India’s metro rail systems should become financially sustainable

Source: The post is based on the article “India’s metro rail systems should become financially sustainable” published in “Live mint” on 5th October 2023.

Syllabus: GS3- Economy- infrastructure (metro rail systems)

News: The article discusses the financial challenges faced by India’s expanding metro rail networks. It emphasizes the necessity for sustainable funding, regular fare adjustments, and creative non-fare revenue streams such as taxes and land value capture. The article also recommends the establishment of Unified Metropolitan Transport Authorities to oversee and enhance these systems.

What is the current status of India’s metro network?

India’s metro network has significantly expanded in recent years.

In 2014, the network was 229 km across 5 cities.

As of April 2023, it has grown to 860 km spanning 20 cities.

The government released about ₹90,000 crore for these projects from 2014 to 2022.

Despite improving public transport, financial performance and patronage have not been impressive.

What are the challenges facing India’s metro rail system?

Financial Strain: Despite elevating public transport standards, many metro rail systems are incurring large financial losses.

Revenue Issues: Their revenue from both fare collections and non-fare sources, like advertisements and parking charges, often fails to meet total expenses.

Infrequent Fare Updates: The metro systems suffer from sporadic fare adjustments, leading to:

Erosion of real value of fares.

Reduced actual revenues.

Increased necessity for subsidies.

Sudden Fare Hikes: Due to the lack of periodic fare revisions, metros occasionally introduce large fare increases, which;

Results in significant customer dissatisfaction.

Leads to a decline in ridership.

Financial Performance: The overall financial performance and patronage of many metro systems, even the mature ones, have not been impressive.

Reliance on Government Funding: The substantial financial losses may compel greater government funding, potentially offsetting the environmental and social benefits metros offer.

What should be done?

Adjust Fares Regularly: Implement systematic and automatic fare adjustments to prevent sudden large hikes and maintain revenue.

Boost Non-Fare Revenues: Enhance revenue through alternative means, such as parking charges and advertisements.

Establish a Fare Regulation Committee: Create an independent metro fare regulation committee to oversee fare structures and ensure they are adjusted methodically.

Secure Additional Funding: Both central and state governments should seek innovative and justified funding sources to supplement fare and non-fare revenues. Examples include:

Appropriating property value gains.

Allocating funds designated for green investments.

Utilizing savings from eliminating subsidies on personal vehicles.

Promote Equity: Implement new fees or taxes that encourage fairness by rectifying imbalances like free parking and ensuring beneficiaries pay appropriately.

Employ Revenue-Generation Strategies: Leverage efficient and equitable non-fare revenue sources, such as:

Land value capture mechanisms.

Taxes on carbon-intensive transport modes.

Carbon and emission-related taxes.

Establish Unified Metropolitan Transport Authorities (UMTAs): Introduce UMTAs to serve as single entities responsible for planning, owning, building, and operating all transport systems within a city or region.

Adhere to Guiding Principles: Ensure revenue generation adheres to principles like making beneficiaries and polluting urban transport pay and collecting transit funds locally when possible.