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Don’t let Delhi Metro go the way of DTC

LiveMint logoLiveMint 03-10-2017 Sundeep Khanna

If you want to know how Air India or Delhi Transport Corporation or any of our numerous stricken public sector corporations got where they did, just check out the ongoing politics around Delhi Metro Rail Corp. Ltd  (DMRC) after it proposed a hike in its fares, the first in over seven years. The hike ranges from two rupees at the lowest end to Rs20 at the top end. Nor is this unexpected or arbitrary: the new price scheme to be implemented in two phases was announced in May this year, with the first set of hikes already in place. What’s more, it was based on the recommendations of the 4th Fare Fixation Committee in May 2016.

Enough cue for the Aam Aadmi Party (AAP), also incidentally the party running the Union territory, to jump in to oppose the move on the grounds that it was “anti people”.

For the record, DMRC is one of India’s best-run corporations and the transportation lifeline of the national capital region with an average daily ridership of 2.76 million. Once the third phase is launched over the next few months, DMRC will be running a metro network spanning over 330km, almost 70% larger than the 195km which is the combined length of Tokyo’s metro lines. That’s not a bad target to have achieved in less than 20 years. What’s more, its record in adopting new and sustainable technologies has been exemplary.

Despite all this, it is struggling to make money and also has a massive loan to repay. Even though its pricing isn’t the lowest in the world, it is competitive and needs revision from time to time to ensure the corporation doesn’t plunge into the sea of red that has swallowed most of our public utilities run by the government. Under these circumstances, most of our public sector corporations turn to the government to stay afloat. From there on, it is a steady road to perdition as government largesse comes loaded with interference.

Not surprisingly, DMRC has been at pains to emphasize that it needs to boost revenues to retain its current level of service and also plan for normal obsolescence and replacement.

None of this seems to cut any ice with AAP, with Delhi’s deputy chief minister Manish Sisodia coming up with an ingenious argument. The DTC may be suffering losses, he said, but it was at least serving the people. For the record, DTC’s losses run into thousands of crores. The Delhi chief minister Arvind Kejriwal has suggested DMRC follow the Hong Kong model and there is merit in that. But eventually, this is something for the DMRC to consider. Surely, it needs to follow neither the DTC example nor the Hong Kong one but evolve its own sustainable business model.

The point of course is who gets to decide on the pricing of a service—the market and the paying customer or a government. Had DMRC’s pricing been particularly usurious or arbitrary, there might have been some justification for the government to step in. But the DMRC does have a proper process in place to fix tariffs—a Fare Fixation Committee (FFC), comprising representatives of both the state and the Centre, which have equal stakes in DMRC. Very wisely, it was given a statutory status in the Delhi Metro Operations & Maintenance Act, 2002.

The third FFC was constituted as far back as June 2009 and this is only the fourth committee to fix tariffs for Delhi’s metro customers. Its members were M.L. Mehta, retired judge of the high court of Delhi as chairman, K.K. Sharma, the then Delhi chief secretary, and Durga Shanker Mishra (additional secretary, ministry of urban development). There’s no reason to believe they didn’t look at all aspects before giving their recommendations on the new pricing. 

DMRC’s first chairman E. Sreedharan called the Delhi Metro a template for other cities. Its success triggered a wave with even smaller cities like Bhopal, Indore, Pune, Vijayawada and Guwahati planning metro rail networks as an answer to their need for a mass transportation system. With 30 Indian cities looking at adopting the Delhi Metro model, it is crucial to set the right fiscal standards for the corporations. One DTC is bad enough, 30 would be a disaster.

Sundeep Khanna is a consulting editor at Mint and oversees the newsroom’s corporate coverage. The Corporate Outsider will look at current issues and trends in the corporate sector every week.

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