Rapid urbanisation in India has accelerated the requirement of the urban rail system for public transportation. In the past two decades, Indian cities have added more than 800 km of operational metro rail network and India now has the fifth-largest metro rail network in the world. It is expected that the pace of implementation of urban rail projects in the country will quadruple in the next 25 years. India plans to have 5,000 km of operational network by the time it celebrates its 100th year of independence.
Opportunities galore for the private sector
The fast pace of expansion in the urban rail sector has created significant scope for private sector participation. The annual market size of the metro rail sector in India for construction, operations and maintenance (O&M) services is more than Rs 250 billion. This is likely to more than double in the next 10 years and the capital will predominately flow from the private sector.
While increased investment will continue to augment private sector participation in construction and allied services, there will also be increased opportunities for the private sector in newer areas such as O&M, innovative and sustainable solutions, and financing.
Private sector will increasingly play a big part in metro rail O&M
Most of the metro rail systems in India are being operated and maintained by public sector entities called metro rail corporations. Traditionally, the O&M of metro rail systems is carried out by metro rail corporations in-house and only certain activities limited to facility management and allied services are outsourced to the private sector. However, increasingly these corporations are outsourcing a significant part of their O&M activities to the private sector with many of them already in the process of outsourcing some of their core O&M functions to them.
The opportunities for the private sector in the area of O&M will continue to grow, especially for shorter length metro rail projects such as those in Tier II cities. This is due to the ever-increasing pressures of running an efficient and sustainable metro rail system and to extenuate the budgetary pressure on state government coffers. The private sector offers efficiency and reduced costs over the project life cycle, and helps alleviate the limitations and capacity constraints that are a bane for metro rail corporations.
Building end-to-end connectivity for passengers
There has been significant progress in the urban mobility sector. Many cities are investing in multimodal integration, shared mobility services and creation of infrastructure including bike lanes, pedestrian walkways, urban placemaking and intermodal terminals for improving safety, access and connectivity, reducing travel time and increasing the share of public transport.
Private companies in some cities today are providing last-mile connectivity solutions for metro rail passengers, such as shuttle services, bike sharing and e-rickshaw services. There is a growing need for involving private companies in the development and deployment of innovative mobility solutions such as mobility-as-a-service (MaaS), on-demand ride-sharing services, micro-mobility solutions such as e-scooters and e-bikes, and autonomous vehicles for last-mile connectivity. Various sustainable business models involving private sector investment are being tested.
Technology-led transformation in urban transport
Technology-based solutions in both construction and operations are transforming the sector. The majority of the construction is being carried out off-site and is increasingly becoming automated. Newer tools and construction machines fitted with internet of things and sensors are being deployed at site by private contractors to reduce the requirement for labour, increase utilisation, improve productivity and drive down costs.
New technologies are revolutionising project management, making it easier and more efficient to plan, execute and monitor projects. Integrated project management platforms comprising 5D BIM, project scheduling software, common data environment, cloud computing, artificial intelligence/machine learning-based dashboards for insight-led and outcome-based project management are being offered by the private sector for successful delivery of metro rail projects.
For a better experience for passengers, solutions in smart ticketing, real-time passenger information systems, journey planning applications, open-loop ticketing and crowd management systems are being deployed by private companies.
Push towards atmanirbharta
While a significant proportion of the procurement of construction and O&M solutions is now sourced from within India, there is still a dependence on the import of critical systems and components. By the 100th year of independence, the sector aims to achieve 100 per cent indigenisation of rolling stock components, track and track fittings, and signalling system and O&M spares to contribute to the dream of an Atmanirbhar Bharat.
Scope for public-private partnership
Fully integrated metro rail public-private partnership (PPP) projects in India have achieved limited success. One of the main reasons for this has been the imbalanced risk allocation between the private and public sectors. Risks such as delays due to utility shifting, traffic diversion, abnormal changes in macroeconomic parameters and ridership risk have typically been in the scope of the private company but are the ones where the private sector has limited or no control. Having burnt their fingers in fully integrated PPP metro rail projects, private companies today are shy to invest in similar opportunities. However, given the demand in the sector, with better structuring and distribution of risks, the private sector’s interest can be reinvoked. Flourishing PPPs in the metro rail sector in Australia are a prime example.
While fully integrated metro rail PPPs will still have some challenges, there are opportunities in unbundled PPPs such as PPPs for automatic fare collection systems, O&M, non-fare revenues, station development, transit oriented development and other innovative solutions.
The metro rail policy 2017 has provisions that encourage PPP models for the development of metro rail projects in the country. The policy recognises that PPP models can provide benefits such as cost efficiency and access to private sector expertise as well as better value of money outcomes for urban rail projects.
“There will be increased opportunities for the private sector in newer areas such as operations, maintenance, innovative and sustainable solutions, and financing.”
The path ahead
India’s urban population is projected to increase to 50 per cent by the year 2047. Given that urban rail transport is critical for the economic growth and development of cities as it facilitates the movement of people and goods, which is essential for businesses, industries and commerce, investment in urban rail transport is likely to increase manyfold in the next two and a half decades. Given the financial constraints of the government and the need for more efficient, cost-effective and innovative solutions, the sector will offer many opportunities for private participation in the future.