Tel Aviv light rail cost balloons by NIS 3.4b

The estimated cost of the Red Line is now NIS 14.1 billion.

The estimated budget cost of the Tel Aviv light railway's Red Line is now NIS 14.1 billion, Minister of Transport Yisrael Katz said today - NIS 3.4 billion more than the project's original budget cost, which was approved when the government nationalized the project in December 2010.

NTA Metropolitan Mass Transit System Ltd., the government company building the Red Line, said that the estimate had not changed, and that overrun was due to external factors, including inflation, the 1% VAT hike, and the extra work planned on the Em Hamoshava train station in Petah Tikva.

However, an investigation by "Globes" has found that, after these factors are weighted, there is a NIS 2.5 billion cost overrun which is unaccounted for. The rise in the Consumer Price Index (CPI) since December 2010 accounts for NIS 530 million of the extra cost; the VAT hike adds NIS 110-140 million (depending on the date of the hike); and the extra work on the Em Hamoshava train station adds NIS 200 million.

There has been increasing criticism of late against the decision to nationalize the project, especially by the Ministry of Finance, which sought to cancel it altogether. The ministry now says that keeping NTA responsible for the project could cause a cost overrun of billions of shekels. A report by an auditor hired by the ministry estimates that the final cost overrun could reach NIS 5 billion from the original estimate.

NTA says that the first trains will run on the Red Line in 2017. The 23-kilometer line runs from Petah Tikva through Bnei Brak, Ramat Gan, Tel Aviv, and Jaffa to Bat Yam. The line will later be extended to Rishon LeZion. The 11-kilometer section in Tel Aviv is due to carry 240,000 passengers a day.

The only work currently underway on the project is the digging of subway tunnels at Em Hamoshava, in Jaffa, and near the Diamond Exchange in Ramat Gan. NTA is currently preparing construction and procurement tenders, after delays by the Ministry of Finance.

Katz said today that he would not let the Ministry of Finance cut the Tel Aviv light rail's budget or delay the project in other ways, and he would prevent handing it back to a private contractor.

Published by Globes [online], Israel business news - www.globes-online.com - on January 16, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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