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Bangalore Metro Rail Corporation Ltd. (BMRCL), which runs the Namma Metro work successful Bengaluru, got a study connected fare revision from a fare fixing committee (FFC) successful December 2024. This was the archetypal clip a 3rd enactment was recommending the fares for the service, akin to a regulator’s tariff determination. When the study was implemented, determination was a nationalist outcry and the fare was brought down from the recommended levels. Stung by losses, aft 1 year, successful February 2026, the corp erstwhile much sought to rise the fare, but again determination was a nationalist outcry and the rise enactment connected hold.
What ails Namma Metro?
The FFC, constituted by the Union Housing and Urban Affairs Ministry and approved by a Cabinet Committee, consisted of a retired Madras High Court judge, Justice R. Tharany, arsenic Chairman, and Additional Secretary to the Ministry Satyendra Pal Singh and erstwhile Additional Chief Secretary, Karnataka, E.V. Ramana Reddy arsenic members. The assignment missive names the members of the committee and the duration of work, but does not notation the Terms of Reference. This was near to Section 35 of the Metro Railways (Operation and Maintenance) Act, 2002.
Two FFC members and 3 BMRCL officials toured Singapore and Hong Kong to survey the Metro systems operating successful those cities. It outgo ₹13 lakh for the 2 members and different ₹12 lakh for the officials. The FFC visited Delhi and Chennai Metros also. The main intent of the survey and the study was to amended the fiscal presumption of the BMRCL, which is successful the red, and gain capable wealth to work astatine slightest the overseas debt. But it could not bash it owing to a pushback from the nationalist and postulation experts. The reasons for the disapproval are arsenic follows: the fare is unaffordable; it is the highest compared with fares successful Mumbai and Delhi; and costs are inflated, based connected flawed calculations.
The study determined the existent fare revision from erstwhile seven-year-old fares from 3 components: user terms index, energy rates, and attraction and medication expenditure, each with its value successful the last handbasket successful 2024. While the archetypal 2 tin beryllium understood arsenic businesslike costs, since the BMRCL is not liable for them, the past is the corporation’s ain summation successful attraction and medication costs which person accrued by 366% implicit 7 years — this fig is inconsistent with their ain 7% headdress of this caput for aboriginal years.
The different metros look antithetic conditions. Those astatine Mumbai and Hong Kong person much riders and bully non-fare gross — for instance, from ads and rents from commercialized space. Delhi has authorities subsidy; truthful does Singapore and adjacent Chennai. Besides, Mumbai and Delhi bash not person escaped autobus commute for women, arsenic Bangalore has, starring to a little gross potential. In Singapore, the metro is the ascendant mode of transport with autobus and MRT accounting for 42% of commuters, cars 36%, walking 18% (the city-state has footpaths), and taxis and cycling 4%. Besides, Singapore has addressed postulation jams with a high-priced licence auctioned successful the marketplace mandatory to thrust connected its roads and peak-load pricing to usage definite roads successful concern districts during highest hours. These propulsion the request implicit to MRT.
Last-mile problem
In Bangalore. the legendary postulation snarls — which person brought it arsenic overmuch infamy arsenic contamination to Delhi — should propulsion radical to metro, but the last-mile occupation remains, which militates against specified a switchover. Almost each car proprietor has a scooter, but wherever volition she parkland adjacent the metro and however volition she commute from the destination to her office, without getting fleeced by autorickshaw drivers? Market has addressed this contented successful Mumbai. When thousands of passengers are disgorged astatine the Churchgate presumption successful Mumbai astatine 9.30 a.m., 1 sees a bid of taxis and a agelong queue of passengers getting 4 each into these stock taxis and going to their bureau paying arsenic small arsenic ₹15. On the contrary, successful the J.P. Magar Metro presumption successful Bangalore, 5 to 10 autorickshaws enactment parked, but they request upwards of ₹60 adjacent for a commute of 1-2 km. Market has developed successful Mumbai; it has not successful Bangalore.
While the FFC has looked astatine the Mumbai Metro, it should really beryllium looking astatine the suburban electrical trains and their fares successful the metropolis. Without them and their precise debased fare structure, 1 cannot adjacent ideate Mumbai being truthful mobile. Do they marque losses? Not sure, the trains, without doors, whitethorn person been wholly depreciated out; the lone moving outgo is the unit salaries and electricity. There should beryllium a 150% load origin (people hanging retired of train).
Which 1 you choose? Low fare and immense fig of commuters, whose livelihood itself depends connected those trains, oregon high-fared Vande Bharats, half-empty arsenic European trains? What is the concealed of the erstwhile being etched successful the lives of people? The concealed is subsidy. It should not beryllium a balancing subsidy, calculated ex-post, which volition militate outgo efficiency, but a subsidy determined ex-ante. The FFC has acceptable itself 2 objectives: affordability for consumers and fiscal sustainability successful the agelong tally for the organisation. Since the authorities has a taxation instrument, isolated from the terms instrumentality which businesses have, sustainability is not an issue, arsenic agelong arsenic authorities is consenting to springiness subsidy. From a nationalist concern constituent of view, it is optimal. For reaching societal optimum, the organisation volition fto consumers travel successful till they screen conscionable the marginal cost, dissimilar a businessman who volition equate marginal gross to marginal cost, and thereby restrict the output/service. In our parlance, the BMRCL should little prices till capableness utilisation is maximum. But it should not endure losses; truthful authorities subsidy, ex-ante. It is connected this premise that Zohran Mamdani promised escaped metro for New Yorkers and won the election. In India, Jayalalitha, successful her tenure arsenic Tamil Nadu Chief Minister, did the aforesaid for Chennai buses, mandated precise debased fares, and earned the goodwill of the radical and votes of the electorate.
It is somewhat similar newspaper, oregon amended still, e-paper, pricing. Charge debased with paper readers who person an elastic demand, summation your circulation and complaint precocious from advertisers, who person inelastic request and tin wage for your eyeballs. That is what Hong Kong metro is doing: important gross from non-fare box. The fare is lone $1 oregon so. You tin adjacent person a azygous slab and fixed terms arsenic successful the New York oregon Paris metros. Metros should look astatine commuters arsenic their constituency, conscionable similar teachers should look astatine their students.
While nett is maximised by the steadfast equating marginal gross to marginal cost, economical ratio is achieved by equating terms to marginal cost. The statement is fixed costs are sunk costs, and request not beryllium recovered, arsenic Government has the taxation way to mop up the resources. The fixed outgo becomes a sunk cost, which has nary power successful pricing. Once the concern is made, the absorption should beryllium connected maximising capableness utilisation.
The writer is simply a retired RBI Chair Professor astatine the Indian Institute of Management, Bangalore, and erstwhile Regulator Member, Telecom Regulatory Authority of India. Views expressed are personal.
