The rapid urbanisation of semi-rural areas and migration of rural labour to existing urban areas have led to increasing demands being placed on urban transport. In order to meet this demand, the penetration of metro systems must increase, and, indeed, metro systems are being developed in many Tier II cities.
By next year, there will be about 900 km of metro networks across various cities, and that network will be more than doubled in the next decade. In addition, various cities are examining the feasibility of rapid transit bus corridors, and Metro-Lite and Metro-Neo systems.
The Covid-19 pandemic and the second wave placed many constraints on such systems. Huge losses were incurred by existing systems during lockdown periods. Engineers and construction firms have had to contend with labour shortages and issues along the materials supply chain. Nevertheless, work is ongoing in extant metro systems such as in Delhi, where new lines are under development, as well as in Patna, Bhopal, Agra and Kochi.
This represents a large set of opportunities across the supply chain and in various related segments. Apart from contractors and consultants for physical infrastructure, there would be opportunities for financiers and, of course, these projects will generate demand for various construction materials. Engines, coaches and buses will in themselves represent another set of opportunities. Once such a system is running, monetising the spaces to generate revenues by station branding, commercial development, advertising, etc. will also offer an opportunity. In addition, there will be demand for IT services since all these systems must be digitalised.
There is a fair amount of budgetary support for these projects in the 2020-21 budget with around
Rs 225 billion allocated to various metro projects and another Rs 180 billion to other urban transport schemes. Public-private partnership models will also be put in place to run bus systems.
Building and running urban transport systems present many challenges under normal circumstances, apart from which, there is the extraordinary impact that we are seeing of Covid. In addition, this sector faces the usual challenges of land acquisition. Variations in local geology and urban congestion call for unique design features for each project and each line, and that adds to costs and complexity.
These systems enable citizens to cluster in urban areas, which develop into hubs for businesses and drive up real estate value. That leads to positive externalities in terms of generation of higher taxes and other revenues.
However, the systems themselves are rarely profitable – fares often do not cover actual costs and capital expenditures are long gestation at best. On the positive side, given policy support, robust project pipelines and an increasing focus on efficient mass transport, private players can find many profitable niches within the urban mobility sector.