Metro models

Written by Shubhra Tandon | Updated: Apr 2 2014, 08:41am hrs
INCREASING urbanisation and influx of people to cities have led governments to consider urban mass rapid transit systems, better known as metro railways, to reclaim much of the lost ground in urban planning.

At least 10 metro projects are at various stages of planning and implementation. These projects would require R2 lakh crore in investments until 2019.

A 2010 report by the McKinsey Global Institute says India needs to build 350 to 400 km of metros and subways every year, more than 20 times the capacity built of this type by the country in the past.

As Bharat moves to India, the change in demographics presents a strong case for developing modes of rapid transport in the smaller cities, which are also seeing a surge in traffic with the rising migration from rural areas. In 2011, Kamal Nath, Union urban development minister, said all cities that have a population in excess of 20 lakh would get a metro corridor. By 2011 census, almost 13 cities qualify under this criterion. Jaipur, Patna, Kochi, Ludhiana are among the names that are or will soon see metro systems donning their public transport systems.

Metro rail is preferred for its ability to transport a large number of people quickly over short distances with minimal land requirements, says Abhaya Agarwal, partner (infrastructure practice & PPP leader), EY.

Metro systems cut travel time, reduce operational costs of transport service, improve connectivity, raise passenger comfort and reduce emissions, pollutants and greenhouse gases.

As states vie with each other to introduce metro services, which entail huge capital expenditure, one way to save on costs is to understand the categories and business models of metro systems and services.

The metro systems, Agarwal says, are classified according to the capacity of passengers carried, measured in peak hour peak direction traffic (phpdt). Heavy capacity system operates with a capacity of 60-90,000 phpdt, medium capacity is with a capacity of 40-50,000 phpdt, while a light metro has a capacity ranging from 25-30,000 phpdt.

By industry estimates, the per km cost of an underground metro would be about R600 crore, while on-surface cost will be around R20 crore/km and elevated sections would cost around R200 crore/km. Similarly, the user fee varies from R3 to R4/ km for the three different types of constructions.

The estimated traffic is the key indicator for the revenue, which essentially determines the viability of the project; this in turn influences the project model. The metro projects can thereby be modelled accordingly on PPP or EPC mode, Agarwal says.

However, Indias Metro man E Sreedharan thinks PPP projects are not viable for Metro projects, since they are expensive to build and have low returns.

To become profitable, projects in the public-private partnership modes have to follow a rail-plus-real estate model, like in Hong Kong, where the metro operators owns skyscrapers and malls which are linked by the metro rail. Hyderabad Metro, which is a PPP project, is pursuing a similar business model where it expects half the revenue to come from property development and rentals.

States that are joining the metro rush can think of giving a commercial linkage to the metro projects rather than seeing them purely as social projects.