Mumbai harbour link funding gets FinMin nod

The finance ministry was earlier unwilling to grant viability gap funding as per the original terms of the concession agreement proposed by the Mumbai Metropolitan Region Development Authority (MMRDA),which is implementing the project,despite its unique risks.

The 22-km MTHL,for which the MMRDA has shortlisted five consortia,has been in the planning stages for more than three decades and has gone through two failed rounds of tendering in the past.

In the first meeting held in September,the ministry had asked the authority to treat the sea link as a road and reduce the proposed concession period. Officials from the ministry had also said that the internal rate of return for the project should be 15 per cent.

“However,we explained to them that this is a very risky project and hence the rate of return needs to be higher. So we have agreed on the internal rate of return to be 17 per cent,” said Rahul Asthana,metropolitan commissioner at MMRDA.

Other than the rate of return,the parties have agreed on having the concession period as 35 years instead of the 45 originally proposed by MMRDA,or the 30 that the ministry was insisting on.

Likewise,the termination clause in the concession agreement will come into effect only after 30 years into the concession period. The authority can invoke the clause based on certain conditions such as the capacity being higher than expected. These conditions will be reviewed during the 20th year of the concession period.

The ministry was keen to push the model concession agreement for road contracts to be applied to the sea link because of the flexibility the state will have to call for bids for capacity augmentation once MTHL reaches peak capacity.