WHY FARE REVISION IS GOOD DECISION BY DELHI METRO

Mr. Alain Flausch, Secretary General, UITP Brussels was part of panel discussion on "UN Sustainable Development Goals: A game changer for transport planning" at International Transport Forum on May 31, 2017 in Leipzig, Germany. He strongly recommended that India should think of automatic fare revision mechanism to revise fare marginally every year. This is important for the viability of public transport organisations. The commuters do not care about a small increase in ticket price. There will be objections for big change. 

Delhi Metro Rail Corporation (DMRC) is operating a metro network of 213 kms in the Delhi-NCR region and carries around 3.0 million passengers / daily. The metro has become lifeline of the city as it provides a comfortable public transport mode akin to world class standards, to the commuters. Further, DMRC is expanding its network very rapidly and will soon add 140 kms to its existing network. However, the corporation faced resistance from political circle for increasing the fare recently.

Since the commencement of its operation in December 2002, Delhi Metro has raised fare only at three occasions and the last fare revision was done in 2009. In May 2017, DMRC increased the fare 4th time after a gap of 8 years and has further rationalized the fare in the month of October 2017.

  • The government constituted the first Fare Fixation Committee (FFC) in December 2003 and revised fares were adopted from 31 March 2004 with minimum fare of INR 6.00 and maximum INR 15.00. The maximum fare was also increased owing to line expansion
  • Second FFC recommendations for fare increase were made effective form 31 December 2005 with minimum fare of INR 6.00 and maximum INR 22.00
  • Third FFC was setup in June 2009 and fares were revised from 13 November 2009 with minimum fare of INR 8.00 and maximum INR 30.00
  • Fourth FFC was constituted in May 2016, which recommended to increase fare in two phases - Phase-I (from 10 May 2017) and Phase-II (1 October 2017). This was done to reduce the burden of fare revision on the commuters in one go. Further, the committee rationalized fare slabs by reducing from 15 fare slabs to 6 slabs only. The minimum fare was increased to INR 10.00 and maximum fare was changed to INR 50.00 in Phase-I. In Phase-II, the fare was marginally increased in all slabs and maximum fare was increased to INR 60.00

The fare increase is crucial as Delhi Metro requires to invest in the upgradation of ageing assets, introduction of new technologies and increase numbers of coaches on existing lines, besides facing steep hike in staff, energy and maintenance costs. In developing countries, it has been observed that fare revision is always seen as anti-people and the government does not favor such measures for oblivious reasons. In sharp contrast, however, in most of developed countries, like Singapore, Hong Kong and London, the fare is completely delinked from the political interference Further, the government remain always willing to bear additional subsidy burden if they want to hold the fare increase, without interfering with the investment plan of public transport agencies.

It is important to highlight that public transport agencies require funds to maintain the existing operations, as well as, to invest in future technologies to improve customer satisfaction. Thus, fare revision is imminent and cannot be hold for very long time. Prudently, the government should allow frequent fare revision in small quantum, rather than big steep hike after long intervals. Delhi Metro is a perfect example as the government did two fare revisions within 2 years of operations, third fare revision was done after the gap of 3 years and latest fare revision is done after a long gap of 8 years. Instead of making steep hike in the fare, the government should allow small increase in fare under fare revision mechanism. This will help commuters to absorb the increase in fare without impacting their monthly budget. The same is shown in the below diagram with Ideal Scenario Line. This practice is normal  in most metros around the world.

Delhi Metro has started repaying its loan from JICA (Japan International Cooperation Agency) and also needs to observe the hike in staff cost. The cost has increased rapidly in last 9 years and forced Delhi Metro to increase the fare to maintain the efficient metro network.

The Delhi Metro Corporation is already generating revenue from non-fare resources like advertising on trains & at metro station, property rental and other possible sources. As per Annual Report 2016-17 19% of its revenue has been generated from Non-fare Box sources under Traffic Operations. Last 8 years figures of Profit Before Tax reported by the Corporation, show how its losses have shot up from US$13.9 million (INR 901.85 million) in 2009-10 to US$58.1 million (INR 3,782.94 million) in 2016-17 (Exchange rate - US$1 = INR 65). This was the period when no fare revision took place. This clearly shows the negative impact on the health of transport companies for withholding the fare hike. 

However, Delhi Metro is also using the fare revision as Demand Management Mechanism by introducing special discounted fare for Sundays and National Holidays. Further, DMRC introduced an additional 10% discount to the passengers using Smart Card who exit from metro system during off peak hours to avoid overcrowding during peak hours. The above discount is applicable from Monday to Saturday (weekdays) only. Thus, in all a passenger may avail 20% discount on smart card while travelling during the off-peak time.

However, the government may think to subsidize the cost of the public transport for under-privilege section by creating personalized metro fare card and linking it with the aadhaar number. This system is followed in other parts of the world like London, Hong Kong etc. Delhi Metro has taken a right decision by hiking the fare price to maintain safe and comfortable public transport network. 

(UITP shared knowledge paper with DMRC in August 2016 on International case studies on Fare Revision Mechanism. UITP is happy to support Delhi Metro for its decision. Link:  DELHI METRO FARE REVISION - LEARNING FROM INTERNATIONAL CITIES)