Delhi Metro fare hike a necessary evil for company's long-term health; political gimmicks not the answer

The Aam Aadmi Party may have announced ‘Metro Fare Satyagraha’ to protest the Delhi Metro fare hike, but a look at the Delhi Metro Rail Corporation (DMRC) finances shows that the company, faced with escalating costs, had no real choice if it wanted to keep afloat the mass public transport.

The AAP has dubbed the move to increase fare as "anti-people". Chief Minister Arvind Kejriwal also expressed his government’s willingness to operate the metro and said that it was ready to provide half the funds needed to meet the gap in its finances for three months.

Representational image. PTI

Representational image. PTI

But the DMRC's financial records show that the problem is far too serious for that sort of stop gap arrangement.

The Economic Times  reported that the AAP said it would lay siege to Union Urban Development Ministry housed in Delhi's Nirman Bhavan. The issue also caught the fancy of the Akhil Bharatiya Vidyarthi Parishad (ABVP) and the National Students' Union of India (NSUI) who demonstrated in front of the DMRC office, trying to score brownie points with aggrieved commuters.

Manish Sisodia also alleged that the hike is aimed towards benefiting taxi aggregators. “A conspiracy is being hatched to make the metro so expensive that people are forced to give up using it and start taking Ola and Uber. It is a conspiracy to benefit these companies,” he said in the Assembly on Tuesday.

But the protesters weren't exactly chock full of ideas to solve the financial crunch that the DMRC is facing. In the last financial year alone, the DMRC lost Rs 348 crore. And this isn't the first time it's been in the red. In the two previous financial years, the company lost 741 crore.

Considering the Delhi government has a budget surplus of only Rs 500 crore, it makes its job of taming the unruly beast that is the DMRC extremely difficult.

According to a report in Business Today, the losses in the DMRC can mainly be attributed to high operating costs and repaying a loan to the Japan International Cooperation Agency (JICA).

“Annually, metro shells out an average Rs 500 crore interest on loans it has taken from the JICA and the principal amount comes to around another Rs 600-800 crore,” Business Today reported.

DMRC sources said that for every Rs 100 the company takes in, it ends up spending Rs 101: Rs 74 on operations and Rs 27 on repaying the loan.

The DMRC reports also shows that the metro's operating costs have surged over the past three years. As of 31 March, 2015, the company spent Rs 1,584.43 crore as operating expenditure, compared to Rs 2,199.65 crore in 2016 and Rs 2,999 crore in 2017.

This increase is also a result of a rise in cost of electricity. “In the last seven years, cost of electricity has gone up by over 100 percent,” reported Economic Times.  DMRC spends 34 percent of its operating expenditure on power and 33 percent on staff, according to the report.

From March 2015 to March 2017, depreciation costs increased from Rs 432 crore to Rs 563 crore. During that same period, expenditure on wear and tear also increased: From Rs 1,288 crore to Rs 1,541 crore. And this will only further increase as the machinery ages.

This constant rise in costs made the fare hike a necessity. And no political stunt, no matter how well it is performed, offers a solution.


Updated Date: Oct 11, 2017 19:59 PM

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