Sreedharan, in a letter to the Planning Commission on the Hyderabad Metro project, had not only questioned the sanctity of its BOT model but also warned that it would lead to a scam of sorts. “Apart from the fact that this might lead to a big political scandal sometime later, it is apparent that the BOT operator has a hidden agenda which appears to be to extend the metro work to large tracts of his private land holdings so as to reap a windfall profit 4-5 times the land price,” Sreedharan stated in the letter.

Countering this in a hard-hitting reply, the Commission said the charge that the Hyderabad project could lead to a political scandal was a mere suspicion “which have not been supported by any facts or evidence.”

“The DPR prepared by the DMRC recommended the BOT route for the Hyderabad Metro and this recommendation was adopted by the Andhra Pradesh government. Till the award of the contracts, no doubts related to the BOT mode of execution were expressed by DMRC,” the Commission stated, reminding Sreedharan that DMRC was consultant to the project.

To cast doubts that the PPP model (public-private partnership) would not succeed in Hyderabad project may not be valid and in any case the government did not have resources for funding such capital-intensive projects, the Commission said.

Trashing the DMRC chief’s arguments that the BOT route is expensive and would only benefit private parties and not the state, the Commission pointed out that indirect subsidies, a financial burden on the government, was more in case of the Delhi Metro model. It said that the Delhi Metro required an investment of Rs 10,000 crore from the exchequer whereas Hyderabad required no such investment.

“It is not correct that Delhi Metro is not putting a financial burden on the two governments. In fact it has received several benefits such as large waiver of taxes, duties, elimination of exchange rate risk on external loans¿ All these concessions to DMRC are actually costs to the government. Moreover, when replacements become due and loan repayments peak, the government may have to provide additional subsidy to Delhi Metro as well. If a true comparison is to be made then all these hidden subsidies must be evaluated and brought at par,” the Commission said.

The DMRC, sources said, has been extended long-term loan of approximately Rs 6800 crore for its first phase at less than 2 per cent interest, while its rolling stock and equipment have been excluded from customs and excise duties. Moreover, DMRC has been granted prime land in Delhi for the purpose of real estate development apart from the land made available for the project while no separate real estate has been made available in the case of the Hyderabad project. They have been allowed to exploit upper floors over maintenance depots for commercial use.

“Real estate revenues have in fact helped finance Delhi Metro since not only part of construction cost but also large part of operating costs are being funded out real estate revenues,”” the Commission said, pointing out that the DMRC model totally lacked transparency and accountability.

“¿it is neither accountable to the Central government/Parliament nor to the state government/ legislative assembly and follows neither Central government rules nor state government rules. Creating such organizations sans accountability and financing them from the public exchequer is open to serious questions and legitimate criticism,” the Commission said.

In his letter, Sreedharan had pointed out that Metro projects should not be left to the state government for planning and execution, as it would be difficult to achieve standardization and uniformity essential to reduce cost.