Cost- benefit analysis of Bangalore metro phase- 1
Student name: Ms Shivani Malhotra
Guide: Prof M.N. Murty
Year of completion: 2013
Host Organisation: Institute of Economic Growth, New Delhi
Abstract: The public Transport system in modern India is experiencing excruciating pressure. Because of
growing population and increasing pace of urbanization most cities today are affected by rising
congestion and depleting ambient air quality. Hence there was need for alternative mode of public
transport system which not only eases out the growing pressure but also improves the urban
ecosystem.
Public Transport projects are highly capital intensive though they have significant economic
benefits like, reduction in air pollution and noise pollution, reduction in road accidents and
congestion, saving in travel time and petrol expenditure, they are heavy in terms of their
investment requirements and there is always a doubts over its financial viability. Though public
transport is a state responsibility, even the government wants to secure certain minimum returns
on its investment so as to at least break-even. Although social and economic benefits always
offset the financial returns, these projects need to have certain minimum level of returns for
implementation.
Bangalore is the IT hub of the country and one of the fastest growing cities. It‟s rising economic
status and population is indeed affecting its transport infrastructure. This led to the inception of
Bangalore Metro project. Like any other infrastructure project this too involves heavy investment.
This study is thus an aim to undertake the cost-benefit analysis of Bangalore metro project in
terms of its financial feasibility for the city. The methodology involves using the discounted cash
flow technique to calculate financial returns accruing to the implementing organization over the
life cycle of the project. The viability is thus ascertained by undertaking ex-ante and ex-post
evaluation of Financial Internal Rate of Return (FIRR) for the project.
