CHAPTER I
Introduction
1.1 Need for Mass Rapid Transit System in Delhi
1.1.1 In order to mitigate the growing traffic and transport problems in Delhi, the Government
of National Capital Territory of Delhi (GNCTD) [formerly known as the Delhi
Administration] commissioned RITES Limited in 1988-89 to study the feasibility of
introducing an Integrated Multi-modal Mass Rapid Transit System for Delhi. In 1990, RITES
recommended a Mass Rapid Transit System (MRTS) comprising Rail corridor, Metro
corridor and dedicated Busway for a total network of 198.50 Kilometres (Kms).
1.1.2 The Central Cabinet in July 1994 gave go-ahead in principle for the MRTS for Delhi as
per the RITES Feasibility Report and directed GNCTD to take up the preparation of a
Detailed Project Report (DPR) for the MRTS. DPR for construction of a 55.30 Kms MRTS
comprising rail and metro corridors was finalised by RITES in May 1995, which was
envisaged to be completed in March 2005.
1.1.3 Till 1995, more than 70 metropolitan rail systems existed in the world and Kolkata
Metro, India's first and Asia's fifth, was commissioned on 24 October 1984. Though the
construction of Kolkata Metro was marred by inordinate delays and caused considerable
public inconvenience, it provided many valuable inputs for planning and execution of the
Delhi MRTS.
1.2 Approval of MRTS Phase I
1.2.1 The Union Cabinet sanctioned implementation of the Delhi MRTS Phase I (Project) of
55.30 Kms in September 1996 at a total cost of Rs. 4859.74 crore (April 1996 prices). As per
the Cabinet sanction, three lines as shown in Table-1 were planned to be constructed.
Table 1
Planned Routes and Corridor of Delhi MRTS Phase I
Line No. Route Corridor Type Length (Kms)
1.2.2 The Project as actually constructed, however, comprised routes and types of
corridors as shown in Table 2 below:
Table 2
Constructed Routes and Corridor of Delhi MRTS Phase I
Line No. Route Corridor Type Length (Kms)
1.2.3 The first section of Line 1 was commissioned in December 2002, while the last section
on Line 3 became operational in November 2006. The map indicating the routes as envisaged
in the original approved DPRs vis-à-vis actually constructed is shown in Annexure I. The
revised approved cost of the Project was Rs. 10571 crore (September2005).
1.2.4 The supervisory levels for the implementation of the Project as approved by the Cabinet
in July 1994 were as under:
• A Group of Ministers♣ was constituted to take policy decisions and to review the progress
of the Project from time to time. The Lieutenant Governor of Delhi was made a permanent
invitee to the Committee. This Group of Ministers was to be chaired by the Prime Minister or
such Minister as he might nominate.
• The Empowered Committee constituted under the Chairmanship of the Cabinet Secretary
with six♥ Secretaries, Chairman Railway Board, Chief Secretary GNCTD and representative
from the Prime Minister’s Office. This Committee was empowered to consider various issues
arising from time to time with reference to funding and implementation of the Project.
• Incorporation of the Delhi Metro Rail Corporation Limited as a company under the
Companies Act 1956 to execute and operate the Project.
1.2.5 The financing plan for the Project stipulated a debt equity ratio of 2:1. Annual
contributions towards equity were to be made by the Government of India (GOI) and the
GNCTD at the rate of Rs. 103.60 crore per annum each; the long term loan was to be raised
on suitable terms from Japan Bank for International Cooperation (JBIC), formerly known as
the Overseas Economic Co-operation Fund (OECF) at an interest rate not exceeding three per
cent per annum; and the balance of the project cost over and above
♣ Ministers for Finance, Home Affairs, Railways, Urban Development, Surface Transport
and Environment & Forests, and Deputy Chairman, Planning Commission
♥ Finance, Home Affairs, Planning Commission, Urban Development, Surface Transport
and Environment & Forests
the equity and debt finance was to be raised from property development, which wasestimated
at six per cent of the revised project cost (April 1996 prices).
1.3 Delhi Metro Rail Corporation Limited
1.3.1 Delhi Metro Rail Corporation Limited (the company) was registered (May 1995) under
the Companies Act, 1956. The Managing Director (MD) and two Functional Directors joined
in November 1997 and June 1998, respectively. The total paid up capital for the Project,
contributed equally by the GOI and the GNCTD, was Rs. 2928 crore as on 31 March 2008.
1.3.2 Secretary, Ministry of Urban Development (GOI) is the part-time Chairman of the
company and five part-time Directors each, representing the GOI and the GNCTD are also on
the Board of Directors (BOD) of the company. As on 31 March 2008 the Board of Directors
had a membership of 16 including six functional Directors.
1.4 Concessions provided to the company
As the Project was not considered commercially viable, the GOI provided the following
concessions to it:
• Land belonging to various Government agencies was provided at interdepartmental transfer
rates. The cost of land amounting to Rs. 504 crore was shared equally by the GOI and the
GNCTD. It would be recovered as interest-free debt after repayment of loan raised from the
JBIC.
• The long-term debt required for the Project was raised by the GOI through a loan agreement
executed (February 1997) with the JBIC at concessional rate of interest and transferred to the
company. The JBIC committed a loan of Rs 6359 crore to the Project which is to be repaid by
the company in 30 years with a moratorium of 10 years with effect from February 1997.
• Exchange rate fluctuation risk for the period of repayment of foreign loan was to be shared
between the GOI and the GNCTD, equally.
• Exemption from property tax and electricity tax.
• Exemption from import duty, excise duty, sales tax and works contract tax.
• No dividend to be paid on Government equity till the JBIC loan is fully repaid by the end of
30th year.
1.5 Audit objectives
Audit objectives were to assess that:
• selection of corridors and routes, and modifications in routes were carried out keeping in
view economic viability and effectiveness of the Project;
• proper analysis of the prevailing technologies relating to various segments of the Project was
carried out to obtain best possible option;
• the contract management was done with due care and economy, works were awarded in a
transparent manner and at competitive cost, execution and supervision of works was carried
out efficiently and the services and goods were procured timely, efficiently and economically;
and
• an adequate mechanism was in existence to monitor the Project, to ensure timely completion
of works and conformity of works executed with laid down specifications.
1.6 Scope of audit
The performance audit covered various activities relating to the implementation of the MRTS
(Phase I). Significant issues relating to the above audit objectives were examined in 28
contracts valuing Rs. 6540.03 crore out of 100 high value contracts (for more than Rs. five
crore) valuing Rs. 8900.57 crore.
1.7 Audit criteria
Audit criteria identified for the purpose of the performance audit for different activities of the
MRTS (Phase I) were:
• Detailed Project Reports.
• Memorandum and Articles of Association of the company.
• Delegation of Powers.
• Provisions stipulated in the Contract Agreements.
• The JBIC guidelines in case of the JBIC funded works.
• Decisions of Cabinet, Group of Ministers and Empowered Committee.
• Agenda papers and minutes of meetings of the BOD.
• Guidelines and instructions issued by the Department of Public Enterprises and the
Department of Economic Affairs.
1.8 Audit methodology
The performance audit was carried out in accordance with the CAG’s Auditing Standards and
Performance Audit Guidelines. The performance audit started with an entry conference with
the management in March 2007. The draft Audit Report was issued to the management in
February 2008. The audit findings and recommendations were presented in a meeting of the
Audit Board held in May 2008 with the representatives that included all the functional
Directors of the management. Replies from the management have been received and suitably
incorporated in the Audit Report. The draft Audit Report was issued to the Secretary (Urban
Development), the GOI and the Chief Secretary, GNCTD in July 2008; their replies have not
been received as of September 2008. A team from the Indian Institute of Technology Delhi
(IIT) was engaged as technical consultants to assist in the examination of certain technical
matters relating to this performance audit. The IIT examined the issues of contract
management, selection of technologies and selection of routes and corridors. The results of
audit together with the findings of the IIT are mentioned in Chapters II to VI of this Audit
Report.
1.9 Acknowledgement
Audit acknowledges the cooperation and assistance provided by the management at all levels
at various stages of the audit.