The Comptroller and Auditor General of India has flagged serious financial weaknesses in the Bangalore Metro Rail Project, identifying a ₹6,603.39 crore overrun in land acquisition costs. According to the CAG report tabled in Parliament, the auditor scrutinised 117 contracts covering Phase 1 and Phase 2 of the rail project by Bangalore Metro Rail Corporation Limited (BMRCL). The report concluded that the corporation planned, valued and financed the project poorly, leaving commuters underserved and the exchequer exposed.
The CAG report highlighted significant problems with land acquisition planning and execution. As reported by the auditor, land requirement for metro corridors was not properly assessed, leading to improper estimation and acquisition delays that drove the substantial cost increase. Additionally, BMRCL paid ₹294.7 crore in excess compensation after 46 landowners converted farmland to non-agricultural use around the time detailed project reports were filed. The auditor noted that actual peak-hour peak-direction traffic for Phase 1 in 2021 ranged between 6,429 and 8,852 passengers - far below the 15,000 threshold that justifies a Heavy Metro system.
The report revealed serious financial sustainability issues for the metro project. According to the CAG findings, BMRCL is completely dependent on the Karnataka government to service the debt raised for the project as of March 31, 2023. The auditor noted that in view of insufficient revenue to meet External Debt Repayment obligations due to continuously incurring cash losses during the period from 2013-14 to 2021-22, the corporation faces significant financial challenges. Despite investment of about ₹40,000 crore in Phases 1 and 2, the governments and BMRCL had not been able to deploy Value Capture Financing principles effectively.
The CAG report includes several key recommendations for improving the project's financial and operational sustainability. As reported by the auditor, recommendations include using value created by Metro investments to generate resources for future projects and ensuring land earmarked for property development becomes available in time. The CAG urged that ridership be estimated realistically using the city's mobility and transit-oriented development plans. Additionally, the auditor suggested that BMRCL should adopt a systematic approach while determining the project timeframe to ensure a time-cost trade-off to derive the most optimum time at which the cost is the lowest.
