[sustran] Re: [NewMobilityCafe] Metro Rails: where's the money?

[Alan Howes]

Quite right, Eric.

Plus, there is no consideration of non-user benefits, including benefits
to employers and other businesses from easier access for staff and
customers.  Nor does it even consider benefits to the users themselves.

Crucially, in the Indian context - whoever heard of an urban road
investment (e.g. "flyovers") being appraised in such a manner?

On the main premise, I do agree that BRT is worth consideration - though
whether BRT alone can cope with the volumes in Indian cities is
debatable.

Alan (about to spend the next month in Mumbai)


--
Alan Howes
Associate Transport Planner
Colin Buchanan 
4 St Colme Street
Edinburgh      EH3 6AA
Scotland
email:  alan.howes at cbuchanan.co.uk
tel:      (0)131 226 4693 (switchboard)
           (0)7952 464335  (mobile)
fax:     (0)131 220 0232
www: http:/www.cbuchanan.co.uk/


-----Original Message-----
From:
sustran-discuss-bounces+alan.howes=cbuchanan.co.uk at list.jca.apc.org
[mailto:sustran-discuss-bounces+alan.howes=cbuchanan.co.uk at list.jca.apc.
org] On Behalf Of Eric Bruun
Sent: 08 August 2006 21:21
To: Asia and the Pacific sustainable transport;
eric.britton at ecoplan.org; GlobalSouth at yahoogroups.com;
NewMobilityCafe at yahoogroups.com
Cc: vuchic at seas.upenn.edu; bruunakhtar at hotmail.com
Subject: [sustran] [NewMobilityCafe] Metro Rails: where's the money?


Boy, I don't agree with this article at all.

 First of all, much of rapid transit investment has no depreciation.
Most tunnels that were built 100+ years ago are more valuable today than
they were then. This is an example of sustainable development, even if
initially costly. 

Second, what is wrong with using real estate funds to pay back the rail
investment? It is the rail investment that added value to  the property
in the first place. Why should there be a windfall to external
developers?
Hong Kong's Metro and Japanese railways have always been real estate
developers. In fact that is how most of the original streetcar lines got
started -- as means to open up real estate.

Eric Bruun


-----Original Message-----
>From: Lee Schipper <schipper at wri.org>
>Sent: Aug 8, 2006 5:45 AM
>To: eric.britton at ecoplan.org, GlobalSouth at yahoogroups.com, 
>NewMobilityCafe at yahoogroups.com
>Cc: Sustran-discuss at jca.apc.org
>Subject: [sustran] Re: [NewMobilityCafe] Metro Rails: where's the
money?
>
>Nice example of what can be done with OPM -- Other Peoples' Money!
>
>>>> eric.britton at ecoplan.org 08/08/06 12:53 AM >>>
>
>Metro Rails: where's the money? 
>
>
>
>
>
>Bus Rapid Transit makes more
><http://www.financialexpress.com/fe_full_story.php?content_id=136535>
>financial
>sense as an urban transport system
>
>
> 
>
>
> <http://www.financialexpress.com/about/feedback.html> RAMESH 
>RAMANATHAN
>
>
>Posted online: Tuesday, August 08, 2006 at 0000 hours IST
>
>http://www.financialexpress.com/fe_full_story.php?content_id=136535
>
>
> 
>
>
>
> 
>
> 
>
> 
>
> 
>
> 
>
>
>
>
>
> E Sreedharan, the driving force behind the Delhi Metro, is a living 
>legend-a remarkable engineer. He delivered the Delhi Metro on time, 
>within cost, and as a example of how public infrastructure ought to be 
>built. In a country parched for projects that move from conception to 
>delivery with no glitches, he is a shining example of how to do it 
>right.
>
>Unfortunately, Sreedharan is not a magician. No matter what he does, he

>can't make the Delhi Metro's financials work, because the numbers don't

>add up.
>
>
> 
>
>Phase 1 cost Rs 10,000 crore for 64 km - a whopping Rs 150 crore/km.
>With 66%
>debt financing, interest cost at 8% works out to Rs 550 crore p.a. And 
>principal repayment would be Rs 500-600 crore p.a., assuming a 10-15 
>year repayment period.
>
>Where are the revenues coming from? Last year, the Metro had operating 
>revenues (i.e. from passengers) of Rs 113 crore. Operating expenditures

>were Rs
>102
>crore, leaving barely Rs 10 crore as surplus before interest. And one 
>other painful item: depreciation. When you build a Rs 10,000crore 
>asset, depreciation can really start hurting. This was Rs 200 crore 
>last year, but will balloon .
>Which means that the Metro is suffering massive losses, even before 
>interest expenses, forget principal repayment. There is no way the 
>Delhi Metro can generate surpluses. Ever.
>
>The only solution to this fiscal problem is to find alternative sources

>of 
><http://www.financialexpress.com/fe_full_story.php?content_id=136535>
>financing,
>which is what Delhi Metro has done. They are now developing real 
>estate-a six-hectare property at Shastri Park, 93 acre at Khyber Pass, 
>etc. Last year, one-time income from real estate came to Rs 300 crore, 
>almost three times that which the Delhi Metro was originally set up 
>for, mass transit. The
>reality:
>Metro Rail projects are financial white elephants. 
>
>Who is
><http://www.financialexpress.com/fe_full_story.php?content_id=136535>
>lending to Metro projects? The biggest - and, possibly, only - lender 
>so far has been the Japan Bank for International Cooperation (JBIC). 
>They financed Delhi Metro over Rs 4,000 crore, and have completed due 
>diligence on phase 2
>- debt of
>another Rs 4,000 crore. There is no public data available on JBIC's 
>rationale for lending to Metro projects.
>
>Strangely, just as the financial hole of Delhi Metro is increasing, the

>Metro bandwagon is moving across the country. Bangalore has just 
>launched its Metro project, Mumbai followed suit a month later, 
>Hyderabad and Chennai are busy preparing detailed project reports. If 
>the numbers are so bad, why are cities interested in these projects?
>
>Actually, it is not the city governments that get to decide (topic for 
>another
>debate) but their state governments. There are a number of reasons.
>Urban
>testosterone for one; metros have become a status symbol. But there are

>many other factors at play, which make the Metro lobby a force to 
>reckon with. A World Bank report on urban transport in India states 
>that our urban transport approach is "supply-oriented, and traffic 
>growth-biased. It conflicts with the principles outlined in the 
>government urban transport policy statement in a number of ways.
>
>In the short term, it neglects the mobility of low-income and poor 
>travelers, especially the non-motorised one..(and) ..favors the most 
>capital-intensive public transport modes (metros and other urban 
>railways) which may not be warranted by either traffic density and 
>passengers' ability to pay, or their budget capacity to pay subsidies 
>in perpetuity."
>
>
>Quick Take
>
>
>. Delhi Metro is suffering huge losses. And no way can it generate 
>surpluses . The only solution is to look for alternative sources of 
>financing . A Bus Rapid Transit system is possibly a more viable 
>transport alternative
>
>What is preventing urban transport alternatives from emerging in India?
>One key
>reason, indeed the first reason, the World Bank report suggests is that

>these alternative proposals run counter to "the formidable urban rail 
>lobby", among others.
>
>But are there alternatives? Clearly, we need mass transport systems in 
>our cities - private cars and two-wheelers are already choking the 
>streets, and barely provide 20% of the total travel needs even today. 
>One possible alternative is Bus-Rapid-Transit (BRT). Across the world, 
>there is increasing support for BRTs. Remarkable scaled up solutions 
>have emerged, none better than in Bogota and Curitiba in South America.
>
>A report prepared by Seema Parekh ,et al for 'India Urban Space', a 
>conference on challenges in urban India, states: "Bogota today boasts 
>of a world-class Bus Rapid Transit system of dedicated bus lanes called

>TransMilenio; Latin America's largest network of bicycle ways called 
>ciclo-rutas 150 miles long; world's longest pedestrian-only street 
>spanning 10.2 miles, hundreds of miles of sidewalks many through the 
>city's poorest neighborhoods; and the world's biggest Car-Free Day (dia

>sin carro), during which private vehicles are not allowed to enter the 
>entire city of 135 square miles."
>
>Importantly, from a financial standpoint, the infrastructure was built 
>at a cost of about $5.3 million per km (Rs 20 crore, or one-sixth of 
>Delhi Metro). As a result, "TransMilenio requires no operating 
>subsidies and earns substantial profits for its operators."
>
>BRT systems make more financial sense than Metros. Ahmedabad seems to 
>think so - it is the first Indian city to go for BRT. Jaipur, Indore 
>and others are also moving in this direction. An alternative is 
>emerging.
>
>Beyond finances, any urban transport system fundamentally defines the 
>destiny of a city for decades, just by virtue of its impact. It is 
>critical, therefore, that these decisions be integrated into an overall

>plan.
>
>Swati Ramanathan of Janaagraha says: "Introducing any rapid transit 
>system without developing a Master Plan with integrated transport as a 
>component is like putting the cart before the horse."
>
>Most public policy decisions are like icebergs. Urban transport choices

>are no different. For those who want to improve the quality of the 
>public debate on this issue, the Achilles heel of Metro Rail systems is

>their finances.
>Sorry, Mr
>Sreedharan--I still think you are great engineer. 
>
>-The writer is founder of Janaagraha,which aims at reforms in urban 
>governance
>
> 
>
>
>
>================================================================
>SUSTRAN-DISCUSS is a forum devoted to discussion of people-centred,
equitable and sustainable transport with a focus on developing countries
(the 'Global South'). Because of the history of the list, the main focus
is on urban transport policy in Asia.



================================================================
SUSTRAN-DISCUSS is a forum devoted to discussion of people-centred,
equitable and sustainable transport with a focus on developing countries
(the 'Global South'). Because of the history of the list, the main focus
is on urban transport policy in Asia.