With more than one-third of India’s population living in urban areas, urban transportation has an indispensable role in daily mobility. The outbreak of the pandemic presented the urban transport sector with unprecedented challenges. It impacted promoters and operators of mass transit systems in the country and led to huge revenue losses owing to reduced ridership in city buses and a complete halt in metro rail operations for several months.
Despite the resumption of operations from September 2020 (after the first wave of Covid-19) and July 2021 (after the second wave of Covid-19) in a graded manner, the low ridership trend continued. On the positive side, construction works were resumed for various ongoing projects. The metro corporations were also able to complete many projects.
Sector outline
The pace of implementation of new projects in the urban transport sector has picked up. The current network length of urban rail systems in India stands at 721 km with 567 operational stations. The Delhi metro has the highest operational network of 390 km, followed by the Hyderabad metro at 66 km and the Bengaluru metro at 48 km. Metro development in the country recorded the highest growth during 2018-20, with the completion of metro stretches spanning about 296 km in key cities. These include Chennai (17.9 km), Hyderabad (38.44 km), Delhi (130.54 km), Noida (29.71 km), Ahmedabad (6.5 km), Mumbai (11.28 km), Kochi (6.8 km), Nagpur (24.5 km), Jaipur (2.35 km), Kolkata (7 km), Lucknow (14.38 km) and Bengaluru (6.29 km).
The bus rapid transit system (BRTS) has also witnessed some developments in the past year. With the opening of the Kumbharia-Kadodora BRTS corridor, Surat has become the city with the longest BRTS network. There are many new upcoming BRTS networks in cities like Jodhpur, Mumbai, Chennai, Hyderabad and Raipur. However, with cities like Delhi, Pune and Pimpri Chinchwad (which implemented BRTS early) having disbanded their BRTS networks, the future of the segment does not look too bright.
The Union Budget 2021-22 laid a major emphasis on the improvement of urban transport. It offered policy solutions to improve the existing infrastructure. The key announcements covered the expansion of metro networks and new public-private partnership (PPP) approaches for augmenting bus services in cities and towns. An investment of Rs 180 billion has been announced for a new scheme to augment public bus transport. Further, innovative PPP models will be adopted to run more than 20,000 buses. A new vehicle scrappage policy for both personal and commercial vehicles was also outlined in the budget, which can help drive the modernisation of city bus fleets.
The Covid-19 crisis
Like all other infrastructure sectors, the urban transport sector was also impacted by the ongoing pandemic. Metro operations across the country were suspended on March 22, 2020 on account of the Covid-19 pandemic. Despite the resumption of services across the country after nearly six months, ridership remained low in almost every metro system due to the social distancing measures being adopted by the metro corporations, coupled with a general fear of the virus being spread from public modes of transport. The Delhi, Kochi, Bengaluru, Chennai and Lucknow metros together suffered a total loss of over Rs 19.83 billion during the lockdown period (as of September 2020).
Further, construction work for metro projects in most of the cities was postponed due to the pandemic. Projects under bidding were also impacted as the bid timelines were extended. It is expected that the outbreak of Covid-19 will have a bearing on the pace of project execution in the coming six months at least.
Further, the subsequent labour migration, limited liquidity and halt on Chinese imports impacted the construction activities. Despite the disruption in construction activity, contract awarding did not completely come to a standstill. Various metro rail corporations were able to award contracts across segments (civil works, rolling stock, fare collection, signalling, etc.). However, some contracts faced delays in award owing to the government’s decision to not award contracts to Chinese companies amid the India-China cold war.
Meanwhile, the pandemic did not have much impact on project planning, announcements and approvals at the state level. Various projects have recently been announced/approved by the state governments. With the introduction of new modes of mass transit (Metrolite and MetroNeo), there is a growing focus on providing metro connectivity in cities with low ridership.
When the sector started recovering, the second wave of Covid-19 brought the sector back to square one. Metro services were closed again in May 2021 due to the rise in the number of Covid cases, which impacted revenue generation yet again. Bus systems were also closed to prevent the spread of the virus. In March 2021, the Ahmedabad BRTS was temporarily suspended amidst the pandemic. Services have now been resumed.
Pain points
While the urban transport system has witnessed significant developments in the past few years, it continues to be fraught with issues. One of the major challenges pertains to financing and revenue shortfalls. The long gestation period renders financing of urban rail projects difficult. With limited availability of public funds, the segment’s growth is stalled at large. The economics of urban rail systems are such that farebox collections are hardly ever enough to recover costs.
Another issue plaguing the sector is delays in land acquisition, which continue to derail the implementation of projects. In the past, the unavailability of land for project construction affected the timely implementation of many metro rail projects in Delhi, Chennai, Kochi, Mumbai and Ahmedabad. Meanwhile, metro rail construction accounting for the different geological and soil conditions is a challenge. The termination of contracts due to poor performance of the contractor and delays in tunnelling due to mixed ground conditions with high water table were the main reasons for the slow progress of Phase I of the Chennai metro projects.
Apart from this, the execution and operating environment is unfavourable. The launch of the Metro Policy in 2017 led to the modification of several detailed project reports. Changing the scope and alignment of metro projects during the construction period had an adverse impact on the project timelines, as well as their cost and viability. Further, fare hikes always carry an imminent threat of ridership loss, with implications for revenue generation.
What lies ahead?
Rapid urbanisation is putting tremendous pressure on the existing transport system. With Tier I cities nearing saturation, rural-to-urban migration is being witnessed in Tier II cities, which is driving the development of urban transport in smaller cities. Alternate modes of transport (elevated and underground structures) are no more a choice but a necessity for densely populated cities. There is a promising outlook for bus and metro rail development in these cities, given the policy support, robust project pipeline and increasing emphasis on efficient modes of mass transport.
New metro rail construction projects are upcoming in the cities such as Kanpur, Indore, Surat and Patna. While some cities have metro rail projects at nascent stages, others are testing the waters with Metrolite and MetroNeo systems. This provides consultants, and rolling stock and technology providers, with a huge opportunity to tap into the sector. Further, the sector continues to offer opportunities for commercial/retail activities and transit-oriented development, which will continue to bolster the non-fare revenues of the metro authorities. The uptake of the Make in India initiative has increased the level of indigenisation in metro projects. The government recently upgraded the indigenous components across subsystems. In October 2020, the government revised the minimum local content of various metro rail components. This is also expected to create many opportunities for local players.
The overall maturity of the sector hinges on a number of factors such as the creation of the Unified Metropolitan Transport Authority, integration of various transport modes and smart ticketing. While countries such as Singapore and Japan have developed advanced metro systems, India still has a long way to go. Going forward, the country needs to fully exploit the sector’s potential across the value chain. The outbreak of the pandemic has also ensured that new and advanced technologies for tracking, monitoring and information are adopted for safe travel and project implementation in the current circumstances.