estimated cost was a huge underestimation.

NITI Aayog says the project cost would, in reality, be more than double the estimated cost of Rs 64,941 crore. Even by its conservative estimate, the project cost would be a whopping Rs 1.33 lakh crore. It has also raised serious doubts about the project's funding model.

NITI Aayog's sanction is not required for railway projects, or for that matter any major infra projects, but its recommendations will form the basis of the decisions taken by the various ministries of the Union government.

Unviable mixed traffic design

In a detailed note sent to Kerala on September 30, NITI Aayog faults the 'mixed traffic' design (passenger and freight) mooted for the Silver Line project. The need to cater to the more demanding freight traffic, NITI Aayog says, would call for more severe infrastructure specifications. "It will render the cost extremely prohibitive," it says.

The two services are also not compatible. While the freight trains have lower average speed, the affordability of the passenger segment would be very low. It will be hard to strike a balance between commercial interests and operational efficiency. Therefore, NITI Aayog says it would be virtually impossible to run the project viably.

Further, it would turn out to be hugely costly to transport goods along the corridor. This is because there will be no interoperability between the Silver Line and the Indian Railway (IR) system.

The freight trains on Silver Line will move only along this corridor and, if goods have to be transferred to the trains on the IR track, transhipment terminals will have to be constructed. "This will make the transportation cost-prohibitive and defeat the very goal of cost-efficient freight transportation," the NITI Aayog note says.

The mixed design could also be a technical hazard. "Operation of mixed services impact the track infrastructure significantly thereby requiring extensive maintenance," the NITI Aayog note says. Kerala's proposal does not have a dedicated maintenance window. High-speed trains, according to NITI Aayog, need continuous maintenance.

Artificially dwarfed project cost

The national think tank was especially critical of the project cost. The proposed per-kilometre cost of the project is Rs 120.77 crore, which NITI Aayog says is "severely low when compared to similar projects."

For Delhi-Meerut RRTS (regional rapid transit system) Project, which like the Silver Line is a semi high-speed regional rail but lengthier, has a per-km cost of nearly Rs 370 crore. For metro rail projects with even leaner specifications, the average cost of completion works out to Rs 269 crore per km, which is more than double the cost estimated for the Silver Line project.

NITI Aayog says the per-km cost for the Silver Line project should be pegged higher than even Rs 250-300 crore. Even if the per-km rate is pegged at Rs 250, the project cost for the proposed 529.45-km line would be Rs 1.33 lakh crore.

Masking land acquisition costs

The land acquisition costs in the detailed project report (DPR) is also found to be a huge underestimate. The plan is to take over 1383 hectares of land, of which nearly 85 per cent (1198 hectares) is private land.

According to the National Highway Authority of India (NHAI), the cost of land acquisition is highest in Kerala. The NHAI estimates an expenditure of over Rs 22,000 crore for acquiring 1200 hectares in Kerala while in the DPR for Silver Line the cost estimated to acquire a larger area of 1383 hectares is only Rs 13,000 crore.

Further, NITI Aaayog itself had analysed land rates in 50 project-affected villages in nine districts of Kerala and came to this conclusion: "Cost of acquisition assessed in DPR (detailed project report) is underestimated.

Too much to expect from Railways

NITI Aayog also expressed serious doubts about the ability of the Ministry of Railways (MoR) to provide equity investment. The project funding has been envisaged as a debt-equity of 85:15 with the MoR taking up almost 5 per cent of the equity.

The MoR has agreed to offer technical advice to the project but NITI Aayog points out that the ministry has not given any commitment regarding equity. It further noted that the ministry was already burdened with its own shelf of projects and said it was finding it hard to fund its operating expenditure and expansion plans. . "Expected investment of Rs 2150 crore of equity from the MoR may not be forthcoming," the NITI Aayog report said.

Finance Ministry's rejection

The Silver Line project had suffered a big jolt even before NITI Aayog made such adverse remarks. The screening committee of the Department of Economic Affairs, Union Ministry of Finance, had on August 18 rejected the Kerala government's request to seek the financial assistance of Rs 33,699.80 crore from the Asian Development Bank (ADB).

The screening committee's verdict was clear: Drop the Silver Line project, at least till the ongoing projects and those in the pipeline were completed.

Here is what the minutes of the Finance Ministry says: "After deliberations, the screening committee decided to drop the proposal advising the state government that the existing pipeline projects may be concluded before taking up new projects and advising the ADB division to utilise the loan for some other state where demand exists."

A simple error that could be rectified

However, V Ajith Kumar, the MD of Kerala Rail Development Corporation Limited (KRDCL), the entity formed to implement the Silver Line project, had a different take on the Finance Ministry's comments. "They have not asked us to drop the project. What they have done is only to reject the request for an ADB loan that we had made," the KRDCL MD said. 

He said it was an error in the loan amount quoted that led to the rejection. "We had wanted only Rs 7000 crore but we ended up asking for Rs 33,698.80 crore. We will correct this and re-submit the application," he said.

When probed about the NITI Aayog comments, he sought to play it down: "Those are routine concerns raised for which we will give the necessary clarifications." Fact is, Nit Aayog wrote its detailed note to Kerala after securing the state's response to the various queries it had iNITIally raised about the Silver Line project.