The Delhi Metro is a much-celebrated service that the City loves to flaunt. It has inspired many other cities such as Bangalore, Mumbai, Chennai and Hyderabad to emulate similar public transport systems. This experience, however, may not remain worth a joyride after a decade or two, if politics override fundamental economics and leaders prevent attempts to increase much-needed fare hikes.
The need for a standardised, automatic, periodic fare-revision mechanism for metro-rail projects being undertaken across cities is increasing by the day. After all, metro-rail systems demand huge capital and operational expenditure, and burn a large hole in the State pockets. In this context, the Government has been adopting the public-private-partnership (PPP) mode to build and operate metros.
A broad underlying trend is that an automatic fare-revision mechanism is inbuilt in those metros where private players are stakeholders. This ensures some level of insulation from political interference.
The PPP mechanism has been adopted in Delhi’s Airport Metro Express Line (a dedicated line offering airport connectivity with much higher fares than the Delhi Metro network); Mumbai Metro 1 and 2; and Hyderabad.
Delhi , Chennai and Bangalore Metros are based on a joint ownership pattern between the Union Urban Development Ministry and the State Government.
Then there is the operational Kolkata Metro, the country’s first metro, which is under the Railway Ministry. The Kolkata Metro has not seen fare hikes for close to a decade and has an operating ratio of 250 per cent, that is it spends, Rs 2.50 to earn Re 1.
The ownership of Kolkata Metro’s new network — currently under expansion — was envisaged as a joint venture between the State Government and Union Urban Development Ministry. However, realising the drain on its finances, the Bengal Government has been trying to push the ownership the new network to the Railways.
Some of the metro networks provide for an inbuilt fare-hike mechanism, while some, including the Delhi Metro (the country’s largest), do not.
The fare formulae and mechanism for the Hyderabad Metro — being built by Larsen & Toubro on a build-operate-transfer basis — is inbuilt. The Hyderabad Metro fare allows for a mix of fixed and variable increases. The revised fare allows for a fixed 5 per cent revision every year (for the first 15 years of operations), and an increase to the extent of 60 per cent of the wholesale price index every year.
The Mumbai Metro — being built by Reliance Infrastructure — also has an inbuilt fare revision mechanism. “In case of Mumbai line 1 and 2, the fare revision formula states that, the fare will be revised upwards every fourth year by 11 per cent,” said a Reliance Infrastructure spokesperson.
Similarly, the mechanism for the Delhi Airport Express is also fixed. “The fare revision allowed will be 90 per cent of wholesale price index every two years,” the Reliance Infra spokesperson said.
Meanwhile, for others, there is fare-fixation committee which is supposed to recommend revisions for the metro systems under the Union Urban Development Ministry — such as Delhi and Bangalore Metros. But the ticket fares have become more of a political issue and any attempt to increase fares faces resistance from the political class.
For instance, the recent round of electricity tariff increase in Delhi increased the power costs for Delhi Metro. Power consumption will account for 40 per cent of Delhi Metro’s operational cost instead of 30 per cent in the pre-tariff hike regime. There have been multiple rounds of discussions to increase the fares, but no decision has yet been taken.
Gurgaon will soon come up with country’s first privately built and operated metro network. The Rapid Rail Metro, promoted by ITNL Enso, is set to kick off with a 99-year concession.
“We do not have an annual revision formula,” says Sanjiv Rai, Managing Director, Rapid Rail. Rapid Rail, subsidiary of IL&FS Transportation and Enso, has a 99-year concession with the Haryana Urban Development Authority to operate the metro system.
Realising the need to have a semblance of financial discipline, the Union Urban Development Ministry has been trying to implement a mechanism for fare revision for the metros.
Urban Development Ministry Secretary Sudhir Krishna has repeatedly called upon the need to devise a mechanism to link commuter fares to key input costs such as electricity tariffs for metro systems.
Incidentally, the Institute of Urban Transport, a research body headed by the Secretary has been studying the issue.