COMMENTS ON RISKS IN METRO PROJECTS

CHAPTER 10

COMMENTS ON RISKS IN METRO PROJECTS

10.1 General Comments

1. Government commitment to the project and willingness to take on a share of the

risk and provide a degree of comfort regarding political risk, etc., to financial
partners is very much required.
2. There is a requirement for high power committee at central level exclusive for
metro project keeping in mind the amount of problems it is facing and the number
of project is planned to be executed all over INDIA.
3. As the project involves interest of its entire stakeholder and the local citizen for
whom it would be dream come true. Views of all this parties including
environmentalist should be considered which will help in mitigating many risks
beforehand.
4. Technical risks related to utility diversion, geotechnical conditions and change in
alignment will have heavy impact on cost, which may increase the cost up to 1.5
times the original cost.
5. The contract should be so prepared that risks are allocated to parties most able to
manage them, priced fairly, and met with effective mitigation strategies.
6. Risk related to ridership has to be dealt with great care as not much example is
there when metro rail project has achieved estimated ridership.

10.2 Comments on Risk Mitigation

1. Project risk management strategy and risks mitigation plan should be established
as soon as possible so that the executing team remain in position to mitigate it
beforehand.
2. Cohesion and good cooperation among relevant government agencies and
ministries is very important to mitigate future risks.

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 COMMENTS ON RISKS IN METRO PROJECTS

3. Insurance covers just a part of the risk and therefore company should have a
strong risk mitigation plan at first.
4. Insurance policy provides part coverage only, therefore instead of taking more
than one different policies it is better to have tailor made policy.
5. There is a requirement of legal framework for metro project as a whole. Some acts
are available but they are having some limitations.
6. Sometimes taking soft loans takes away the advantage of truly harnessing the
potential of competitive domestic and international construction and equipment
vendors market, because except DFID (Department for International
Development), there is no bilateral aid, which is not tied up to the export from the
donor country. It is estimated that hidden cost of being tied up to the donor
country’s equipment vendors and construction companies takes away whatever
interest differential advantage is available. So this risk is also kept in mind.
7. To reduce the chances of default from subcontractor like, Breach of Contract or
inferior quality of work, etc. making them the stakeholder in the project is
recommended.
8. If the time overrun and cost over-run are minimized through strong project
management than a lot of money can be saved which is a major problem metro
project in and outside India is facing.

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