Performance Audit on Implementation of Phase 1 and Phase 2 of the Bangalore Metro Rail Project, Bangalore Metro Rail Corporation Limited

Findings

1. Peak hour peak direction traffic on Phase 1 in 2021 ranged between 6,429 and 8,852 against the 15,000 threshold at which a heavy metro is the recommended mode — and no study was done to show how ridership could be improved to justify that investment.

   “as per the norms for selecting mode of transport issued by Working Group on Urban Transport in May 2011, Heavy Metro should be proposed if the Peak Hour Peak Direction Traffic (PHPDT) in 2021 was more than 15,000 for at least 5 km continuous length, else Bus Rapid Transit System should be proposed. Audit noticed that Phase 2 could not be implemented as of 2021 and actual PHPDT achieved in 2021 for Phase 1 was far below the projections (below 15,000) and ranged between 6,429 and 8,852. Despite above, there was no study to show how ridership could be improved to justify investment in Heavy Metro.”Executive Summary

2. Phase 2 project reports were prepared without the comprehensive mobility plan, transit oriented development plan or land use policy the national urban transport policy requires; those plans were approved only in September 2020 and November 2022.

   “Though National Urban Transport Policy (NUTP), 2006 framed by the Ministry of Housing and Urban Affairs (MoHUA), GoI emphasized preparation of Integrated Land Use and Comprehensive City Transport Plans, DPRs for Phase 2 (May 2011/ July 2011/ September 2011) were prepared in absence of the Comprehensive Mobility Plan (CMP), Transit Oriented Development (TOD)/ Land Use Policy (LUP)… The CMP and TOD Plan for Bengaluru were approved by GoK in September 2020 and November 2022 respectively.”Executive Summary

3. The financial and economic rates of return for both phases were computed on ridership that turned out to be overestimated, no sensitivity analysis was done for lower ridership, and no study was made of why ridership was low.

   “For Phase 1 and Phase 2, the Financial Internal Rate of Return (FIRR) and Economic Internal Rate of Return (EIRR) were calculated based on ridership figures which appeared to be overestimated as the envisaged ridership could not be achieved. Sensitivity Analysis for different levels of ridership was not conducted. Moreover, no detailed study had been done to understand the reasons for low ridership.”Executive Summary

4. Land requirement was misjudged in both phases' project reports, and poor estimation with acquisition delays raised the cost of land by ₹6,603.39 crore as of 31 March 2023 — ₹835.81 crore in Phase 1 and ₹5,767.58 crore in Phase 2.

   “Land requirement for metro corridors was not properly assessed in DPRs of Phase 1 and Phase 2 metro projects… Further, improper land estimation coupled with delays in acquisition resulted in increase in cost of land acquisition by ₹6,603.39 crore (Phase 1: ₹835.81 crore and Phase 2: ₹5,767.58 crore) as of 31 March 2023.”Executive Summary

5. Because Karnataka issued no preventive orders while Phase 2 project reports were being submitted, 46 landowners converted agricultural land to non-agricultural just before or after submission and were paid more; loose valuation added ₹294.72 crore of excess compensation, delay in notification added ₹186.86 crore of interest, and higher-than-prescribed frontage premiums added ₹31.35 crore.

   “Unlike Phase 1, Government of Karnataka did not issue preventive orders when DPRs for Phase 2 Reaches were under submission. As a result, 46 landowners converted their lands from agriculture to non-agriculture lands just before submission of DPR or just after submission of DPR, resulting in BMRCL paying additional compensation… This resulted in excess payment of land compensation to landowners to the extent of ₹294.72 crore… BMRCL paid additional compensation at 12 per cent of market value as interest to the extent of ₹186.86 crore… resulting in payment of excess compensation of ₹31.35 crore.”Executive Summary

6. The corporation had no procurement manual, so cost estimates were prepared inconsistently and there were no guidelines for project duration, package size, tender periods or advances to contractors.

   “BMRCL did not have a Procurement Manual due to which there was no uniformity in preparation of cost estimates. There were no established guidelines for deciding project duration, size of Package, time period allowed for sale of tender documents and for regulating release of advances to contractors and fixation of interest rates on advances.”Executive Summary

7. Cost estimates for nine Phase 2 civil contracts included ₹1,098.28 crore of taxes while bidders were told to bid excluding taxes and the estimates were never revised, raising project cost by ₹1,222.40 crore.

   “BMRCL prepared cost estimates for Phase 2 contracts inclusive of all taxes but instructed the bidders to submit bids exclusive of taxes without revising its cost estimates by excluding the tax components. Audit observed that taxes amounting to ₹1,098.28 crore were included in the cost estimates of nine civil contracts resulting in increase in project cost by ₹1,222.40 crore.”Executive Summary

8. Land was handed to contractors 12 to 1,305 days beyond the 90-day contractual limit in 13 contracts, and in five of them contractors claimed ₹98.21 crore in damages, of which ₹12.19 crore has been paid.

   “during tendering for Phase 2 works, BMRCL amended the tender terms to include payment of damages to the contractor for delays in handing over of land beyond 90 days from the date of signing the contract agreement. Audit noticed delays in handing over the land in 13 contracts which ranged between 12 and 1,305 days (beyond the allowable 90 days). In 5 out of 13 contract, the contractors raised claims to the tune of ₹98.21 crore, out of which ₹12.19 crore has already been paid against one claim.”Executive Summary

9. The corporation ran cash losses continuously from 2013-14 to 2021-22, so its revenue cannot meet external debt repayment and it depends entirely on the Karnataka government to service project debt.

   “Audit observed that BMRCL has been continuously incurring cash losses for the period from 2013-14 to 2021-22, Hence, the revenue generated by BMRCL is insufficient to meet the External Debt Repayment obligations and BMRCL is completely dependent on GoK to service the debt raised for the project as of 31 March 2023.”Executive Summary

10. Phase 2's viability rested on ₹21,282 crore of projected property development income from 55 hectares that had still not been acquired as of March 2023, and of 2.46 lakh sq ft of commercial space built in stations only 0.23 lakh sq ft was in use, losing ₹38.53 crore of lease income over 2019-22.

    “financial viability of corridors under Phase 2 was considered, with income projections of ₹21,282 crore from Property Development in an additional 55 hectare of land during the years from 2016-17 to 2041-42. However, 55 hectare of land is yet to be acquired as of March 2023… BMRCL developed built-up area of 2.46 lakh sft in the Metro stations for Property Development, of which only 0.23 lakh sft had been utilised for Property Development/commercial activity, while the remaining 2.23 lakh sft built-up area had been lying vacant for years, thereby losing the opportunity to earn Non-FBR (lease rent) of ₹38.53 crore during the period 2019-22.”Executive Summary

11. Rails were procured with hardness between 260 and 330 Brinell at 34 of 36 locations against a 340-390 standard, which the audit warns may raise maintenance cost, noise and vibration and shorten rail and wheel life.

    “Rails of relatively low value of hardness (ranged between 260 and 330 BHN in 34 of the 36 locations), as compared to standards (340 – 390 BHN), were procured, which may result in increased maintenance cost as well as increase in noise and vibration as well as increase in energy loss arising due to high friction/traction and decreased life of rails and wheels.”Executive Summary

12. Five Phase 1 stations were built alongside national highways with no foot over bridge or underpass to reach them; three were added later, and at Peenya and Peenya Industry bridges were found infeasible on height clearance.

    “BMRCL constructed Metro stations at Nagasandra, Peenya, Peenya Industry, Jalahalli and Dasarahalli of Phase 1 alongside of National Highways without Foot Over Bridge (FOB)/ under pass to access the metro stations. Though FOBs/ under pass in case of Nagasandra, Jalahalli and Dasarahalli could be constructed subsequently, FOBs at Peenya and Peenya Industry were not found feasible due to vertical height clearances.”Executive Summary

Fact-checks citing this report

• ◑Lacks contextIn the next five years, we will ensure that 50 cities are covered with a strong metro network.