New Concerns Arise Over Excessive Subsidies in Tunnel Road Project
BENGALURU: The North-South Tunnel Road project, already a subject of controversy, has encountered a new concern: the Tunnel Road Detailed Project Report (DPR) is recommending subsidies that exceed what is necessary for the project's viability.
The draft DPR, released in September 2024 (Volume 1), stated that the entire project is financially viable with a 30% subsidy, ensuring an internal rate of return (IRR) of at least 15%. However, the draft concession agreement for the Tunnel Road project specifies that the state government will cover 40% of the project cost. This discrepancy has raised questions among experts and stakeholders.
The draft DPR clearly shows that the project can meet its profitability targets with a 30% subsidy. So, the question arises: why is the government paying 40%? This has prompted calls for greater scrutiny of the project's financial arrangements.
The project includes the development of 'Intermodal Interchange Hubs' designed to facilitate seamless transfers between various modes of transport, such as buses and the Metro. These hubs will feature modern amenities like escalators, elevators, clear signage, emergency exits, and wide platforms for safe passenger flow. Additional amenities include comfortable seating, clean facilities, Wi-Fi, charging stations, and retail outlets to enhance the commuter experience.
According to the agreement, the concessionaire will have 100% rights over the profits generated from the intermodal hubs for 25 years. They will also have rights over ancillary revenues, supported by a maximum floor space index (FSI) of 5.
Experts argue that the 40% subsidy, when combined with the concessionaire's rights over real estate revenues, effectively increases the government's financial burden. Satya Arikutharam, an independent mobility expert, highlighted this issue, stating, “The capital costs of this project have increased by 50% since it was first proposed last year, without any significant changes in scope. Calculating subsidies based on unreliable cost estimates is fraught with dangers.”
Arikutharam further explained, “The subsidy offered by the government is closer to 70% than the stated 40%. This is because the concessionaire gets 100% rights over the real estate revenues with minimal investment and can also reduce costs through value engineering.”
Environmental activist and Bangalore Environment Trust trustee Dattatraya Devare added another layer of concern, stating, “This adds to the long list of issues already raised, including environmental, geological, hydrological, and potential damage to Lalbagh, a heritage site. The quantum of subsidy is yet another critical question that needs to be answered.”
As the project moves forward, stakeholders are calling for a transparent and thorough review of the financial and environmental impacts. The government's decision to provide a higher subsidy without a clear justification has further fueled public skepticism about the project's true benefits and costs.
