A Reality Check: The Expanding 'Indian Metro Network' Needs Quick Fixes To Woo Passengers

British publication, The Economist, on 23 December 2023, stirred controversy with its critique of India's metro rail systems in its year-ending 'Christmas Double' issue.

In an article, titled "Why are Indians shunning the country’s shiny new metro lines?" the magazine contends that India’s massive metro build-out is failing to attract enough passengers.

"Not one of India’s metro rail systems has achieved even half its projected ridership, according to a study by Geetam Tiwari and Deepty Jain of the Indian Institute of Technology (IIT) Delhi," the article said.

The publication sparked a virtual uproar, prompting the Ministry of Housing and Urban Affairs (MoHUA) to issue a statement stating that “the article, while containing factual inaccuracies, also does not provide the necessary context against which India’s growing metro rail network must be studied.”

Although the primary assertion of the article, suggesting that not one of India’s metro rail systems has achieved even half its projected ridership, warrants careful examination, it is essential to consider the ministry's response for a well-rounded perspective.

Poor Ridership?

The release from the Housing Ministry says that more than three-fourths of India’s current metro rail network was conceived, constructed and operationalised less than 10 years ago, with some systems being a couple of years old.

“Yet, daily ridership across metro systems in the country has already crossed the 10 million mark, and is expected to exceed 12.5 million in a year or two. India is witnessing a steep rise in its metro ridership and will continue to do so as our metro systems evolve. It must also be noted that nearly all metro rail systems in the country presently generate operational profits,” the release said.

The release also notes that in a mature metro system like the Delhi Metro, daily ridership has already surpassed 7 million, a figure well beyond the projected number for Delhi Metro by the end of 2023.

A subsequent press release from the Delhi Metro Rail Corporation (DMRC) underscores this achievement, stating that the Delhi Metro has exceeded its projected figures, with an average of around 67 lakh passenger journeys on weekdays, marking an 8 per cent increase over the 2023 projection.

Profitability

The Economist also questions India's metro systems for not covering their expenses adequately, citing a study by Sandip Chakrabarti at the Indian Institute of Management (IIM), Ahmedabad.

"In keeping with the august tradition of Indian Railways, not a single metro system makes enough money to cover its expenses," The Economist writes.

However, the Delhi Metro in its release asserts that the Parliamentary Standing Committee on Housing and Urban Affairs, while analysing its ridership, has appreciated its operational performance.

"The Committee also noted that Delhi Metro has been repaying its loans taken from the Japan International Cooperation Agency (JICA), timely from its operational revenues," says the DMRC release.

Devil-In-The-Detail

Although the Centre's assertion regarding the limited operational stretch of most metro projects contributing to low ridership does carry some validity, a thoughtful examination of the parliamentary report unveils intriguing insights.

In an April 2022 report titled "Implementation of Metro Rail Projects", the parliamentary panel, led by Jagdambika Pal, highlighted that barring Delhi and Mumbai Line 1, many operational metro railways, including Bengaluru, Hyderabad, Lucknow, Chennai, Kolkata and Kochi, had low ridership that was leading to a delay in the projects attaining breaking even point.

While the ridership projected in the detailed project report is used for estimating all benefits and for calculating economic rate of return, the break even ridership is the minimum ridership required to meet the operational cost. To get the full benefit and justify the project cost, projected ridership is important.

“The dismal performance of the majority of the metro rail networks in terms of carrying passengers enough to breakeven even after six to seven years of continuous operations shows that (i) faulty DPRs, (ii) lack of proper planning to provide first and last mile connectivity, (iii) provision of parking at metro rail stations, (iv) need for increasing catchment area, etc (sic),” the report stated.

The committee in its report had asked the Housing Ministry to deliberate upon the reasons for low ridership vis-a-vis the projected ridership and take concrete steps to increase ridership of all metro projects.

In an action taken report, the ministry informed the panel that it has asked metro rail corporations to make all possible efforts to increase ridership, including commissioning the remaining network and improving first and last mile connectivity among others.

Regarding financial performance, the committee found that many metro rail projects have been incurring continuous and increasing losses.

Consider this: the committee, acknowledging the significantly enhanced operational performance of DMRC, voiced apprehension over the continuous net losses incurred by it despite (i) average daily earnings surpassing the breakeven requirement, (ii) a consistent rise in average daily ridership across all phases operational from 2011-12 to 2019-20, (iii) continuous increase in fare box collections since 2002-03, and (iv) timely repayment of loans to JICA.

While the committee agreed with the view that the performance of metro projects may not be assessed purely on economic considerations, given the benefits that such infrastructure projects bring to society as a whole, it suggested a need to enhance non-fare box revenue.

Best Hedge

It is undeniable that the speed and scale of India's metro expansion over the past decade have been remarkable, not only transforming daily commutes but also influencing how millions connect and navigate the vibrant rhythm of life in bustling cities.

Certainly, addressing concerns related to passenger numbers and finances is crucial and is actively underway. However, suggesting that India is placing its bets on the wrong strategy is a far-fetched proposition.

Undoubtedly, a thorough examination of the entire initiative is necessary to bridge gaps and attract more passengers — an aspect even acknowledged by The Economist in its closing lines: "Mr. Modi and his advisers have done well to build so many metro lines. Now they need to make them more convenient to use."