prefeasibility studies on urban transport, cochin, india · 4. from an urban and transport planning...

Prefeasibility Studies on Urban Transport, Cochin, India

June 2010 Executive Summaries of Investment Proposals for Ferry Services, Priority lanes and Pedestrian Precincts Prepared by Global Works

Cities Development Initiative for Asia P a g e | 2

i. Investment Proposal 1 – Ferry Services A. City and District Profile 1. Cochin is the second most important port city on the western coast of India. It is located in the Ernakulam district of the central region of the State of Kerala, along the Arabian Sea and Vembanad Estuary. The city is well connected to other parts of the country with transportation systems of air, road, rail and waterways. The National Highway NH-47 passes through the city‟s central business district (CBD), while NH-49 and NH-17 originate from the city. The Cochin International Airport is located 32 km from the city centre. The Greater Cochin Development Authority (GCDA)1 covers an area of 732.11 square kilometres (km²) and has a population of 1.933 million, while the Cochin Urban Area covers an area of 345.88 km². The jurisdiction of the Cochin Corporation (Corporation) extends over an area of 94.88 km². In 2001 it had a population of 596,000. 2. Cochin is unofficially referred to as the „economic capital‟ of Kerala by volume of trade. In recent years, the city has witnessed heavy investments, thus making it one of the fastest-growing second-tier metro cities in India. Cochin‟s urban configuration includes several island residential communities scattered along its western coast and in the backwaters of Kerala. This configuration is unique to Cochin and highlights the crucial role of water transport in providing mobility for these island communities. The city has a long background in the fishing industry and has relied on water transport since the early days of settlement. 3. The modern development of Cochin has been closely linked to the creation of an all-weather port on Wellington Island in 1940, as well as the extension of rail and road networks to and from the port area. Since then, the area has developed rapidly; attracting industries, commercial establishments, work centres, public/semi public institutions and retail trading centres. This investment proposal for ferry services will dramatically improve water transport services and facilities for Cochin‟s island communities and mainland residential colonies, significantly enhancing their access to the urban facilities of the growing Cochin urban area. B. Investment Proposal Rationale 4. From an urban and transport planning perspective, Cochin is at a crossroads. In the face of increasing levels of congestion, Cochin‟s urban area continues to expand. The rate of growth in private vehicle ownership, combined with the inadequate road network is unsustainable. The city has grown in a largely unplanned fashion, with major growth along the key highway arterials towards the east. Private sector led development is rapidly outstripping the capacity of the Government sector to provide for the transport sector in the future. Consequently, numerous transport network links and intersections in and near the CBD are either at capacity or exceeding it; a situation will progressively worsen. 5. Cochin owes its recent economic development to its island communities; primarily the role of the port in the formation of the harbor, and ongoing developments along the shores of the backwaters. Historically, ferry transport was the key mode for passengers and for transporting farm produce and seafood to markets due to the city having an extensive network of water canals which penetrate into the urban area. In fact Cochin has over 60 jetties located in the backwaters. Promoted as a tourist destination, the backwater and island communities have therefore long relied on water transport to access the mainland. With increasing commercial development and rising private vehicle ownership however, there has

1 The GCDA is the planning and urban development Authority for the metropolitan area of Cochin.


subsequently been a „policy shift‟, resulting in island communities being connected to the mainland with road bridges. 6. These road connections caused a substantial shift from ferry to road based transport. The continuing modal shift from ferries to the roads sector is exacerbating congestion levels. In 2008, over 2,200 daily bus departures were recorded from key island locations to the mainland (figure opposite) carried passengers, many of whom previously relied on the ferry network. The estimated daily passenger demand for ferry services is 18,000. This is despite ferry journeys taking less than 20 minutes compared with up to one hour by bus. Despite the substantial potential for passenger ferry travel, there is little being done to maintain market share. 7. Vessels are in a poor state of repair; and public jetties and ferry terminals are run down and lack essential modern passenger facilities2. With the road connections between the islands and the mainland becoming increasingly congested and in a constant state of poor repair, the option for a revival of the ferry mode is rapidly becoming a reality. Such a revival would provide fast and direct connections, and assist in relieving congestion pressures on key arterials. Improved ferry services will therefore play an increasingly important strategic role in serving the future travel demands and improving the overall mobility of the island residents. This is of crucial importance, as the primary employment areas are located on the mainland, and commuting demands across the backwaters to service these employment activities will increase over time. 8. This ferry services investment proposal emanates from a wider, strategic review of Cochin‟s transport sector, undertaken by CDIA at the request of the Cochin Corporation. This review has determined there is an unmet demand for travel between the island communities and the mainland. The target daily capacity of this ferry services investment proposal is 100,000 passengers. This is therefore a substantial investment project. This growth in ferry travel will generate substantial reductions in carbon emissions3. With the natural beauty of the backwaters, there is an added opportunity for the tourism market to be developed. Finally, this investment will contribute to delivering an environmentally sustainable transport system which is in accordance with the objectives of National Urban Transport Policy. C. Technical Description and Aspects 9. The ferry services investment proposal comprises ferry and terminal upgrades for five of Cochin‟s island ferry routes. These routes have been selected due to their significant passenger demand potential, and their overall strategic importance in promoting transport system integration. The five route upgrades include a total of 15 new or improved ferry terminal facilities, and the provision of twelve purpose-built, low wash type catamaran passenger vessels, which are fast, versatile and efficient. 10. The upgraded terminals will include, (i) floating pontoons with islands, (ii) covered walkways from the vessels to the waiting areas, (iii) either terminal waiting areas or covered „at-shore‟ pontoon waiting areas, (iv) pedestrian ramps, and (v) site landscaping and cosmetic improvements. The terminal facilities will be modern and efficient, yet low cost, and provide completely covered walkways to the vessels. The floating pontoons are the basis for the design of all terminals, and are illustrated as follows.

2 Other than at Ernakulam and the High Court

3 Especially from Chittoor, on the Goshree Bridge, on the NH47 from Thopumpady and from Thevara.


11. The proposed vessels are low wash type catamarans referred to as Kochi Cats. These purpose built vessels will include the following technical specifications: (i) capacity – 163 passengers, (ii) length, beam and draft are 25.5, 7.6 and 1.42 metres respectively; (iii) clearance – 8 metres;(iv) displacement - 35 tonnes; (v) operating speed – normal at 18 knots, maximum at 25 knots; (vi) hull – aluminium; (vii) deck and upper section – fibreglass. Due to their speed and carrying capacity, and to the efficiency of the pontoon loading/unloading systems, the Kochi Cats will provide a dramatically improved ferry service in terms of safety, comfort, speed and reliability. The Kochi Cats are illustrated as follows.

12. The estimated capital cost of this ferry services proposal is US$ 49.5 million. The location of the proposed five ferry services routes are shown overleaf.


C. Economic Analysis 13. The economic analysis has identified the following project costs and benefits, and sensitivity analysis:

14. The evaluation indicates that the ferry services investment proposal is expected to be economically viable, with the calculated EIRR values exceeding the economic opportunity cost of capital. The sensitivity analysis demonstrates the robustness of this result, with the investment proposal being economically viable even when a combination of sensitivity assumptions is tested. The calculated EIRR value is also considered to be conservative, as there are a number of economic benefits that have not been quantified, such as tourism benefits, and reduced pollution leading to a cleaner city.


D. Financial Analysis 15. A financial analysis was carried out using existing fares in the range of Rs 6 to 10 depending on the route; existing parking charges of Rs 10 (for cars) and Rs 3 (for two wheelers); and existing commercial space monthly rents (Rs 500 per square meter). For analytical purposes, an increase of 15% every third year has been considered in respect of fees, parking charges and rents. 16. The assumptions and approach used in the calculation of the FIRR include, (i) all revenues and costs are stated at constant 2010 prices, (ii) all revenues and costs are calculated on an incremental basis, that is, the difference between “with investment proposal” and “without investment proposal” situations, and (iii) investment proposal capital expenditures are recognized at the time they are incurred during the period of implementation. Sensitivity analyses have also been carried out to determine the possible effects of adverse changes on the investment proposals. The key variables considered in the sensitivity analysis are, (i) 10% increase in capital costs, (ii) 10% increase in operation and maintenance (O&M) costs, (iii) 10% decrease in revenues, and (iv) the worst case scenario. The results of the FIRR calculation and sensitivity analyses are summarized as follows.

17. The ferry services investment proposal appears financially viable with a combined IRR of 14.0% for the total investment proposal. This FIRR is higher than the Weighted Average Cost of Capital (WACC), which under different financing scenarios ranged from 2.9% to 5.7%. The results of the sensitivity analysis underline the robustness of the investment proposal even under unfavorable scenarios of sensitivity. In all the above scenarios, the returns are also considered sufficient to attract private sector investment if so desired. 18. Both the economic and financial analyses rely on the assumed patronage being achieved. Further surveys of existing and potential customers will be required to confirm the patronage assumptions before any decision to invest is made.


E. Financing Options and Public Private Partnerships 19. There are potentially several public and private sector financing options available for the US$49.5 million required for this proposal. Two public sector options are considered here as well as the option for private sector funding. The first public sector option is through the JnNURM program, which would include grant funding from both the National Government (50%) and State Government (30%); with the balance (20%) to be provided by the Corporation as its own equity provided from its own resources, 20. from the State Government, or from private modalities. This option would naturally include applications to the National and State Governments, together with convincing justification of the benefits of the investment package and the high priority nature of it. 21. The second option is to secure international donor funding, such as through the partners of the CDIA. This would include a donor-funded loan or loans, with an equity contribution provided through the Corporation‟s own resources, the State Government or from private modalities. Such donor funded loans vary in type, duration, repayment schedule, costs, interest rates and other parameters, and would require a detailed proposal which conforms to the application requirements of a particular funding agency. The potential also exists to supplement conventional loan funding by parallel grant funding from donor agencies. 22. There are also options for private sector funding. Several of Cochin‟s ferry services are currently operated by the private sector. Although these services face many challenges and only provide a marginal level of service, they do demonstrate that a PPP enabling environment does exist in Cochin, and that the private sector is able to operate in the ferry subsector with some degree of sustainability. In addition, several private sector groups have already expressed interest to run additional ferry routes, further demonstrating the potential for expanded and enhanced PPP involvement in the sector. In the national context, the Indian Government fully recognizes role the private sector can play. As a result, PPP is evolving as a viable option for infrastructure investment and operations, and there is commitment and willingness at all Government levels to promote and support PPP. At the local level, PPP is recognized by the Cochin Corporation as a viable modality for infrastructure investment and provision, and to date there have already been several modest PPP innovations in Cochin‟s transport sector. 23. As a consequence, there are a number of viable of options available for the funding and delivery of this proposal. These are summarised below and should be further evaluated by the Corporation during the subsequent feasibility assessment phase;

23.1. Secure investment financing through Government programs or international donor agency support, while considering further the potential for private sector financing through BOT modalities. .

23.2. In the event that the investment proposals are financed through Government

or international donor agency financing, then consider carefully the various options available under competitively bid, performance based PPP operations contract modalities.

23.3. Develop the necessary skills and capabilities to properly manage the PPP

contracts throughout the procurement, design, build and operations stages of the initiative.

F. Investment Proposal Benefits


24. A SWOT analysis has been used to evaluate the strengths, weaknesses, opportunities and threats of the proposed ferry services investment. This analysis is summarized as follows.

25. A PLEST analytical framework has been used evaluate the investment proposal in terms of political, legal, economic, social and technological constraints. This analysis is summarized as follows.

26. Beneficiaries from investments in the ferry network include the general community and current operating staff. The poor and socially excluded island residents will benefit significantly from the investment proposal through, (i) better accessibility to the city, their workplace, and other activity centres, (ii) affordable transport alternatives to travel into the city, (iii) better living conditions and reduced pollution, and (iv) potential employment opportunities arising from investment construction and operations. These benefits have been identified and allocated against the three primary physical components, namely ferry services, ferry terminals and supporting park and ride facilities. The following figure summarizes this information.


G. Social Due Diligence 27. The efficiency, reliability and mobility provided by a modern ferry system will have a direct and profound impact on island communities where street systems are narrow and there are limited alternative modes of transport. Improvements in transport and mobility options have been proven to help reduce poverty levels in these often isolated communities. Where new residential colonies are being established along the backwaters, modern water transport facilities provide a viable option for travel to the CBD. The household interview survey undertaken during this study confirmed these observations. Key findings of the social policy analysis are provided on the following figure


H. Investment Proposal Institutional Arrangements 28. The investment proposal requires an integrated proposal of measures covering demand forecasting, vessel standards, infrastructure design, community engagement, legal and capacity building expertise. These skills are currently lacking in the Corporation. Therefore, for implementation purposes, an institutional structure with these skills and supporting accountabilities will be required. While there is merit in the model which advocates a single all encompassing agency (the Urban Mass Transit Authority model), this is considered premature for Cochin. For the immediate future, there is a recognised value in co-ordination committees in the development and implementation of sector improvements. This is a model which is in place in Cochin and irrespective of the effectiveness of this model, is considered a basis for the immediate future on the basis of it being a familiar model to start with. In addition, such a familiar model gives everyone a sense that their role in the sector is not being diminished. 29. A co-ordinating committee, nominally referred to as CAFE Implementation Committee (CIC) with the correct level of empowerment is considered be the most practical option for the immediate future. Such a committee would in turn oversee an Agency charged with the delivery of the policies developed and projects sanctioned by the CIC. This Agency could be formed by drawing personel and resources from existing Agencies involved in the transport sector. It would be supported by a CAFE implementation cell, resourced for the specific purpose of front line delivery of the proposal. Alternatively, Special Purpose Vehicle (SPV) could be established by the Corporation with the specific mandate to implement the proposal. These model options are illustrated in the following figures.


30. It will be the responsibility of the Corporation to make the decision on the appropriate model for Cochin. Whatever decision is made, the body will need to be the Nodal Agency for all matters relating to the delivery of this proposal and other responsibilities addressing master planning of urban development and the provision of sustainable urban transport outcomes which conform with and support the National Urban Transport Policy. I. Climate Change Analysis 31. The climate change analysis considered emission savings and climate change proofing of the proposal. The emission savings focused only on GHG emissions for the proposal. The climate proofing analysis considered the measures required to offset the effect of climate change on the investment in the proposal. The net total emission savings over a five year period for the proposal is expected to be 38,000 tonnes of CO2. On an annual basis, the net emissions savings will be approximately 7,500 tonnes. The following figure provides a breakdown of the contribution of the elements to this saving.


32. The impact of the effects of Climate Change on the transport sector is summarised in the following figure. This highlights components requiring attention during design and operation of the ferry proposal.

33. Based on these anticipated impacts, the climate proofing actions required for the ferries and the complementary land infrastructure for this investment proposal are identified in the following figures


J. Risks 34. A number of potential risks have been identified during the PFS, which relate directly to the development and implementation of this investment proposal. While there is widespread support for the overall ferry investment proposal, individual components may be subject to risks during their development and implementation. Subject to the assumptions documented in the PFS, the key risks and potential responses are as follows:

34.1. Institutional and Political: The political landscape has numerous weaknesses in relation to the ability to implement projects in a timely and consultative manner. For successful implementation of this initiative, it is essential that this aspect be corrected and remains in a corrected state. Where external union influence, which has the effect of hindering the implementation of the proposal on unsustainable grounds is likely, measures should be put in place to manage this process in a more proactive manner. 34.2. Public Compliance and Enforcement: There is a history of non compliance with established regulation. As a result, there is a general acknowledgement within both the private and public sector that public compliance and enforcement is a fluid situation and is available to substantial variations in “interpretation”. It will be therefore be important for this issue to be addressed and corrected so that the public trust in the ferry sector can be reinstated and the market for travel be re-established and maintained. Regarding service performance, it will be important for the relevant agencies to develop operation and maintenance manuals for the ongoing compliance and enforcement regimes. This will assist in bringing much needed transparency to the process.


34.3. Public Confidence and Support: Many of the elements which have sapped public confidence and support are related to the political process and the practice of “settling” disagreements and non compliance issues without the need for litigation. This issue needs to be corrected. 34.4. In addition much of the cause of the erosion of public confidence is as a result of the practice of agencies failing to engage the community in a proactive manner and encouraging widespread involvement in project planning, design and delivery. This aspect can be addressed relatively easily through a simple realignment of staff attitudes and practices so that as a first priority, the affected community is consulted early rather than later in the process. In addition, where issues potentially affect the project, genuine and proactive procedures need to be developed as a basis for project delivery. With the community being included as part of the solution, rather than (as is often the current view) being part of the problem, project risks will lessen, both in number and in intensity. Without this support, there could be a risk to the proposal. 34.5. Agency Capability: There is a direct relationship between the technical capability of an agency and the ability of that agency to articulate in a clear and logical manner, the benefits of projects and programs. In the context of this proposal, the ability of the Corporation to market it to both investment partners and the public, will be intimately associated with the technical ability of the agency and the staff involved. Unless the Corporation improves its current level of technical capability to plan, design, procure and manage procurement contracts, there may be a significant risk to the project. This risk may manifest itself in funding shortfalls and reduced revenue streams through reduced public support. 34.6. Contingent Liability Risk: There is strong potential for this proposal, or at least some routes, being implemented under a PPP model. There are are financial risks in developing and implementing PPP based infrastructure projects. The financial commitment required of the Corporation for this proposal has a fiscal cost and this represents a risk if the Corporation is required to provide an operating subsidy. Any capital cost guarantees if required from the Corporation also create obligations to make payments (even if in extraordinary circumstances). As the ultimate underwriter of a PPP, the Corporation may be faced with assuming the full financial responsibility for the project in the event that the private sector partner withdraws for financial reasons (ie the project is considered poor value for money). Therefore the key challenge for the Corporation is to achieve the right balance between risk and reward.

35. Overall, the investment proposal risk is rated at this pre-feasibility stage as being low. The proposal does not have any widespread political or institutional opposition, and there is widespread public support for the improvements proposed. In addition, a substantial effort has been directed at assessing the financial capacity of the Corporation to participate financially in the project. None of these have raised any significant concerns from a risk perspective. The key risk is more related to the processes and practices of the Corporation in relation to project preparation and delivery. It is this aspect that will require a focus of attention so that there is ongoing support of the public for the proposal. Risk mitigation will be the key in successful proposal delivery. Whatever mitigation measure is determined, it must be framed to include the principles of openness and transparency, trust, legal soundness, and being good for business. A compromise on any one of these principles could have serious consequences for the delivery of the proposal and its relevant components.


ii. Investment Proposal 2 – Priority Bus Lanes A. City District and Profile 1. Cochin is the second most important port city on the western coast of India. It is located between 9º 52' and 10º 10' North Latitude and between 76º 14' and 76º 21' East Longitude, in the Ernakulam district of the central region of the State of Kerala, along the Arabian Sea and Vembanad Estuary. The city is well connected to other parts of the country with transportation systems of air, road, rail and waterways. The National Highway NH-47 passes through the city‟s central business district (CBD) while NH-49 and NH-17 originate and radiate outwards from the city. Cochin is 220 km north of Thiruvananthapuram, the State Capital. The Cochin International Airport is 32 km from the city center. The Greater Cochin Development Authority (GCDA) area, which encompasses the majority of the urbanized area, covers 732 square kilometres (km²) and has a population of 1.933 million, while the more centralized Cochin Urban Area covers an area of 346 km². The jurisdiction of the Cochin Corporation (Corporation) extends over an area of 95 km², and in 2001 had a population of 596,000. 2. Cochin is unofficially referred to as the „economic capital‟ of Kerala by volume of trade. In recent years, the city has witnessed heavy investments, thus making it one of the fastest growing second-tier metro cities in India. Sales tax income generated in the Cochin Metropolitan Area contributes heavily to state revenues. The city‟s economy can be classified as a business economy with emphasis on the service sector. Major business sectors include gold and textile retailing, spices, seafood exports, information technology (IT), tourism, health services, banking, ship building, and the fishing industry. The economy is mostly dependent on trade and retail activities. As in most of Kerala, remittances from non resident Indians (NRI‟s) is a major source of income. 3. The city‟s hinterland is highly industrialized, with Ambalamugal, Kalamassery and Alwaye containing many well established industries serving the needs of Kerala and neighbouring states. More recently, substantial urban developments such as the one million square feet Lulu shopping complex, Smart City, Cyber City and IT City are extending the urban footprint to the east at a rapid rate. This development is largely driven by the private sector and without the guidance of a formal planning process. 4. The Port of Cochin is the third oldest port in India and a major generator of employment for the City and surrounds. Recent construction of the international container transhipment terminal with a planned ultimate annual throughput capacity of 3 million TEU‟s4, and the liquid natural gas (LNG) plant on Vypeen Island, will project Cochin into a major trading hub linking the entire southern India area to international markets in the Middle-East and Europe. Governments‟ proposals to exploit the full capacity of the port are expected to lead to greater industrialization and employment demand in the city and surrounding areas. B. Investment Proposal Rationale 5. City Development Issues and Opportunities: In the face of increasing congestion levels, Cochin‟s urban area continues to densify and expand. The explosive growth rate in private vehicle ownership, coupled with the inadequate and constrained road network is unsustainable and represents a major challenge to Cochin‟s transport future. Due to the complexity of land acquisition for transport infrastructure, a simple and widespread „road

4 The term TEU refers to the „twenty-foot equivalent unit‟, a measure used for capacity in container transportation.


widening‟ approach is neither practical nor feasible. A paradigm shift in strategy is necessary in order to transition towards a more sustainable transport system. 6. Cochin‟s residential development has primarily resulted from the rapid parcelling of agricultural land to accommodate housing demands as a consequence of rapid growth of the city during the middle of the last century. As a result, the majority of the road network comprises narrow access roads within residential colonies, which were provided during the original parcelling and sale of the properties. Less than 5 percent of urban land is used for transportation in the city. Private sector development is rapidly outstripping the Government‟s capacity to provide supporting infrastructure, especially relating to transport. This is a situation which is destined to progressively worsen. Cochin is heavily industrialized with industries concentrated in the areas of Aluva, Kalamassery and Ambalamugal. In addition, there are also major advancements in telecommunications and IT, with several IT parks being created. With its substantial shipyard, Cochin is the State‟s industrial hub, and ongoing large scale investments include a major international container terminal, a liquefied natural gas (LNG) terminal and petrochemical complex. 7. The Government is investing heavily in Cochin thereby signalling the relative strength of the local economy and strong potential for economic growth into the future. It also highlights the important trade-gateway role that Cochin plays in linking southern India to the Middle East and European trading markets. 8. Land Use Planning and Constraints: Cochin‟s development situation is more reactive than proactive. Development occurs primarily on the basis of perceived commercial opportunity rather than through a conventional structured and scientific planning process. New urban development provides an important revenue stream for the Government and this is often (conveniently) viewed as a measure of progress. As a result, the continued eastward urban development in Cochin is largely a result of private sector led initiatives rather than being part of an overarching master plan for the area. The urban sprawl is creating growth rates in traffic of up to 10% per year and the transport network is left to cope as best as it can. 9. Urban Growth Trends: Cochin‟s primary growth areas are to the east of the city. This is primarily in response to the need to accommodate the increasing population generated by the demands of the new economic developments. This growth is being influenced by the following forces;

9.1. Development of the port, major industrial initiatives and the demand for better quality housing.

9.2. High land values in west Cochin which prohibit further residential

development in this area, 9.3. The demand for affordable housing and new commercial areas being met in

areas to the east. 9.4. Government‟s preference for greenfield developments as important revenue

streams. 9.5. Limiting brownfield developments through capping the Floor Space Index

(FSI) to 2 in Cochin. 10. Employment opportunities are growing faster than the supply of housing and allied infrastructure in their vicinity, and this population will therefore depend on the urban core for


community and other institutional facilities. The consequence of this will be that the bulk of the traffic will continue to use the limited road corridors that service the city, drawing large volumes of bus and vehicular traffic through the already congested city streets. 11. Road Transport Network: Cochin‟s transport network consists of, (i) road based transportation serving inter-city and intra-city traffic movements, (ii) rail based transportation which is meant for inter-city movement, but also serves the demand for commuter movement from and around the city, (iii) a limited network of water transportation services catering for travel from island communities to the mainland as well as travel between island communities surrounding the backwaters, and (iv) air transport that meets the inter- regional and international demand for movement. Of particular relevance to this investment proposal is the road based transport sector. 12. Cochin has three national highways (NH) that either surround it or bisect it, and connect it to the rest of the country. These are, (i) NH 17, connecting Cochin to Mumbai5, (ii) NH 49, connecting Cochin to Madurai, and (iii) NH 47 connecting Cochin to Salem and Kanyakumari. These roads are shown on Figure 1. NH 47 traverses through the heavily built-up areas of Ernakulam, Palluruthy and Mattancherry. Within the city, the function of this highway has been reduced to that of an arterial road, due to the urban area being left to develop without proactive alignment, planning or preservation strategies. A city bypass (known as the NH47 Bypass) has been constructed from Edapally, to pass through Vyttilla, Maradu and Kumbalam to rejoin the NH 47 at Aroor. This bypass connects with NH17 at Edapally for travel north to Mumbai. 13. Land allocated to roads is limited. The 614 kilometer road network hierarchy is: 3% arterial roads, 9% sub-arterial roads‟ 25% collector streets and 64% are local streets. Figure ESX highlights the extent of this imbalance which has led to substantial traffic congestion. Two agencies share primary responsibility for the maintenance of this road network. These are the Corporation which is responsible for 542 km, and the Public Works Department which is responsible for 72 km. The figure below shows this.

14. Most of the roads have poor cross-sectional components, and the limited arterial roads have only two or three lane divided carriageways. Many of them are also heavily congested with kerb parking, often reducing the operating carriageways to a single lane in each direction. Pedestrian facilities such as footpaths and pedestrian crossings are substandard across the entire urban area. The available footpaths are narrow and in poor condition, often with broken pavements, rubble piles and encroachments. Pedestrians are regularly forced onto the roadway to weave between parked and moving vehicles. Official records show that 40% of traffic deaths involve pedestrians, and 25% of these involve school

5 NH 47 also includes a link to the Cochin Port, known as NH 47A


children. Separating pedestrians and vehicular traffic for safety reasons is a critical issue that has strongly influenced aspects of this investment proposal. 15. Market Share: Vehicle ownership in Cochin is low, with only 20 cars per 1000 population, and 80 motorized two-wheelers per 1000 population. Studies show however that two-wheelers and cars account for almost 80% of the vehicles on the road, whereas they carry only 28 % of the total trips made. In contrast, buses account for less than 2% of all vehicles on the road, but carry 51% of the market. Auto rickshaws constitute 7% of the traffic, but carry only 3% of the commuters. Almost 17% walk to work. These are illustrated below.

16. Recent assessments indicate that the modal share of buses along five primary arterials of the CBD accounts for between 58% and 88% of the total passenger traffic6. The existing modal split is therefore heavily in favour of mass transportation. Conversely, the congestion currently experienced on the roads is largely a result of private transport modes. To address this issue in a sustainable manner, Cochin must consider improving the operating conditions for the bus services which carry over 50% of all passengers on the network while at the same time contributing a mere 2% of the total vehicular traffic volume.

17. The urgency for this action is underscored by the data presented below. This shows the vehicle to capacity ratio (V/C ratio) for key sections in MG Road and Banerjee Road7. The data clearly shows that with current trends continuing, the congestion levels on these road sections are forecast to rise substantially. Without mitigation, the CBD area will soon suffer gridlock, which will detrimentally impact on the city‟s capacity to continue to support

6 Including the „old‟ NH between Thopumpady and Edakochi, MG Road, Banerjee Road, Chittoor Road, and Ravipuram to High

Court and Madhava Pharmacy (NATPAC report 2008). 7 The vehicle/capacity (V/C) ratio is a measure of the relationship between vehicle flows and the design capacity of the road

section. Where the V/C ratio is 1.0, this indicates the road section is at capacity and delays can be anticipated on a regular basis. Given the variations in traffic flows along sections during peak periods, a V/C ratio of 0.85 is often taken as a signal for action to address the congestion on that section.


and indeed to attract future investments. This impact will be suffered by all levels of society and particularly the urban poor. It is the combination of the current mode share, the current trends in private vehicle ownership and the worsening levels of congestion in the CBD area that have informed the compilation of key elements of this investment proposal. 18. Inter-City Passenger Traffic: An analysis of inter-city passenger movements shows that external-to-internal, and internal-to-external trips account for approximately 40% of all passenger travel. Approximately 51% of these travel by scheduled bus services. The significance of this data is that, as is the case with intra-city travel, commuters rely heavily on bus transportation for access to employment and the range of facilities offered in Cochin. As the bus mode is the most efficient mode of travel, there is a need to ensure this mode is able to function as efficiently as possible. In this way, those that are most reliant on public transport (including the urban poor) are well catered for. It is this aspect of the travel market that has informed the development of key elements of this investment proposal. 19. CBD Parking: Parking demand for private vehicles and auto rickshaws in Cochin is primarily met by on-street parking. Most of the roads in Cochin are lined with parked vehicles, reducing the carrying capacity of the roads by as much as 50% in many cases. In addition, vehicles are also often parked in a haphazard manner, and parking maneuvers also take up additional space, stopping the traffic particularly during peak hours. This restricts traffic flow and roads that are designed as four lane carriageways effectively operate as two lane carriageways for much of the day. 20. Removal of on-street parking on key arterials to off-street parking lots will therefore substantially relieve current congestion levels. In particular, where there are high volumes of buses, the conversion of selected kerbside lanes from current parking lanes to priority bus lanes will significantly assist the flow of private vehicles by removing buses from the general traffic flow. It will also assist the flow of buses by providing a dedicated lane for their operations. The concept of park and pay is familiar to private vehicle drivers. It is therefore considered that in the absence of adequate road space, and in view of the difficulty in acquiring additional land, the concept of CBD wide park and pay strategy with adequate facilities be developed as an integral part of the CBD environment. It is this issue of kerbside parking and the need to provide an alternative in order to release kerbside lanes for bus services that has influenced the development of key components of this investment proposal. 21. Pedestrian Issues: Although Cochin has very high pedestrian traffic volumes there are few pedestrian facilities. Where footpaths have been provided, walking on them is often a safety hazard, due to the uneven, broken surfaces, the rubbish lying on them, or vehicles parked across them. pedestrians often avoid walking on them, preferring to walk on the streets. Approximately 40% of vehicle accidents involve pedestrians. To address this, a focus on improving modal priority for pedestrians has been addressed in this investment proposal. 22. Bus Services: The private bus industry dominates the bus system in Cochin. Bus carriage permits (licenses) are issued by the Road Transport Authority (RTA) for each bus. Legislation restricts licenses to a maximum of five licenses per individual and ten licenses for a corporation. As a result, the structure of the private bus industry is “atomised” with many operators possessing a single license to operate. 23. The city bus network is highly concentric, with all routes passing through the CBD. This pattern is a reflection of the growth of the city area where urban development has simply spread outwards along the main arterials over the past four or so decades. With limited road network capacity in the CBD, most bus services are routed through the three


north-south arterials of Chittoor Road, MG Road and Shanmugham Road. Bus travel to the east is either via NH47 or SA Road. A number of peak period counts were made to gauge the quantum of buses passing key locations in the CBD and to appreciate the role this mode plays in the overall passenger transport task. As the table below shows, bus volumes through key intersections in the CBD range from 300 to over 800 per peak two-hour period.

24. This data is profoundly significant, as it demonstrates how significant the current market share for bus travel is and that any investment strategy which improves bus network operations will have a significant impact on the passenger carrying capacity of that section. It is this observation that has guided the development of the bus priority lanes in this investment proposal. C. Technical Description and Aspects 25. This investment proposal comprises nine individual investment components. Each component includes a combination of innovative and high priority sub-components including, (i) priority bus lanes8, complete with necessary bus stand upgrades, integrated traffic signage and signalling (giving additional priority to buses through key intersections), (ii) dedicated and off-street park and pay sites, and (iii) zebra crossings and pedestrian overbridges (so that buses and other traffic can continue to flow while the needs of pedestrians are being met). These components are described as follows and shown overleaf. 26. Priority Bus Lanes (PBLs): PBLs are kerbside lanes which are exclusively reserved for buses and emergency vehicles. Due to the availability of road width, they will be a minimum width of 3.5 meters, and located kerbside rather than in the median lanes. The PBLs will be color-coded along their length with lane separators in order to make them clear to general motorists. Unauthorized PBL parking and driving access will be prohibited, and a fine system will be implemented to ensure its compliance. Access across the lane will be permitted at relevant locations however, in order to provide access to properties along the road and at intersections. Traffic signage will also be provided along the road, and at certain junctions, integrated traffic signalling will be included to facilitate priority bus travel through intersections. Selected bus stands will also be upgraded to more closely match demonstrated and forecasted demand.

8 A total of 36.8 km of priority bus lanes are to be constructed, including 2.0 km of elevated section.


27. Dedicated Park and Pay Facilities: These facilities are designed to provide drivers with the option of parking their vehicles at a dedicated parking site and transferring to and completing their journey into the CBD by a dedicated shuttle bus service. As the shuttle buses will use the PBL network, travel between the park and pay site and the CBD will be fast, convenient and frequent. These facilities are different from standard park and pay sites, as they have dedicated shuttle bus loading and unloading facilities as an integral part of the design. The sites will also include a priority bus lane to allow efficient shuttle bus entry and exit. Dedicated park and pay sites are summarized below.

28. Off Street Park and Pay Facilities: These facilities are conventional park and pay facilities similar to those existing in the CBD at the present time. They cater for general vehicle parking for a set fee, and provide a CBD based alternative for those who currently park along the kerb. The priority is to alleviate illegally parked vehicles in MG Road and the general parking in Park Avenue9. The locations and details of these facilities are as follows.

29. Zebra Crossings and Pedestrian Overbridges: These physical components are planned to separate pedestrians and vehicles thereby improve pedestrian safety and enhancing bus and other traffic movements at certain congested locations. D. Economic Analysis 30. The economic analysis, undertaken in accordance with Asian Development Bank (ADB) and Indian Roads Congress (IRC) guidelines, follows a standard approach of comparing the situation with and without the investment proposal. This has included assessment of capital and operating costs and benefits of each investment component; and

9 Although significant lengths of MG Road are signposted as no parking areas, illegal private vehicle parking is widespread and

tolerated by the authorities.


calculation of net agency costs, net user costs and net project benefits in order provide indicative estimates of internal rate of return (IRR) and net present value (NPV). Sensitivity tests were also completed including, (i) 20% increase in capital and operating costs, (ii) 20% decrease in benefits, and (iii) 20% increase in capital and operating costs combined with 20% decrease in benefits. The results of the analysis are summarized as follows;

31. As shown, the preliminary evaluation indicates that the investment proposal is economically viable, with the calculated EIRR values exceeding the economic opportunity cost of capital. The sensitivity analysis demonstrates the robustness of this result, with the investments being economically viable even when the combination of changed assumptions is tested. Furthermore, the calculated EIRR value is considered to be a conservative estimate as there are a number of economic benefits, including benefits for tourism and a cleaner city, which have not been quantified in the above analysis. E. Financial Analysis 32. The park and pay components of the investment proposal have been subjected to preliminary financial analysis. In the analysis, the financial internal rate of return (FIRR) has been determined in accordance with ADB's guidelines, and compared with the weighted average cost of capital (WACC) calculated under a range of scenarios. The analysis indicates that the park and pay facilities are financially viable with a combined IRR of 14.0% for the total park and pay investment proposal. This FIRR is higher than the WACC which ranged from 2.9% to 5.8% under four different financing scenarios. The results of the sensitivity analysis underline the robustness of the investment proposal even under unfavorable scenarios of sensitivity, shown as follows;


F. Financing Options and Public Private Partnerships 33. There are potentially several public and private sector financing options available for the US$ 41.3 million required for this investment proposal. The first is through the JnNURM program, which would include grant funding from both the National Government (50%) and State Government (30%); with the balance (20%) to be provided by the Corporation as its own equity provided from its own resources, from the State Government, or from private modalities. This option would naturally include applications to the National and State Governments, together with convincing justification of the benefits of the investment package and the high priority nature of it. 34. The second option is to secure international donor funding, such as through the partners of the CDIA. This would include a donor-funded loan or loans, with an equity contribution provided through the Corporation‟s own resources, the State Government or from private modalities. Such donor funded loans vary in type, duration, repayment schedule, costs, interest rates and other parameters, and would require a detailed proposal which conforms to the application requirements of a particular funding agency. This PFS already includes valuable preliminary information which can be used as the basis of initial donor funding review, supplemented where necessary by further feasibility assessment leading to funds approval. 35. The potential also exists to supplement conventional loan funding by parallel grant funding from donor agencies. This may be possible to provide additional funding for discrete aspects of the investment proposal, for example, (i) community awareness activities to promote the use of bus services through the introduction of the BRT concept, (ii) financial or other assistance for the small retail businesses locating within and near to the complementary park and pay sites, the pedestrian overbridges or along the alignment where bus stand upgrades or where the kerbside priority bus lane may affect business, or (iii) possible funding to promote the climate change agenda of the investment, due to its carbon reduction achievements and its built-in climate proofing measures such as solar panels for station lighting and BRT communications systems. 36. Most of Cochin‟s city bus services are currently operated by the private sector7. Current bus stands are partly funded by revenues received from hoardings and there is a proposal to provide additional bus stands and associated community public toilet facilities on a PPP basis. The PPP delivery of the airport, bridges and toll roads demonstrates that a PPP enabling environment does exist in Cochin, and that the private sector is able to participate in the road transport subsector with some degree of sustainability. This planned investment proposal provides an opportunity to optimize PPP involvement wherever this is of benefit. 37. In summary, the preliminary PPP conclusions at this pre-feasibility stage are summarized, which should be further evaluated by the Corporation during the subsequent feasibility assessment phase;

37.1. Secure investment financing through Government programs or international donor agency support, while considering further the potential for private sector financing through BOT modalities. The latter should include, (a) internal Government review of procedures, requirements and ramifications relating to BOT intervention, and overall interest and capabilities to proceed with BOT, (b) further assessment of private sector capacity and willingness to invest in the proposed investments, and (c) tailoring the development of one or several BOT packages in light of these findings.


37.2. In the event that the investment proposals are financed through Government or international donor agency financing, then consider carefully the various options available under competitively bid, performance based PPP operations contract modalities. At this stage, it seems potentially feasible to include the following contract packages, (a) a contract to develop a comprehensive set of infrastructure design standards for this investment proposal, (b) PPP contracts to design and build each of the 9 components of this investment proposal, (c) contracts to manage the park and pay facilities on an ongoing basis.

37.3. In association with the above contracts, technical assistance can be provided

to provide institutional strengthening to, (a) analyse and better understand the demands of the passenger market and that of the industry, (b) develop an improved level of appreciation between the Government and private sector so that reforms can be achieved based on mutual respect and cooperation, and (c) develop skills and resources to manage and monitor contracts and compliance issues in readiness for the prospect of further enhancements to this investment proposal and (potentially) the introduction of a BRT system for Cochin.

G. Investment Proposal Benefits 38. A SWOT analysis has been used to evaluate the strengths, weaknesses, opportunities and threats of this investment proposal. This analysis is summarized as follows.


39. A PLEST analytical framework has been used to evaluate the investment proposal in terms of political, legal, economic, social and technological constraints. This is summarized as follows.

40. Beneficiaries from the investment proposal are grouped according to the three primary physical components; (a) priority bus lanes and linked bus priority signals, (b) park and pay facilities, and (c) pedestrian overbridges and zebra crossings. The poor and socially excluded residents from a number of areas of the city will benefit significantly from the investment proposal through, (i) better accessibility to the city, their workplace, and other activity centres, (ii) affordable transport alternatives to travel into the city, (iii) better living conditions and reduced pollution, and (iv) potential employment opportunities arising from investment construction and operations.


H. Social Due Diligence 41. The efficiency, reliability and mobility provided by modern urban transport systems have a direct impact on local communities. Where private vehicle ownership levels are low, access to quality public transport increases the household‟s access to the employment, educational, medical and social facilities offered by the city. In doing so, it reduces the need to commit limited funds to purchase, operate8 and maintain private vehicles. In this respect, it reduces the capital strain on these households. This is most relevant in cases of the urban poor. To ensure the continued provision of quality and financially viable services for the urban poor, there is a need to ensure the buses have widespread support. When this occurs, all sectors of the community are more inclined to support the system. This then has a flow-on financial effect in that it provides a basis for continued investment into fleet and service standards. This in turn generates further community benefits and therefore additional support. Therefore, a quality bus system is an important component of city infrastructure. 42. The household interview survey undertaken during this study confirmed a widespread level of support for the range of investment components contained in this investment proposal. These are summarised in the following table.


I. Investment Proposal Institutional Arrangements 43. The investment proposal requires an integrated proposal of measures covering demand forecasting, technical standards, infrastructure design, community engagement, legal and capacity building expertise. This is irrespective of the institutional model finally agreed upon. These skills are currently lacking in the Corporation. Therefore, for implementation purposes, an institutional structure with these skills and supporting accountabilities will be required. While there is merit in the model which advocates a single all encompassing agency (the Urban Mass Transit Authority model), this is considered premature for Cochin. For the immediate future, there is a recognised value in co-ordination committees in the development and implementation of sector improvements. This is a model which is in place in Cochin and irrespective of the effectiveness of this model, is considered a basis for the immediate future on the basis of it being a familiar model to start with. In addition, such a familiar model gives everyone a sense that their role in the sector is not being diminished. 44. A co-ordinating committee, nominally referred to as CAFE Implementation Committee (CIC) with the correct level of empowerment is considered be the most practical option for the immediate future. Such a committee would in turn oversee an Agency charged with the delivery of the policies developed and projects sanctioned by the CIC. This Agency could be formed by drawing personnel and resources from existing Agencies involved in the transport sector. It would be supported by a CAFE implementation cell, resourced for the specific purpose of front line delivery of the proposal. Alternatively, Special Purpose Vehicle (SPV) could be established by the Corporation with the specific mandate to implement the proposal. These model options are illustrated in the following figures.


45. It will be the responsibility of the Corporation to make the decision on the appropriate model for Cochin. Whatever decision is made, the body will need to be the Nodal Agency for all matters relating to the delivery of this proposal and other responsibilities addressing master planning of urban development and the provision of sustainable urban transport outcomes which conform with and support the National Urban Transport Policy. J. Climate Change Analysis 46. The activities under the enhanced bus investment package result in project emissions and emissions savings in different ways. The table below outlines the project emissions and emissions saving associated with each of the activities under this proposal.

47. The climate proofing analysis considered the measures required to offset the effect of climate change on the investment in the proposal. The net total emission savings over a five year period for the proposal is expected to be 13,800 tonnes of CO2. On an annual basis, the net emissions savings will be approximately 2,600 tonnes. The following figure provides a breakdown of the contribution of the elements to this saving.


48. Based on these anticipated impacts, the climate proofing actions required for the components of this investment proposal are as follows.


K. Risks 49. A number of potential risks have been identified during the PFS, which relate directly to the development and implementation of this investment proposal. These risks are summarized as follows, and require further analysis during future feasibility assessment for the investment. Five fundamental areas of risk have been identified in relation to the investment proposal. These are summarized as follows;

49.1. Institutional and Political: As has been highlighted earlier, the political landscape has numerous weaknesses in relation to the ability to implement projects in a timely and consultative manner. These shortcomings are a reflection of the broad political background in Kerala and have been moulded by a combination of union influence and a general lack of analytical capability to address matters on a proactive and scientific basis. For successful implementation of this initiative, it is essential that this aspect be corrected and remains in a corrected state. In particular, the practice of decisions being challenged and placed before the High Court needs to be mitigated for all but critically important issues. In addition, where external union influence, which has the effect of hindering the implementation of the proposal on unsustainable grounds is likely, measures should be put in place to manage this process in a more proactive manner. 49.2. Public Compliance and Enforcement: There is a history of non compliance with established regulation. This is as much an issue of poor design and maintenance processes as an inability to adequately enforce regulations. From the enforcement perspective, this inadequacy results from a combination of capacity of an agency (technically), and the ability of an offender to “settle” the issue to avoid further legal actions. As a result, there is a general acknowledgement within both the private and public sector that public compliance and enforcement is a fluid situation and is available to substantial variations in “interpretation”. It will be therefore be important for this issue to be addressed and corrected so that the public trust in the bus sector can be strengthened and the market for bus travel be maintained. Regarding service performance, the compliance of maintenance of infrastructure will be an essential component of increasing public confidence in the sector and that of Government in being able to deliver services in the public interest. A failure to correct the problem of enforcement and compliance with adequate regulations may have a serious effect on the success of this initiative. 49.3. Public Confidence and Support: Many of the elements which have sapped public confidence and support are related to the political process and the practice of “settling” disagreements and non compliance issues without the need for litigation.


This will need to be addressed and has been commented upon above. In addition to this aspect, much of the cause of the erosion of public confidence is as a result of the practice of agencies failing to engage the community in a proactive manner and encouraging widespread involvement in project planning, design and delivery. This aspect can be addressed relatively easily through a simple realignment of staff attitudes and practices so that as a first priority, the affected community is consulted early rather than later in the process. In addition, where issues potentially affect the project, genuine and proactive procedures need to be developed as a basis for project delivery. With the community being included as part of the solution, rather than (as is often the current view) being part of the problem, project risks will lessen, both in number and in intensity. Without this support, there could be a risk to the proposal. 49.4. Agency Capability: There is a direct relationship between the technical capability of an agency and the ability of that agency to articulate in a clear and logical manner, the benefits of projects and programs. In the context of this proposal, the ability of the Corporation to market it to both investment partners and the public, will be intimately associated with the technical ability of the agency and the staff involved. Unless the Corporation improves its current level of technical capability to plan, design, procure and manage procurement contracts, there may be a significant risk to the project. This risk may manifest itself in funding shortfalls and reduced revenue streams through reduced public support. 49.5. Contingent Liability Risk: There is strong potential for the park and pay components to be implemented under a PPP model. While the Corporation is familiar with this delivery model, there remains a reluctance to engage the private sector in such public projects. With the limitations outlined above, there are financial risks in developing and implementing PPP based infrastructure projects. The financial commitment required of the Corporation for this proposal has a fiscal cost. Even if there are no immediate expenditures, the prospect of providing an operating subsidy creates a drain on the annual budget. The guarantees if required from the Corporation also create obligations to make payments (even if in extraordinary circumstances). As the ultimate underwriter of a PPP, the Corporation may be faced with assuming the full financial responsibility for the project in the event that the private sector partner withdraws for financial reasons. If the Corporation seeks to limit its financial exposure to the project by passing too many risk elements to the private sector partner, the project may become viewed as not value-for-money. In this case it may become un-bankable. Therefore the key challenge is for the Corporation to achieve the right balance between risk and reward. This will then result in a project which is both bankable and represents optimal value-for-money for both the public and private sector partners. It is considered that the identified risks regarding the PPP during implementation of the components will remain an issue unless the Corporation takes steps to accommodate the contingent liability risks for all parties to minimise the financial risk.

50. Overall, the investment proposal risk is rated at this pre-feasibility stage as being low. The proposal does not have any widespread political or institutional opposition, and there is widespread public support for the improvements proposed. In addition, a substantial effort has been directed at assessing the financial capacity of the Corporation to participate financially in the project. None of these have raised any significant concerns from a risk perspective. The key risk is more related to the processes and practices of the Corporation


in relation to project preparation and delivery. It is this aspect that will require a focus of attention so that there is ongoing support of the public for the proposal. Risk mitigation will be the key in successful proposal delivery. Whatever mitigation measure is determined, it must be framed to include the principles of openness and transparency, trust, legal soundness, and being good for business. A compromise on any one of these principles could have serious consequences for the delivery of the proposal and its relevant components. L. Towards Bus Rapid Transit (BRT) 51. The priority bus lane investment proposal will provide Cochin with a foundation for a transition to a fully functioning BRT system in the future. Such a system will dramatically increase the scope for a sustainable transport outcome for the city. This study has assessed Cochin‟s institutional capacity to plan, design, implement and manage a BRT system and in doing so, has identified a number of key tasks to undertake. These tasks are designed to provide the Corporation (and potential investors) with early guidance towards a practical long term, cost effective strategy for the development of a sustainable transport outcome by using the resources of the established bus sector. 52. In summary these key tasks are:

52.1. Undertake visits to inspect systems which have infrastructure and operational issues considered practical for Cochin.

52.2. Upgrade skills and capacities within relevant Government agencies to be able

to design, implement, manage and monitor the BRT with the due diligence and scientific rigour required.

52.3. Modernise the bus industry into a structure and operating capability which is

more relevant to the contracting model anticipated for the implementation of the BRT contracts.

52.4. Develop the necessary skills to be able to engage the community during the

planning, design and construction phases of the BRT system. 52.5. Develop a business approach to the management of the range of contracts

required for a successful BRT system. 53. When specific activities are planned for action, more detailed consideration will be required.


iii. Investment Proposal 3 – Pedestrian Precincts A. City and District Profile 1. Cochin is the second most important port city on India‟s west coast. Located in the Ernakulam district of the State of Kerala‟s central region, it is 220 km north of Thiruvananthapuram, the State Capital. The city is well connected by air, road, rail and waterway transport systems; several national highways extend through the city, and the international airport is located 32 km from the city center. The jurisdiction of the Greater Cochin Development Authority (GCDA), which encompasses the majority of the urbanized area, covers an area of about 732 square kilometres (km²), while the jurisdiction of the Cochin Corporation (Corporation) extends over an area of 95 km², which in 2001, had a population of 596,000. 2. Cochin is unofficially referred to as the „economic capital‟ of Kerala. In recent years, the city has benefited from major investments, making it one of the fastest growing second-tier metro cities in India. Sales tax income generated in the Cochin metropolitan area contributes considerably to state revenues. Major business sectors include gold and textile retailing, spices, seafood exports, tourism, information technology (IT), health services, banking, ship building, and the fishing industry. As in many parts of Kerala, remittances from non resident Indians (NRI‟s) are also a major source of income. The city‟s hinterland is highly industrialized, with Ambalamugal, Kalamassery and Alwaye containing many well established industries serving the needs of Kerala and the neighbouring states. More recently, substantial urban developments such as the one million square feet Lulu shopping complex, Smart City, Cyber City and IT City are extending the urban footprint to the east at a rapid rate. This development is largely driven by the private sector and without the guidance of a formal planning process. 3. The Port of Cochin is the third oldest port in India and a major generator of employment for the city and its surrounds. The construction of the international container transhipment terminal and liquefied natural gas (LNG) plant on Vypeen Island further demonstrate Cochin‟s important trading hub status, linking the entire southern India area to international markets in the Middle-East and Europe. Governments‟ proposals to exploit the capacity of the port are expected to lead to greater industrialization and employment potential in the city and surrounding areas. B. Investment Proposal Rationale 4. The population of Cochin is expected to exceed 1.4 million within the next two decades. A large proportion of this growth will be accommodated in the developing areas to the east. These areas will also benefit from substantial investments in industry and technology and together will generate a substantial demand for commuting to west Cochin. In addition substantial investment is proposed for west Cochin, including development of the Vallarpadam international container transhipment terminal, the US$160 million offshore single buoy mooring, and a proposed US$760 million petrochemical complex on Vypeen Island. These developments will bring a great need for commercial and retail services for the labour force both during construction and ongoing operations. The existing establishments in the CBD will be in a prime location to provide these goods and services. 5. However, none of these developments are being implemented as part of an overall coherent urban development strategy. The private sector drives the development of the city and the majority of new urban development is in greenfield sites to the east. The consequences of this will be an increase in traffic volumes on key arterials as this spread of


urban development continues. The already congested CBD streets will suffer from this increase and this will reduce the attractiveness of the shopping/business experience in the CBD. In time these customers will seek other retail and commercial precincts to satisfy their needs. 6. Without targeted intervention measures, the recently reported decline in CBD business activity is likely to continue and reduce the capacity of the CBD to fulfil its traditional role of serving the needs of the greater Cochin metropolitan area. The CBD needs to modernise in order to retain its primacy within the broader Cochin city economy. This PFS has developed the CAFE Transport Strategy to provide the basis for delivering sustainable transport outcomes for the city. It recognises the importance of maintaining a strong and vibrant CBD and therefore the urgent need for the CBD to modernise in order to retain its primacy within the broader metropolitan area. Improved public domain and urban design through pedestrian precincts is a recognised strategy for such modernisation and revitalisation of CBD and commercial precincts. This strategy has been applied successfully in cities throughout the world since 1953. This is the rationale for this investment proposal. 7. Road Transport Network: Cochin‟s transport network consists of, (i) road based transportation serving inter-city and intra-city traffic movements, (ii) rail based transportation which is meant for inter-city movement, but also serves the demand for commuter movement from and around the city, (iii) a limited network of water transportation services catering for travel from island communities to the mainland as well as travel between island communities surrounding the backwaters, and (iv) air transport that meets the inter- regional and international demand for movement. 8. Cochin has three national highways (NH) that either surround it or bisect it, and connect it to the rest of the country. NH 47 traverses through the heavily built-up areas of Ernakulam, Palluruthy and Mattancherry. Within the city CBD, the function of this highway has been reduced to that of an arterial road, due to the urban area being left to develop without proactive alignment, planning or preservation strategies. The effect of this is very high levels of congestion which make travel within the city unreliable and a challenge to negotiate. It is a situation which requires urgent attention for the CBD to continue to maintain its commercial viability. 9. The urgency for this action is underscored by the data presented below. This shows the vehicle to capacity ratio (V/C ratio) for key sections in MG Road and Banerjee Road10. The city CBD core is served by a number of narrow streets and alleyways which all suffer the same worsening congested conditions. With current trends continuing, the congestion levels on these road sections are forecast to rise substantially. Without mitigation, the CBD area will soon suffer gridlock, which will detrimentally impact on the city‟s capacity to continue to support and indeed to attract future investments. This impact will be suffered by all levels of society and particularly the urban poor. It is through the realisation of the need to improve the road network conditions in many of these narrow streets and alleyways that have informed the compilation of key elements of this investment proposal.

10

The vehicle/capacity (V/C) ratio is a measure of the relationship between vehicle flows and the design capacity of the road section. Where the V/C ratio is 1.0, this indicates the road section is at capacity and delays can be anticipated on a regular basis. Given the variations in traffic flows along sections during peak periods, a V/C ratio of 0.85 is often taken as a signal for action to address the congestion on that section.


10. Pedestrian Issues: Although Cochin has very high pedestrian traffic volumes there are few pedestrian facilities. Where footpaths have been provided, walking on them is often a safety hazard, due to the uneven, broken surfaces, the rubbish lying on them, or vehicles parked across them. Pedestrians often avoid walking on them preferring to walk on the streets. Approximately 40% of vehicle accidents involve pedestrians. To address this, a focus on improving modal priority for pedestrians has been addressed in this investment proposal. 11. CBD Parking: Parking demand for private vehicles and auto rickshaws in Cochin is primarily met by on-street parking. Most of the roads in Cochin are lined with parked vehicles, reducing the carrying capacity of the roads by as much as 50% in many cases. In addition, vehicles are also often parked in a haphazard manner, and parking manoeuvres also take up additional space, stopping the traffic particularly during peak hours. This restricts traffic flow and roads that are designed as four lane carriageways effectively operate as two lane carriageways for much of the day. This is particularly noticeable in the narrow streets of the traditional market areas of the CBD where these streets were developed prior to widespread motorisation. 12. Removal of on-street parking on key arterials to off-street parking lots will therefore substantially relieve current congestion levels. The concept of park and pay is familiar to private vehicle drivers. It is therefore considered that in the absence of adequate road space, and in view of the difficulty in acquiring additional land, the concept of CBD wide park and pay strategy with adequate facilities be developed as an integral part of the CBD environment. It is this issue of kerbside parking and the need to provide an alternative in order to improve these streets for pedestrian use that has influenced the development of key components of this investment proposal. C. A Strategic Approach 13. The Government recognizes that for urban areas to continue to function in an economically, socially and environmentally sustainable manner, specific interventions need to be formulated and implemented. In response, the Government has developed a National Urban Transport Policy to assist cities such as Cochin to deal with the transport challenges in the coming decades. CBD viability is a critical component of the urban economy and as such, measures to sustain viable CBDs are consistent with this national policy. The Government‟s vision centres on three core elements, (i) that „people come first‟, (ii) that the focus is on „making cities liveable‟, and (iii) that an urban form is created to support social and economic functions in urbanized areas. These visionary elements are eminently suitable and appropriate for Cochin and investment proposals which reflect this vision have been incorporated into the strategy for Cochin.


14. This pedestrian precinct and supporting park and pay investment proposal is one of three proposals emanating from a wider, strategic review and PFS of Cochin‟s transport sector. It has culminated in the following overall strategic recommendations for Cochin;

14.1. City vision; to provide a Clean, Affordable, Fast and Efficient transportation system for Cochin („CAFÉ Transport‟), in full compliance with the National Urban Transport Policy objectives. 14.2. Policy drivers; (a) promoting a fair and equitable quality of life, and improved access to employment and social services for all Cochin‟s residents, (b) obtaining greater transport efficiency, (c) slowing the need for private vehicle ownership growth, through improving public transport, (d) encouraging non-motorized travel wherever possible, (e) improving modal interchanges, (f) managing the eastern expansion of the urban footprint while improving western linkages, (g) enhancing public awareness to be aware of, identify with, and support system improvements, and (h) reducing environmental pollution and improving transportation safety. 14.3. Target improvement areas; (i) to develop an integrated, pro-poor, safe and cost effective transport plan for pedestrians, public transport, and private vehicles, (ii) formally acknowledge governance shortcomings and commit to improvements, (iii) develop a staged improvement strategy for pedestrian, bus, ferry and rail systems, (iv) establish monitoring and evaluation systems for implementation effectiveness, (v) deliver a transport system which prioritizes climate change improvements, and (vii) identify public private partnership (PPP) opportunities and create a PPP enabling environment. 14.4. 4. Modal priority; focusing the CAFÉ transport strategy towards modal priority and integration, with an emphasis on people and passengers rather than on vehicles. In this context, the order of modal priority is (i) non-motorized modes, including pedestrian footpaths, overbridges and precincts, supported by modal interchanges and park and pay facilities, (ii) public transport, including bus, ferry and rail transport, and (iii) private motorized transport, placed third in importance, and including cars, auto-rickshaws and two-wheeled transport vehicles.

D. Rationale for Pedestrian Precincts and Park and Pay Facilities 15. This investment proposal has been devised as a direct initiative to support the above strategy. It will reverse the current CBD issues of increased congestion, inadequate pedestrian facilities, a poor pedestrian safety record, and a declining urban environment in which to do business. The CBD is a unique area of the city; housing retailing, commercial and financial establishments, as well as accommodation and recreational facilities. It is a „destination‟ rather than a „corridor precinct‟ for travelling through to a more distant destination; a location where local residents, tourists and international business visitors come for a range of activities. Due to the volume, noise and the chaos of private vehicles entering the narrow streets and alleyways each day however, many precincts urgently require substantial “makeovers” to ensure their long term viability. 16. Purposely designed pedestrian streets have spread across the world as cities increasingly turn to pedestrian precincts as a way of revitalizing older commercial areas. When implemented, pedestrian malls often take pride of place in the marketing materials of a city, aimed at additional business and the tourist market. There is ample evidence of the benefits of pedestrian precincts from the perspective of city and community building, and


also a widespread professional opinion that commercial businesses are principal beneficiaries of these improved urban facilities. 17. As many of Cochin‟s narrow streets are not conducive to accommodating motorized transport, it is therefore considered preferable to pedestrianize selected streets and convert others into shared space for both pedestrians and motorized modes. These initiatives are also to be complemented by converting some two way streets into one way couplets to improve the flow of traffic on those streets retained for vehicular traffic. E. Technical Description and Aspects 18. This investment proposal comprises five individual precinct based investment components. Each precinct component includes a combination of innovative and complementary sub-components aimed at improving the liveability and securing the commercial viability of precincts within the CBD into the future. Specific sub-components include, (i) creating pedestrian only precincts with improved streetscapes and supporting quality urban designs, (ii) creating shared spaces where vehicles are permitted to enter pedestrian areas under strict conditions and where pedestrians have right of way, (iii) complementary park and pay facilities to provide an alternative to kerbside parking, and (iv) traffic management initiatives by converting selected streets into one way couplets, and providing signage and strategies to manage the entry of delivery vehicles in the interests of ongoing business needs. The locations of the proposed precincts are shown overleaf, and a general description follows; 19. Pedestrian Precincts: These are streets which are reserved for pedestrians at the expense of motor vehicles. Although conceptually simple, they involve a range of design components in response to concerns expressed by neighbouring stakeholders. Pedestrian precincts are characterized by quality urban design, good street lighting and comprehensive traffic signage to ensure compliance by motorized modes.

20. Shared Precincts: Shared precincts are designed to include both pedestrians and motor vehicles in a mixed environment. For these precincts, the speed of vehicles is reduced dramatically and pedestrians have right of way. Street designs including shared precincts often have wide footpaths with a slightly depressed pathway for vehicles. Pavement texture and colour can also assist in managing the interaction between pedestrians and private vehicles. These designs are best tailor made to local conditions and levels of demand within the precinct. Pedestrian and shared precincts are proposed for 30 streets listed as follows.


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These streets and lanes are unnamed.


21. One Way Streets: These are designed to provide improved circulation while a number of streets are being converted to shared or pedestrian only precincts. By conversion to one way, these streets will benefit by reduced friction from parked cars and oncoming traffic. Streets proposed for conversion to a one way flow are listed as follows.

22. Park and Pay Facilities: These are designed to provide drivers with an alternative to parking at kerbside locations where often inadequate space creates friction with passing traffic and limits pedestrian access to quality walkways. By providing formalized park and pay facilities, the public‟s call for more off street parking facilities can be met. Park and pay facilities are proposed for 16 sites, listed as follows.


23. A summary of the estimated capital costs for the five precincts is shown as follows;

24. The total annual operating costs for this investment proposal are estimated to be approximately Rs. 12 million (US$ 0.26 million). 25. The concept of pedestrian precincts and shared spaces is relatively new to Cochin. For this reason, it is recommended that the concept be phased in on a progressive basis with those streets having the greatest potential and with the least community concerns being implemented first. Therefore as an initial step, individual streets should be targeted as private sector support is identified. Once this process has been established and the Corporation has developed a positive “track record” in implementation, a more aggressive approach to precinct wide improvements can be attempted. The recommended scheduling of activities for this investment proposal is shown overleaf.


F. Economic Analysis 26. The economic analysis, undertaken in accordance with Asian Development Bank (ADB) and Indian Roads Congress (IRC) guidelines, follows a standard approach of comparing the situation with and without the investment proposal. This has included assessment of capital and operating costs and benefits of each investment component; and calculation of net agency costs, net user costs and net project benefits in order provide indicative estimates of internal rate of return (IRR) and net present value (NPV). The main user benefits included are the benefits to motorists from the improved traffic flow made possible by removing kerb side parking. Commercial and environmental benefits from the pedestrianised facilities have not been estimated at this stage. These need to be assessed and incorporated in the next stage of the project. Sensitivity tests were also completed including, (i) 20% increase in capital and operating costs, (ii) 20% decrease in benefits, and (iii) 20% increase in capital and operating costs combined with 20% decrease in benefits. The results of the analysis are summarized as follows;


27. The preliminary evaluation indicates that the investment proposal is likely to be economically viable, with the calculated EIRR values exceeding the economic opportunity cost of capital. The sensitivity analysis demonstrates the robustness of this result, with the investments being economically viable even when a combination of changed assumptions is tested. Furthermore, the calculated EIRR value is considered to be a conservative estimate as there are a number of economic benefits, including commercial and environmental benefits that have not been quantified in the analysis. G. Financial Analysis 28. The park and pay components of the investment proposal have been subjected to preliminary financial analysis. In the analysis, the financial internal rate of return (FIRR) has been determined in accordance with ADB's guidelines, and compared with the weighted average cost of capital (WACC) calculated under a range of scenarios. The analysis indicates that the park and pay facilities are financially viable with a combined IRR of 10.0% for the total park and pay investment proposal. This FIRR is higher than the WACC (assuming public sector investment) which ranged from 2.9% to 5.8% under four different financing scenarios. The results of the sensitivity analysis underline the robustness of the investment proposal.

H. Financing Options and Public Private Partnerships 29. There are potentially several public and private sector financing options available for the US$ 31.0 million investment required for this proposal. The first is through the JnNURM program, which would include grant funding from both the National Government (50%) and State Government (30%); with the balance (20%) to be provided by the Corporation as its own equity provided from its own resources, from the State Government, or from private


modalities. This option would naturally include applications to the National and State Governments, together with convincing justification of the benefits of the investment package and the high priority nature of it. 30. The second option is to secure international donor funding, such as through the partners of the CDIA. This would include a donor-funded loan or loans, with an equity contribution provided through the Corporation‟s own resources, the State Government or from private modalities. Such donor funded loans vary in type, duration, repayment schedule, costs, interest rates and other parameters, and would require a detailed proposal which conforms to the application requirements of a particular funding agency. This PFS already includes valuable preliminary information which can be used as the basis of initial donor funding review, supplemented where necessary by further feasibility assessment leading to funds approval. 31. The potential also exists to supplement conventional loan funding by parallel grant funding from donor agencies. This may be possible to provide additional funding for discrete aspects of the investment proposal, for example, (i) community awareness activities to promote the use of park and pay facilities, (ii) financial or other assistance for the small retail businesses locating within and near to the complementary park and pay sites and pedestrian precincts, or (iii) possible funding to promote the climate change agenda of the investment, due to its carbon reduction achievements and its built-in climate proofing measures such as solar panels for lighting and communication systems. 32. The successful delivery of Cochin‟s privately developed international airport and several of its bridges and toll roads demonstrates that a PPP enabling environment does exist in Cochin, and that the private sector is able to participate in the transport sector with some degree of sustainability. To this end, this investment proposal provides opportunities for PPP involvement, and this should be optimized wherever beneficial. 33. In summary, the financing recommendations developed at this pre-feasibility stage are summarized as follows, which should be further evaluated by the Corporation during subsequent feasibility phases;

33.1. Secure investment financing through Government programs or international donor agency support, while considering further the potential for private sector financing through build-operate-transfer (BOT) modalities. The latter should include, (a) internal Government review of procedures, requirements and ramifications relating to BOT intervention, and overall interest and capabilities to proceed with BOT, (b) further assessment of private sector capacity and willingness to invest in the proposed investments, and (c) tailoring the development of one or several BOT packages in light of these findings. 33.2. In the event that the investment proposals are financed through Government or international donor agency financing, then consider carefully the various options available under competitively bid, performance based PPP operations contract modalities. At this stage, it seems potentially feasible to include the following contract packages, (a) a contract to develop a comprehensive set of infrastructure design standards for this investment proposal, (b) PPP contracts to design and build each of the five components of this investment proposal, and (c) contracts to manage the park and pay facilities on an ongoing basis. 33.3. In association with the above contracts, technical assistance can be provided to provide institutional strengthening to, (a) analyse and better understand the


demands of the passenger market and that of the industry, (b) develop an improved level of appreciation between the Government and private sector so that reforms can be achieved based on mutual respect and cooperation, and (c) develop skills and resources to manage and monitor contracts and compliance issues in readiness for the prospect of further enhancements to this investment proposal.

I. Investment Proposal Benefits 34. A SWOT analysis has been used to evaluate the strengths, weaknesses, opportunities and threats of the proposed bus priority lane investment12. The results of the analysis are summarized as follows.

35. A PLEST analytical framework has also been utilized as a tool to further evaluate the investment proposal in terms of political, legal, economic, social and technological constraints. This is summarized as follows.

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This includes, (i) strengths; project attributes which assist in achieving the intended objective, (ii) weaknesses; attributes which hamper the achievement of the objectives, (iii) opportunities; external conditions which assist to achieve the objectives, and (iv) threats; external conditions which hamper the achievement of the objectives.


36. The beneficiaries of the investment proposal are divided into the beneficiaries of the three primary physical components; (a) pedestrian precincts and shared zones, (b) one way streets and traffic signage, and (c) park and pay facilities. The poor and socially excluded residents from a number of areas of the city will benefit significantly from the investment proposal through, (i) a better business environment in the CBD with additional employment opportunities, (ii) improved priority for pedestrians, many of whom are not able to afford private vehicles, (iii) better living conditions and reduced pollution from reduced levels of local traffic congestion, and (iv) potential employment opportunities arising from construction and operations contracts. Overall, the proposed initiative contributes substantially to the betterment of an efficient, safe, and environmentally sustainable urban transport system for the CBD area, benefiting local commerce and citizens, visitors and tourists to the city. Beneficiaries are summarized as follows;


J. Social Due Diligence 37. The economic vibrancy of the CBD will provide direct spin off effects for local residents, the most obvious being increased employment opportunities. For residents, visiting business interests and tourists, improved urban amenity will generate a more business enabling environment. In this case, it is a win-win outcome for all community groups, especially the urban poor who rely on robust employment demands to reduce the impact of poverty. As part of this study, a household interview survey was undertaken to record residents‟ perceptions and to assist in prioritizing transport investments. The survey confirmed widespread level of support for the range of pedestrian oriented investment components contained in this investment proposal. K. Investment Proposal Institutional Arrangements 38. The investment proposal requires the integration of measures covering master planning, pedestrian precinct and public domain planning, urban design, technical standards, infrastructure design, community engagement, legal and capacity building expertise. As these skills are currently lacking, an institutional structure with these skills and supporting accountabilities will be required. While there is merit in an institutional model which advocates a single all encompassing agency (such as the Urban Mass Transit Authority model), this is considered premature for Cochin. For the immediate future, there is recognized value in coordination committees in the development and implementation of sector improvements. This is a model which is in place in Cochin and irrespective of the


effectiveness of this model, is considered a basis for the immediate future as it is a familiar model to start with. In addition, such a familiar model gives everyone a sense that their role in the sector is not being diminished. 39. A coordinating committee, nominally referred to as CAFE Implementation Committee (CIC) with the correct level of empowerment, is considered be the most practical option for the immediate future. Such a committee would in turn oversee an agency charged with the delivery of the policies developed and projects sanctioned by the CIC. This Agency could be formed by drawing personnel and resources from existing agencies involved in the transport sector. It would be supported by a CAFE implementation cell, resourced for the specific purpose of front line delivery of the investment proposal. Alternatively, a special purpose vehicle (SPV) could be established by the Corporation with the specific mandate to implement the investment proposal. These model options are illustrated in the following figures.


40. It will be the responsibility of the Corporation to make the decision on the appropriate model for Cochin. Whatever decision is made, the entity will need to be the nodal agency for all matters relating to the delivery of this investment proposal, and other responsibilities which address master urban development master planning and the provision of sustainable urban transport outcomes which conform with and support the National Urban Transport Policy. L. Climate Change Analysis 41. The total emissions reduction from implementation of this investment proposal is approximately 4,300 tonnes of CO2 over a five year period. These reductions are generated from two sources, (i) the five pedestrian precincts totalling 25.6 km in length will save an estimated 6,500 vehicle-km per day, resulting in an emissions savings of 284 tonnes of CO2 per year, and (ii) the park-and-pay facilities will ease congestion along about 20 km of thoroughfares and roadways, improving the fuel efficiency of approximately 2,700 vehicles per day, resulting in total annual emissions savings of about 674 tonnes of CO2. These emissions gains are offset by one-time emissions from park-and-pay facility construction of approximately 400 tonnes of CO2. Excluding the one-time park-and-pay construction, this proposal saves approximately 1,000 tonnes of CO2 emissions annually.

42. The vulnerability of the investment package is assessed against the risks of the expected climate impacts shown as follows.

43. After considering local perspectives and potential future climate impacts, the following measures have been identified to increase adaptive capacity of the investment proposal.


M. Risks 44. Five fundamental areas of risk have been identified in relation to the investment proposal. These are summarized as follows;

44.1. Institutional and Political: The political landscape has numerous weaknesses in relation to the ability to implement projects in a timely and consultative manner. These shortcomings are a reflection of the broad political background in Kerala and have been moulded by a combination of union influence and a general lack of analytical capability to address matters on a proactive and scientific basis. For successful implementation of this initiative, it is essential that this aspect be corrected and remains in a corrected state. In particular, the practice of decisions being challenged and placed before the High Court needs to be mitigated for all but critically important issues. 44.2. Public Compliance and Enforcement: There is a history of non compliance with established regulation. This is as much an issue of poor design and maintenance processes as an inability to adequately enforce regulations. From the enforcement perspective, this inadequacy results from a combination of capacity of an agency (technically), and the ability of an offender to “settle” the issue to avoid further legal actions. As a result, there is a general acknowledgement within both the private and public sector that public compliance and enforcement is a fluid situation and is available to substantial variations in “interpretation”. It will be therefore be important for this issue to be addressed and corrected so that the public trust can be strengthened. To help minimise the opportunity for non compliance, the design of the pedestrian precincts should adopt CPTED13 and other internationally recognised and proven mitigating design standards to ensure compliance. Regarding service performance, the compliance of maintenance of infrastructure will be an essential component of increasing public confidence in the sector and that of Government in being able to deliver services in the public interest. A failure to correct the problem of enforcement and compliance with adequate regulations may have a serious effect on the success of this initiative.

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Crime Prevention Through Environmental Design.


44.3. Public Confidence and Support: Many of the elements which have sapped public confidence and support relate to the political process and the practice of “settling” disagreements and non compliance issues without the need for litigation. This will need to be addressed. In addition to this aspect, much of the cause of the erosion of public confidence is as a result of the practice of agencies failing to engage the community in a proactive manner and encouraging widespread involvement in project planning, design and delivery. This aspect can be addressed relatively easily through a simple realignment of staff attitudes and practices so that as a first priority, the affected community is consulted early rather than later in the process. In addition, where issues potentially affect the investment proposal, genuine and proactive procedures need to be developed as a basis for project delivery. With the community being included as part of the solution, rather than (as is often the current view) being part of the problem, project risks will lessen, both in number and in intensity. Without this support, there could be a risk to the proposal. 44.4. Agency Capability: There is a direct relationship between the technical capability of an agency and the ability of that agency to articulate in a clear and logical manner, the benefits of projects and programs. In the context of this proposal, the ability of the Corporation to market it to both investment partners and the public will be intimately associated with the technical ability of the agency and the staff involved. Unless the Corporation improves its current level of technical capability to plan, design, procure and manage procurement contracts, there may be a significant risk to the proposal. This risk may manifest itself in funding shortfalls and reduced revenue streams through reduced public support. 44.5. Contingent Liability Risk: There is strong potential for the park and pay components to be implemented under a PPP model. While the Corporation is familiar with this delivery model, there remains a reluctance to engage the private sector in such public projects. With the limitations outlined above, there are financial risks in developing and implementing PPP based infrastructure projects. The financial commitment required of the Corporation for this proposal has a fiscal cost. Even if there are no immediate expenditures, the prospect of providing an operating subsidy creates a drain on the annual budget. The guarantees if required from the Corporation also create obligations to make payments (even if in extraordinary circumstances). As the ultimate underwriter of a PPP, the Corporation may be faced with assuming the full financial responsibility for the project in the event that the private sector partner withdraws for financial reasons. In the event that project delays affect businesses within the pedestrian precinct, additional financial risks may result. If the Corporation seeks to limit its financial exposure to the proposal by passing too many risk elements to the private sector partner, the project may become viewed as not value-for-money. In this case it may become unbankable. Therefore the key challenge is for the Corporation to achieve the right balance between risk and reward. This will then result in a project which is both bankable and represents optimal value-for-money for both the public and private sector partners. The identified risks regarding the PPP during implementation of the components will remain an issue unless the Corporation takes steps to accommodate the contingent liability risks for all parties to minimise the financial risk.

45. Overall, the investment proposal risk is rated at this pre-feasibility stage as being low. The proposal does not have any widespread political or institutional opposition, and there is


widespread public support for improvements to pedestrian facilities. There is also concern at the declining level of business sales in the CBD. Given the capacity of this proposal to help arrest this decline, it will be the challenge for the Corporation to harness this concern into active support for this investment proposal.

prefeasibility studies on urban transport, cochin, india · 4. from an urban and transport planning...

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