Metro Rail: Is Privatisation the Way Forward?

Last month, in a major policy shift, the government submitted draft of New Metro Rail Policy, which aims to allow privatisation in the metro rail projects in India. Whether the move can fix solve the problem of public transport system in India cities, is worth examination.
In the last one decade, there has been a growing interest among policy makers about relevance of rail-based systems in India, to address the mobility needs of expanding population in the cities.

As metro rail is capital-intensive projects and most of the metro companies are running on loss, it is imperative to understand the need for, and effectiveness of metro systems as a viable, and financially sustainable means of public transportation in the Indian context.

Metro Vs Bus Transit

The Twelfth Five-Year Plan for urban transport has recommended that all Indian cities with a population in excess of 3 million start constructing the metro rails, which required an estimated investment of $26.1 billion.

A reason for the preference is because metro rails are perceived to have higher levels of comfort, speed and efficiency, than bus systems, making them more attractive to both policy makers and potential users of the system.

Promoters of metro systems often claim that one of the benefits of the metro is reduced congestion, due to the users’ shift from road-based motorized modes to metro systems.

But even in Delhi, DTC buses carry 3.5 million passengers every day, much more than the Metro’s average ridership of 2.7 million. RITES forecasts that even after the full completion of the Metro project, its ridership will be just 20 per cent of the vehicular trips, including non-motorised transport in 2021.

According to the Ministry of Urban Development, at present about 300 km of metro lines being operational in seven cities, and another 600 km of metro line projects being under construction in 12 cities. A proposals of over 500 km projects are already under consideration.

Will Privatisation Help Metro Projects?

In most of the metro projects the Centre and state have 50:50 stakes. Only Hyderabad and Mumbai Metro Line-1 run on PPP (public private partnership) model.
Metro rail project is a cost intensive project and require massive funding. Even when the centre give funding support to the selected metro project, raising money is a problem. Policy makers claim that privatisation will help them to raise money.

Private participation alone does not ensure the success of the metro project and its live example is Airport Metro Expressline, by Reliance, which was marred by faulty design, delay in construction and high fare, which was not able to attract passengers due to expensive fare. It was only when Reliance handed it over to DMRC, it became functional, which integrated it in the main line and reduced the fair by 60 per cent.

“None of the Metro companies are running at a profit. The loss of Delhi Metro is to the tune of Rs 700 crore,” said a Delhi government official. It is not just Delhi Metro. Most of the metro across the globe are running on losses and are supported by government subsidy, in this case can private participation will ensure viability and affordability of metro projects. The airport Expressline in Delhi failed to attract the passengers due to high ticket cost and Reliance finally had to exit.

Another example is Mumbai Metro. Despite huge investment and technology and so much of investment, it has not been able to ease the traffic of the city, owing to poor planning.

Taking case of Hyderabad Metro Rail Ltd’s 72-km-long elevated metro rail network project, it was marred by 369 court cases, that caused huge cost escalation and delayed the project by one year.