[sustran] Delhi Metro article..

[Sudhir]

Dear All,

Please have a look at this article.

we should think about this.....

http://www.business-standard.com/india/storypage.php?autono=331266


*Source : Business Standard*

**

*A K Bhattacharya: In defence of Delhi Metro*

NEW DELHI DIARY

*A K Bhattacharya / New Delhi August 13, 2008, 0:21 IST*


Those who regularly use the Delhi Metro service swear by it. The first phase
of the network, covering a 65-kilometre stretch that now carries about
800,000 passengers every day, was completed ahead of schedule. Its service
was efficient, when it started the first leg of the network more than five
years ago. It continues to be so even today. The service stands out because
of the manner in which its coaches and the station areas are regularly
maintained and kept clean. Most users are impressed by Delhi Metro's
adherence to basic safety guidelines, punctuality of service and the use of
technology for the benefit of its passengers.

What's more, Delhi Metro's operational efficiency will make any manager turn
green with envy. Its operating ratio (expenditure as a proportion of the
total income) has seen steady improvements over the years. In 2007-08, it
was down to 0.52 from 0.60-0.64 a year before. In other words, Delhi Metro's
expenditure on running the service is now just about half its total income.

For connoisseurs, experts and economists, though, Delhi Metro has many
problems. First, there are those who question the very model of running a
highly capital-intensive metro service in a city like Delhi. A metro
service, they argue, is better suited to cities that have grown vertically
and not to those like Delhi, which has seen circular growth.

Second, there are legitimate questions about the manner in which Delhi Metro
has been funded. The bulk of Delhi Metro's financing needs has been met
through long-term loans from Japanese and other agencies at hugely
concessional interest rates. The money it has got is virtually free. So, its
real costs have been hidden and the operational efficiency that Delhi Metro
boasts of will not look as dramatic if it had to budget for market rates of
interest on the funds it used to build the network.

Third, there is a view that Delhi Metro has hugely benefitted from the large
tracts of land it got from the government. It has used that land to develop
real estate and augment its income. Indeed, only 40 per cent of its total
revenue is coming from traffic operations and Delhi Metro's target is to
reduce it further. In other words, Delhi Metro's profit is boosted not so
much by its traffic income as by what it earns from real estate (which
incidentally is now more than its revenue from traffic).

And finally, there is the argument that the ownership structure followed for
Delhi Metro is not sustainable. With the state and the Centre owning 50 per
cent each in Delhi Metro, neither of the shareholders can actually assert
itself or drive the company. This, it is argued, is not a healthy structure.

Each of these arguments may have some merit. Delhi Metro may not be the
ideal form of public transport in the capital city. Concessional funds may
have skewed the general assessment of Delhi Metro's financial performance
and credit is being given where it is not due (though, public transport
projects are globally subsidised through such concessional funding). Real
estate development has given an advantage to Delhi Metro which no other
public transport provider in the country has got so far. And finally, there
may be some merit in the view that the success of Delhi Metro is largely
dependent on an efficient administrator like its present managing director,
E Sreedharan. But once he is gone, the system might collapse. So, Delhi
Metro's ownership structure is not what should be replicated in any other
city.

But it is important to note that the entire debate on Delhi Metro has
centred round its financial model, its ownership structure and the use of
real estate to augment revenues. The fact that it is a public transport
network offering service efficiently and at a reasonable tariff seems to
have no place in this debate. There are few examples of an efficient public
service network in this country and when one of them shines like the way
Delhi Metro does, it is perhaps more appropriate to assess how that model
has worked, instead of focussing on what is wrong with it.

Indeed, the 50:50 ownership pattern, followed for Delhi Metro, may well be
the preferred option for most other public transport systems, provided the
management of such a network is given the kind of operational autonomy that
E Sreedharan has got. There is no need to allow him to run metro services in
other cities as subsidiaries of Delhi Metro. But surely the same ownership
structure with a top management that enjoys full autonomy with clearly
defined performance goals will be a better option.

The Hyderabad metro project has raised hopes of a new model in which a
private sector infrastructure company will implement the public transport
project at no cost to the government. The irony is that the Hyderabad metro
project also is dependent on real estate development as a significant source
of revenue. And given what problems surface when private sector players
start acquiring land for their projects (special economic zones and Posco
are recent examples), the government's gains from the Hyderabad project may
well remain illusory.


-- 
Sudhir Gota
Transport Specialist
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