Delhi Metro plans to enter into construction works besides O&M, consultancy services

The third Managing Director of Delhi Metro Rail Corporation (DMRC) has taken over the reins at the time it is making efforts to recover its operations as well as finances. To improve revenue while keeping ticket fares in check, DMRC is venturing into newer regions and business avenues. Vikas shares details of DMRC’s growth plans in a recent interview.

In the past 20 years, how has Delhi Metro maintained its cost and operations?

We made the Delhi Public Transport at par with the international metro rail systems. The cost of Rolling Stock during these years has hardly escalated. The cost quoted in the recent tender won by Alstom Transport, is comparable to the cost in Phase - 1, though these coaches have much better technology and passenger facilities.

Another reason is domestic manufacturing by the suppliers. They have factories in Sri City, Savli, Bengaluru and an upcoming one in West Bengal. DMRC convinced them to set up manufacturing in India at low cost and even export to Australia, Canada etc.

Electricity and manpower are one third of the total operational  cost. We  have  saved on electricity and earned carbon credits. Close to 35% of our energy requirement comes from renewable sources and we aim to reach 50% in the next 10 years. 

How is recovery from Covid-19 shaping up?

In terms of ridership and revenue, we are close to 90% of the pre-pandemic levels. There has been a shift in the ridership demography, but we are attracting more passengers as growth in the NCR in there. Our growth rate in the past decade has been about 13% annually. As compared to international metro systems (apart from China), this is healthy growth. Future growth will depend on development of newer areas where there will be offices and IT Parks.

While operationally profit-making, DMRC has been in a net loss historically. Any estimate on when it will break even?

This is high capital-intensive project and a debt worth Rs 35,000 crores has been taken  up to date. So far, we have repaid only Rs 5,000 crore, and the rest will be paid over the next 20 years.

World over, metros are not profit-making. We have been able to pay our loans and run the system till now and it will be our endeavour to do the same. We are exploring how revenue can be generated from sources other than ticketing – advertising, leasing of properties, standalone property building, consultancy, and undertaking civil infrastructure projects.

What are some of newer business areas that you are focusing on?

Consultancy for both domestic and international metro rail transport,. We are trying to bid for Tel Aviv Metro in Israel and Bahrain. A lot of revenues will open if we win this. We will partner with other organisations like we did in Dhaka.

In civil infrastructure, we are working in Patna and Mumbai. We will make use of our experience of operations and maintenance of metro rail to do O&M for other metro companies. Mumbai Metro recently floated tender for O&M where we will participate. We are looking at South-Asian markets too.

What is your vision for the next decade?

To make the organization sustainable, we will venture into other construction activities as well, besides consultancy and O&M. The Delhi Government has asked us to construct ISBTs. In Phase 4 stations, we have optimized the cost, design and the area of the station. We are looking to be a key player in the urban infrastructure space. I would say, even compete with major players like L&T.

Is PPP still on your radar?

PPP in metro has not been successful so far, since the private partner also must bring in capital, which it will be financing at a much higher rate than we do. Here, our JICA loan with the sovereign guarantee is much more feasible. If a plan is made where a lot of earning through real estate development is there, perhaps it could work. But even that has not been successful. If we look at Hyderabad Metro’s PPP with L&T, it is suffering losses and L&T is trying is trying to get out of it. If the private sector can manage  low cost funds, maybe PPP could be successful.

In the coming years, will you be looking at other lenders beside JICA?

JICA has provided loan to us with the best rates. We have spoken with organizations like the World Bank and Asian Development Bank, but they have not been able to compete with JICA as far as rates are concerned.

(Based on conversation with Dhruvaksh Saha and Shreya Jai, Business Standard)