Christmas Day

E Sreedharan

Delhi Metro Railway Corporation

DMRC

Japan International Cooperation Agency

The idea should be to encourage more people to use public transport instead of cars, not put them off by increasing metro fares.The Delhi Metro was inaugurated onin 2002, which also happens to be the then Prime Minister Atal Bihari Vajpayee’s birthday. It is an amazing feat of project management, which was led byand completed under budgeted time and cost.Presently, it connects 164 stations and covers a total length of 218 kilometres. Daily ridership is nearly 3 million (Mumbai is more than 7 million). When Phase 4 is completed daily ridership will go up to 4 million. Delhi Metro is the first metro rail in the world to get carbon credits for reducing greenhouse gases and pollution. Till 2014 it is estimated that the Delhi Metro had saved cumulatively nearly 3 million tonnes of carbon dioxide due to reduction in vehicles on the road. The metro also has aregenerative brake system, which generates electricity when braking. This saves net electricity requirement, leading to additional annual saving of 40,000 tonnes of carbon dioxide. The metro system also reduces road fatalities and has very high safety record (Mumbai rail please note).The metro is run by an autonomous company called theis jointly owned by government of India and Delhi state. Its first managing director was the veritable Sreedharan. The metro was built with a long-term, low-cost loan from(JICA), the same agency which has promised to fund India’s first bullet train. The annual interest cost for DMRC is about Rs 500 crore and principal repayment is another Rs 600 crore to 800 crore. This is part of the annual cost of running the DMRC. The other major costs are electricity, salaries and depreciation. The operating ratio for DMRC, i.e. the ratio of cost to revenue, is 70:100.These days the fares of DMRC are in the news and have become a political football between the Delhi and central governments (the two entities which own DMRC half and half). Fare revision is done by a Fare Fixation Committee appointed from time to time. The fourth such committee was appointed recently and has recommended a 20 to 50 per cent hike in the fares. This would be the second fare hike in this year alone and it has been approved. The Delhi government, led by its chief minister, is extremely unhappy and calls this hike anti-people. But the Union government says that fares had not been increased since 2009, so a catch-up was needed. Besides, input costs like salaries and electricity had gone up substantially. Thorough public scrutiny and audit of the costs and revenues is not yet available.But stepping back from the political football, let’s consider some economic arguments. In the mid-1990s when mobile telephony started, the cost of an outgoing and an incoming call was Rs 32 per minute. Over many years, despite input cost inflation (like salaries, spectrum cost, cost of setting up thousands of towers in the country, interest cost on loans), the price of a phone call did not go up, but down. Call charges came down to 50 paise per minute, and companies were still making profits. This is mainly because of huge growth in subscribers. Of course, this was until the advent of Jio which made the price of voice calls down to zero. The point to note is that despite input cost escalation, say at 4 per cent per year, if growth of consumers is good, then prices need not rise. Indeed, they can fall.As DMRC’s airport express usage increased, its fares went down. Another example is that of electricity distribution companies (discoms). When they were privatised in a few cities like Mumbai and Delhi, the electricity tariffs were say around five or six rupees per unit. That was fifteen years ago. In all these years, despite increase in input costs, since consumer base expanded and leakage, theft and losses were reduced, the price of electricity did not change at all (or much less than cost escalation). Growth in business means that fixed cost overheads get spread over a large user base. Hence price need not be raised.But more importantly in the case of Delhi Metro, it provides public transportation, reduces carbon footprint, takes vehicles off the roads, improves safety, and is a pride of the national capital. For these reasons we need to induce more people to use the metro, not less. So prices should be raised very, very reluctantly, lest people go back to using private vehicles (Delhi has the cheapest petrol and diesel in the country). Indeed even a subsidy is justified to run DMRC. Remember the saying: “A developed country is not where poor people can afford cars, but one where even the rich use public transport.” Hence two fare hikes in one year in DMRC are definitely unfair.