November 2018

Rapid urbanisation has been a driver of growth. But it has also stressed inadequate urban infrastructure to breaking point. Public transport is one of the many areas of concern. Poor public transport leads to more private vehicles on the road and that means congestion and additional air pollution.

Creating more public transport capacity is an urgent priority and, to be fair, the sector has received a lot of attention from policymakers. Nine metro projects are operational and many more are work-in-progress. Eleven bus rapid transit (BRT) projects have been operationalised and many more are at various stages of planning and development. In addition, nine light rail transit (LRT) projects are being developed.

The expansion of public transport capacity will absorb many trillions spread across the next decade, or even longer. It could be a huge opportunity for private capital and for the induction of multiple technical and management skills. There will be opportunities for private players in manufacturing; in running privatised transport services; and providing high-end IT and digitalisation solutions. There could also be private participation in real estate development, repair and maintenance, etc.

The latest policy thinking is represented by the Metro Rail Policy, 2017. This aims to streamline project approval processes. It also encourages private investment and considers innovative financing solutions.  In 2018, there was a fillip to domestic manufacturers as well, as the new norms make it mandatory to manufacture metro coaches and other critical equipment under the Make in India Initiative.

Metros have already made a significant positive difference in cities where they are operational – Delhi, Bengaluru, Kolkata, Gurugram, Jaipur, Chennai, Lucknow, Kochi and Mumbai. The next series of metros will improve connectivity in Kanpur, Vijayawada, Varanasi, Chennai, Patna, Kozhikode, Bhopal, Ahmedabad, Nagpur, Guwahati, Pune and Indore. There is talk that possibly 50 cities could end up having LRT systems.

Metros are massively capital intensive and very efficient in terms of mass rapid transit but have low financial internal rates of return. BRT and LRT are less capital intensive but also have lower capacity when it comes to ridership. All three transit systems must be optimised by technology induction, in terms of ticket solutions, advanced equipment, IT-enabled scheduling, etc. Metros are likely to go driverless and engineless soon and signalling systems will be completely automated, and ideally, based on train-train communication systems.

The PPP mode has been quite successful in the BRT segment but PPP for metros has not been particularly successful yet. Importantly, metros have to find new modes of raising capital and developing non-fare revenue channels, by leveraging prospects for advertising and various forms of real estate development. The Rapid Gurugram Metro experience indicates that non-fare revenues can be ramped up significantly – non-fare revenues for the metro are around 50 per cent.

Urban mobility will be a big segment for years to come. Quite apart from smoothening out the usual delays in land acquisition and regulatory clearances that impede all infrastructure projects, policymakers must improve the risk allocation in concession agreements, find ways to enable low-cost, long-term debt funding, and put good dispute resolution mechanisms in place. Finding viable public transit solutions is an imperative. It could also in, and of itself, give a boost to economic activity.

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