Governance and Policies

Subsidising Delhi Metro will delay expansion of the network

Delhi metro rides became costlier from Tuesday after the Delhi Metro Rail Corporation (DMRC) board decided against rolling back the hike recommended by the Fare Fixation Committee (FFC).

Oct 11, 2017
Delhi metro rides became costlier from Tuesday after the Delhi Metro Rail Corporation (DMRC) board decided against rolling back the hike recommended by the Fare Fixation Committee (FFC). Fare-hike, especially of services like energy or public transport, often meets with stiff opposition from the political class. The DMRC board’s decision too has not gone down well with chief minister Arvind Kejriwal. He has called the move “anti-people” despite being aware that a fare hike had become a necessity in the wake of metro’s mounting operational cost.
 
The DMRC board must be applauded for standing its ground in the face of strong political pressure from the city government to reverse the hike. Ignoring the law --- Metro (Operations & Maintenance) Act, 2002 --- which makes it binding on the metro rail administration to accept the recommendations of the FFC, the Delhi transport minister threatened to revoke DMRC chief Mangu Singh’s appointment if the hike was not reversed.
 
Populism could hurt the Metro
 
Populism, however, well intentioned, should not come at the cost of hurting the efficiency of the city’s most popular mode of public transport. A roll back or deferment could earn political dividends for the AAP government but will be disastrous for Delhi metro’s financial health and operational performance. The last time metro fares were increased was in 2009. Since then electricity tariff has gone up by over 90%, accounting for almost 30% of DMRC’s total operating cost. In the last few years, the DMRC has written several times to the Delhi government and the Union housing and urban affairs ministry to increase the fares, citing the rising operating cost. In 2015-16, DMRC had suffered a net loss of Rs 708.5 crore. In January, Arvind Panagariya, former chairman of the federal think tank NITI Aayog had also flagged the issue when he wrote to the Prime Minister’s Office that at the current level the fares are “inadequate for the provision of high quality services and maintenance.”
 
What happens elsewhere?
 
Despite the hike, Delhi metro fares continue to be far lower compared to other international cities. The minimum fare in Delhi post revision is Rs 10 as against Rs 288 (4 pound) in London, Rs 35.51 (1 SGD) in Singapore and Rs 21 (2 Yuan) in Shanghai.
 
Building and running metro rail service is highly capital intensive. Periodic fare revision is a prerequisite for running it efficiently. Worldwide, passenger fares are the largest source of income for metro rail. In London Underground, for instance, the Mayor decides the fare and political interference is unheard of. In India, the FFC is an independent entity set up by the Centre as and when a metro rail corporation requests a fare hike. They are temporary in nature and has three members who are appointed by the Appointment Committee of the Cabinet.
 
Though under the statute FFCs are insulated from political interference, there have been instances where state governments have not accepted their recommendation. In Mumbai Line-1, the FFC’s recommendation was not accepted by the state government and challenged in the court. The case is yet to be disposed of.
 
Subsidy is not the answer
 
Subsidising a world-class service like the Delhi Metro will not only delay the expansion of the network in the city, it might also send it the way the other train/local services have gone in different cities in India.
 
Take the case of Delhi Transport Corporation (DTC), the operator of the public transport fleet of buses in the city. Low fares over the years have crippled the public transporter with its fleet now reduced to 3,944 as against the requirement of 5,500 buses. The Delhi government is giving grant-in-aid of Rs ,1600 crore every year to the DTC to keep it running.
 
Hindustan Times, October 11, 2017

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