Don’t make a DTC out of Delhi Metro

Almost about half a century ago, the concessional all-route bus pass for students in the capital city of Delhi used to cost ~12.50. The bus service those days used to be run by Delhi Transport Undertaking (DTU), which was owned by the Municipal Corporation of Delhi. In 1971, the

Union government took over DTU and renamed it Delhi Transport Corporation (DTC). Twenty-five years later, there was another change in DTC’s ownership in 1996, as it came under the administrative control of the Delhi government.

Today, the all-route concessional pass for students using DTC buses costs ~13 only, according to a Delhi government website. Another Delhi government website quotes a figure of ~100 for student passes, but it does not mention if that is a concessional rate.

Either way, the slow pace at which the concessional all-route tariff for students travelling in DTC buses has moved in the last five decades betrays all that is wrong with the pricing of subsidised services in India.

The increase in the tariff for concessional student passes is way below even the average inflation rate in this period, and certainly lower than the increase in the cost of bus services, depending as they are largely on fossil fuel and periodic wage increases for DTC employees, mandated by pay commissions from time to time.

The current mess in DTC is attributable to a variety of factors. But the management’s failure to periodically revise fares, including those for concessional passes, is certainly one of the key reasons for its financial woes. In spite of that, however, the lessons from DTC do not appear to have been learnt by those who own Delhi Metro.

Media reports appearing about a week ago suggested that the Narendra Modi government has suddenly realised the virtues of concessional fares for students and senior citizens using Delhi Metro. It is sudden because until about a few months ago, the Modi government had wholeheartedly endorsed a proposal for a fare hike for all in two phases, as recommended by a fare-fixation committee.

The Delhi government, which has a 50 per cent equity stake in the company that runs Delhi Metro, was not keen on raising the fares. But the Modi government, which owns the remaining 50 per cent equity in the company, decided to go ahead. And the fare increase was steep, coming as it did after no increase in fares for about eight years.

With the rising burden of costs, Delhi Metro’s finances came under strain during these eight years and if it had to maintain the quality of service and undertake fresh investments to expand its network, fare revision was of utmost importance. After the 2017 fare increase, there were some protests and even the number of users of Delhi Metro had declined a bit, but the users of the Metro service have now got used to the new fares and even the traffic has begun to rise again.

So, what was the need for the Union Urban Affairs Minister, Hardeep Singh Puri, to announce that the government would consider offering concessional fares for students and senior citizens? One explanation could be to please large segments of vocal voters — students and senior citizens, in the run up to the general elections to be held in about a year from now. The other explanation is to make public transport more accessible to the non-salaried class of commuters like students and senior citizens (people above 60 years of age).

Note that there is nothing wrong per se in subsidising public transport services. Public transport operation should not operate only on the principles of profit maximisation for the company that provides the service. Tariffs should be fixed at a level that they are reasonable and affordable for commuters so that the public transport network reduces the incentive for using private transport, thereby alleviating vehicular pollution, optimising better use of road space per vehicle and reducing road congestion.

But at the same time, efforts should be made to keep the fares at a level that should at least be able to reimburse the transport operator the cost it incurs in providing the service and earn a minimum return on the capital it has employed. It must not lose the incentive to reinvest its earnings in improving and expanding the service network.

And if travel by students and senior citizens has to be subsidised, then there must be a transparent system by which the losses incurred by Delhi Metro in offering concessional fare to students and senior citizens are reimbursed directly by the state through a bank transfer of the subsidy amount. This will obviate the need for Delhi Metro to introduce a new concessional fare structure for students and senior citizens. As and when the fare fixation committee revises the fares, Delhi Metro can enforce it on all commuters. And those availing themselves of the concessional fare will receive the difference in the fare they paid and the lower fare they were entitled to. This will prevent a DTC-like situation where political compulsions do not allow periodic upward revisions in the concessional fares.

Going forward, Delhi Metro should be encouraged to even link the availability of concessional fares for students to the income level of commuters. In the case of students, the income level of their parents could be considered. With the increasing coverage of the incometax payers base, this data could be easily used for commuters to claim the concession and get the fare difference reimbursed to their bank accounts, like it has been done for supply of subsidised cooking gas under the direct benefits transfer scheme.

There can be no quarrel with the principle of providing public transport subsidy to deserving sections of society. But it is important to target the subsidy well after identifying that the users indeed qualify for such concession and the burden of this subsidy is fully shared by the government, so that the public transport provider can continue to run the service efficiently without compromising its quality.

The idea is to make sure that Delhi Metro does not degenerate into another DTC. Already with 252 kilometres of network, which is set to go up to 360 kilometres by the end of the year, Delhi Metro has succeeded in relieving a lot of pressure on the capital city’s road space. Messing up Delhi Metro’s fares at this juncture will create a bigger mess for the city’s public transport network.