Tier-2 cities facing challenge of making Metros financially viable

“A metro system in cities such as Lucknow and other tier-2 cities doesn’t make sense as the average trip length is short -- just 3-5km. When we use the metro or any grade separate facility, there is a penalty time, which is the time taken to reach the station, pass through the security check and board the train. These cities have a vibrant informal public transport system that’s popular with people and cheap. Why will people use the metro when they neither save time nor money?” asked Amit Bhatt, managing director of the International Council on Clean Transportation.

To be sure, metros may be needed in the future.

Mangu Singh, former managing director of Delhi Metro Rail Corporation (DMRC), which runs the largest metro network in India, said: “When phase-1 of Delhi Metro was made operational, ridership was low, but it gradually picked up as the network expanded. To achieve financial viability, a minimum of two cross lines and a ring connecting the four ends is essential. Also, metro is essential to improve livability in these cities.”

But the challenge is to manage the present and prepare for the future.

Currently, 15 Indian cities have 754km of metro rail network. Of this, 548km was built after 2014, when the National Democratic Alliance government came to power under the leadership of Narendra Modi.

Prior to 2014, 229km of the metro rail network was operational in Delhi & NCR (194km), Kolkata (28km) and Bangalore (7km).

In the past 10 years, smaller cities such as Jaipur (population of 6.6 million as per census 2011), Kochi (2.5 million), Pune (3.3 million), Hyderabad (3.9 million), Ahmedabad (5.5 million), and Nagpur (4.6 million) have got metro networks. Of the lot, only Hyderabad, which is almost a metro and has a thriving IT and pharma industry, perhaps needs a metro right now.

In December 2021, Prime Minister Narendra Modi inaugurated the 9km metro corridor in Kanpur. In September 2022, he inaugurated the Phase-I of Ahmedabad metro—a 32km corridor.

In its report on Metro projects in India, tabled in the Lok Sabha in December last year, the parliamentary standing committee was critical of the performance of metro corporations and recommended that the ministry deliberate upon reasons for low ridership on the mass-transit network.

“The dismal performance of the majority of the metro rail networks in terms of carrying passengers enough to break even after six to seven years of continuous operations shows that (i) faulty DPRs (detailed project reports), (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,” the report said.

But this has not stopped state governments from proposing new metro rail projects. The ministry of housing and urban affairs (MoHUA) received 26 proposals for Metro rail projects from state governments between 2018 and 2020 — 13 proposals were received in the financial year 2020-21—of which 18 are still pending approval, the ministry said in response in the Lok Sabha in December last year.

Some of the proposals awaiting the Centre’s nod are the 15 km MetroLite projects in Gorakhpur (estimated cost of ?2,670 crore); a 23km corridor in Jammu ( ?4,069 crore), a 25 km corridor in Srinagar ( ?4,892 crore), a 22.4km MetroNeo project in Dehradun ( ?1,853 crore), and a 33km MetroNeo project in Nashik. In its budget for the financial year 2023-24, the UP government has earmarked ?100 crore for metro rail projects in different cities, including Varanasi. Uttar Pradesh is the state with the highest number of metro projects — while Lucknow, Noida and Kanpur are operational, construction work is going on at Agra and will be operational by next year. Ghaziabad and Noida are connected to Delhi via metro.

Are rail-based metro systems really needed in tier-2 cities?

According to Hemant Kumar Suman, assistant professor at the Centre for Transportation Systems at IIT-Roorkee, “Not really”.

“The majority of trips are less than 10km and for such trips, road-based public transport systems are more viable options as compared to rail-based metro systems. The Metro may not be a viable option for tier-2 cities since it also requires a lot of capital expenditure.”

Transport experts also point out the inadequate bus strength in cities where Metro projects are proposed. “It has become a status symbol for cities to have a metro corridor. If even a small portion of the amount of money spent on the metro project is spent on expanding the bus fleet, then the public transport system will transform completely,” added Bhatt.

Indeed, vanity and politics are the driving force behind metros in tier-II cities, not necessity or economics.

For instance, the 32km Kanpur metro is being constructed at a cost of ?11,000 crore. Currently, the daily ridership on the operational stretch is around 6,000 passengers. According to the Detailed Project Report of Kanpur Metro, the daily ridership of Phase-I is expected to be 940,000 in 2024 and 1,350,000 in 2041. According to the modal split given in the DPR, close to 50% of people travel by two-wheelers and 37.6% by public transport and shared autos. The DPR indicates a slight change in the modal split by 2041.

Experts point out that most DPRs exaggerate the numbers; for instance, it is highly unlikely that Kanpur will have almost a million people a day riding the metro by next year.

While the Gorakhpur MetroLite project is awaiting the Centre’s approval, the construction of Agra Metro is expected to be completed by next year. “In absence of good public transport services in cities such as Agra, Kanpur, Lucknow and Gorakhpur, metro projects are the need of the hour. Metros in these cities will provide a faster, affordable and comfortable mode of transportation to people,” said Panchanan Mishra, deputy general manager, communication at UPMRC.

Financial viability of these projects

With 390km of network, the Delhi Metro Rail Corporation (DMRC) is the biggest metro network in India and the fourth largest driverless network in the world. It is the transport lifeline of Delhi and the National Capital Region with a daily ridership of over five million (pre-pandemic).

Yet, the corporation is loss-making despite its average daily earnings being much more than what’s required to break even. According to the report of Lok Sabha’s standing committee on housing and urban affairs, “DMRC is making profits at the operating level, but it is yet to make net profits. The Committee while appreciating the operational performance of DMRC, which has improved considerably, they are concerned to note that DMRC is continuously incurring net losses….”

In India, eight operational metro rail networks, which are joint ventures between the Centre and state governments, are “incurring losses”, the ministry said in a response to a question raised in Rajya Sabha in February this year.

The proposed metro projects in Jammu and Srinagar will cost around ?4,069 crore and ?4,892 crore respectively. The two cities have just 300-odd old buses as against the current demand of 700 buses for intra-city movement, senior officials said.

Making a case for the Metro in J&K, Anuj Malhotra, head of planning and urban development, Jammu and Kashmir said that high-speed rail transport in smaller cities can play an important role in the development of cities as “urban centres, satellite towns or economic growth engines”.

“A large number of people come daily to Srinagar and Jammu from neighbouring towns for education, jobs, etc. If these towns are connected to Srinagar and Jammu with a high-speed rail network, it will help the places become economic growth engines by improving productive hours of the workforce and allowing affordable housing and other development in these smaller towns which will be only 30 minutes away,” Malhotra said.

Some transport experts said the development along the metro corridors in the future will help in increasing ridership and also help corporations generate revenue from non-fare box sources. “Transit Oriented Development along the metro corridor can help increase ridership. “Cities should plan for transit-oriented development (TOD) to enable higher ridership on rapid transit modes. Value capture mechanisms from TOD can help in financing transport investments and operations,” said Shalini Sinha, head and principal researcher, at Centre for Excellence in Urban Transport, CRDF, CEPT University.

Metro corporations are exploring other options to increase their revenue.

“Along with ticketing revenues, a number of measures have been taken to boost non-ticketing earnings. In many stations like Huda City Center, Nehru Place, Hauz Khas and Netaji Subhash Place, we have gone for retail space development. In Dwarka Sector 21, a mall with a multiplex and food court has come up. Some more stations also will have similar development in the coming months. Consultancy is another area where we are now bidding for International projects very aggressively. Recently, we qualified for the prequalification tender process for Bahrain Metro. Our consultancy assignments in Dhaka are also progressing well. Therefore, we are optimistic that in the future, DMRC's financial condition will see gradual improvement,” Anuj Dayal, principal executive director, DMRC.

But that may not be a viable option in smaller cities – and may well become another cost head.

Like DMRC, UPMRC is exploring other revenue options. “These are capital-intensive projects and the revenue from fare-box collection is not enough. Therefore, we are trying to increase our revenue from non-fare box sources such as advertising, renting space at metro stations to kiosks and also property development. We recently started renting space for Kiosks at our stations and it has helped us generate revenue of ?5-10 lakh per month. We are exploring other options as well,” said Mishra.

A good bus system, and integration with other modes essential

Metro systems can’t be planned as a stand-alone mode of transportation in any city. Therefore integration with all other modes of public transportation is key to its success, said experts.

“There is a need for a comprehensive approach to transport planning when it comes to planning for Metro in a city, especially tier-2 and 3. It (Metro) can’t be planned as a stand-alone mode of transportation; it has to be integrated with bus and para-transit modes for it to be effective. In absence of proper integration, the metro system, which is a capital-intensive project, will have poor ridership and result in revenue loss,” said OP Agarwal, senior advisor at World Resources Institute-India.

The public bus transport service is far cheaper, faster and has more coverage (in terms of area) than Metros. But still, it is inadequate in most states. “Most Indian cities, especially tier-2 cities such as Jammu, Dehradun or Kanpur don’t have a good bus transport system. The number of buses is fewer than the actual requirement. The focus should be on improving the bus transport service as it can reach every nook and corner of the city, and cater to a large population,” said T Surya Kiran, managing director at the Association of State Road Transport Undertakings, which is the apex coordinating body representing 62 State Transport Undertakings.