Urban mobility development in India: Need to look beyond costs

Managing the urbanisation process is likely to be the single biggest challenge that will confront policy makers in India over the next decade.

Emerging economies such as India must build and develop new infrastructure to meet basic requirements. According to RAI (Rural Access Index, developed by the World Bank), there are still 301 million people who do not have access to rural transport in India. All the country’s high-density rail corridors face severe capacity constraints. Moreover, freight transportation costs by rail are much higher than in most countries as freight tariffs in India have been kept high to subsidise passenger traffic.

As stated by the Indian Government, India requires around $4.5 trillion worth of investments till 2040 to develop infrastructure to improve economic growth and community wellbeing.

Only mass urban transport solutions can provide India's urban commuters with competent mobility

Nobody will disagree that the best thing that happened to Delhi in recent years is the metro rail. Metro has altered the character of the city in many locales. In Mumbai, the electric train service is touted to be the lifeline, catering to almost 80 percent of citizen trips.

The cost of travel, especially for the poor, has increased considerably. Walking or cycling has become risky or impractical with expanding urban sprawl. The increasing number of personal vehicles is the leading cause for environmental degradation.

What is required is a balanced focus on extending transportation infrastructure, as well as leveraging smart technology solutions. The task list is long to improve and extend public transportation infrastructure in Indian cities. The government of India is investing in various national, state and local initiatives to improve public transportation. Now there is also a need to leverage smart technology solutions to quickly improve the efficiency and capacity of public transportation, and to create a high quality public transportation system.

While public transport systems should be able to match the demand, they also need to be self-sustaining in terms of revenue

The P&L debate is now soundless

There is always a debate on ways to make the entire system economically viable. Most metro operations begin with low occupancy rate but as the network grows, it attracts more people from all around the city, bringing down the cost per passenger trips. Take the example of Mass Transit Railway (in Hong Kong) and The Delhi Metro Rail Corporation's (DMRC). The Mass Transit Railway is a major public transport network serving Hong Kong and is one of the most profitable metro systems in the world. It had a farebox recovery ratio of 187 percent in 2015, the world's highest.

The level of profitability of a transit system is usually measured using the farebox recovery ratio, which is the difference between the revenue collected as fares from the users and the operating expenses.

DMRC's earnings per kilometer have gone up by 74 percent since 2014, India’s highest. The DMRC has also been able to meet the target for the last fiscal year. According to a statement by Union Minister of Housing and Urban affairs, the government may not even increase fares till 2020, as a result of this achievement.

Building an innovative financing framework

It is necessary to consider innovative urban transportation financing as part of a comprehensive framework, rather than individual projects. At present, the government’s flagship urban development schemes including the Smart Cities Mission and AMRUT (Atal Mission for Rejuvenation and Urban Transformation), funds that are only a fraction of the required investment. For instance, under the Smart Cities Mission, the Government has allocated $14 billion for 100 cities to be disbursed over five years, with equal contributions from the central and state governments. This amount is by no means sufficient. Thus, the grant is to be used as a starting point to attract funding from external sources.

Local authorities, including urban transport, state-owned enterprises and the Union government should become more attractive to private investors. Climate investors can also provide new sources of funding.  In December 2016, Mexico City became the first sub-national government to issue a green bond in Latin America, which was then used to finance sustainable transport projects, including improvements to the city’s metro system. The good news is that when there is a challenge to design projects that can attract private sector interest, World Bank provides help to governments to design better urban rail PPPs.

The framework should seek to achieve maximised social-economic benefits to the society through implementation of the most cost-effective option for urban transportation.

Leverage the advantages of localization

The Make in India programme significantly reduces the cost of metro rail projects by localising manufacturing. India has already proved that it has a huge reservoir of talent and infrastructure required to create cost-efficient metro networks, which have become a benchmark technically, economically and environmentally for urban mobility all over the world.

But localisation needs to go beyond manufacturing mechanical parts. It needs to cover design, manufacturing and procurement, which can reduce the cost of metro projects as well as the lead time. The reduced cost and time to execute will allow for the faster execution of projects and improve customer satisfaction.

The number of jobs, short-term and long-term, that a metro project creates should also be considered while calculating the cost effectiveness of a metro project. A solid localised footprint is the way forward for all the metro operators that view India as a place for innovative mobility solutions.

Finally, there is no substitute for experience. Metro projects are best handled by companies which have been doing this all over the world and are well poised to bring their global expertise to India. They can be quality guarantors with their proven track record as a provider of advanced mobility solutions with high standards in safety and efficiency.

A robust urban rail system will be a huge advantage for growing Indian cities. A combination of the correct metrics, procurement and industry policies, along with effective planning can make metros a shining example for the rest of the world. Metro rails can win any argument owing to their comparative cost advantage. Let the wagon roll!

Alain Spohr, Managing Director, Alstom India and South Asia