Delhi Metro Rail finances in the red

Needs a fare rise after 6 years of no change; unable to make provision for a depreciation reserve

The government’s latest decision to set up a Fare Fixation Committee (FFC) with the mandate to recommend revision in fares for Delhi Metro Rail Corporation (DMRC) may not have come at a better time. With fares stagnant for more than six years amid rising input costs, the metro operator is struggling to wriggle out of a financial mess.

A Business Standard analysis showed annual growth in the company’s total revenue dropped sharply from over 100 per cent in 2010-11 to 11 per cent in 2014-15, the latest year for which data is publicly available. DMRC reported total earning of Rs 3,562 crore in 2014-15, about 11.5 per cent more than the Rs 3,197 crore the previous year.

The slowing growth in earnings has come despite a 20 per cent jump in total route length during the period, from 161 km at the end of 2010-11 to 193 km in March 2015. The annual growth in average daily ridership also declined from 37 per cent to 8.6 per cent during the five years. Daily ridership was 2.38 million in 2014-15, from 2.19 mn in 2013-14.

The company has not registered a positive profit after tax in 10 years, except once in 2008-09. Net loss declined from Rs 413 crore in 2010-11 to Rs 90 crore in 2012-13, before rising to Rs 99 crore in 2013-14 and further to Rs 104 crore in 2014-15. However, the firm recorded an operating profit of Rs 1,123 crore for 2014-15, up 13 per cent over Rs 994 crore in previous year.

DMRC wrote to the Ministry of Urban Development (MoUD) at least thrice in the past five years seeking setting up of the fare fixation panel. The corporation desists from officially commenting on the impact of the stagnant fares on financial health. An email sent to DMRC remained unanswered.  However, A K Gupta, its director-electrical had earlier this month said at a conference that they were not able to provide for a Depreciation Reserve Fund (DRF).

“We are financially viable, though we are not able to make provision for DRF or service it,” Gupta had said. DRF is meant for upkeep and replacement of assets, including rolling stock.He added that expenditure on electricity, 40 per cent of total spending, rises yearly.

Experts say DMRC is in urgent need of a fare increase. “During these six years, all other costs have gone up by 70-80 per cent,” said Amrit Pandurangi, senior director at Deloitte.

He added DMRC had not done badly in garnering income from non-fare revenue sources, as compared to global standards. With stagnant passenger fares, the share of fares in total revenue had dropped from 46 per cent in 2010-11 to 42 per cent (Rs 1,505 crore) in 2014-15. Consultancy, real estate and advertising revenue accounted for the rest.