DELHI METRO FARE REVISION - LEARNING FROM INTERNATIONAL CITIES

Delhi Metro Rail Corporation (DMRC) has become lifeline of Delhi, carrying around 2.8 million passengers per day. Currently, DMRC is managing a length of 213 kms of network and will be adding 160.57 kms under construction by 2017. The operating ratio of DMRC is 67.22% for the financial year 2014-15. Energy costs are around 35% of the total costs. Delhi Metro is one of the urban rail projects which are making profits. However, the corporation is facing huge cost pressure owing to increase in cost inputs. The Delhi Metro's fares were last revised in November 2009 when the minimum fare was revised to INR 8 from INR 6 while the maximum fare was revised to INR 30 from INR 22. It was highlighted in earlier article - "Metro System in India - Fare Comparsion" that Delhi Metro is the cheapest metro system in the country. 

In order to increase the farebox revenue, Ministry of Urban Development has constituted fourth Fare Fixation Committee (FFC) for recommending revised passenger fares of Delhi Metro. The committee, set up under Sections 33 and 34 of the Metro Railway (Operations and Maintenance) Act, 2002, has to submit the report by September 8, 2016. The committee has also invited suggestions from the general public. The notice inviting suggestions from the passengers has also been displayed at major interchange stations. The last date for sending suggestions is June 30, 2016.

Currently, there is no automatic revision formula to revise the fare for DMRC based on input cost. Thus, the process is dependent on the government to review the costs and approve the revision. It is important to take learning from some of other cities around the world:

Singapore

Singapore has created an independent body - Public Transport Council (PTC) to regulate public transport fares. PTC plays a key role to safeguard commuters’ interest by ensuring adequate public transport services at affordable fares, and at the same time ensure the long term viability of public transport operations.

PTC released the refreshed Fare Review Mechanism in October 2013. The government does not provide operating subsidies currently. Commuters pay for operating cost and public transport operators (PTOs) operate efficiently under the scrutiny of the regulator.

PTC introduced first fare cap formula in 1997.  The authority revised the same in 2005, 2007 and 2008. The existing applicable formula is valid from 2013 to 2017.

Fare Adjustment = 0.4 cCPI + 0.4 WI + 0.2 EI – 0.5%

cCPI : Change in year-on-year core Consumer Price Index (new)

WI : Change in year-on-year Wage Index, adjusted for changes in employer’s CPF contribution rate

EI : Change in year-on-year Energy Index (new)

0.5% : Productivity Extraction based productivity gain achieved in the period 2007-2011

The current fare revision formula is based on the principle of Affordability.

AI = Monthly household expenditure of the household on public transport

The lower the indicator, the better it is, i.e. fares are more affordable than before. This indicator directly tracks year-on-year changes in fare adjustments and income. In order to serve the needy segment, PTC has created Public Transport Fund. It is mandatory for PTO (Public Transport Operators) to contribute portion of fare increases granted, to the PTF (Public Transport Fund) – as a form of giving back to commuters through sharing of gains. Further, Fines imposed on service lapses to be channeled back to PTF.

Hong Kong

In Hong Kong, the government believes that the fares have to be fair to both passengers and operators. The government has been providing pragmatic subsidies for targeted users. The Fare Adjustment Mechanism (FAM) was adopted by the Government at the time of the merger of the two railway operators in 2007. It is designed to meet three key objectives, namely, to ensure that our fares reflect Hong Kong’s economic conditions, to address the travelling public’s concern about affordability of rail services, and to ensure that the operator generates sufficient revenues to support its operations over the long term.

Overall Fare Adjustment Rate = (0.5 x Change in CCPI) + (0.5 x Change in NWI(TS)) –Productivity Factor

Change in CCPI (Composite Consumer Price Index) - the year-on-year percentage change in CCPI for December of the previous year

Change in NWI(TS) (The Nominal Wage Index (Transportation Section)) – the year-on-year percentage change in NWI(TS) for December of the previous year

Productivity Factor is a pre-determined factor of 0.3% before 2013 and 0.6% from 2013 to 2017

Based on the data of these objective indices under the FAM, fares will be maintained, or adjusted upwards or downwards. If, in a given year, the outcome of the calculations on the overall fare adjustment rate under the FAM is within the range of ±1.5%, there shall be no fare adjustment and the unadjusted percentage shall be rolled over to the next annual fare review for calculation. The latest fare adjustment came into effect in June 2014 with an Overall Fare Adjustment Rate of +3.6 per cent, reflecting

·         a year-on-year increase in the Nominal Wage Index of 4.1%

·         an increase in the Composite Consumer Price Index of 4.3 %

·         a Productivity Factor of 0.6%

Taipei, Taiwan

Taipei Metro is 70% owned by the government. The government is responsible for fare setting. Normally the metro fares are reviewed once a new mayor of Taipei City. The mayor is appointed for a four-year term, renewable once only. The current mayor was appointed on 25 December 2014.

Taking into account the economic situation and the affordability of the residents, the metro fares has not been adjusted for the past 17 years. However, the Taipei government has decided to adjust metro fares in 2016 and is now in the process of the development of new fare policies including a potential abolition of the 20% discount for the travel card (Easycard & iPASS) and may switch to offer discount fares to frequent users instead.