The Indian metro rail segment was expected to undergo a transformation with the launch of the Metro Rail Policy, 2017, which mandated private involvement across all the newly conceived metro projects. Two years after its launch, the policy has been unable to reinvigorate private interest in the sector. Past experience with public-private partnerships (PPPs), the cases in point being the Delhi Airport Line, the Hyderabad metro and the Mumbai metro section, has been quite bitter. The capital-intensive nature of the projects has rendered them unviable for the private sector to invest in and deal sweeteners such as land parcels have also failed to evoke interest among them. Despite all odds, India has emerged as a fast growing market for urban rail systems. The urban rail network has increased significantly in the past decade, up from 81 km in 2006 to over 680 km operational currently and the network has expanded from two cities in 2006 to 13 cities as of March 2019.
Key sector trends
Foreign fund inflow continues
Multilateral sources have been key in meeting the funding needs of mass transit systems in the country. Multilateral agencies including the Asian Development Bank, the Japan International Cooperation Agency, KfW, the European Investment Bank and Agence Française de Développement have been continuously providing financial assistance to metro projects. The Asian Infrastructure Investment Bank is a new entrant in the country’s urban transport sector.
Innovations in rolling stock
With the launch of the Make in India initiative, several manufacturing facilities have been set up in the country for assembling coaches in-house. Alstom, for instance, developed a 100 per cent indigenous metro fleet for the Chennai, Lucknow and Kochi metros at its manufacturing facility at Sricity in Bengaluru. Also, in November 2019, Alstom unveiled the first metro coach for the Mumbai metro, Line 3, that has been developed with over 80 per cent localised manufacturing. BEML too unveiled an indigenous mock-up of a metro coach developed for the Mumbai metro, Lines 2A, 2B and 7, at its facility in Bengaluru in September 2019.
Focus on energy conservation
With high operational costs, metro rail corporations are devising strategies to pare the financial outgo for operating their systems. Several metro systems have installed variable voltage/variable frequency control drives in coaches, lifts and escalators that ensure energy savings of 30-40 per cent by matching the power requirements with the actual load, thereby reducing energy consumption. Some metro systems have built solar power generation capacity to promote green energy as well as reduce their dependence on state electricity utilities.
Innovative technologies for fare collection
India’s first indigenous automatic fare collection system – the National Common Mobility Card – was launched in March 2019. Recently, metro corporations have turned to account-based ticketing systems to improve efficiency of metro ticketing. The Kochi metro has collaborated with Axis Bank to develop a smart card that will automatically deduct money from the users’ bank account. Also, third-party digital payment platforms such as Paytm, PhonePe, Mobiwik and Google Pay are increasingly partnering with metro corporations to offer easier recharge facilities for smart cards.
Commercial development
Metro corporations have started leasing out spaces available in and around metro stations for enhancing their revenues. Licensing of food kiosks, refreshment stalls, commercial outlets/ shopping malls, etc. inside stations; and concessions for commercial/residential developments, among others are some examples. More recently, the Delhi Metro Rail Corporation tied up with cab aggregators such as Ola and Uber to provide last-mile connectivity to commuters. These cab aggregators have set up kiosks at the Dwarka Sector 21, Rajiv Chowk, Sikandarpur, M.G. Road and Noida Sector 18 metro stations.
Looking up
In the years to come, the urban rail segment will continue to operate with the limitations of challenging economic and financial conditions. The sector offers significant opportunities for various stakeholders with a strong project pipeline as over 25 cities will have metro networks in the coming years. Engineering, procurement and construction will continue to be the dominant mode of project implementation, at least in the short to medium term.
Emerging segments such as station branding, commercial development, real estate development, etc. will also provide significant opportunity in the years to come. Creation of unified metropolitan transportation authorities, as proposed under the Metro Rail Policy, 2017, will not only facilitate chalking out of a comprehensive mobility plan but also help attract innovative sources of funding for projects.
Though the Metro Rail Policy, 2017, aims to reinvigorate PPPs, private players will take time to step up investments. Metro corporations will continue their efforts to enhance non-fare revenues. To this end, variants of value capture financing such as betterment levy, transferable development rights and premium on floor space index will become crucial to bridge the funding gaps. However, the issues at hand must be resolved. Land acquisition, securing of regulatory clearances and right of way, engineering issues, geotechnical challenges are some of the pressing concerns. Meanwhile, financial constraints could slow down India’s urban rail story.