1. Delhi Metro fares hike: Do not tax commuters unduly

Delhi Metro fares hike: Do not tax commuters unduly

DMRC fares must cover costs but not tax users unduly

By: | Published: November 9, 2016 6:21 AM

Given the Delhi Metro Rail Corporation (DMRC) has been chalking up losses for several years now it is not surprising the fare fixation committee recommended a fare hike—of 25%, from R8 to R10 in the lower bracket and a somewhat steeper 66% revision from R30 to R50 at the higher end. The Delhi government, however, has asked for time to review the recommendation. In absolute terms, the proposed increase at the lower end isn’t really unreasonable. Especially since the last—and only—time, fares were upped was way back in 2009. At that time, fares were increased by 33% from R6 to R8 for the minimum category and R22 to R30 for the higher bracket.

Since then, however, expenses—salaries and electricity—have skyrocketed throwing the economics of the transporter out of gear. Overall, costs have been rising at a faster pace than revenues. While revenues grew11.4% in FY15, costs rose by 18% in FY15 and in the previous year, revenues increased by 19% while costs were up 21%. Consequently, the losses have been climbing—from R7.9 crore in FY13, they rose to R60.73 crore in FY14 and to R275.5 crore in FY15. The moderation in the growth of revenues is partly because fare revenues are rising at a slower pace. In fact, the contribution of fares to total revenues has been coming down—from 46% in FY13 to 43% in FY14 and further to 42% in FY15. While it is creditable that the DMRC has been able to ratchet up non-fare revenues—from feeder buses, rentals and advertisements—thereby not burdening users, it is possible these cannot be increased beyond a point. It is no one’s case that the DMRC should run up costs that it cannot recoup and depend on the state for sustenance. Neither is it desirable the corporation should be over-leveraged and unable to pay off its dues. Given that lines are being added, the interest bill has not come off while expenses on employees jumped 30% in FY15.

However, the metro is a public good and at the end of the day its usefulness—the sheer convenience that it provides to thousands of commuters—probably outweighs financial considerations, at least up to a point. After all, the trains ferry an average of 24 lakh customers every day travelling across a total stretch of over 200 km. So, it could take a leaf out of the UPA government book, increasing fares gradually just as it was done for petrol. But DMRC must have funds to construct more lines and upgrade the existing infrastructure so that the quality of the service is maintained and travel is not in any way jeopardised. And it must stay solvent.

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