For over 16 years, the Metro has been Delhi’s heartbeat, serving not just 26 million Delhiites, but the over 50 million people in the ever-expanding megalopolis in the NCR. At first glance, it appears to be a well-oiled machine fulfilling the crucial need for public transportation for almost thrice as many people as the London tube. But at an organisational level, running India’s largest public metro network has its fair share of issues. Laudable as its connectivity may be, the Metro continues to struggle with problems: financial, bureaucratic and otherwise.
The Delhi Metro Rail Corporation is an ailing organisation, desperate to find its way back up from the red. Financially built on the back of loans from Japanese agencies JICA (Japanese International Cooperation Agency) and JBIC (Japan Bank for International Cooperation), the DMRC’s debt burdens are big anchors to its progress. This, coupled with the withdrawals of private stakeholders such as Reliance Infrastructure and DLF from their respective metro lines, have compounded the financial stress for the DMRC.
Aside from finances, it also falls
victim to bureaucracy and red tape. The constant battle between the Central
Government and the State Government over sharing of costs and the financial
viability of the Metro’s expansion has put the metro’s future into some
question. Delayed construction on Phase 4 is an added complication as a result
of this. In particular, there is a structural and design issue that a 16 year
old metro system has not addressed.
The corridors of the Delhi Metro are extremely fluid. They operate on a system such that one can freely interchange across lines (except the Airport Express) and the only records in the system are those of a passenger’s entry and exit. As a consequence, there exists a lack of a mechanism to measure financial performances of individual lines of the network. For all the shine of the new lines, it is impossible to precisely determine their profitability. With the network showing negative profits ever since 2010, it seems that DMRC can only reasonably speculate as to where its losses are actually coming from.
The financials do have some key trajectories to follow. 2010 and 2011 represent the first instances of DMRC facing negative profit, which tended to improve over the next three years before a huge drop in 2015 and further worsening in 2016. The former years align closely with the completion of Phase 2. It is plausible that the addition of 3 new lines (violet, green and Airport Express) might have slowed the network down initially, instead of being immediately profitable.
The latter years’ decline can be explained by the mammoth cost of Phase 3, which crossed Rs. 41,000 crores (a huge increase from the Rs. 18,000 crores in Phase 2). Nearly half of this was financed by a JICA loan. Added to that, the unchanged fares on the network for more than 7 years increased the burden. The upshot of DMRC’s revenue by 74% after the fare hike are possible indicators of the huge distress that lower fares had put on the organisation.
In the future, it would be worth seeing how the recent acquisition of the Rapid Metro from DLF impacts DMRC. While the Airport Express acquisition did not have an immediate impact on the financials, it has definitely been a huge financial liability for the DMRC. While the doom of the private lines looks to be an attractive argument for justifying financial pressure, the second and rather unattractive factor is worth considering: the fares on the network.
A fare dilemma
Like an ailing corporation, the problem with DMRC is that it faces a dilemma when it comes to fares. Since 2009 prices on the metro’s network remain unchanged. Already hemorrhaging due to older fares that did not accommodate for rising inflation, a price hike seemed the most imminent occurrence. The problem was that this was going to create a disruption. The prices were set in stone for so long, that they became preferred ones for most commuters, and moving them could create a volatility in demand.
Thus, the 2017 price hike came across as a jolted increase of sorts, where the loss was made by the riders. Before the first of the recent fare increases, prices in the metro used to start as low as Rs. 6. This has since gone up to Rs. 10. The old Rs. 12 slab became Rs. 20, the old Rs. 20 slab became Rs. 40 and the highest fare on the Network which was Rs. 30 in 2009 has now doubled at Rs. 60.
As mentioned above, there was a 74% revenue increase due to the fare hike. But the hike also led to noticeable drops in ridership. The 2016-17 ridership for the metro was 2.76 million passengers per day. After the fare hikes, the 2017-18 ridership fell to 2.53 million passenger per day. The hikes have also led some to cite Delhi Metro as the second-most unaffordable metro service behind Hanoi, Vietnam based on the percentage of income spent by citizens on metro travel, which is as high as 14% in Delhi’s case.
The financial dilemma faced by the DMRC is not an uncommon one for organisations in financial stress. It has to strive to earn the profits while maintaining its ridership. Fare hikes or borrowings alone cannot help and thus, there is a need for mechanisms that do not leverage one factor for the other. That possibly explains their move towards privatization with allowing advertisements on train coaches and changing station names.
It remains to be seen whether the 2018-19 data witnesses a boost due to the expansion of the network and addition of two new lines. There is strong reason to believe so alongside the assurance that there won’t be any fare hikes at least until 2020, relieving passengers’ pockets. Even so, one cannot ignore the role of government bureaucracy in the metro’s (lower) profitability.
State vs. Center: Who bears the cost?
When the Delhi Metro was initially conceived, the State-Center financial sharing was representative of a commitment to doing what’s best for Delhi. In the early days, then Prime Minister Atal Bihari Vajpayee and Delhi Chief Minister Sheila Dixit’s collaborative efforts were able to implement the project, which had been stalled for considerably long. Contrast that with the scenario that exists today, and it almost feels like the Center and the State are at loggerheads with each other.
It is no unknown fact that the Delhi government has been stalling the Delhi Metro’s Phase 4 by not approving new corridors for construction. Kejriwal’s government has halted progress over demands for a change in the sharing of the project costs and operational losses between the State and the Central Government. Citing doubts over the corridors financial viability, the State Government does not wish to maintain the status quo of equal loss sharing, and wants to bear no liability in the loan from JICA. According to them, the onus of this lies on the center.
The Central Government has given Kejriwal a lot of flak for stalling the phase, jeopardizing the metro’s future. The construction, which has now been delayed for 2 years, does not look to start very soon. With Phase 3 complete, and all the mobilized resources having been utilized and done away with, the breakdown of phase 4 has raised costs higher. Remobilizing labour and getting fresh resources is an added cost, which was avoided as the work on the next phase by DMRC would begin during the ongoing one.
What is also worth noting is that Delhi Metro is not the only ailing transport entity in the city. If it is offset by anyone, that is the Delhi Transport Corporation, which is in need for desperate revamp and has again been failed by the Kejriwal Government. The consensus and collaboration between Vajpayee and Sheila Dixit was driven by what was best for Delhi. But clearly, the DTC’s woes, reflect that on a larger level, the tussle between Modi and Kejriwal is helping neither. Clearly, people can see that it has led to stalling and a substantial increase in costs, in the metro’s case. So, while a collaborative approach may not be unattainable, what then, can be the next aspirations that the Delhi Metro can hope to achieve?
Quest for being better?
Possibly, not all is gloomy for the Delhi Metro. Despite the financial stress and bureaucratic stalling it has faced, the metro’s quality has definitely been high and served as an inspiration for metros elsewhere. Most riders associate it with order, cleanliness and accommodation. At least that’s how the Metro Man E. Sreedharan feels that the Metro changed the people of Delhi.
In terms of growth, Delhi does have a lot to borrow from elsewhere. Particularly, specific features like greater reach and accessibility across locations from Paris, or greater embeddedness with the existing public transport system like London. Even though the mass transport system in Delhi is not all that scattered and confusing, London’s embed of various means form a cohesive transportation system that Delhi currently lacks. There is a possibility to revamp the DTC and as the city spreads, it will only seem feasible to have greater access and integration across means of transportation, aside from the Metro’s expansion.
For all that is ahead of it, the
legacy of Delhi Metro and the values that Sreedharan describes it has stood for
make it seem capable of weathering what appears to be a slowdown. With the city
set to grow larger in the next decade, this encumbrance too, shall pass.