Remove shortcomings of new Metro Rail Policy to make Metro projects work

February 4, 2019 2:49 AM

What is required is a comprehensive policy that clearly states how Metro systems built in PPP mode can be made viable

The Hyderabad Metro is the largest Metro system in India to be built in PPP mode

By Jaideep Ghosh and Devika Kapur

In August, 2017, the new Metro Rail Policy was approved, containing directives for Metro projects that improve last-mile connectivity in cities. Despite the policy stating how Metro projects should be undertaken and financed in a sustainable manner, there are some loopholes which may work against it. A key feature of this policy, debated at length, is that private participation has been made mandatory in order to avail central support for Metro projects. This public-private partnership (PPP) model has received a lot of criticism since previous partnership attempts (in the Airport line) had been failures.

When it comes to projects globally, of the 113 cities having Metro lines, a majority (88%) are public sector projects and only 12% cities have PPP. With private participation, profitability becomes a key indicator of a project’s success. These projects are capital intensive, have high construction costs and long gestation and payback periods, which makes it difficult to get a good return on investment. One way to make Metro projects profitable would be an increase in fares. But this may make long-distance travel too expensive for poor income groups.

With rapid urbanisation, the need to have Metro lines in cities is gaining importance. Hence, using profit & loss to measure the success of Metro (PPP) projects would be an inappropriate indicator. What is required is a comprehensive policy which clearly states how these PPP projects can be made viable. All Metro (PPP) projects should be undertaken only after a Comprehensive Mobility Plan is put in place by a statutory body, which assesses the viability of the project. Further, fixing fares is of utmost importance, given that providing affordable long-distance travel to low-income groups is one of the key benefits of a Metro line. The need of the hour is a holistic Metro Rail policy which addresses all these challenges.

Way forward

As the demand for urban transport continually rises, it is becoming increasingly essential to have a mass urban transit system in cities. In light of this, it is necessary to improve urban transport not only in terms of increasing connectivity, but also a faster, more reliable, affordable and sustainable urban transit system. Additional roads, rails and vehicles are not the only solution to the problem. These need to be coupled with an effective public transportation system that promotes sustainable economic development.

This can be achieved in a number of ways – starting with ensuring coherence between policy interventions and operational implications. Existing challenges in acquiring land, getting regulatory clearances, technical/engineering issues, etc. must be dealt with to ensure viable urban mass transit. The government must ensure that all important routes are connected via road, rail or Metro. The existing public transportation system must also be upgraded to provide commuters some relief and ease the overcrowding issue.

The growth of mass urban transit systems in India can be sustained by ensuring competent, financially secure and robust institutions, which are transparent and accountable, being responsible for effective public transport and efficient connectivity. In order to ensure the same, strong political will and government support are a must.

-Jaideep Ghosh is Partner and Head, Transport, Leisure and Sports, and Devika Kapur is Senior Consultant, Transport and Logistics, KPMG in India

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Kolkata’s SPM Port introduces hi-tech amphibious boats to cut operational cost; details here
2Celebrating India-Bhutan ties: The Mangdechhu Hydroelectric Power Project receives prestigious award
3Indian Railways’ Navratri gift to women commuters of Mumbai local trains! More ladies specials to run