Metros across India run into losses: Study

Urban transport experts pointed out several reasons for the failure. These include lower than expected ridership due to poor last-mile connectivity, delay in commissioning of under-construction lines which would feed ridership to the already operational lines.

Even as the country has close to 650km of operational Metro lines and hundreds of kilometers under construction, most Metro networks are facing heavy losses.

A blue line metro moves, near Kaushambi metro station, in Ghaziabad. (Sakib Ali / Hindustan Times)

According to a recent study which looked at the latest available annual filings for FY18-19, Bengaluru, Chennai, Hyderabad, Gurgaon and Kochi Metros faced losses, with Chennai Metro alone facing net losses amounting to Rs 714 crore on its total income of Rs 183 crore, including on operations and other income.

Bengaluru, which is looking to expand its Metro network to 300km by 2025, earned a revenue of Rs 536 crore, but faced net losses amounting to Rs 498 crore, as per their annual report. Mumbai, which has only one operational line (11.5-km line connecting the suburbs of Versova and Ghatkopar) also faced a net loss of Rs 236 crore on revenue of Rs 322 crore, as per their latest annual filings.

However, for Bengaluru and Chennai, while the revenue figures correspond to the operational line, the cost figures correspond to all lines, even those under construction.

Urban transport experts pointed out several reasons for the failure. These include lower than expected ridership due to poor last-mile connectivity, delay in commissioning of under-construction lines which would feed ridership to the already operational lines, sub-optimal monetisation of non-fare revenue options such as commercial space leasing, advertisement space leasing, property development, land monetisation, etc. due to various constraints, including regulatory and contractual restrictions.

“Unrestricted monetisation of commercial revenue streams is key to the operating viability of any Metro network. It keeps fares under check and reduces the dependency on government funding,” said Shadab Siddiqui, project manager at Auctus Advisors management consultants, which undertook the study as part of its non-fare revenue maximisation project for the Mumbai Metro Rail Corporation (MMRC), which is executing the 33.5-km underground Metro in Mumbai.

As per their study, Bengaluru Metro lost a major chunk of non-fare revenue as the city municipal corporation banned outdoor advertising in 2018 owing to the menace of illegal hoardings. The corporation is currently drafting a revised policy which is yet to be finalised. In Chennai and Hyderabad, only a small stretch of the Metro line is operational, leading to restricted ridership vis-a-vis potential and in case of Gurgaon, although there were plans for property monetisation under a transit-oriented development policy, it is yet to take off, which along with restricted advertisement rights made the Metro network unsustainable for the erstwhile private operator.

The data for the study was compiled through annual reports and filings with the ministry of corporate affairs. The study benchmarks Indian Metros with international networks like Hong Kong Metro which reported an operating profit of 36% from its Hong Kong operations in 2018 translating to approx. USD 1.5 billion to its coffers, thanks to its monetisation from station commercial and property rentals, as per their 2018 annual report.

According to the study, Delhi Metro, which boasts of a 389-km network, earned revenue of Rs 6,462 crore, with a net loss of only 7% as a large part of their network is operational and the costs correspond to revenue across all lines. Delhi, which has the largest and busiest Metro network in India, earned Rs 3,119 crore from fares, Rs 564 crore as its non-fare revenue component, Rs 2,011 crore via consultancy for other Metro networks and Rs 767 crore from other income. Delhi’s expanded network itself has given a boost to its non-fare revenue via station name rights, advertisement in stations and monetising of commercial space and land parcels.

R Ramana, executive director at MMRC said, “Metro is an intra-city network, which unless well-connected, will not yield the right benefits. In some cities, the peak ridership is low in comparison to the projected traffic. There are other limitations too. Like fares are not decided as per the prevailing market conditions. It is also not revised regularly.”

Amruta Ponkshe, a Mumbai-based transport expert, said that apart from looking at maximising on non-fare revenue, transit decisions must look to discourage cars too. She said, “Transit decisions made at the metropolitan or national level must look at introduction of congestion charges and increasing parking costs to increase metro ridership and farebox revenues.”