Local Governments do not have funds for such projects
Metro rail projects are slick modern city infrastructure, which local Governments love to flaunt to their voters.
Social scientists hail them as a melting pot for all classes. For city dwellers, Metro trains are where glamour meets utility.

EXPENSIVE PROJECTS

However, they are fairly expensive projects and are more likely to function with operating losses unless supported by subsidised input costs, income from other sources such as land parcels, and most importantly, optimum fares for passengers. The fare levels should be such that they are low enough to attract ridership without adversely affecting financial viability of the project.
Metro rails are essentially intra-city rail-based passenger transport projects. But, from the Government perspective, such projects require not just high capital investments, but high operational expenses as well.
This is unlike roadswhere the local Government puts in a one-time investment and does not have to inject much money for operational expenditure.
For example, the capital and operational expenses for rolling stock on road such as cars, buses, trucks, scooters, are borne by users.
It is not difficult to understand why the Central, State and city governments have been slow and cautious in adopting Metro projects. They are highly subsidised and they have to be significantly funded by local Government — State or city level. After all, why should the taxpayers’ money be spent on subsidising a limited number of Metro rail users of one city? The local Governments are starved of funds to take up such large projects.
India has two key Metro rail system examples — Delhi and Kolkata — which started operations two decades apart. India’s first underground Metro — the Metro Railway in Kolkata — which was under Indian Railways, started operations in 1984. About 16.5 km of the project became operational in 1995. The subsequent 8 km length was operationalised after about 15 years when Mamata Banerjee became the Railway Minister.

LOSS-MAKING ZONE

Today, Kolkata Metro is Railways’ largest loss-making zone.
And earlier in January this year, when the then Railway Minister Pawan Bansalincreased fares across the board for all passengers, he could not increase fares of Kolkata’s Metro Rail.
After Kolkata, Delhi Metro was built with Government-ownership, with huge financial support from the Centre and Delhi Governments, and long-term funding support from the Japanese Government.
But it was a corporate entity with its own balance sheet. It had higher tariff structure compared to Kolkata. Delhi Metro has expanded and will complete 10 years of operations this year. But, it has been crying hoarse for increase in tariffs on the back of higher input costs such as electricity for over a year, and the Government has not permitted it.
After Delhi, other cities which are in different phases of having Metro systems include Bangalore, Mumbai, Chennai, Jaipur, Ahmedabad and Gurgaon.
In the backdrop of Delhi and Kolkata, India has tried experimenting with public-private partnership (PPP) model in one section in Delhi, Hyderabad and Mumbai.
But, the PPP experiments have usually gone sour. Reliance Infrastructure, which bagged three projects in Delhi and Mumbai, has exited from one in Delhi with great difficulty, sought higher fares for one in Mumbai even before it is operational, and is most likely to get out from the third project in Mumbai. Mumbai’s third Metro line recently was approved on a Government funding model.
Hyderabad Metro, with huge land parcel, being developed on the PPP model by infra major Larsen & Toubro, is in construction phase. Metro projects even in developed countries need huge funding support from Government. India will have to learn its own lessons.
(This article was published on September 27, 2013)

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