Metro projects to produce Rs 800 bn opportunities over next 5 years

Metro rail projects will produce Rs 800 billion of opportunities for construction firms over the next five years, according to the Icra research report.

In India, 15 cities have functional metro networks of approximately 746 km, while another seven cities of about 640 km have under-implementation metro rail projects. This apart, 1,400 km of metro projects worth Rs 2 trillion are in the clearance and proposal stage. Of these, 352 km of the new metro rail network have been approved, with the remaining being in the proposal stage.

Given the government’s thrust for infrastructure development, the metro network is expected to see 2.7 times expansion in the next five years. Typically, the metro rail development cost varies between Rs 280 and Rs 320 crore per km for elevated metro, and the price could be much higher in the case of an underground metro rail network. Civil construction forms 35%-45% of the overall expense.

ICRA, corporate ratings, sector head & assistant vice president Abhishek Gupta said given the large size of the metro rail projects, this is likely to present sizable opportunities for construction firms over the next five years.

Due to the existence of a limited number of players in the industry, the competitive intensity has so far remained mild with no signs of aggressive bidding as seen in other infrastructure segments like railways, roads, etc.

As per Icra’s research, nearly 58% of the projects were awarded at a premium over the base price, with 14% of the projects granted at over 20% premium. While 42% of the bids were granted at a discount; the majority of these were at a nominal discount, and only 7% of succeeding bids were at over 25% discount.

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